The following program, the ENT , mortgage and Realty Show is paid for in full by ENT mortgage, LLC and equal housing lender consumer access.org number 2 5 5 3 6 8. The advice and opinions expressed during the Academic Mortgage and Realty Show are solely that at the hosts and guests of ENT mortgage, LLC, and not WTMJ or Good Karma Brands.
Speaker 2:Welcome to the Accu Net Mortgage and Realty Show, getting you inside information on buying, selling, and financing your home with expert advice from Accu Net Mortgage and Realty. And now here's Brian and David Wickers.
Speaker 1:Welcome to the Accu Mortgage and Realty Show. I'm Brian Wicker, licensed real estate broker with ACU Net Realty Advisors and also the majority owner of ACU Net Mortgage, where my individual N-M-L-S-I-D number, David is 2 5 9 6 1 0. Along with my son David Wicker, who's one of our top senior loan consultants. Also our chief client experience Officer. What's your individual NLS ID
Speaker 3:Number David? 3 2, 4 7.
Speaker 1:Can you say it one more time?
Speaker 3:3 2 8 8 4 7.
Speaker 1:Alright , thanks a lot. Hey, we're supposed to say that because this is a podcast. So I told regular regulator in Minnesota that we'd start saying that. Anyway, here we go. Uh, it's been a busy week in Mortgage World and real estate world. We got an important economic reading on inflation. Uh, last week on Leap day on February 29th, the personal Consumptions expenditures index, which is the Federal Reserve's preferred measurement of , uh, inflation. And that measurement of inflation came in exactly as expected. And so the stock market and the interest rate markets yawned. Would you agree with that, David?
Speaker 3:Yeah. Uh, mostly I think everyone, especially in the mortgage and bond markets, thankful that it wasn't worse.
Speaker 1:Okay. And what's it was about up 2.4% or something like that. The
Speaker 3:Core year over year was two point percent. Let us all open our hymnals to the federal of chapter two, which is the Fed would like inflation to be at near or around 2% over year . So we are close, we are not there. 2.8 was core personal consumption expenditure month over month though, which , um, I mean, you know, you're only looking at February compared to 0.4 . So it's , the answer is probably , well, yeah , but the answer lies right. Point four . If you extrapolate that over a per annum, that's four point. So the answer is right . Well , it's , we're lucky
Speaker 1:That rates didn't get worse. Okay. Yeah, it kind of stayed the same. And we'll do a little rate roundup later. We're basically around 7% on a 30 year fixed rate. Let's call it 6.99 if you , we'll , we'll get back to that in a minute. But what I also wanted to give everybody was a flash report on February home sales. Now this is only gonna get better, and this is according to the , um, greater Milwaukee Association of Realtors and the multiple listing service. Uh , and the reason I think it's gonna get better is not everybody has their data in yet from the last day of the month. They have a couple of days to do that, but as of right now, three more homes sold this past February condos and single family detached properties in the five county metro area that's 911 , uh, closed , made it to the closing table with the help of a member of the National Association of Realtors. You got something to say about that, David ?
Speaker 3:And I'm , what, what your numbers prove thing I have felt about buyers is that buyers are ready. They're not waiting, they're not waiting for rates, they're not waiting for home values to do anything, are making life decisions. And that was, it's true this year in comparison to last year's march forward.
Speaker 1:And speaking of same Zs as last year, there were 1,216 properties that came on the market in February, which is 11 fewer than last year. So a a statistical dead heat on both sales and listings. Uh , but if we compare to a pre COD year, let's go back five years to February of 2019, there were eight one hundred and eighty seven fewer closed sales last month in February. That's a 17% decline. And let's just look at that and say, that ain't too bad. No . Given all the facts and circumstances, and you won't be surprised to know David, that listings, however, were 400 and too fewer. That's a 25% reduction in inventory and not be surprised to learn that with that , um, greater cinch, greater restriction on supply and the still demand that's out there because people wanna live in houses that has caused the median sales price over the last five years in the five county metro Milwaukee area to go up a cool 53% woo , or 101,000 American dollars. The median sales price in February was $292,000. Right ? You're gonna say something.
Speaker 3:Well, what I was gonna observe to you is, given how this February looked a lot like last February, and not all that much like from five years ago, pre covid , it might be that welcome to the new normal , that we really should be setting expectations if we've got, you know, one data does not a pattern make two data points, you know, last February, this February. Boy, that looks like a trend to me, that that might be for buyers and sellers.
