The Accunet Mortgage and Realty Show
The Accunet Mortgage and Realty Show
The Accunet Mortgage & Realty Show 8-4-24
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 Anette Mortgage and Realty Show, getting you inside information on buying, selling, and financing your home with expert advice from Anette Mortgage and Realty. And now, here's Brian Wicker and Tim Holdman.
Speaker 1:Welcome to the Anette Mortgage and Realty Show. I'm Brian Wicker, licensed real estate broker with AED Realty Advisors and majority owner of ACU Mortgage, where my individual NMLS ID number is 2 5 9 6 1 0. And I'm here today along with my son-in-Law. Tim Holdman , our top senior loan consultant at AED Mortgage. And his individual NMLS ID number is 1 5 9 3 1 4 6 . Yes , indeed . If you 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 . So , Tim, it was a great week. I , I wonder if this was the best week in a year,
Speaker 3:This year. Uh , probably . I would almost be willing to bet it was for
Speaker 1:Sure , uh, for mortgage rates and other long-term interest rates. Let's talk about the why and then we'll get to the what. Absolutely. And do all someone , I'm gonna do a little refresher Okay. On refinancing, because like for the first
Speaker 3:Time, sorry, what, what is that word? What
Speaker 1:Yeah. There , there are gonna be some people who can benefit from , uh, refinancing. So we'll do a little refresher on on that. So, you know, I think a lot of homeowners and home shoppers, Tim, you know, if they're tuned into interest rates Yeah . They , they probably were aware that the Federal Reserve is widely expected to do their first rate cut in September. Right.
Speaker 3:They, they met on this past Wednesday and they didn't change rates at that meeting. So the maybe more uninformed general, you know, person out there might think, oh, well re rates didn't change 'cause the Fed didn't change rates. Right.
Speaker 1:Right. And remember they only control one rate, right? Yeah . The interest rate that banks charge each other overnight. Yeah. So it's not even really related.
Speaker 3:It's not long term mortgage rates.
Speaker 1:No , it's not related to
Speaker 3:Complete opposite. Yeah .
Speaker 1:But as a reminder, what, and we've said this , uh, probably a hundred times on the radio show, the reason that the Fed had cranked up rates and the reason that mortgage rates are high was because of inflation. Right. Okay. And so now we've had some, a couple of friendly inflation reports Yeah . The last month. Um, and then he had the, the fed , uh, chairman Powell on Wednesday in his news conference said everything, but we're gonna have a rate cut in September. Yes . Right ? Yes . So , so the market was
Speaker 3:Like, I listened to the, the , the press conference. He was very good at not fully committing, but if you're reading the tea leaves, he basically said it's all but a certainty Yeah . That they will cut rates for the first time this year in September.
Speaker 1:Then on Thursday we got a weekly , uh, jobless , uh, unemployment claims. Mm-Hmm. <affirmative> . Mm-Hmm . <affirmative> . And that was higher than expected. Right. So, you know, that's if, if if more people , um, if fewer people are employed, that means they have less money to spend. Mm-Hmm. <affirmative> . And so that is disinflationary, if that's a
Speaker 3:Word. And it's really more about how did the data match up to expectations. Expectations . That's right . Right . Exactly. So the whole thing is that there , the , it was worse than expected, which ironically was good news for
Speaker 1:Mortgage rates. Good for mortgage rates. Yeah. And then the other big thing, so you got inflation numbers, and then you have job numbers. And we got the , um, monthly jobs report for July Mm-Hmm. <affirmative> came out last Friday. And boy did that disappoint Yeah. In a good way for mortgage rates .
Speaker 3:<laugh> . Right.
Speaker 1:The market had been expecting 185,000 new jobs to be created. Mm-Hmm. <affirmative> . And by the way, the 12 month trailing average for new job creation is a blistering 215,000. Okay . So in that context, we get the report on Friday that in July only 114,000 jobs were created. Hey, so the good news, it's still
Speaker 3:Positive. Yeah. It's positive, but way less than expected, which is the, that's the key detail. Right?
Speaker 1:Right. And remember that number comes from a survey of large employers and payroll companies like a DP and Paychex and stuff like that. Sure. Uh , and then the other survey that they do, which is a household survey, is for the unemployment rate. And the unemployment rate unexpectedly went from 4.1 up to 4.3
Speaker 3:Boom
Speaker 1:Percent. And the market had been expecting 4.2. So for all those reasons, you know, this, this , so
Speaker 3:The combination of all those factors
Speaker 1:Put together all that stuff . Yeah . Uh, the , the financial markets are thinking, oh boy, the Fed didn't cut rates soon enough. Right. Right. To help the economy glide
Speaker 3:To us avoid these. Yeah, yeah . Yeah . The soft landing , the
Speaker 1:Soft, the whole four soft landing. And so this stock market took a licking big time of beating Yeah . On Thursday and Friday and, and long term interest rates I have already started to come down. Um , if you look at the 10 year treasury that had been , uh, that's a really good benchmark to keep track the correlation to mortgage rates than the Fed funds.
