The following program, the Academic Mortgage and Realty Show is paid for in full by accident 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 Academic 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, the licensed real estate broker with Acue Realty Advisors, and also the majority owner of Acue Mortgage, along with my son David Wicker, who is one of our top senior loan consultants and also our Chief Client Experience Officer. By the way, my NMLS ID number is 2 5 9 6 1 0. David, what's yours?
Speaker 3:3 2 8 8 4 7.
Speaker 1:There you go. We are now regulatory regulatorily compliant. If you've got a question or a comment, you can call or text us on the WTMJ talk and text line, which is 8 5 5 6 1 6 1 6 20, and you can get a podcast of today's show or any of our pass shows wherever you normally get your podcasts. So David, big week in , uh, big news item Big Friday. One of the biggest numbers of every month is the , uh, monthly, what do they call it, job situation. What , what's the official title of
Speaker 3:It? Non-Farm Payroll. NFP . Well ,
Speaker 1:Non-Farm Payroll, but it's the Employment Situation Report. That's what they call it, the Employment Situation Report. And it comes out from the Bureau of Labor Statistics, the BLS and David, why do we care in the mortgage industry about this once a month report?
Speaker 3:Uh , it all ties back to 70% of the American economy is built on people spending money. People need to have jobs in order to spend money when people spend money. And if there's too much money chasing too few goods that can drive up inflation. And inflation is the enemy of interest rates, which has been the case for two some years now,
Speaker 1:Right? Or since the beginning of time. Uh , but most recently in the past two years. So , um, so we got the report. And how many, so there's two surveys, just by the way, folks. There's a survey that the Bureau of Labor Statistics gets from payroll companies and large employers, and that's where we find out how many new jobs were created and what was the theoretical number there or estimate, David ,
Speaker 3:Uh, for February that the American economy created 275,000 new jobs. Forecasts were about, you know, 200,000, the bigger there was a lot. It was a mixed bag. So that was, you know, man, 275,000 jobs. January, in case , uh, everyone didn't remember was a gangbusters number that when it was reported in the first week of February, we added 353,000 jobs in January. Oh. But then the Bureau of Labor Statistics this past Friday was like, did we say 3 53? What we meant was let's revise it in January, we created 229,000 jobs. Still strong,
Speaker 1:But , but still that's off by over a hundred thousand. And the mortgage rate markets did not like that last report. So sore kind of
Speaker 3:Went <crosstalk> . Well , no , that's a ton of jobs. That's a ton of jobs, ton of money, ton of spending.
Speaker 1:Yeah. Inflationary. So then they , like you said, this was a mixed bag so that , so the , uh, we got some kind of mortgage friendly renews on , on , on that, on that last revision. Uh, the other thing that was in there was , uh, average hourly earnings was only up 0.1%. Mm-Hmm . <affirmative> , uh, from the previous month. So that was half of the expected amount. And that goes to wage inflation, right? So, okay. People aren't making a lot more. Um, and then the other number that was in there was the 3.9% , um, unemployment rate. Do you wanna explain that, David A. Little bit?
Speaker 3:The, well, the unemployment rate is those seeking work, but have not found any? Is it once you stop looking for work after, is it , uh,
Speaker 1:Four weeks, eight weeks? I think four
Speaker 3:Weeks . Eight . I don't remember . You are longer part of the unemployment rate. There's plenty. If you would like to find flaw in the unemployment rate, you will find it. But it is, because it is reported consistently, we can at least hang our hat that over time at least its inconsistency is consistent.
Speaker 1:Consistent, yeah . So that was a little higher than what was expected. The market was expecting it to hang in there at 3.7. Yeah. And so it was up a little bit , uh, the number of unemployed people according to the phone survey, this is where the Bureau of Labor Statistics hires a company to call a bunch of people and say, are you working? Do you wish you were working? Are you working part-time? Because you , you'd rather work full-time, but you can only find part-time work, all those kinds of great questions. And so, long story short , um, there were 334,000 more people unemployed bringing the total to 6.4 million in all of America. That's really not that many. Uh , 'cause you know, I always like to think of, Hey, you know what that means? That 96.1% of people who want a job have
Speaker 3:'em have
Speaker 1:One, just by the way. And the other important thing is that 62.5% of working age Americans are working. If you're ever wondering how , how many people are holding down a job in America , uh, and these are, I think these are still non-farm jobs, 167,426,000. Boom. So many people are making this economy go. Kind of doesn't seem that many does it to you, David ?