Speaker 1:Yeah. And, and then, you know, the only thing, we've said this before on the show, Hey, as rates hopefully drift down at some point, it hasn't happened yet. We're kind of stuck , um, you that way . We have a big, a couple of reports coming up next week. We have the monthly jobs report will come out on Friday, and that's a big mover for interest rates because if more people get jobs and earn more money , uh, they spend it. And that is not good for inflation. So we're looking for a, hopefully a more tempered , uh, jobs report. Hey, when we come back, let's take a look, David , uh, you said you had one , uh, offer where they were competing against 11 other offers. Yeah, let's talk about that. 'cause that's kind of an indication of, of the current market conditions when we come back. You are listening to the Anette Mortgage and Realty Show on AM six 20 WTMJ
Speaker 2:Home buying advice from the guys who know it best. This is the ACU Mortgage and Realty Show with Brian Wicker on WTMJ.
Speaker 1:Welcome back and thanks for tuning into this week's show. David, we're just , uh, kind of recapped what the market was like in February and we're saying it's kind of a reprint from last year, which is more buyers than , uh, listings. Mm-Hmm . <affirmative> . And so you, you said you just had an offer , uh, one of your clients that you've been working with for a while Mm-Hmm . Competing against 11 others. Give us the rundown on what we did to make 'em the best and how things turned out.
Speaker 3:Well. So let me actually tell you what this listing was not. This listing was not, I would say have you previously described, you know, the meat of the market is between like 1 75 and like 4 75. Is that what you've previously called the meat of the market? Uh , yeah. Or
Speaker 1:Thereabouts. I would say that's about right. Well, the median price , uh, in February was 2 92. So yeah, let's slap 150,000 above and below that and yeah, that's probably two thirds of your market.
Speaker 3:So, so, because what we've observed over many years now is like, oh, you wanna buy a three bed , two bath, you know , uh, on 68th and north in Wauwatosa , it's like, well get your knife out 'cause it's gonna be competitive amongst many other buyers for this one house. Okay, well this house was north of five 50 , uh, which not everyone buying a home is reaching for that much house. That's right . You know , that , that's a thinner group of buyers,
Speaker 1:I would agree.
Speaker 3:But for this home, nicely redone, the listing agent is someone who's been in this, you know , industry, in this Milwaukee market for a long time, seasoned pro. And so the buyer's agent looped me in that her client was gonna be writing an offer around this house. They were gonna be writing $15,000 over the list price. Oh . But had already, I think, let's call this, that this was a Saturday . By Saturday, this house already had 11 other offers that they were looking at, which anytime that you've got 11 , that's a lot of people . When you've got 11 offers, there's a lot of people who actually decided to not write. So there probably was even more interest in this home than not. So what I got question the agent. Yes , sir.
Speaker 1:Did , were you able to get these property specific? I was appraisal waiver , my favorite tool in the drawer.
Speaker 3:It , I was, because what, what this smart buyer's agent realized is like, holy cow, okay, we got a lot of competition. We need to reach for every tool that we can. And I've worked with this buyer's agent a number of times. And so she said, Hey, here's the house that my clients are interested in. Could you run it through the mortgage software and see if we get the appraisal waiver at the price that her buyers were willing to pay,
Speaker 1:Which is 15,000 over the asking price ,
Speaker 3:Over the list price. And so I cracked open my laptop, ran it through the software, and za Fannie Mae in their mortgage software said, oh, the property at 1 2 3 Main Street and you're gonna , you know, you saved the value of the home,
Speaker 1:Buy it from
Speaker 3:Right. The, the software system. And it is a black box. And so this isn't true every time, but given all the data that Fannie Mae has on this particular house at this price, the mortgage software said, we believe you on value, no need for an appraisal.
Speaker 1:Did you try to go higher than what they were willing to offer?
Speaker 3:I offered, but the buyer's agent was pretty clear in communicating that her clients did not have an appetite to go above
Speaker 1:More than that. Exactly. And keep in mind, you know, the listing price is as you point out a made up number. Yep . You know, it's now a lot of times it's based on facts like, hey, what if similar homes sold for, did you have any feeling from talking with a buyer's agent? Was this home underpriced priced just right? Any indication of that?