Speaker 3:Right. When I'm talking to customers, I almost always say, if you wanna look for any singular piece of news to find out which direction mortgage rates are moving, look at the 10 year treasury. Yeah. That's it. Don't pay attention to the Fed, don't pay attention to, you know, there's a lot of other things out there. It's like, look at the tenure . Look
Speaker 1:At the tenure that , that came back under 4% for the first time in a long time. Yeah . And , um, and mortgage rates consequently , uh, came down as well, quite smartly. Um, but so the bottom line, the takeaway from this first segment is if you're sitting there waiting, you know, I'm gonna wait until September to resume my home search to start my home search to think about refinancing the higher rate that I got earlier in 2024, or back in the fall of 2023. Mm-Hmm. <affirmative> . I wanna wait till the Fed actually starts cutting rates. You don't have to wait.
Speaker 3:Yeah. Don't wait till September. 'cause nothing's gonna change in September. Right. Right. The changes already happened.
Speaker 1:It's already happened. And in fact, I would say the mortgage rates reflect three more rate cuts in 2024 already. Exactly . When we come back , uh, let's tell you where mortgage rates
Speaker 3:Actually are,
Speaker 1:Are well , they actually are. And then also talk about some rules of thumb for refinancing and some of the other things that we probably have forgotten about the
Speaker 3:Re the refi refresher. The
Speaker 1:Refi refresher when we come back. You're listening to the Academic Mortgage and Realty Show on AM six 20. WT MJ
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 again for tuning in today. So we're talking about how everything went our way when it comes to mortgage rates , uh, the last half of last week . And so , um, on as of Friday, if you had a $300,000 balance and you wanted to refinance that on a 30 year fixed and you had at least 25% equity and all the other Right. Stuff, which means it's your primary residence, you don't have a second mortgage behind it, you're willing to escrow for taxes. Yeah .
Speaker 3:Good credit score. Seven 80 or above.
Speaker 1:Yeah . Seven 80 credit score or above , uh, low overhead, high efficiency ACU could offer a interest rate of 6.625%. And that's with , uh, an a PR of six points. Six five because there would be no points folks.
Speaker 3:No points.
Speaker 1:No points. And your total loan costs would be $1,200. That includes an appraisal if we need one,
Speaker 3:If we need one.
Speaker 1:And, you know, every time we get somebody's loan application, we put it through Fannie Mae and Freddie Mac , automated underwriting systems, which are a little different. And we hope that we get an appraisal waiver.
Speaker 3:Yeah. And just testimonial. Yeah . Because the dominoes have already started to fall on the front lines for loan consulting. And generally, generally speaking, I've had success already getting appraisal waivers for some refinance customers. Wow. Yeah. So it's , it's not a guarantee, it's not a slam dunk. But, you know, there's a very strong chance I'll say that due to positive home values and you know, all the data that Fannie and Freddie have in their systems, we can get away with an appraisal waiver for a lot of
Speaker 1:Refis. Okay. And, and that saves you $475. Correct. If we don't need an appraisal
Speaker 3:And it makes the whole refi faster as wells. True . 'cause you're not waiting for an appraiser to go out to your home. That's true. You don't need to clean your house. There
Speaker 1:You go. <laugh>. Alright . And, and so if that $300,000 loan , um, if you, if your rate before that was 7.125 , uh, you would save exactly a hundred dollars a month in monthly payment. Awesome. And so my rule of thumb, I , I like to see people recoup their hard cost of refinancing in, in a year or less. Yeah. You know, because, hey, I made back , you know, I spent $1,200 to get this lower rate , um, I'm gonna make it back in a year. Yeah. Now you can also go with a no cost refi and we could do that. That's where we pick up all the loan costs. Right. The no loan cost rate would be 6.875, and that would've an a PR of 6.89. You know, because then your , your return on investment is instant.
Speaker 3:Yeah. Your instant savings. Right.
Speaker 1:Right. So now the, the other thing to remember is that the loan size matters.
Speaker 3:Absolutely.
Speaker 1:Right. So if you have a , if you have a lower loan amount, if you're down at $200,000, you know you're only gonna save , um, about $61 a month.
