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 Mortgage and Realty. And now, here's Brian Wicker and Tim Holdman.
Speaker 1:Welcome to the Acade Mortgage and Realty Show. I'm Brian Wicker, licensed real estate broker with ANet Realty Advisors and the majority owner of Acade Mortgage, along with my son-in-Law, Tim Holdman , who's one of our top senior loan consultants. My individual N-M-L-S-I-D number is 2 5 9 6 1 0. And Tims N-M-L-S-I-D number is 1 5 9 3 1 4 6 . If you have 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 remember, you can grab a podcast of today's show or any of our past shows wherever you normally get your podcast. All right , Tim. So hot off the press Friday morning. The National Association of Realtors announced us that they have reached an agreement with all of the plaintiffs in the class action lawsuits across the country that , uh, are suing various members of the National Association of Realtors , uh, over the payment of commissions to agents who worked with the buyers. And so there have already been hundreds of millions of dollars that have changed hands in the first couple of class action lawsuits. And , um, maybe we should start out by reminding folks how the current , uh, ecosystem works with real estate commissions. Do you want to take a crack at
Speaker 3:That? Sure. So I , the, the, how did we get here, I guess , uh, you know, setting the , the table. So normally , uh, when someone decides to list their home for sale, they hire a realtor who will then list that property on the multiple listing service, and they will agree to pay the listing agent a certain percentage of the sale proceeds, right? So typically it's 6%, let's say five or
Speaker 1:Six. Some are lower, there are some flat fee agents out there because price fixing has always been a concern. Let's use 5% as an example. You sounds good . Hey , I'm gonna list my , my $400,000 home and I'm gonna pay you , uh, mr. Listing brokerage 5%. So that's 20 grand to have the exclusive right to market and sell my property. Alright , go on from there
Speaker 3:E Exactly . And the way we educate our buyers is that we recommend they have their own agent that is representing their fiduciary interests known as a buyer's agent, but that buyer's agent isn't paid from the buyer. They're , it's not like you're stroking a check for $5,000 to your realtor if you're a home shopper or home buyer. So that realtor gets paid from the proceeds of the sale from the seller. So the seller is paying both agents involved in the transaction.
Speaker 1:And technically, and this is, this goes to the lawsuits, the seller pays the listing broker
Speaker 3:And then the listing. Yeah. The listing broker pays the buyer agents right through
Speaker 1:The multiple listing service. The listing broker is offering compensation to any other agent, whether the agent's working under contract with the buyer or is
Speaker 3:Or not,
Speaker 1:Or not, and they'll say, Hey, we'll pay you 2.4% of the , uh, sale price. So on $400,000 , uh, that's eight. What does that come out to? Tim?
Speaker 3:Oh boy. Lemme get my calculator. <laugh>.
Speaker 1:Alright , we'll get that out. 2.4% on that 8,000
Speaker 3:$9,600.
Speaker 1:9,600 bucks. Yeah. Yeah . So of the $20,000, the listing broker says, Hey, whatever brokerage out there finds us a buyer, whether they're working directly under contract with the buyer or just kind of unaffiliated, which makes them actually a subagent of the seller , uh, we'll pay them that 9,600 bucks. Well, that is the whole crux is that the offer of compensation through the multiple listing service is deemed to be anti-competitive. Right. 'cause it, it masked, you know, how much the buyers were paying for the services of the agent that was , uh, walking 'em through the house. And so under this , um, settlement agreement, it is effective in mid-July. And it seems like they're going ahead with this regardless of whether the court approves of the settlement agreement,
Speaker 3:They're just deciding. Yeah.
Speaker 1:Well, the parties have agreed Mm-Hmm . <affirmative> , and I think the National Association of Realtors is realizing we gotta do this no matter what. Because not only are these private lawsuits , um, out there, but also the Department of Justice has long been looking at the real estate industry, right . And wanting it to change its , uh, commission practices. So thing number one is that effective in mid-July, no exact date, but they're saying in mid-July, listing brokerages can no longer offer compensation to other agents via the MLS. Wow . Now, it goes on to say you can do it off the MLS <laugh> . Oh ,
Speaker 3:Wait a minute, how's that gonna work?