Speaker 3:I think this house was , uh, can I go more big picture than that? Sure . So this house was nicely redone in wa , Waukesha County suburb. And I think given the appetite for this house, what probably a lot of these buyers recognized was, it is cheaper for me to pay for this completed house with it redone, you know, 1, 2, 3 than to buy an ugly house and spend money cash out of pocket to improve my ugly 1994 home in a, you know , Waukesha County suburb. And so I think the appetite, I don't think it, I don't believe that this home was mispriced on the list price. I think all the buyers in this price range, I think all the buyers were like, wow, it is cheaper for me to hand this seller $20,000 over the list price than to buy a home that needs work and hand $120,000 to a general contractor cash out of pocket to make it better.
Speaker 1:Yeah. And then it's like, yeah , I mean, then it would be your own David . And you can make all those torturous decisions on what color countertop you want to have and all that happy stuff. Yes . But yes . So what's another, so, so you had the appraisal waiver. Awesome. Which means you had to have at least 20% down, which is attractive to this seller. And what else did this buyer do to try to make their offer more attractive than the other 10 or 11 or 12?
Speaker 3:So, so the other thing that they reached for was inspection wiggle room. That, you know what a seller, particularly in a competitive situation, a seller doesn't want to get, you know, nit onesie, twosie nit . Yeah. Nitpick because it's like you're buying like of a house will always need work, will always need fixing. I with the buyer's agent , had a philosophical conversation about, okay, well what is, you know, the best way to use inspection, wi inspection, wiggle room. Let me give you some of those details after this break. You are listening to the Anette Mortgage and Realty Show on AM six 20 WTMJ getting
Speaker 2:You into the home of your dreams. Here's more of the Accu Mortgage and Realty Show with Brian Weer on wtmj.
Speaker 3:Welcome back to the Acuate Mortgage and Realty Show. I am David Wicker, the younger, that's Brian Wicker over there, the wiser. And I like that . Uh , yeah. So dad telling a story about, boy this home in o Waukesha County suburb listed over half a million dollars, had 11 offers at least. But you know, that was just my update. Who knows what they ended up with? 12, 13.
Speaker 1:Yeah. Before Sunday. Yeah.
Speaker 3:So my clients used appraisal wiggle room. Hey seller, we're gonna offer you this price. And the computer system says we don't even need to send an appraiser out to the house. One less thing. See at the closing table. Yeah . Sellers love. Yeah . Therefore ,
Speaker 1:Yeah , certainty. Right? And they did not have to check the appraisal contingency box that was left a vacant notes out . And you highlighted in your pre rock solid preapproval letter. Oh yeah . It says no appraisal required and you probably for your house have the listing agent.
Speaker 3:Yeah . At 1, 2, 3 . You bet. I did. Yeah. So then the other thing that the buyers reached for was inspection, wiggle room. And I have, me personally, I approach the inspection contingency as money fixes everything. Because whatever you might discover about a house can be addressed new roof foundation issues, but it's all a matter of degrees. Right? Right . But it's mold. And so these buyers said, Hey , seller, for any one of the things that we buy or not buy, we , uh, have discovered in the inspection. So long as that one thing is not greater than $15,000 to remediate, we will not bring that problem to you for any one . Wow . Not cumulative. Wow . For any one thing.
Speaker 1:So let me ask you, what , 15 . So if they had a $10,000 basement problem and a $10,000 roof problem, they're eating both.
Speaker 3:Well, that is how the words were written in the contract at least. Okay . Uh , but
Speaker 1:How'd that go over with the seller?
Speaker 3:Well, I can tell you at best, my clients came in second place on this house. Hmm . And as, as my brother-in-law, Tim's likes to say in the words of Ricky Bobby, if you ain't first, you're last. And that is true in housing. 'cause there's only one, there's only one house. So, you know, as I was texting back and forth with the buyer's agent, you know, I said, I was like, okay, 15,000, well let's go down this slippery slope. What if it was 15,500? What if it was 16,000 ? Where 900 ? What if it was 16,000? What if it was 17,000? Where is your, you know, you know, oh, that's too much. Once we got to 18,000, then I would have to stop's.
Speaker 1:So what , what is the, is this just a philosophical 'cause obviously what we're suggesting is that somebody probably wrote with no inspection contingency.