Speaker 3:61. Okay. By
Speaker 1:Lowering the rate a half a percent. Sure. So you have all these variables in there. Yeah. And now the other thing that, you know, I think people forget about is, okay, when you are refinancing, there are a few things that happen that don't happen on a purchase. Mm-Hmm. <affirmative> a purchase is kind of more straightforward.
Speaker 3:Before we jump into that, I do want to do a quick PSA about loan costs for refinances. 'cause it's different than purchases when you're getting a purchase mortgage, whatever the loan costs are, you have to pay for it out of pocket. Right . There's no other option. Right. With refinancing for anyone who's thinking about shopping around for refi or talking to a lender about it, buyer not , maybe not buyer. Be aware , but buyer be aware that with loan costs on a refinance, you can finance that into the new loan balance. And a , a lot of lenders will try to gloss over whatever the closing costs are. Actual
Speaker 1:Real, the real loan costs are.
Speaker 3:Yeah. 'cause they'll just say no cash needed out of pocket . Right. No, no money needed out of pocket. Right . And then people will interpret that as no cost . But if you're financing that cost into your new loan, that's still cost that you're paying. You're just not paying for it with money outta your pocket. You're paying for it with the equity in your home. Correct .
Speaker 1:So that's a really good,
Speaker 3:When you're talking to ANet For sure. And if you're talking to me, I'll even show this to you, live in real time, I'll show you a true no-cost option where we're paying for the closing cost with the lender credit in
Speaker 1:Exchange for a slightly higher rate. Yes . That's, we're doing it
Speaker 3:Absolutely. Right. Yeah. That's not outta
Speaker 1:The goodness of our heart, but it's like we're using the financial markets to our benefit to say Yeah. Yeah. To our mutual benefit.
Speaker 3:Or if you want to get that lower rate, whether it's 6.6 2, 5, 6 0.5, lower and lower, you can go Right. I i I even quote a 5.99 for someone earlier to , uh, uh, earlier this week. Uh, we can give you those. And in a lot of cases you can do that with no money needed out of pocket . But I will show you what the costs are that you're financing into the new loan balance.
Speaker 1:So on the thing called the loan estimate, that is the official , uh, disclosure ,
Speaker 3:Government disclosure , government regulated disclosure.
Speaker 1:Yeah. But we have a much easier to read , um, side-by-side comparison tool.
Speaker 3:Absolutely. Yeah. You
Speaker 1:Wanna look for the loan costs , which is at the , uh, bottom left hand column of page two of that loan estimate. Right . And then also look to see if the lender is providing any closing cost credit , uh, credit. Yeah . That's over on the right hand side. So it's not the best display
Speaker 3:<laugh> No. It's not that easy
Speaker 1:To interpret. So , so like on, on our, on a no loan cost deal, you would see the actual loan cost of about $1,400. Right. But then you'd see a lender credit for $1,400. Yes. That's how you figure out what you're really paying to refinance. It's not what the government shows as quote closing costs.
Speaker 3:No, that's, that's a different definition. Right .
Speaker 1:Which it appears on the first page. Because the other thing about refinancing is if you're escrowing for taxes, right. You have to redeposit , uh, money into a new tax escrow account. Right .
Speaker 3:Because you're creating a new mortgage. That's right . Is what you're doing when you're refinance and
Speaker 1:Then you'll get that money back from your old servicer when you, when that loan about two or three weeks after you pay off that loan. Right. So those are all the details that we're great at coaching people through and figuring out what's the best for your situation. Alright . When we come back, let's , uh, tell a story from the front lines of mortgage lending. I've got one, I know you've got several, Tim. Absolutely . You're listening to the ANet Mortgage and Realty Show on Wisconsin's radio station. 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 er on WTMJ.
Speaker 3:Welcome back to the ACU Net Mortgage and Realty Show. I am senior loan consultant, Tim Holdman, joined by Chief Honesty Officer Brian Wicker. Uh, we're having a good time this morning talking about refinances. What , uh, which is that we haven't , uh, had the luxury of talking about for it seems like a long time. So this has , uh, been a fun show for us. And , uh, we've been talking about where rates are at, why rates have been going down, why it doesn't really make sense to wait until September to do anything. Rates are down
Speaker 1:Already, folks,
Speaker 3:Whether you're looking to buy or refinance. And the rate activity of this last week has , I think really opened up opportunity for a lot of folks who bought their homes and got whatever mortgage they got either tail end of last year, you know, late fall, winter of last year and early this year because rates were in the mid to upper sevens . Right. You know, for some folks they even tickled a little bit north of 8% for a little while .