Speaker 3:Uh , that's a lot of people. By the way, just for reference , uh, unemployment rate 3.9, a traditional economist would tell you that full employment air quotes is at 5%. So some of what the Federal Reserve is trying to do is, are we over employed? Meaning there's lots of jobs and lots of spending and pushing on inflation. Yeah .
Speaker 1:Yep . So, all right . So the bottom line is rates didn't change much. They got a touch. Better. We kind of mainly dodged a bullet. 'cause Yeah , if , you know, it could have been worse. So,
Speaker 3:Well and sa saddle up. 'cause on Tuesday is the CPI report the other of the two biggest numbers in a month. The jobs report First Friday or first ish Friday. And then the consumer price index, CPI, which is the inflation reading that's on Tuesday coming up here on the 12th.
Speaker 1:Alright. When we come back, we'll talk about how rates really don't matter to people who are passionate about buying a home. We got a couple stories to share with you. Uh, and we will tell you where rates , uh, end of the week, you are listening to the Academic 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 again for tuning in to this week's show. I'm Brian the Elder. That's David the younger over there. Last name Wicker. And um, David, last week you were telling us about a couple that you did a pretty nice job of setting him up for success, writing an offer. Uh , I believe it was in Waukesha County , um, like around 600,000. Was that the price
Speaker 3:Range? Yeah . Yeah .
Speaker 1:And they were up against at least 11 other offers and they , uh, came in second or who knows, but they didn't come in first Mm-Hmm. <affirmative> despite, you know, our best efforts . So you got an update for us on that .
Speaker 3:These buyers, to their credit, dusted themselves off and got back to it, found another house that they were interested in. And over the weekend, as they, you know, went to see the home as any ACU loan consultants can and does offer, these folks were committed to making a 20% down payment. And so when they updated me again, Hey David, I know you know this other house we lost, but man, we're back at it at 1 2 3 Main Street. What I pulled up, because it , you know, this is, it's competitive out there and you need every advantage that you can share to make a seller feel safe by choosing you. Yeah . The one that we reached for as I plugged in 1, 2 3 Main Street into the, you know, their , uh, setup in our software because what I ran as I said, oh, you're, you're thinking of writing your contract price at X dollars. Well I'm gonna plug that into the computer system, put it at 20% down and we're gonna run this house through the computer mortgage software to be like, are we gonna need an appraisal or not? And when I ran it through, the sky's opened up and Sunshine splashed upon my face. The computer system said, we do not need an appraisal on this house at this price with these buyers. Yeah . And don't you know it ba I put that on the pre-approval letter. The buyer's agent sent it to the listing agent. I called and texted the listing agent and Za come Monday morning, they had an accepted offer.
Speaker 1:Yeah . 'cause they didn't have to worry about the appraisal. What did they end up doing on that one, on the inspection contingency? David ?
Speaker 3:I, they still included. I'm going from memory. I think they included a large
Speaker 1:Okay .
Speaker 3:You know , exception or large. Like hey, 10,000 bucks, don't worry about it. Yeah. I'm not unlimited. Okay.
Speaker 1:Alright . That , that's, you know, that's better than going naked as we say. But , uh, good for you and good for them , uh, for getting right back on on the horse and writing another offer. Uh, go ahead. You got something else to
Speaker 3:Add to that? Well, so there's two more little nuggets to this. You know, the other true thing, a lot of times dad, I sometimes describe, we do public pre-approvals and private pre-approvals that you might want to show a seller, Hey look, I can, I am able to do 20% down. But then privately if you're considering less, you know, down payment 'cause you wanna keep some of your cash, we'll also generate and , you know, show our clients like you would also be approved privately if you only wanna do 10% down payment. Yeah.
Speaker 1:You just can't get that super special appraisal , no appraisal required. Well ,
Speaker 3:And so this , you put less
Speaker 1:Less than 20% down. Yeah .
Speaker 3:This on Monday morning when we connected, I said, you know, I just need to triple confirm or I'm, I'm basically telling you, if you wrote your contract with no appraisal needed, nobody's walking through the house, you don't get to change your mind now about the down payment, you are strapped, you're committed into 20% down. Yes. And they yeah .
Speaker 1:And they're okay with that, right?