Speaker 3:Yes. Because because whatever you might find in an inspection can be addressed with money. And my buyers said, Hey, don't worry up to 15,000 bucks. Don't worry about it. Per
Speaker 1:Item. Yeah. Per item. And so that, you know, so we don't know. Maybe they lost on price and maybe, you know, we'll never know. Right. Rarely do we get a complete , complete postmortem on this or do you know something?
Speaker 3:I don't. But I'm gonna watch for the , uh, when the house closes. I'm guessing it closes, you know, maybe sometime end of March. So we'll at least know on the price part.
Speaker 1:Mm-Hmm. <affirmative>. So, you know, chances are maybe somebody wrote 25,000 over, I'm just guessing. Yeah . And, and maybe it wasn't the , uh, uh, modified home inspection contingency that made their deal second place. Uh ,
Speaker 3:The other thing. But,
Speaker 1:But the point is, when you got 11 offers on there , uh, and at least this, you didn't get, this isn't like, 'cause you said it was in Waukesha County, so it's not gonna be a hundred year old house. Uh, you know, which people do people write offers on 100-year-old homes in Milwaukee County all the time without inspection contingencies. But go ahead,
Speaker 3:Wrap it up . What , so, so what I also messaged the buyer's agent was I was like, look, at some point, if there , if something is discovered that might cost 15,000 or more dollars worth of work, there's a strong likelihood that as your uh , friendly lender, I might be the bad cop about that thing. Hey, we discovered a hole in the roof and that's gonna cost $14,000. It's below your threshold. Well, I <laugh> it might be, I , we sometimes like to say the financing contingency is in many ways a back inspection contingency. Because if the house has something that bad, we probably, as your lender will be like, cool, it's fine that you might wanna address this, you know, on your own. But before we lend you the money, the home needs to be in good and marketable condition and we gotta patch that hole in the roof in my example. Yeah . Yeah .
Speaker 1:We're gonna ,
Speaker 3:Before we all show up to the closing table. Right,
Speaker 1:Right. Or we're not gonna give you the loan and then you escape on the financing contingency.
Speaker 3:So really, if you're about to offer wiggle room greater than 10,000, I guess my advice would be don't even bother checking the box. 'cause in many ways you're already protected if you're trying to get up a loan . 'cause we care about the marketability of the home, the health of the home.
Speaker 1:Yeah. Yeah. It's, it's , uh, it's a competitive market and everybody's gonna have to take their own risks and maybe these folks will, will waive the appraisal, or I'm sorry, the inspection contingency next time. It is something I don't really like to see people do. Alright. Uh , right now it's time to turn it over to the WTMJ Breaking News Center.
Speaker 2:Don't break the bag to get into a house. Back to the ACU Net Mortgage and Realty Show with Brian Wicker on WTMJ.
Speaker 1:Welcome back and thanks again for tuning into today's show. I'm Brian Wicker, the elder, and that is David Wicker over there. The younger, taller, more handsome wicker. And he's one of our senior loan consultants and Chief client Experience Officer, which by the way, David, I , I've originated a couple of loans in the last few weeks and I love that email you send out , uh, that you've designed. In our process, when we send in the loan application for official underwriting approval, after we get all the documentation in , we ask the customers, Hey, how are we doing? Oh yeah. And I wanna say, I'm getting really good reviews,
Speaker 3:<laugh> , that's good. Great. I would expect nothing less.