Speaker 1:How's that gonna work? So there's a big fat question mark, and it also says sellers can offer buyer concessions on the MLS. So for example , uh, you know, maybe one scenario is, Hey, I'm a listing agent now and maybe I'm gonna list your house for 3% instead of five mm . And then maybe the seller through the multiple listing service says, and you know what? I as the seller will agree to pay 2% of the asking PR or the settle , you know, offer price to the buyer to help with their closing costs , whatever they may be. Ah , alright . There's more meat on this very interesting bone. We'll come back and chew on it a little bit more right after this first break. You're 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 Net Mortgage and Realty Show with Brian Wicker on WTMJ.
Speaker 1:Welcome back and thanks for tuning into today's Seat Patrick Day Show. And we are talking about Friday's announcement from the National Association of Realtors about how compensation is gonna change. But you know, this is important for both home sellers and home buyers . Yep . And , uh, we talked in the first segment about how under this , uh, settlement that still needs to be approved by the court, but seems like it is going to get implemented by members of the National Association of Realtors , um, effective in mid-July, is that listing brokers can no longer use the MLS to offer compensation to other agents who bring a buyer to the seller. Oh . So this just kind of causes all sorts of questions to arise. Like, oh , what are listing agents gonna do? Are they gonna now, you know, say, Hey, you know what, I'm gonna list your house for less. I'm gonna list it for 2% instead of five, I'm gonna list it for 3% instead of five. And then, you know, you can decide, Mr. Seller, if you wanna offer compensation to an agent , the buyer directly representing a buyer. Right? Right. So it's gonna create a whole bunch of conversation, which I think is what the parties are looking for on the other side, the plaintiffs. And they're saying, you know, we need to have more discussion about how are we gonna pay the agents involved instead of, you know, what has been a fairly easy to understand , um, kind of simple, simple math, right? Hey, I'm gonna pay you 5% no matter what, no matter who sells . That's, that's the current deal between the home seller and the listing brokerage is I'm gonna pay you X percent of the , uh, sales price regardless. It was who sells the property? Who, who finds the buyer? Well, now we're forcing additional under this settlement discussion between, well , what happens if the buyer comes with a different agent and they're Mm-Hmm. <affirmative> they're forcing this to be a conversation and a contract , uh, variation. Then the other conversation that hasn't had to happen before is agents who are working with a buyer now, and this is part of the settlement, must have written agreements with the buyer for compensation effective in mid-July. So right now that's optional, right, Tim, you've got buyers, some of 'em have formal agreements with agents who are taking around to shop and some don't.
Speaker 3:Right? Yeah. And it's, you know, go ahead. Easily. It's a 50 50 split. In fact, I mean, and this is just my own personal , uh, experience and , and slice of the overall market, but I probably see more purchase contracts that do not have the buyer agency agreement then do , uh, so it's de this is definitely a big shift where effective mid-July, that's a requirement, you know, where it wasn't before.
Speaker 1:Yeah. And so, so now that it , it's coming out into the open, which is kind of what the Department of Justice wanted. They wanted buyers to
Speaker 3:Realize, shine, shine a light on it. Yeah.
Speaker 1:Yeah. Because right now it seems to the buyer, I'm not paying anything
Speaker 3:<laugh> . Right .
Speaker 1:'cause it's not on their side of the closing statement. Yeah.
Speaker 3:It's on the seller side. Yeah.
Speaker 1:Right. And so now, oh, you gotta have a written agreement. How much are you gonna pay that nice buyer's agent? Are you gonna pay them by the number of homes they take you around to see? Or are you gonna pay them based on the number of offers they write for you? Or are you just gonna pay 'em a success fee? Which is essentially what happens now, but wait, is , is 2.4% the right number, which is kind of common in the southeastern Wisconsin market? Mm-Hmm . <affirmative> ? Or are you gonna say, well, geez , you know what, I'm buying an $800,000 house. Uh , you know, maybe 1% seems more like it, that would be eight grand, you know, or is it 2%? So there's gonna be some out in the open conversations that have to happen . I've already seen one where I was surprised to see the , uh, re max agent already lowered their compensation to 2% as a buyer's agent. Yeah. So that's, that's kinda what the Department of Justice is looking for. So just know if you're out there, you know, right now as an active buyer or you're about to list your property for sale, you know what, I think this is gonna affect people that have their homes listed. There's a lot yet to be determined and understood. Uh, so this is gonna be an evolving story, but , uh, we're here to help you think your way through it. Um, as you, you know, look to make an offer on a property, there are gonna be ways for buyers to , um, not have to compensate out of their pocket a buyer's agent. Would you agree with that too ? Well,
Speaker 3:Right. And that's the main concern, or , or was the main concern out of all these lawsuits is like, the buyers are like, well, most buyers don't have extra cash in the bank to the tune of five grand, six grand, you know, eight grand, whatever, to pay a , a realtor on top of their down payment and their normal closing costs that they have to budget for. So that's the, the , you know, was the big concern is like, okay, if the buyer's agents still need to be paid, where is that compensation going to come from if it doesn't come from the listing agent's commission, which is how it was previously arranged.