Speaker 3:Absolutely. Uh , but it , I just didn't want to ignore, you know , that even if, even if they wanted to consider putting less than 20% down,
Speaker 1:That would, the more
Speaker 3:They couldn't do it. Because the more important thing was if you put 15% down, the computer system is highly, highly unlikely. No, it
Speaker 1:Just won't. That's hard quoted buddy. Uh ,
Speaker 3:It can't No , I You've
Speaker 1:Had one that 15% down .
Speaker 3:Absolutely. Yes.
Speaker 1:Well arm wrestle on that at another time. But I thought that you had to have 20% done . No . Alright . Alright . Anything else on this , uh, particular transaction? Oh wait , how are you doing on the approval? How are you doing on the approval, David?
Speaker 3:We had the accepted offer on Monday and come Friday morning we had approval from underwriting Conti . You know, with I , I would say we are functionally clear to close. There's some clerical stuff like title gotta get the homeowner's insurance wrapped up. But that was basically the only two things. So when you don't need an appraisal and you get me your pay stubs and your W twos and your down payment, you know, liquidity split. Yeah . You can have the accepted offer on Monday and by that Friday, as I sometimes like to say, we're just counting down the day . Still closing now. Yeah. I'm only gonna have boring updates. Like Yep . Still waiting. Still waiting between now .
Speaker 1:And what did they decide to do on their rate and closing cost combination? Did they decide to pay up some money to get a lower rate or which way do they go?
Speaker 3:Well, so let me, let me tee this up because this is worth examining as we always do, we offer choice. And in column one I was like, here's that trophy rate. You want that low rate? Man, we can give it to you. What was it ? Do remember for them it was 6 3, 7, 5 . Oh baby paying paying points to get there too. But then the opposite end of the spectrum, ugly looking . 7 3 7 5 oh ugly for a reason because you had no closing costs . Let me talk you through how they went about analyzing that after this break. You are listening to the Anette Mortgage and Realty Show on AM six 20 WTMJ
Speaker 2:Getting you into the home of your dreams. Here's more of the Anette Mortgage and Realty Show with Brian Weer on WTMJ.
Speaker 3:Welcome back to the Academic Mortgage and Realty Show. I'm David, that's Brian over there. Dad, I was telling you about some buyer clients of mine who, you know, were defeated the week prior having lost out to 11 other offers on a home that they were interested in, dusted themselves back off and za found a house, didn't need an appraisal on their, on the contract. And by Monday when we had the accepted offer all their documentation come Friday, we were basically clear to close. And what I wanted to detail was your question on how did my clients go about picking their interest rate and closing cost combination. Do you wanna take a guess? Maybe how the conversation went
Speaker 1:I think went , I think they went in the middle. 'cause you said you offered 'em 6.375 with a lot of points. Mm-Hmm <affirmative> , which would still have the lowest annual percentage rate because those points get slathered out over all 30 years. Points are just interest paid in advance in order to obtain a lower rate. Then you said you offered them a 7.3, a full 1% higher.
Speaker 3:Ugh .
Speaker 1:Yeah . At 7.375. But that was with no loan cost . And then you'd give 'em something in the middle like six nine . I
Speaker 3:Did give a 6 9 9. It know something not too hot, not too cold. Yeah, I
Speaker 1:Bet they picked the 6 9 9.
Speaker 3:Well what , so here's what, here's how the story actually went. They, we began with proposal three at the no cost option because what they, you know, as I reviewed with him , I was like, when you do proposal three, you have no sunk cost in a no cost loan option. That at any time when if when rates come down, you are not waiting to break even on an investment in to points to get the lower rate , to get the, you know, as I like to say , when you pay points, you're digging a hole, a one time hole, and then you're filling that hole one month at a time with your monthly payment savings.
Speaker 1:That's right.
Speaker 3:And so they began with proposal three and then come Wednesday upon further analysis and discussion, and here I'm gonna hit you with this , uh, reason they pivoted all the way to proposal one with the maximum points and the lowest rate
Speaker 1:Because, and
Speaker 3:Because , uh, so these folks do have a portfolio that they're , you know , um, has done well for them with their investment advisor. And at least the initial, and I didn't push back on this necessarily was because should rates come down, their expectation as a family is that their portfolio might rise in value offsetting the cost today to acquire the lower rate because their portfolio goes up in value.