Speaker 1:That's right. That's right. And , uh, hey, I want to tell you about a past client of ours. We've helped 'em on their former primary residents in Illinois. And then we helped them buy a condo in Florida that eventually now has become their primary residence as they've moved more toward Fuller retirement. And now they found a really lovely home , uh, on the water. Um, it's one of the keys, you know, along the left hand coast of of Florida that they wanna buy. And it's, it's , it's rather expensive. It's, it's a little less than 3 million. And , uh, and so they called up and said, Hey, we, we negotiated this offer and because they have the means, they wrote it as a cash offer, but now they can still get a mortgage just like in Wisconsin. And they do wanna do that because they
Speaker 3:Don't take all their money . Wait , they called you after they wrote the offer? Or , or simultaneous too . It
Speaker 1:Was kind of simultaneous to it, but , um,
Speaker 3:Because the thing about a cash offer is like if you write it , you are showing up at closing. Uh , I would want to just call to make sure that while I, you know, cash offer is proving that you can, do you want to as part of your conversation Yeah . With them. Right. They
Speaker 1:Were con they were confident enough that in you , we were talking <laugh> pretty much that on , uh, yeah. Yeah. So, so they have this accepted offer, 30 day close, and we're , we're gonna lend them over $1.3 million. So it's not a small loan, but no problem. We can handle it. And we got a great jumbo. Check this out, David, in a market where conventional , uh, financing is around seven, well, a jumbo would be about the same if you want no points. And typically jumbo pricing isn't as good as Fannie Mae and Freddie Mac, but the cost of buy down the rate , um, to 6.375% was only one and a half points. And so one , one part of this story is, do you recall in the IRS uh , code , um, which I've confirmed with my buyer's tax accountant, what is the interesting thing about paying points on the purchase of a primary residence?
Speaker 3:You can itemize it in your tax returns for that year.
Speaker 1:Yeah, that's right. You can take the deduction in the year. So this is gonna be like $2,000 of points, but he's going to get a benefit of taking that as a tax deduction. And actually, because the loan amount is over 750,000, he is gonna get a little haircut on that. But he's gonna recoup that in about two years of lower monthly payments. Okay . And here's the other interesting thing. Plus,
Speaker 3:Yeah. Plus to your point, he's getting a discount on the actual cost of the points. Correct . Yeah.
Speaker 1:And points is just interest paid in advance. That's all points are, it's, it's , it's calculated.
Speaker 3:This is next , this is next level, but yeah, next level.
Speaker 1:So, so, you know, once we started going down this road, he quickly caught on and , and you know , it was like, okay, well then let's go even lower. Right? So we went down to 6.375. And um, the, the other thing that's interesting about this is in Florida, because the state of Florida doesn't have income taxes, state income taxes, they find other things to tax. Oh yeah. And guess what? One of those other things is a mortgage. And so between the state and the county, the mortgage tax on this transaction is 7,500. Okay.
Speaker 3:Other , which is based upon the loan size. The loan size , not what you're buying it for. What you're borrowing.
Speaker 1:That's right. And then the other thing that's true is title insurance much more expensive in Florida. And so that's gonna run about six grand. So the point is, it is hard to justify a refinance in Florida. Yeah . 'cause you have to overcome the high title cost and the high , uh, mor the the mortgage tax. Yep . Um, and so I was telling them this is another reason to pay points. Right. In
Speaker 3:Particular situation , you need to set this up. Like, like this loan might actually be the only loan you put on this property, which is, you know, which is what's fun about doing this whole mortgage thing is the advice that you or I might provide is specific even to the state that you're in. Hey, you're in Florida and you're in this big loan, we really need to get you the best deal that we possibly can in Wisconsin.
Speaker 1:That is not the advice we would not give . Right? You're just go, go ahead and finish that thought
Speaker 3:In Wisconsin or Illinois because refinancing is relatively cheap. We'd be like, why are you investing to get a lower rate right now? It's so cheap to refinance that like, you know, date the rate as we've said for a long time.
Speaker 1:Alright, when we come back, I got a little bit more on this story, but I think you'll find interesting relative to property taxes. You are listening to the ENT , mortgage and Realty show on Wisconsin's radio station AM six 20 WTMJ.
Speaker 2:Important home buying questions and answers you can count on. This is the Accu Net Mortgage and Realty Show with Brian Wicker on WTMJ.
Speaker 1:Welcome back to the show and thanks again for tuning in today. Uh , we're just , uh, talking about helping some clients , uh, who are originally from Illinois now Florida residents buying a really nice home on a canal in , uh, west shore of Florida. And uh , I was just telling about how there was another element to the story called property taxes. So on this home that's just a hair under 3 million, the current property tax bill was $8,000 a year. So guess what a normal human being would assume, David.