Speaker 1:Yep . So it's, it's gonna get a little messier, but , uh, I think we're gonna be able to help people navigate what you really don't wanna see, though, you still wanna see people get the advice of , um, a buyer's agent, right . You know , who can help them? Well , am I , is this property listed too high or is it listed just right? You know ? Mm-Hmm . <affirmative> . How , how is it priced without somebody being your advocate and getting paid for it? You know, like an attorney's not gonna be able to tell you what to pay for the house. No. Right . They're just gonna write up the contract. So I hope that it doesn't result in people being unrepresented. Alright , when we come back, let's talk about the market as it is right now. You are listening to the Academic Mortgage and Realty Show on AM six 20 WTMJ,
Speaker 2:Getting you into the home of your dreams. Here's more of the ACU Mortgage and Realty Show with Brian Wicker on WTMJ.
Speaker 1:Thanks again for tuning in to today's show. I'm Brian Wicker , the elder. That's , uh, Tim Holdman, my son-in-Law.
Speaker 3:Good morning . Senior
Speaker 1:Vice . Oh, senior loan consultant with academic
Speaker 3:Mortgage. I'll take Senior Vice president. That's fine. Yeah. <laugh> ,
Speaker 1:I'll get a promotion and then you'll Yeah ,
Speaker 3:Sure.
Speaker 1:Why not? Liability. Sure. All that kind of
Speaker 3:Good stuff. <laugh> .
Speaker 1:Hey , uh, one thing, we were talking in the first two segments about this , uh, proposed , uh, class action lawsuit settlement over how real estate , uh, agents and brokers get compensated. One thing I failed to mention is that is the National Association of Realtors has agreed to pay $418 million to settle that and also , uh, release from all liability, of course. And admit no wrongdoing. Uh , so , uh, we'll see. We'll keep you posted on that, and I'm sure we'll have interesting stories to tell as reality , uh, you know, interfaces with this , uh, settlement. Alright ? Mm-Hmm . <affirmative> . But let's talk about the market . Tim. Um , just wanted to refine the numbers from February here in the five county metro Milwaukee area, and , uh, let everybody know that home sales in February compared to a year earlier, and maybe it's because there was one more day,
Speaker 3:<laugh> , that , that extra leap they did it. Yeah. Yeah.
Speaker 1:We had 66 more , uh, condominium and single family detached home sales in the five county metro area according to the multiple listing service, which means the transaction was facilitated by a member of the National Association of Realtors. So that means that 974 transactions took place, median sales price was up 7.4% from a year earlier , uh, up almost 20 grand , uh, to be just a frog hair under 290,000 bucks. Listings were also up compared to last year. So that's good list . There were 82 more , uh, single family detached condos that came on the market, and , uh, that is 6.7% higher. The other thing I like to look at though, is , um, speed , uh, how many days on market
Speaker 3:Yeah. To close. Yeah.
Speaker 1:Yeah. And it's higher , uh, which is interesting. So, Hmm . You know, what does that mean? So my , uh, top uh , markets, the average continuous days on market , uh, for the five county areas, single family detached, you know, all price ranges was 52 days, five, two, wow . I can't remember it being above 30 for a long time. Uh, and then you got, Waukesha was at the median city of Milwaukee was at 51 Ocon Walk , 46 Brookfield 46 West Bend 40 days , uh, Greenfield 33, Wauwatosa 32, geez , doesn't that seem long? 32 days in Wauwatosa .
Speaker 3:Maybe there's just one, you know, shack property that's been on the market for like 200 days that's bringing the average up or something. Maybe
Speaker 1:<laugh> , although I did it has to , the municipality has to have at least 10 closed sales.