Speaker 1:I don't track that, but okay. Hey, you know what? Whatever you want , uh, well exactly . It's just that you're never gonna get that, you know, we're hoping here in the mortgage industry in general and accu in particular, that maybe by the end of this year or the beginning of 2025, you know, maybe we're gonna be able to give people the 6.375 rate with no points. They're never gonna get their points back. I would point out,
Speaker 3:Not directly or at least as I as I think about that they're not, they're comfortable not getting it back directly and in their minds right or wrong, if their portfolio goes up, that will offset offset up what they might not recoup. Yeah.
Speaker 1:Okay. That's, that's , that's interesting logic and , and I
Speaker 3:And I and this , but this is why we offer choice. It's because it's their life. They need to be comfortable and they're, they're deciding for themselves. And I was like, okay ,
Speaker 1:Is this a primary residence?
Speaker 3:This is a primary.
Speaker 1:And if they, so if they do , um, itemize their deductions on their federal tax return and state tax return points paid on a primary residence are tax deductible. I just , uh, reverified that , um, last week on the IRS website and meaning that, you know , you can , you can say, Hey, I'm , I'm gonna reduce my income by the amount of points I paid on the purchase of my primary residence in the year that I paid them. So that kind of puts 'em on sale, if you will. Yeah . At whatever your marginal income tax rate is. So that's not nothing. Um, alright. I , I've got a , a similar story that we talked about last week relative to , uh, that big, big loan that we're doing in Florida to help these people buy the beautiful home on one of the keys in Florida. And you know, that's a situation where I actually recommended the paying of points because the cost to refinance in Florida is so high. Uh, Florida has a county and a state tax on mortgages why don't have an income tax. So you gotta get your tax money somewhere. Exactly . And then the title insurance costs are really high in Florida compared to Wisconsin and, and even Illinois. And so that's one where I , um, had recommended 6.375 paying I think one and a half points or so to get that rate on a jumbo mortgage. Yeah . Um , because it's over the conforming limit. So , um, the, the, I got a couple of rest of the stories on that you might remember from last week. I said I was gonna suggest that they borrow more money. Oh yeah. So they have more money left over after they buy this beautiful home to, you know, just have, and they took me up on that. So we increased loan 'em up by a couple hundred thousand dollars. But then there's a couple of other nuggets on that story that I want to , um, go over. Um, but we're gonna do that after we hand it over to the breaking news center.
Speaker 2:Don't break the bank 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 spending some of your Sunday with us. I'm Brian Wicker, the , uh, elder. That's David Wicker, the younger, taller, more handsome of the wicker's. And uh , we love what we do. In fact, David, you were telling me off the air that you had some , a real estate agent recently after a transaction say , I'm sending all my buyers to you. Why? Why did they say that? Uh ,
Speaker 3:Well, I mean, proof is in the pudding that , um, they enjoyed the experience. As much as you can tell someone that we're really good at what we do, there's nothing quite like, you know, showing them and proving it that we're really good at what we do. And having done that, they were like, we should do more transactions together. More things . And so we will .
Speaker 1:Yeah. When you're good at your craft and you're passionate about it, it it , it comes through and, and I don't, I don't do many loans anymore 'cause I'm like to have you younger folks , uh, take over that responsibility. But I had a nice compliment similar to that on this Florida transaction that we're doing. 'cause I think we all are trained , um, to go that extra mile and think of things like I was mentioning you , you know, we started out with a $1.3 million loan amount and I said, you know, maybe you wanna have a little money , more money left over . You really can afford it. And so
Speaker 3:These , did you take the incrementalism approach? Like, Hey, you starting at 1.3, how's about 1.301? I
Speaker 1:Just , I just went right to, they had shared with me in a conversation, Hey, you know what , we think we'd like to have like two years worth of living expenses left over . And so I took that and I did the math and I said, if you put this amount of money down, you're not gonna have that. But if you borrow another couple a hundred thousand, you know, move that loan amount up, you will have that two years worth of living expense reserve that you kind of said was, gives you comfort and , uh, you know, so that was cool. And they were like really happy , uh, with that advice. We also kind of talked through, because I did I mention that Florida title insurance is really expensive and , and on a big purchase price, you know , uh, it's, it was like almost $10,000 for the owner's policy. And what's weird about Florida, depending on what county you're doing business in, in Florida, sometimes the buyer is made to pay for all the title insurance costs. And that's the case up there in, I think we're in Sarasota County. And , uh, so they looked at that and said, do we need that? And so we had the conversation of, well I'm , I have to have a lender's policy for my loan amount and you know, that alone , which they also have to pay for, that's gonna be like six grand. And um, you know that, but that just protects me. If there's a problem with the title, the title company that wrote the policy is gonna have to fix the problem.