Speaker 3:Well , I get , I get that eight thou 8,000, $3 million house. That is, yeah . I would want, I would, can they keep it that way
Speaker 1:<laugh>? Uh , no. So, so , uh, so I, I go to the county tax collector , uh, site to a look up the tax bill on this house. And right there it says, warning, if you're buying a home in this county, do not assume that the old property tax , uh, uh, is gonna apply to you as a buyer. Because in, in Florida, apparently we , they have a lot of caveats that slow down the acceleration of property taxes. And these people have lived, the sellers have lived in the home over 20 years and I think are elderly and they have enjoyed lots of protection from their property taxes going up. Want a hazard a guess, David, as to what the new property tax bill, according to the county's website where they say take the purchase price and then put a deflator on it of about 20% to get to the assessed value. What do you think? Well,
Speaker 3:That , that assumes then that 3 million is down to 2.4. Let's say 1% of that deflator 2.4 $24,000 a year for the privilege.
Speaker 1:$34,000. $34,000. And so when I discovered this, I thought I better tell my clients this and they got over it because they really, really want, want this house. 'cause it's , you know
Speaker 3:What, a client from Illinois wouldn't even blink at a property tax bill that bad I bet. <laugh>. No . Have you looked at property tax bills outside of Chicago? I mean yeah, it's pricey.
Speaker 1:Yeah. It it is pricey and uh , that
Speaker 3:And so , so anyway , for them, for them, if that's the cost of sunshine, they're like, whatever. Can I correct? Go ahead. So at , so at your at , I think you had said these people are making a really big down payment. Like more than
Speaker 1:Half. Yeah , more than 50. Yeah, more than
Speaker 3:Half. How , how did they arrive at like were they, is that like a monthly payment thing for them or how did they zero in on like Brian ? We want it not for 1.29. I want it for 1.3. Yeah.
Speaker 1:'cause it's not, I think it's because it's not all their non-retirement money. It's a lot of it though. And so that's a conversation that I want to have. So we kind of had to get this started. We're on a short clock, right? Yeah . 30 days. It's like we gotta get this thing moving and, and so by the way, we're gonna have the appraisal back next week already. Yeah . And we've already got things all put together, very cooperative clients. And so we've already, we're already standing in the queue for official underwriting approval. But you're right, it's like now that I've confirmed with the borrowers, the buyers tax accountant , uh, what the tax deduction is, so they do itemize their taxes, which means that mortgage interest is to tax deductible. But under the 2017 Tax Reform Act, the interest on only the first $750,000 of mortgage debt is tax deductible. Not on the whole 1.3 or so that we're gonna lend them , but it turns out that they're , the 6.375 turns into an effective after tax rate of 5.03. So they can borrow money fixed for 30 years for 5.03 on an after tax basis. What do you think I'm gonna pose to them and their financial advisor?
Speaker 3:Well why , why not? It's the slippery slope. You're at 1.3. Why not 1.31? You know, for every thousand dollars that they're borrowing, it's probably gonna cost them, let's call it $7.
Speaker 1:Not No, no, no less than that.
Speaker 3:Okay . $6 a monthly payment. And, and as I've heard you describe in retirement, you know cash is king and is it is like, so why not 1.32, why not 1.33 ? Right?
Speaker 1:So, so, so that's the conversation I'm gonna have. Now I'm gonna type it up, you know, here on Monday and say, okay, here's just something to consider. And it really comes down to can their financial advisor over some period of time, let's say 10 years confidently , uh, say that they can beat 5.03 on an after-tax basis in their investment portfolio. And if they can, then it's how many million can I borrow? Uh , but, and I'm sure there'll be some, you know , I don't think we're gonna go to 2 million, but it's gonna be maybe somewhere in before. But what do you always say about money questions, David?
Speaker 3:It's you, you decide with your gut and then justify it to your brain.
Speaker 1:That's right. Alright, when we come back, David, you told me you've got a floor to purchase. Yeah . Story to share as well. We're gonna talk about that and down payment and retirement funds when we come back. You are listening to the Academic Mortgage and Realty Show on the biggest stick in the state AM six 20 WTMJ.
Speaker 2:Find a place to call home without the headache. This is the Accu Net Mortgage and Realty Show with Brian Wicker on WTMJ.
Speaker 3:Thanks for hanging out with us on the Academic Mortgage and Realty Show. I'm David Wicker. That's Brian Wicker over there. Dad. We're talking about well you have a Florida client and I have a Florida client. I mean it just seems to be, I, so I helped my client last year buy a new place up here in Wisconsin and then I think, I don't know if it was this winter, you know, maybe it was when it was like minus 30 out in January. He probably was like, you know what , uh, maybe I do wanna move to Florida this year, not in x number of years. And so he was zeroing in on the villages, which is a popular choice. I would describe it huge. Particularly because there are some affordable options. You are describing your client in the $3 million range. My client was able to get a perfectly lovely home for under $300,000. I think that's attractive. Oh my gosh . To a lot of people. And
Speaker 1:It was , and the sunshine is kind of similar.