Speaker 1:8.1 in the fall of 2023. Yeah.
Speaker 3:So , uh, I wanted to share a story of some customers I talked to this past week where we did not help them , uh, with their mortgage to buy their home, but they bought a home , uh, in, in Franklin , uh, in, I think they closed November of 2023. So that, that they bought at that high point, pretty much the high point. Which, you know, again, we , you know , we talked about it many times. People don't buy homes for financial reasons. Right. They bought the home they wanted and, and they are proving what we've been saying over the last few months. It's, they're already in their home. They bought it for last year's price. Yeah . The house is worth more now and they're gonna refinance it into a lower rate now. Anyways , uh, they were referred to , um, uh, a mortgage that is synonymous with the name of the state, a mortgage company that synonymous with the name of our state that we're in, referred by their realtor. And then , uh, ironically, that mortgage company transferred the service into , uh, the, the big , uh, mortgage company that sponsors the all the, you know, college , uh, football games on Sunday . Oh,
Speaker 1:The ones
Speaker 3:With the rocket. The ones with the rocket. Exactly. Oh , okay . So they're at a 7.875 Okay. On a 30 year fixed. And, you know, I didn't get into it, but they probably even paid closing costs at that rate . Right . Yeah . Which is unfortunate. Uh, but it was a pretty healthy loan size around $400,000. Ooh . And we are doing a no cost refi for them. We're able to waive the appraisal 'cause they have a good amount of equity in their home. And I think at no cost, they're saving close to $300 a month. Tim,
Speaker 1:Do those folks have any , uh, are they escrowing for taxes or insurance or anything?
Speaker 3:They're , they're escrowing for both. And they, they wanted to keep on escrowing with the new mortgage. So one of the things we looked at is, okay, you're gonna have to set up a new escrow account and based on we're gonna close probably later this month, you won't have a mortgage payment until , until October. And property taxes come due in December. So, you know, the closings are gonna happen this year, still are gonna have a pretty large amount that needs to go into the escrow. So I said, Hey, we have options here on how you wanna fund that new escrow account. You can finance it into the new loan, much like loan costs . Or you can actually bring some money to closing to sort of self-fund. Yeah . The new escrow account.
Speaker 1:Yeah . Yeah. Reseed that escrow account.
Speaker 3:Yes. Because you will get refunded back whatever the balance is in your current escrow account. Usually you'll get that back in the mail a couple weeks after closing once the old loan is paid off. 'cause that money, the old escrow is yours. It's always been yours. And once that loan is closed, there's really nowhere for that money to go except back to you. So with that knowledge, they said, okay, we're gonna choose to bring money to closing , uh, in order to not Yeah .
Speaker 1:Fund the escrow cost . Exactly. So that's oddly, you know, on page one of that loan estimate, it's gonna show as a closing cost. The money that they're bringing, you know, which I think you told me , uh, before we started this segment, then something like nine grand.
Speaker 3:Yeah. $9,000
Speaker 1:Taxes are not low in Franklin. No.
Speaker 3:Milwaukee
Speaker 1:County. So that's gonna look like closing costs on the front page, but it's not. Right. The loan costs are actually zero. Exactly. Example. Exactly. So a little bit of confusion and we're gonna, you know, carefully, I'm sure you carefully pointed all that out to
Speaker 3:Them. Oh, absolutely.
Speaker 1:So, but the other alternative I is what you hinted at where, and I did one of these earlier this year Mm-Hmm . <affirmative> for somebody that closed last fall. And I , I call it the stealth cash refinance . Yeah . 'cause if you take cash out again, that has a different pricing structure that's considered riskier by Fannie Mae and Freddie Mac.
Speaker 3:Yeah . This is gonna have a higher rate to it,
Speaker 1:But we can actually hand you $2,000 of incidental cash <laugh>. Yes . Uh , back at the
Speaker 3:Walking around money.
Speaker 1:Yeah. That doesn't get counted. Then as a part, it doesn't get flagged as a cash out refinance. Mm-Hmm. <affirmative> . But then as you pointed out, your air quotes skipping a payment. Right. Whenever you refinance and you're not really skipping the interest cause you're paying,
Speaker 3:You're rolling that in interest
Speaker 1:For that month in which you close some of it on the old loan and some of it on the new loan and you're paying it at the closing table. Right. Okay. But again, if you choose to , um, increase your loan amount to cover that Yeah . One month of interest expense, you know what, there's gonna be a full monthly payment that stays in your checking account. Exactly. Right. That never comes out. And then you've got the refund if you're escrowing for taxes coming back. So, you know , in this particular case, I'm just gonna guess, had they chosen, if you take the nine grand , uh, in tax escrow account, you take the two grand, there's 11 and a month of interest is maybe two grand. We could have done a $13,000 stealth cash out refi .