Speaker 3:Can I, can I clarify? Go ahead . So the lender's policy protects the lo the loan amount. Yeah ,
Speaker 1:The loan amount. And the lender, the beneficiary of the policy is, so let's just say, so it's 1.5 million and the beneficiary is a at its successors and or assign . So you just
Speaker 3:Better hope . Yes . But that doesn't, but that doesn't protect against, so that's only 1.5 if the house is worth 2.5,
Speaker 1:Well , in this case, almost three.
Speaker 3:Okay. The lender's policy does not cover all of that other equity that you might have in your house.
Speaker 1:That's that's right. And so we talked about that. You know, if there's, if there's a $2 million problem, you're not gonna get or $2.5 million problem. Hey, ACU Net's gonna be made whole or whoever we sell the loan to, but you are not. And they just went, we don't think there's gonna be such a problem. And, and frankly, neither I nor the title company could come up with a plausible example.
Speaker 3:Risk is what you don't see. Yeah .
Speaker 1:Yeah . As they say . Well , so that was a another interesting, you know, value added conversation. They made their decision. But then what I wanted to share is that , uh, you know, real estate transactions go through some emotional turmoil sometimes. And so you might recall from this story last week , um, the first thing I did was I , I looked up on the county website and , and saw that, oh , the old property taxes were eight grand. What are they gonna be after this place changes hands? And I came up with the number using the county's website of just $33,900. Yeah, that didn't phase 'em . Okay. So then the next thing , um, 'cause they thought they were gonna be maybe a little lower. Geez , I hope they are. Uh , but we qualified 'em at that 31 bigger number. Yeah . Then this property is in a floodplain and, you know , 'cause it , it's right on the key, you know, one of those little skinny island or if Smiths . Now luckily it's on the inland side, so the flood insurance, they're able to get it transferred from the old owner. Okay, now we're over to the homeowner's insurance, which is what covers hurricanes and wind. And you wanna guess what their first quote? They're , they got three quotes initially. Any , you just wanna take a wild guess.
Speaker 3:This is basically hurricane coverage is what they're getting quoted .
Speaker 1:Yeah . And it , and it's a $3 million house, but the cost to replace the house is only 1.2 million.
Speaker 3:Ah , 10,000 bucks.
Speaker 1:40,000,
Speaker 3:$40,000 .
Speaker 1:And then the next, the cheapest one, if they went with some combination of like Lloyd's of London and somebody else was all the way down to , uh, 32,000. So they're like, now that , now this is starting to give them pause <laugh> . Right?
Speaker 3:Not the property taxes, not the flood, but like, oh, you want the house rebuilt? Isn't that a little backwards? Almost? But
Speaker 1:Yeah , the flood insurance remember only covers you up to two 50 just by the way. Uh , 'cause it's fema. And, and so luckily they were able to find a policy that only costs 12,900 and, and that kind of made everything okay. But there was this moment of doubt we're like, maybe we don't wanna own this house. And, and so luckily they came out of that and it's all gonna work out. Alright. When we come back, I got a great email from a , a buyer looking to buy a duplex. Let's talk about that when we come back. David, you're listening to the Aate 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 Acuate Mortgage and Realty Show with Brian Wicker on WTMJ. Welcome back
Speaker 1:And thanks again for tuning into today's show. So, David, many people I know including our ecu , its own Jerry Circuit , um, and I remember our first neighbors when we bought in the St . Joe's area did the same thing. Many, many, many Milwaukeean have started out owning homes and buying a duplex as their first home. Sure, yeah. You know, hey, let's have somebody else make the rental payment and we'll live in that other unit and they'll help us make the mortgage payment is what I meant to say. And, you know, then you have to live there for a year in order for it to be considered owner occupied. And then, you know, maybe you move out and you keep that rental property and enjoy the rental income and go buy your single family house if you want that. So I got a , um, email , uh, on Friday , uh, from a client that we had worked on to do a pre-approval in 22, but didn't go anywhere. And so , uh, she writes that , uh, she's 37 and her boyfriend is 35. They're planning to get married and they see joint home ownership as a serious financial commitment. I agree. Uh , they're not certain if it's best to get married before or after a purchase. And they're kind of asking me to comment on each of these things. You go better to buy before or after you get married. Um ,
Speaker 3:I mean , how certain are you that you're actually gonna get married <laugh> ? Well , that's right. No , it's just , uh, and stay married and and remain married. Well , uh, but that's exactly it. What they're actually asking is, Hey Brian, if it doesn't work out, you know, how does the real estate get handled in are not married or married status? I don't
Speaker 1:Even , I don't even think they were thinking that way. I just was , I think they were thinking, is there some advantage in the mortgage world of being married? And the answer is no . No ,
Speaker 3:There's
Speaker 1:Not . But what I wrote back to them is, you know, nobody ever goes to the altar thinking that they're not gonna stay married
Speaker 3:For not , not nobody, but go on .