Speaker 3:Okay.
Speaker 1:So that would dilute the outlier a little bit . Racine was 32 days. West Dallas , 28, and Oak Creek 18 days. Wow . So that, that , that surprised me because we still are hearing, you know, about multiple offers, right? Mm-Hmm. <affirmative>. And do you have any, or you were just telling me off the air about somebody who , uh, was in the catbird seat until they weren't You wanna tell about that?
Speaker 3:Yes . I mean, fast closings are still , uh, a super helpful tool to help get buyers get their offers accepted. So that's why I'm surprised , uh, that, like you said, that data is trending upwards for , uh, time to close. But I had some customers who , uh, first time home buyers , uh, got a bunch of kids now and , and trying to get into their first home to get a little bit more space. And they found a , a home on the south side of Milwaukee that they were in love with. And the , the wife turned to her husband and said, I want this house. Let's go get it. So they were , they were all in, they were in it to win it. They wanted to do everything they could. So we, we crafted a really strong offer , uh, you know, 15 K above the listing price, no inspection contingency whatsoever, no appraisal contingency whatsoever, only a financing contingency. And we offered a very fast close, I think 21 day close. Right. Uh , chatted with the listing agent. 'cause you know, as I'm sure you've talked about, that's something NT Loan consultants are happy to do, is to, you know , to help get their customers into the winner circle. We , we call the listing agent to chat up the strength of the offer. And the listing agent even said, you know, Hey, yeah, we're , we're reviewing offers until tomorrow night, but as of now, I feel really good about your offer. I had worked with this agent before, you know, so
Speaker 1:I got a question. Oh yeah. What percent down, what percent down were these people?
Speaker 3:Ah, excellent question. It was a 3% down pre-approval. So, ah , sneakily. And, you know, the listing agent was sharp enough to notice this. Really, the financing contingency was the backdoor appraisal contingency. Right. Because if it appraised low, we couldn't approve the mortgage. 'cause they didn't have additional funds to bridge the gap on their own. Like, like we can do with a lot of other buyers with a larger down payment. Yeah . We ,
Speaker 1:We couldn't raise the loan amount anymore. Another thing that I like to keep track of is Days on Market or Velocity. Yeah . We're gonna have to get to the punchline of this
Speaker 3:Story. All right . Sounds good. Yeah . After
Speaker 1:We take our break for the news 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. Welcome
Speaker 1:Back and thanks again for spending part of your Sunday with us. Hey, the , the bucks are gonna be playing against the Phoenix Sun, so we wish them well here , uh, just a little bit while, a little bit after the show. Yes , indeed. So Tim, you were telling us about a buyer that you , uh, were working with. You knew the listing agent. It , uh, was 3% down. Was it conventional, FHA conventional financing, Fannie Mae
Speaker 3:Con , conventional Fannie Mae financing. Yep . And , uh, you know, they were in the, the front runner, I think, position. Um ,
Speaker 1:'cause they were how much over asking,
Speaker 3:You know, 15 k over asking , which based on the, the list price, I think there was , um, easily like o over 5% above list. I think it was maybe six or seven above list. Okay.
Speaker 1:And they waved their finance No, they waived their waive , their appraisal contingency
Speaker 3:Yep . And their inspection contingency. So really the, the financing was the only safety net that they were allowing themselves. And , um, yeah. Gosh, they they were , they were really excited. You know, they had their hopes up. They , they , we literally pre-approved 'em like two days earlier. So they , they had just begun the house hunt and they were, the classic example of is like, we put that pre-approval letter in their inbox, and they literally looked at the house that day, wrote the offer. They were , they were just, they were all in. And they got the news that their offer was not accepted, but it was because according to the seller, another offer came in complete cash offer $40,000 above list price, and that knocked all the other offers out of the water. Yeah . Underst understandably so. I , I , I said to them, I was like, if you were the sellers, you would take that, you take that offer too . I saw ,
Speaker 1:Yeah . And you had mentioned to me off the air that the listing agent also noticed something about the appraisal contingency waiver.