Speaker 3:Yeah. Which, and for some people that's, you know, if they wanted a way to fund a little home project or fund a vacation coming up, this is a way to do that without getting the higher rate that comes with a traditional cash
Speaker 1:Out finance .
Speaker 3:Finance real . So this is the expertise folks that you gotta get from talking to akin at mortgage. All right .
Speaker 1:Well thanks. This has been fun talking about that. Right now it's time for us to turn it over to the WTMJ 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. Welcome
Speaker 1:Back and thanks again for tuning into today's show. I'm Brian Wicker, the , uh, elder. And that is Tim Holdman over there. Our senior loan consultant. My son-in-law, father of two of my grandchildren. The
Speaker 3:Best of your grandchildren. <laugh>.
Speaker 1:Whoa, whoa,
Speaker 3:Whoa . Yeah . David's not here.
Speaker 1:It's okay . That's right. So , um, took a quick look at the , uh, MLS Let's, let's talk about, you know, market conditions in the real estate market. 'cause you know, if you look at headlines , uh, inventory is way up. Well , no, not in our corner of the world. No. Um, right now, and it's still early, so I'm not gonna quote specific numbers, but it looks like , uh, July total number of home sales will be very similar to July of 2023.
Speaker 3:Okay.
Speaker 1:This things should also be really pretty , pretty much on par with last year. Um, and that's following June. We had a dip Yeah . In , uh, June sales. You remember about
Speaker 3:A atypical
Speaker 1:Yeah. 10% dip in the number of home sales this past June. So, so it's nice to see that kind of coming back
Speaker 3:Yeah . Bounce back. Yeah.
Speaker 1:Um, do you feel like it's, you know, with your clients as you're working with on buying homes Mm-Hmm . <affirmative> , is it still the fevered competitiveness? Or what are you , what are you feeling?
Speaker 3:I still have a lot of people looking. That's for sure. Uh, you know, and getting
Speaker 1:Accepted offers you get a lot of people get accepted off .
Speaker 3:Yes, absolutely. And I think that's , uh, an encouraging sign of maybe the market softening just a little. Is that the people that still want to win, maybe it's a little bit easier for them to
Speaker 1:Win. Okay . Maybe it's not competing against six offers. Maybe it's only three.
Speaker 3:Exactly. I mean, lack of inventory is still a , a song that everyone is, you know, saying to me on a pretty regular basis. Right . Okay . But yeah, I , you know, I have customers who maybe if it was, you know, last year, if they had to write four or five times to get into the winter circle, maybe they only have to write once or twice to get into the winter circle. Right . And, you know, your experience may , may vary, may
Speaker 1:Vary. Right . Yeah . Well, and remember our tip is that Yeah. If you're going off, if you're going after that perfectly newly remodeled home Right. That looks like it just came off one of the HGTV, you know, remodeling shows. Yeah , exactly. Yeah. That's gonna have a lot of competition and you're probably gonna have to go over asking and all that. Yeah,
Speaker 3:Perfect. Case in point. I mean, down the road, literally down the street from where Grace and I live in Wauwatosa, nice quiet neighborhood, big lots, ranch homes, very desirable, really nice house. Went on a corner lot went on the market, delayed listing, went out on Thursday. By Saturday it was under contract. Right. And I'm sure, you know, it didn't bother calling the agent, but I'm sure they had tons of offers. You know, maybe a cash offer or some equivalent to that was the one that won out. So there, there are still extreme examples like that, that are still happening, you know , in the market
Speaker 1:For sure. Sure. You know, the , the best way to avoid competition is take a look at the one that's been on the market for two weeks. Right. Or one week.
Speaker 3:Yeah . Those sellers are willing getting nervous . Yeah .
Speaker 1:Yeah . They're getting a little nervous and Mm-Hmm. <affirmative> , you know, that kind of a thing. So , um, let's talk a little bit about , uh, uh, what people are having to do or what people have had to do in the past. And we had one that we were working on together. You were working with your , um, Sister-in-Law , uh, Sue one of our loan consultants on this deal where the seller, or we had written a pre-approval contingent upon the sale of this person's home. Correct. Uh, and we, we could have written it without the home sale contingency if they were willing to go with a higher loan amount. Right. And pay PMI so they could afford to carry both homes, but
Speaker 3:Yeah, they, they qualified retaining the cost of their current home payment. Right. But they wanted to, they didn't, you know, and they , I think they were already under contract to sell their current home by the way. Okay. But they just, you know, it's not a done deal until they close, as, as we all know. Uh, so they didn't really want to entertain the possibility of putting less down. They just, you know, they only wanted to see options with that higher down payment that frankly would only come from if they actually sold, you know, their current home.