Speaker 3:Yeah, exactly. <laugh> and I think the house was even less than a year old. So, you know, there's, there's some mechanics. So he's retired and so we're gonna be using our favorite tool for retired people, which is, hey, we're gonna turn your asset of IRA into monthly income on the application , uh, to prove that you can make the monthly payment on your new Florida primary home. Which is actually what we also did for his Wisconsin home last year. Just reaching back into the bag for that trick again as he's like, I wanna move to Florida. But the conversation that we, you know, spent some time on was down payment because he was mindful. He is like, okay, not only am I gonna, you know , be buying this house, but then, you know, I gotta buy couches and yeah. You know, rugs or whatever, you know, for my new Florida home, perhaps a wardrobe change for his new Florida life as well.
Speaker 1:More shorts
Speaker 3:And more shorts. And so he , we began with , uh, as I sometimes like to tell my clients and a connect clients, like I know I'm perhaps a little bit biased in this advice, but I believe in the mortgage product and I believe in you keeping your cash customer 'cause you that that is a prudent way.
Speaker 1:Yeah. It's a , it's a good tool. Ca having cash reserves, cash is fixes money, fixes a lot of problems. Equity in your home, not so much equity . We call that debt equity, equity.
Speaker 3:Well as I like to say, equity is putting a hundred dollars bill on your roof and you don't have a ladder. It's up there, you just can't get to it
Speaker 1:Unless you go open a home equity line of credit, blah, blah, blah, blah,
Speaker 3:Blah. So while I laid out the facts of like his initial request was a 5% down payment as a repeat buyer in America, so long as you are below the conventional limit, you can put as little as 5% down on your next house.
Speaker 1:So why, why where's he getting the extra money if he's gonna make a bigger down payment? What sector is he pulling that out of?
Speaker 3:He is gonna be pulling that from his qualified retirement account, his personal IRA. So he decided, whoa , whoa, whoa, whoa.
Speaker 1:Wait , is this a regular IRA or a Roth? IRA
Speaker 3:Regular.
Speaker 1:That is a horrible idea. Whoa . And we should, let me call him. I want the number. It's not , I'm gonna call
Speaker 3:That is a, it's a decision not based on the numbers, but on the,
Speaker 1:Does he understand personal comp to pay income tax on ? Yes. So let me just spell it out. For every 10 grand you take out now, this is gonna push him up in his tax bracket. Mm-Hmm . <affirmative> . So let's say he's in the 22% tax bracket. Yeah . Remember just pulling that outta the air. Not to mention his state. Well, he's gonna be Florida, but he is not . Anyway, let's just stick to 22% for every 10 grand you pull out, you gotta fork over $2,200 to at least the federal government. Yes . And , and so you gotta keep pulling out more and more to get to the net amount. Now he may not realize that pain until he files his tax return in 2025. He does. But how, how, how detailed did you lay that pain out for him
Speaker 3:Side by side and for him? I, I think he looked in the mirror and said, I don't care that for him he wanted to get to that 20% down. I think there was also, he's got great credit and even the PMI was dirt cheap. And, and as we do at acuate , we laid out, here are the numbers, here are the facts. And then what he decided for his comfort level was he wanted to do the , to do the 20% down.
Speaker 1:Alright , that's all the time we have for today's show folks. But I want to have, I wanna report back next week. I'd like to have an opportunity to have a, a conversation with this fellow because he could put five or 10% down and then make the rest of the down payment in the next tax year. You know, something like that. There's opportunity for him not to waste his money by giving it to the, to the IRS. Anyway, that is all the time we have for today's show. Thanks for spending part of your Sunday with us. You've been listening to the Academic Mortgage and Realty Show on AM six 20 WTMJ. The proceeding was a paid program. Advice and opinions expressed during the Uni Mortgage and Realty show are solely that of the host or guests of academic mortgage and academic realty advisors and not WTMJ Radio or Good Karma Brands. Milwaukee, LLC.