Speaker 3:Yes . So the really, the waiver of the appraisal contingency in this particular case was mostly window dressing. And that's because the pre-approval and the financing contingency were so written that it was a 3% down or 97% financing scenario. And the listing agent was smart enough to understand that if the appraisal came in low, that would give them an out where they would not get the financing approved <laugh> based on the terms in the contract. Right . And , and therefore they could legally back out that way. So it was, you know, it , uh, I think David has used this before, like the, the appra the financing contingency is kinda like the backdoor appraisal contingency. Correct. In some cases, and this is one of those cases,
Speaker 1:And this is a situation where they didn't have any appraisal wiggle room because the only wiggle room they could offer was if they had more cash to put down in the case of a short appraisal. So that was a weakness of their particular offer. I wanna point out that in Wisconsin, if a seller makes a cash offer, the uh , seller has the right to demand proof that they can actually pay cash. Right . Which is good. And, and the way you can do that is you
Speaker 3:And they should, frankly, yeah ,
Speaker 1:You'd be an idiot not to. Um, and the two ways you can do that is actually show 'em redacted bank or investment account statements. You know, you can black out your Mm-Hmm . <affirmative> , um, account number. Yeah .
Speaker 3:Or you can't do that for loan approvals. But you can do that for proof of funds, no <laugh>
Speaker 1:For the contract. Or you can get a letter from your financial institution that says, to whom it may concern, this is to verify that, you know, Fred and Ethel have $500,000 in liquid assets that they can use. Was
Speaker 3:That a I love Lucy reference just now. It is.
Speaker 1:Oh my goodness. Fred Ethel, Merman , that mer Oh man.
Speaker 3:<laugh> .
Speaker 1:Okay. So let's start talking about another , uh, a home buyer. You were mentioning to me somebody who's got two in-person jobs. Not everybody can be a remote worker
Speaker 3:No.
Speaker 1:In today's economy, this , so tell us about that.
Speaker 3:Yeah, this was a fun one because it really allowed me to exercise my mortgage , uh, diagnosing muscle , which is kind of the most fun part about our job, right? I mean, the assembly of the mortgage itself is, you know, kind of meat and potatoes. But this was, this was pretty fun. And I'm sure we'll, we'll go more into the next segment about this too. But , uh, customer was referred to me by one of my past customers, and she was like, I'm already pre-approved with UW Credit Union. Uh, you know, I got , uh, my banks there, so just kind of went in and did it real quick. And she's like, I'm kind of nervous. I was like, well, why are you nervous? And she's like ,
Speaker 1:Why are you nervous?
Speaker 3:So she's like, I , I'm , I'm a teacher in Dodge County and I've been doing that for 20 years, and I'm also a server at a restaurant as a part-time job. But I've been doing that for five years as a nice way to supplement my income. And that's how UW Credit Union , uh, approved me, was based off that income. And I was like, okay, sounds good so far. Right. Nothing wrong there. But here's the kicker. The home she wants to buy is in Manish Waters. Four hours. That's way up north.
Speaker 1:Yeah ,
Speaker 3:North, north . Yeah. Four and a half hours north. And I was like, oh yeah, that is a problem. Because, and , and you know, and she was very sweet. And she said, well, you know, I'm, you know, I , I don't , I'm nervous. I don't wanna attest at closing that I'm gonna keep these jobs because I can't. I was like, ma'am, that's not even real . I mean, I appreciate you saying that, but no mortgage underwriter worth their salt is going to approve the loan. Even if you say that you're gonna keep those jobs <laugh>. Right . 'cause Right , right . It doesn't pass the smell test. Right. Yeah. So when we get back , uh, we'll dive into the , uh, the different scenarios that I mapped out for, and we are gonna find a way to help her out. So we'll get into more about how , uh, we put together a game plan to help her. You're listening to The Kin at Mortgage and Realty Show, 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 and thanks again for tuning in to today's St. Patrick's Day edition of the Academic Mortgage and Realty Show. Tim, you're telling us about a , uh, home buyer referred to you by a past customer who's looking to buy a place up north. Her , she currently owns a home here in southeastern Wisconsin and has jobs that require in-person , uh, participation. Correct. Uh , teacher and a server. So how are you gonna help her buy up north when she doesn't have employment up there ? Yeah,
Speaker 3:So there's actually two , uh, different ways that we might be able to help her. It depends on a couple real life things. So, option number one, I told her that because she is playing on living up there eventually, right? The, the , um, seller, she , she knows the seller. So it's already a particular property in mine. It's gonna happen off market . Okay . And the sellers wanna live there until July 15th. That doesn't mean they have to wait that long to close, but they have to, they wanna live there until least July 15th. So I said, well, depending on how things go , uh, you know, she's not of retirement age yet. Our , our customer. So she is planning on finding new gainful employment up there. And I said, because there's some flexibility in this when, since you know, the seller and you could go out and find a full-time salary job up in that area and get an offer letter with a start date, an income agreement, no contingencies of employment, and we can qualify you as a, with a primary residence mortgage with that future income program that I know we've talked about before on , on the show. Right . And she'll have a substantial down payment because of her home sale proceeds from her home here in , in town. So that's option one. What
Speaker 1:About, I got a question about that house. Yeah . Is it already on the market?