Speaker 1:And somehow , uh, even though our pre-approval letter said contingent on the sale of the home, they were
Speaker 3:In bold, I think <laugh> in , in bold , uh, itals.
Speaker 1:No, I don't Do we do that in bold? I'm not sure. When you don't have to sell the home. We say that in, in bold, and you're right , that's a yellow highlighting. But when you do go to the sale of the home, we're kind of just regular typeface on that. It's just in there. Yeah. Uh , but somehow they got their offer accepted , uh, without a home sale contingency, then who knows? May maybe they said, oh, we already have our contract, so Sure . Don't worry about it. But , um, what the detail is that if you get to the end, you know, and all of a sudden you don't sell your home, that that would delay closing if we had to switch the loan amount Right. And increase it and add the private mortgage insurance cost. Mm-Hmm. <affirmative>, because the federal regulation is that if your annual percentage rate goes up by more than a quarter of a percent on a fixed rate loan between the initial closing disclosure and the final numbers that you're gonna close at Mm-Hmm. <affirmative> , you have to be given an extra three days minimum. Right.
Speaker 3:Three business days, three business , not calendar days. That's right. So if you're , if this delay happens on Friday, you're not closing on Monday, you're closing on Wednesday <laugh> to , to
Speaker 1:Reconsider that hire . Yes . So our, our , uh, recommendation was that we proceed with the loan approval at the hire loan amount with the PMI mm-Hmm. <affirmative> . Because if we have it approved that way, and then we wanna drop it back to the most likely outcome, there is no waiting period. Right. Because lowering the A PR , uh,
Speaker 3:<laugh> no waiting period for that . Not a problem. And there's, there's more I want to unpack in the next segment about this, Brian, because in addition to the closing timeline, there's a much sooner deadline that , uh, realtors and loan consultants alike are , uh, definitely aware of called the financing contingency deadline. So I want to talk about that more in the next segment. Alright.
Speaker 1:You're listening to the Academic Mortgage and Realty Show on AM six 20 WTMJ.
Speaker 2:Important home buying questions and answers you can count on. This is the ANet Mortgage and Realty Show with Brian Wicker on WTMJ.
Speaker 3:Welcome back to the ANet Mortgage and Realty Show. We have pivoted away from our , uh, rate and refi talk and we're talking purchases again. 'cause uh, if you're out there and you can't refi yet, 'cause you haven't bought a home yet, so That's right. These segments are for you. Uh, in the last segment we were talking about , uh, uh, a buyer who hadn't accepted offer to purchase a new home. He wrote it without a home sale contingency, but he did have a home <laugh> that he , uh, was planning to sell and in fact already was under contract to sell that home just had not closed yet. And I, I don't believe are ,
Speaker 1:Are they closing on the same day ? One of those ,
Speaker 3:Uh, maybe a couple days before actually. Okay . Alright . Uh , but aside from the logistics of the closings themselves, there's a sooner deadline that I am always maybe even more hyper aware of than the closing date itself as the lender, which is the financing contingency or the loan commitment deadline as it's sometimes referred to as, and this is the deadline. Or, you know, the way I would explain it to my customers is this is the deadline that your lender has to give you a loan commitment letter, which is their indication that you're fully approved and ready to bring that big bag of money to the table called the mortgage. And in this particular case, the customer that worked with one of our other consultants, Sue, he said, I don't really want to see any other loan options other than the ones that show me bringing the large down payment to the table that would come from my home sale proceeds, which going down that path, that's fine. But if we get the loan approved that way, and Brian, you obviously know this on our loan commitment letter, it would have a condition Yeah. That says, Hey, this whole thing is still contingent on your current home sale successfully closing because , so
Speaker 1:You as a buyer, once you have that loan commitment delivered to you by your lender, you give that to your buyer's agent who then gives it to the seller and the seller's agent. Right. To prove that, okay, we have now met the financing contingency deadline. However, you are then accepting the risk as the buyer for any conditions that are on your commitment
Speaker 3:Letter. Yes. And there are are always some standard conditions actually. Like
Speaker 1:You gotta keep
Speaker 3:Your job. Yeah. Like kind of final verbal , uh, verification of employment, you know, things like that that are literally standard. Because think about it . It's like we can't predict if you're gonna get fired from your job the day before closing. That's right . And frankly, neither can you. But at the same time, if that does happen, as unfortunate as that would be, we are not lending the money anymore. Right . Because you don't have a job
Speaker 1:That's a standard one. Or we issued one , uh, last week where it was subject to homeowner's insurance. Of course they hadn't gotten that done. So that's an easy one. Easy. Um, but you're assuming that risk. And so , uh, if we had, if we deliver that commitment letter to this borrower condition on the sale of their home, and then their home doesn't sell, they can't get out of the deal anymore because
Speaker 3:Not , not legally anyways. Right? Yeah .