Speaker 1:Okay . Most people. And so I said, you know, the nice thing about being married and owning real estate is if you then dissolve the relationship, the courts take care of
Speaker 3:The education . Yeah . They compel you figure it out.
Speaker 1:Yeah. Oh , here , here's what's gonna happen to all your marital assets, you know, and then there's a referee. If you're not married, you don't have that. And so I said , well,
Speaker 3:There's no boyfriend court is what you're saying. That's ,
Speaker 1:That's right. <laugh> . And I said , uh, but you know, you could have this very unromantic thing called a prenup that says, you know, this is what's gonna happen if, if , uh, you know, we break up and we own this property together, here's how we're gonna handle it. I would say that mm , 2% of people do that. Uh, and these people are young. They don't have a lot of assets. She does own a condo, by the way. So she's a condo owner. And , um, you know , and it may turn out that, hey, they're just, they already, maybe they already have their wedding plan . I haven't talked to her live . Maybe they already have their wedding plan for, you know, September mm-Hmm . And so the only risk is that they would break up between the time they buy a home in May and or
Speaker 3:Duplex, which is okay because like September you can buy a house unmarried, and then if you break up, then you could just, you know , sell the house just like you can do in a divorce, by the way. You don't have to , well have to retain the real estate. You can just sell it . That's ,
Speaker 1:That's true. So, so that was question, you know, number one, and we've talked about that before on the show. Then she talks about, okay, she owns this condo that might be worth 70 or $80,000. She's not certain if she should keep it or sell it. And later on she says they have about $10,000 saved up for down payment. So those two things go together. What , uh, is the minimum down payment you can make if you're buying a duplex? David?
Speaker 3:Uh , if you're a military veteran, the answer to that question is 0%. Okay . They're ,
Speaker 1:But
Speaker 3:What if you're not otherwise FHA 3.5%, which is true, true . FHA one unit, 2, 3, 4 units. You can do three and a half percent down three
Speaker 1:Half percent . But I , and I pointed that out and I said , uh, but listing agents and sellers really don't like FHA because there can be no peeling or chipping paint anywhere that's outta concern of lead poisoning. There can be no broken glass on any of the windows or doors. You have to have handrails on all the steps inside and out. And there can be no trip hazards like, you know, uneven sidewalk slabs or can I cracks that you could trip over. Did I miss anything? Uh ,
Speaker 3:No, but I, I've, I've taken that , um, fear the stink eye sometimes that sellers, you know, cast toward an FHA preapproval. Yeah. And I've told buyers turn it around on the sellers and be like, wait, you're telling me your house is in such disrepair that this short list of safety stuff is really something that's gonna bother you?
Speaker 1:That's a good, that's a really good strategy, David .
Speaker 3:I mean , to turn it around, it's like your house is so crummy right now. Really? You're gonna beat me up that you've got chipping paint. Yeah . I mean, in a competitive situation you really don't have that juice as a buyer, but
Speaker 1:Well, but yeah . Yeah. And it's minimal down payment. But now we just had a nice , uh, so FHA does have a stigma, let's say, when it comes to Sure. Listing agents in particular, but maybe it can be overcome. We should put up together a marketing , uh, piece on that, by the way. Sure . Um , but now what just happened in conventional, regular Fannie Freddie land not too long
Speaker 3:Ago , uh, so it used to be that , uh, for a conventional loan on a two unit property, you would've to do 15 1 5, 15% down. That has been relaxed now where if you fit in the income box now more than ever, you could do as little as 5% down. That's right . On a two unit property. Let's get into some of those gritty details. As always, in mortgage lending, the devil is in the details. True And duplex as anything else, you are listening to the Acuate 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 Acuate Mortgage and Realty Show with Brian Wicker on WTMJ.