Speaker 3:She already has a buyer lined up and , uh, and that's also gonna happen off market . 'cause she has , uh, someone she knows from a title company who is really just gonna cook up the WB 11 and knock that all out. So literally those people are standing by just waiting for her to say the word go to buy up her current property.
Speaker 1:Okay. So that's cool. So she's got a big down payment. She's gotta seller or her property lined up. Yeah .
Speaker 3:Income is the kicker. She the job . Yeah. Yeah, exactly . Comes right .
Speaker 1:But wait, you came up with another way to ,
Speaker 3:Uh , yes. So , uh, the option number two is we could actually, because she has someone in town that will let her live with her rent free after she sells her home in southeastern Wisconsin. So the second scenario we could do is we could do the mortgage on the up north property as a second home mortgage. And she continues to work here for indefinitely. 'cause , you know, there's no occupancy requirement with a second home mortgage. So she can let the sellers live there into the summer, even into the fall and beyond. And she continues to work her current jobs until further notice because it's not like she, you know, she, she just wants to get the property. It's not like she's saying she needs to go up there and live there immediately. And, and she enjoys her jobs that she's bo you know, been working here for a long time. So she would be fine going that route too , of just continuing to stay here and work , uh, until a new job , uh, maybe presents itself at some point in the future up north.
Speaker 1:So then obviously the pricing on a vacation home in today's mortgage world is a little less favorable, but with a big down payment, it's not gonna be that huge a deal. Yeah.
Speaker 3:And it's the price of the flexibility, you know, I , I , that's the way I , I described it. So , uh, I
Speaker 1:Kind of like that the , the second home route. And then, you know , when she does move up there, hopefully rates will be lower and we'll be able to refinance her , uh, right . Into a lower rate.
Speaker 3:Exactly. Right .
Speaker 1:So it's all about finding different ways to solve the puzzle , uh, you know, when it's presented, you know, I just had a loan application , uh, come in , uh, that David and I are tag teaming and , uh, you know, we normally like to look for , um, a way to take advantage of some special loan program. Right? That's the triage Yeah . That we do. Mm-Hmm. <affirmative> , uh, these people are both first time home buyers , but together , uh, and this is in a , in a northeastern Wisconsin county, they make too much money Mm . To qualify for our special first time home buyer money, which counts the income of the household regardless of who's on the loan. Yep . And so then our next move is, well, could we leave one of their incomes off , uh, so that we get into this category where they earn less than 100% of the area median income. And the reason why that's a cool thing is if , if you fall into that basket of earning less than 100% of the county's area median income, Fannie Mae and Freddie Mac will waive all the little price penalties. Mm-Hmm . <affirmative> for having a certain combination of credit score and , uh, down payment. And they like your buyers are in that 3% down.
Speaker 3:Yeah. So it'll ultimately make their closing costs and rate options more favorable. 'cause all those behind the scenes , uh, fees are, are waived with that program.
Speaker 1:So, and so in this particular case, because one of the borrower's credit scores is in the high six hundreds mm-Hmm . <affirmative> , I think we've gotta take a look at FHA , uh, yeah . As an alternative. And the reason is that FHA is government mortgage insurance, which does not vary based on the borrower's credit score credit score. Right . It's the same whereas private mortgage insurance does. Hey, when we come back, let's just do a little recap of , uh, where rates ended up this last week. It was kind of an active week for economic news. You are listening to the Audet Mortgage and Realty Show on AM six 20 WTMJ.
Speaker 2:Find a place to call home without the headache. This is the Audet Mortgage and Realty Show with Brian Wicker on WTMJ.