Speaker 1:Yeah. Because they'd say, well, you already delivered your financing commitment. Right . And , um, so, you know, our recommendation on this particular case would be let's go with a certain path. Yes. The bigger loan amount with the PMI and then it's easier to adjust at the end. But they didn't wanna do it that way, so we're gonna do it their way.
Speaker 3:Right. Because ultimately it's, it's their risk. And if they want to assume it, that's their choice. That's right. I mean , we , we pride ourselves on being mortgage advisors as much as possible, but , uh, there are so many choices where it truly is choose your own adventure. And it's our job to tell you what the pros and cons are. That's rightly. And then we're just gonna go with whatever you want at the , the end of the
Speaker 1:Day. Um, so, you know, some other things I've been reading in national articles, I'm just wondering if you're seeing this on the front lines here in southeastern Wisconsin. I read a comment where , um, home inspections are not being waived as routinely as we had seen earlier. Mm-Hmm . <affirmative> , are you seeing that as
Speaker 3:Well? In this past week? I think if not all, the majority of contracts I had did have an inspection contingency. Some of them had wiggle room. Okay . You know, written in, which I think is still the smart way to do it. Right. Because then you're telling the seller, I'm not gonna come after you if I have to install , uh, an electrical outlet in the kitchen island or, you know, something minor, but I am gonna protect myself if the inspection reveals that the basement's going to , uh, you know, fall apart or there's a hole in the roof or something
Speaker 1:Nature like that . Right . So, and they'll typically do that by saying the buyer will pay the first $2,000 of any repairs or something like that.
Speaker 3:Exactly. Yeah. But no, that , that's, I'd say, and then this could be recency bias, but if I were to look at my purchases from just this last week, for example, I would say most had an in an inspection contingency in the contract. They did not need to waive it outright.
Speaker 1:We'll run the numbers , uh, when July's figures are a little bit more firm, but Sure. Uh, do you get the sense that people are still having to pay over asking for nice houses?
Speaker 3:Yeah. For the, the hot competition. Yeah. Again, not as egregiously as maybe last year. Right. Uh , not seen as much
Speaker 1:As Okay . Or even a few months ago. Earlier in the
Speaker 3:Spring. Yeah . I'm not seeing the 50, 60, 70 k over list anymore. Okay. Um , and it's a much more, there's more variety. Some are getting it right at list, some are getting it a little bit under list if it's been a house that's been on the market for a couple weeks. Yeah . So more , uh, variety in that respect .
Speaker 1:Excellent. Alright. When we come back, Tim, let's talk about , uh, you got somebody, a couple people, I think you told me, buying duplexes. Yes . A tried and true strategy to get into the housing market. Absolutely. We'll cover that when we come back. You are listening to the Academic Mortgage and Realty Show on Wisconsin's radio station AM six 20 WTMJ.
Speaker 2:Find a place to call home without the headache. This is the ACU Net Mortgage and Realty Show with Brian Wicker on WTMJ.
Speaker 1:Welcome back and thanks again for joining us on today's show. I'm Brian Wicker, majority owner of Anette Mortgage. That's Tim Holdman over there. Super senior loan consultant. Hello. Hello . My son-in-Law. Thanks for joining in today's show, Tim.
Speaker 3:Absolutely.