Speaker 1:Welcome back. And we're talking about , uh, uh, a very common, at least Milwaukee, and maybe this is true in other places , buying a duplex as a way to buy your first , uh, primary residence together. And we're talking about a young couple. Uh , and , and what are their options? Well, we've covered, you could do three and a half percent down on a FHA loan , uh, but that doesn't get looked on upon as favorably by listing agents because of FHA appraisal requirements , uh, and property condition requirements. So the good news is that now , uh, very recently Fannie Mae came out and said, you know, you can put as little as 5% down , um, on a duplex. 'cause they're trying to make homes more accessible to more people. And , uh, the interesting thing is, there's no income limit. Now , uh, with Fannie Mae, if your qualifying income is at 100% or less of the county's area meeting income, which for Milwaukee County is a hundred thousand, or right around there, maybe a hundred thousand $200 or something like that. Mm-Hmm . <affirmative> , then Fannie Mae will waive its loan level price adjustments. Think of this as risk penalties, which on a duplex are now 1.25% of the loan amount. So that's not too bad. Even if you're above and if with their combined income , uh, she writes her email , she makes 70,000 and he makes 55. So together , uh, they're over that a hundred percent area median income limit. They're also over the , uh, limit for , uh, our special Wisconsin first time home buyers program. Um, but we , we've got a shot at 5% down. So then, you know, her other question had to do whether she should sell her condo because they only have $10,000 for a down payment. And I started doing some math. I said, well, if you wanna buy a $250,000 duplex, you know, 5% down is 12 five mm-Hmm. <affirmative> . And then plus don't forget, you got your first time, your first year of homeowner's insurance, you gotta put away two or three months into the PEs grow account. Um, loan costs on a duplex are about $1,700 because the appraisals are more expensive. Mm-Hmm. <affirmative> and , uh, what am , oh , and you got the , uh, home inspection, which is also gonna be more costly 'cause it's a bigger property. You're looking at like four grand of other things in addition to the down payment. So I said, I think you gotta sell your condo so that you have extra money and you can buy a nicer duplex. So we basically , you know, kind of kinda answering all of her questions as to, you know, how should we navigate through this? Um, so we'll see. She's got a lot to digest over to you, Dave.
Speaker 3:There's, I mean, you , you've got the analysis part spot on , but in, there's a competitive part to this too that I'm sure was in the back of your mind that there are not just home buyers interested in snapping up $250,000 duplexes. You're competing against investors and cash offers as well. And so that's the other part of this coin is yeah, we can get you set up and we can hand you the pre-approval letter that details Yep . We can get you the mortgage, but then you must go forth into the marketplace and convince a seller to pick yours over somebody else's. If she sells that condo, they are likely to be able to say, Hey, we can do 20% down the magical 20% down or more on this duplex. And then, and then if privately they're like, you know what, shoot, we'd like to keep our cash. Just put the five utilize Yeah. As little as 5% down. That's the other part of this analysis as well.
Speaker 1:Yeah. You're , you're absolutely right. The , um, other thing is guess what, how we got in contact with this 30 something person, her mother Okay . Who we helped , uh, and her husband buy a really nice place way up north in the northern most regions of Minnesota. And , um, so maybe we'll say, Hey, what about a gift for mom and dad? If not, in reality. Yeah. Well , you know, maybe that backup gift that we talked about. Uh ,
Speaker 3:Can I also, can I also just say like, and this is my personal bias, that, you know, don't keep the condo as a rental property. The , the cash proceeds has so much more value to you and your life than the couple hundred bucks you might be getting, you know, net rental income above the cost. Oh ,
Speaker 1:You know what ? There's a family thing. Her mother and mother's husband owns some rental properties. So there's just kind of this family tradition of rental properties are good, right? And a and a good investment. So, but, but they're short on, on down payment. I mean, with just $10,000 for down payment and closing costs , that is not gonna get you very far , um, in today's market. So that's a , a recap. Uh , love to help young people , uh, figure out their path towards their next house in this case or first house in the case of the fiance because he's not been a home buyer before, David, that's gone by fast today. Today's show, thanks for as it does your , uh, help and talking through all these fun issues. We'll be here at the same time next week. 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 Accu 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.