Speaker 1:Welcome back to the A Mortgage and Realty Show. I'm Brian Wicker , the elder, that's Tim Holdman, senior loan consultant. Uh , father of my two oldest grandchildren, <laugh> , which makes him my son-in-Law. And so , uh, Tim, it was an interesting week last week for mortgage rates , uh, mortgage news daily, which we think is the most accurate , uh, measurement of , uh, mortgage rate , uh, situation around the country. Uh, posted that interest rates are up to 7.09% for a best case scenario . Ah , over
Speaker 3:Seven again.
Speaker 1:Yeah. We had, we had trickled down, you know, into the 6.9 range and now low overhead ACU net could still offer a 6.99% , uh, rate. That's, so with 24 20 5% down, buying a $300,000 home, which is about the median sales price, that's with a seven 80 qualifying FICO score, no second mortgage and all the other Right. Stuff. And that would come with a loan cost of $1,978 because you'd be paying a pinch of points,
Speaker 3:Just a little bit
Speaker 1:Five , $560 to get that six handle on the mortgage, which makes the annual percentage rate 7.03. Now , uh, over in first time home buyer world , uh, the special 30 year fixed rate for first time home buyers , uh, and this is , uh, income related . So you cannot make a family of one to two people cannot earn more than $99,900 of household income to qualify for the super fantastic rate of 5.875% if you have three or more people in your household. So, you know, maybe some kids Mm-Hmm . <affirmative> can earn up to $114,885. And so, you know, that's a big difference. Uh, even on a $225,000 mortgage, that is a payment difference of 164 bucks a month. Yeah . Is what that's worth. Now the annual percentage rate will depend on your down payment , uh, because most first time home buyers , uh, have to pay for private mortgage insurance. Mm-Hmm. <affirmative> . And the cost of that private mortgage insurance gets added right onto the interest rate when Cal calculating your, your , uh, annual percentage rate. So depending on how good your credit score is, you know, maybe your a PR is gonna be between six and a quarter,
Speaker 3:Six , seven . And one other thing I'll point I'll mention about that special program, Brian, with the 5.875% rate as of today. Yeah . If the, if the qualifying income, so not even the household income, but the, the income being used to qualify for the mortgage, if that happens to be less than 80% of the , uh, area median, you know, income census tract, it's a discount on that private mortgage insurance, which you know, is just as good as dropping the rate a little bit more. 'cause it , it lowers the monthly payment. So you know that that's a tough bucket to fit into in some cases. But that is a little extra perk is that if you are, you know , have very minimal debt and , and your income is enough to get you the mortgage, you won't, but you're also underneath 80% of the area media income area median , uh, yeah. A PMI discount for you.
Speaker 1:Yep . That's, so we're always looking for the most efficient way, you know, to help , uh, somebody buy a home. Uh , other couple of true statements , uh, there's just an article in, I forget if it was the Wall Street Journal or the New York Times that recapped Yeah. You know , adjustable rate mortgages are really not an effective tool.
Speaker 3:I saw that article. Yeah.
Speaker 1:Market . Yeah. And the reason is that adjustable rate mortgages where the rates typically fixed for five or seven years, those rates are the same right now because short term interest rates are higher. Uh , like if you look at a two or three or a five year treasury yield that's higher than it is for a 10 year treasury or a 30 year treasury. And so adjustable rate mortgages have not been our friend in this interest rate cycle. Uh , reasons why the rates kind of ticked up this last week. We got the inflation reading at the consumer level on Tuesday that's called the CPI Consumer Price Index. And it was a little hotter than expected. Things weren't so bad then we got retail sales more robust than expected. And then we also got the producer price index, which is in wholesale level. And that's kind of what really spooked the market. Um , because you figure, oh , if , if it's uh , high at the wholesale level, it's probably gonna follow through to the retail level. That's what made rates trickle up. Doesn't seem to be holding back our home buyers. Right. Jim
Speaker 3:<laugh> ? No, no. I still got a lot of people looking and shopping and uh, yeah. The desire to own a home is greater than the desire to wait for rates to get lower. Yep .
Speaker 1:Which is fine. Alright, well that's all the time we have for today's show, folks. Thanks for tuning in and go bucks . You've been listening to the Academic Mortgage and Realty Show on Wisconsin's radio station AM six 20 WTMJ. The proceeding was a paid program. Advice and opinions expressed during the Accu Net 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.