Speaker 1:So duplexes, I mean that's been a tried and true , uh, strategy , uh, for home buyers and Jerry Circuit are sometimes co-host , uh, and , uh, managing owner of Acuate . I mean, the first home that he and his wife bought was a duplex. Sure. Yeah . You know , you live in that for a while and you move out and
Speaker 3:You keep it , keep it as a
Speaker 1:Rental and , and so on and so forth. What , uh, duplex , uh, story do you have to share with us this morning? Yeah, so
Speaker 3:It's a little bit , uh, different. Uh, it's um , older gentleman who was a previous homeowner but hasn't owned a home for several years. So he's back technically considered a first time home buyer again. 'cause he hasn't owned any real estate in the last three years. Okay . That's the minimum requirement. You can regain
Speaker 1:Your
Speaker 3:<laugh> . Yeah . You can eligibility, get that status back. Uh , and he was looking exclusively for duplexes 'cause he, you know, is a handy guy and wants to have a one unit to live in the other unit to rent out and, you know, maintain the property. Something to do. Okay. Sure . All good things and , um, found a home and you know, like a lot of people nowadays, they want to keep more money in the bank and maybe have the option at least to put less money down. Okay . And , uh, he was , uh, shopping in the Port Washington area, which for duplexes, which according to him was a pretty hot market. Okay . So he had to go a little bit higher in price range than he maybe would've preferred in order to get the place that he wanted, which I think will be well worth it in the end. Uh , but because of that, he said, yeah, Tim, I'd really like to do what's the most the least Yeah. The minimal amount of down payment that I can do. I said, well, the rules on that have changed. Uh , technically the the smallest amount of down payment is three and a half percent down with an FHA loan. But I said, you don't , seller sellers don't like FHA sellers don't like that. We're not gonna entertain that in your case. And he said, I agree. Okay. So the next best thing is through a loan program through Freddie Mac called the Home Possible Loan Program. And with home possible you can do on a duplex as long as it's gonna be owner occupied primary residence. Yep . You can do as little as 5% down. And here's the thing, if you're doing 5% down Brian through Fannie Mae with no special first time home buyer program, you could still do it. But the rate would be brutal due to loan level price adjustments. Right. Because it's a multi-unit property combined with 5% down combined with, I think his credit score was okay, but not best case.
Speaker 1:Okay. Not the top tier. Yeah.
Speaker 3:The rate would've been, you know, even with, even with lower rates now rates, his rate still would've been probably around 7.5%. Okay. Okay . So the key with home possible is they waive all those loan level price adjustments.
Speaker 1:Okay. So any , any penalties, let's call it for being a duplex and not having top-notch credit
Speaker 3:And having lower down payment, all that
Speaker 1:Wiped out , all goes out the window.
Speaker 3:Nice . Exactly. So you got a very competitive rate and very competitive loan costs all while still doing that minimal amount down. A couple other benefits of the home Possible program, there were no reserve requirements. A lot of times when you're buying a multi-unit property, primary residence or not, you have to show reserves, which
Speaker 1:Is e even if you go with , uh, Wisconsin's first time home buyer program Yeah. They sell those loans to Fannie Mae and it's a six months worth of payment reserves. Right. That's a lot of money that a lot of people don't have.
Speaker 3:Yeah. And it's on top of what you have to bring to closing. This is money that you have to show that you have Yeah . Even if you aren't bringing it to closing. Right, right. As an emergency fund. Right.
Speaker 1:So no, no reserves required. Yeah . And I think you were telling me the private mortgage insurance is also less expensive.
Speaker 3:Yeah . So there's a discount on the PMI, the private mortgage insurance. Um, if you do 5% down the mortgage insurance is priced as if you were putting 10% down. Okay . Which is nice. It's not , again, not a massive amount, but that combined with the lower rate really is, is giving him a a pretty favorable monthly payment. Especially considering he is gonna get rental income from the other unit that he's not living in. So , uh, home Possible has an income restriction. Restriction Yeah . To it . Good point . So this is not a program that anyone can take advantage of, but we can be pretty clever where , uh, this borrower of mine had income sources from a couple different , uh, streams we'll call it. And we got to be selective with what we used on the application Ah , to qualify 'cause qualifying is pass fail. Right. And we were able to thread the needle where there's enough income qualify to qualify him , but not too much to exceed that home possible income limit. So
Speaker 1:That's outstanding. That's about 80,000, is that the limit? Or a little hair ? Over 80,000. It's 80% of the area media income for
Speaker 3:The county. Right. And that's key because you , uh, you do wanna , and this is available on just anyone can go to this website through home possible income limits. You want to type in the address of the property you're trying to get the financing on. Okay. And it'll tell you the income limit for that specific area. So it , it does vary a little bit.
Speaker 1:Alright , well good . Good job on threading that needle. Sure. <laugh> uh , for that client and making it happen. Yeah. Alright folks, that's all the time we have for today's show. Remember, rates are great. If you uh, wanna get a no social security number required refi checkup, all you gotta do is click on that blue button. The same blue button can be used to get started with your rock solid guaranteed preapproval by Absolutely . 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 ACU 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.