Speaker 1: 0:00

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: 0:21

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 Holman.

Speaker 1: 0:36

Welcome to the Anette Mortgage and Realty Show. I'm Brian Wickett, licensed real estate broker with AC Realty Advisors and the majority owner of AUM Mortgage. Here today with my son-in-law, senior loan consultant , uh, Tim Holden. Tim's NMLS ID number is 1 5 9 3 1 4 6 and mine is 2 5 9 6 1 0. 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 remember, you can get a copy of today's show or any of our past shows wherever you normally get your podcast. So Tim, thanks to you for you and David doing the show last week. You did a fine job.

Speaker 3: 1:12

Thank you very much. It was a good time. Here we

Speaker 1: 1:14

Are in the middle of January, still looking ahead to the new year by the way. I've got the December and total year home sale numbers Nice for southeastern Wisconsin that we'll do a little bit later in this show. Um, we saw some thank goodness improvement in mortgage rates this week.

Speaker 3: 1:31

Some welcome news. Yeah . LA

Speaker 1: 1:32

Last week you and David described how the monthly jobs report kind of was way hotter than expected. Yeah.

Speaker 3: 1:39

Put a damper on rates a little bit.

Speaker 1: 1:41

Caused rates to go up about one eighth of 1% from where they were. And thankfully this week we got a major inflation, a report, the consumer price index. Yep . And that showed that , uh, prices year over year as of December went up. Only air quotes, 2.9%,

Speaker 3: 1:59

Only 2.9, which was better than anticipated, which that's

Speaker 1: 2:02

Kind of the main of the game . I think it was pretty much darn right on. Yeah . I think it was the core inflation that was just a little teamer . That's right. Yeah.

Speaker 3: 2:08

Yeah.

Speaker 1: 2:08

Yeah. So it's kind of weird that we got this big. Maybe it was just relief that they thought it was gonna be worse. Sure. Yeah. Uh, but we had a nice improvement in rates this past week and, and so we're back to where we were.

Speaker 3: 2:19

Yeah. We're basically back to where we were about two weeks ago, I would say. But it's uh , nice to get a little bit of a bounce back wherever we can get it and

Speaker 1: 2:25

We'll, we will take it, man, because it seemed like we were on the road to nowhere for a while . Um, is , remember the Fed wants inflation to get back to 2%. Right . So we're still above, you know, when we're sitting there at two target nine the target . Yeah . Um, now let's just , just say briefly where we were or where we are here currently on a $250,000 30 year fixed rate , uh, to buy an owner occupied single family home or a condo with 25% down on all the of the right stuff. We're back to the point where we ended the week and we could offer a 6.99% rate with about $1,800 of total loan costs , which brings the a PR to 7.02. Or if you wanted to pony up an extra 4,700 bucks mm-hmm <affirmative> . In points, which is interest paid in advance to permanently lower the rate, you could snag a six and a half percent rate. And I'm sure a good practitioner like you would probably make that 6.49. Yeah. But , uh, at six and a half , the A PR would be 6.7. By the way, in exchange for that extra $4,700 upfront on a $250,000 loan, that would lower your payment $81 compared to the 6 9 9 rate . Yeah. So if you do the math, and this is what we help people do every day, is we say, well, how long would it take for you to recoup those upfront funds, by the way of lower monthly payments? The answer is 4.8 years. Yeah.

Speaker 3: 3:45

So call it, call it five years. Just for the sake of round numbers. Call

Speaker 1: 3:48

It five. Yeah . So if you believe that mortgage rates are gonna come down, you know, to around six and a half in the next 4.8 years, you would say, yeah, I'll wait.

Speaker 3: 3:57

As David likes to say that the decision to pay points or not pay points is really an indicator on your opinion as the customer on where you think mortgage rates will go in the future. That's the way to look at it. Right. So if you think that rates will not fall to at or below 6.5% within the next four and a half to five years, then pay the points, right? Yeah . Because you'll keep the mortgage longer than that and ultimately save a little bit of money at the end of the day, but yeah .

Speaker 1: 4:23

Over the 30 year life. Oh yeah . Yeah . That's what the A PR is. The APR says what's the total cost of the upfront points plus the interest over time. Yeah . Over the whole 30 years. Right . That's what the A PR is.

Speaker 3: 4:32

Well , and PMI if there's

Speaker 1: 4:33

PMI involved . That's correct. Good

Speaker 3: 4:34

Point. Yeah. But it's like most people and , and nobody knows the right answer, by the way. That's the frustrating part. No one can accurately predict where mortgage rates are gonna be next week, much less four years from now. But I'd think the , the general consensus, both with customers and industry professionals is that rates will be below six point half percent, four point a half years from now,

Speaker 1: 4:55

But yeah, some at some point during that time. Yeah . We don't know if it's gonna be there at four point a half years, but sometime in that window.

Speaker 3: 5:00

Yeah , exactly. So if you took the 6.99% and just kept that extra four plus grand in your bank account and use that to subsidize the higher monthly payment, true debt , you could do that for 4.8 years. That's right. Before you'd run outta the money in the bank. Good

Speaker 1: 5:14

Way to put it. Yeah. So we're seeing a lot of people here in mid-January. Both our past customers that were pre-approved in 2024 but didn't find a house, they're coming back in and said, sign me up again. Let's, let's go again. I'm ready to shop for sure. We're also seeing a lot of new customers. Yeah. Uh , say, you know what, it's 2025, whatever the case. I don't care where interest rates are, thank goodness.

Speaker 3: 5:35

This is the year we're gonna

Speaker 1: 5:36

Get , we wanna get out there. We either, you know, have grown out of our existing home mm-hmm <affirmative> . Or we wanna become homeowners. Yep .

Speaker 3: 5:41

I got customers that will we'll talk about later in the show that firmly fit into that category where it , they want to buy their first home for family and life reasons. Not at all financially related. So ,

Speaker 1: 5:53

Alright . So, so I took a little look at , uh, how is inventory looking Yeah. Here in the middle of January. And , uh, we're going to cover that when we come back. You are listening to the Aced Mortgage and Realty Show on AM six 20 WTMJ

Speaker 2: 6:10

Home buying advice from the guys who know it best. This is the Accu Net Mortgage and Realty Show with Brian Wicker on WTMJ.

Speaker 1: 6:19

Welcome back and thanks again for tuning in today. I'm Brian Wicker, majority owner of ACU Mortgage. That's Tim Holdman over there. Good morning. Senior loan consultant and , uh, all around . Great guy. My son-in-law, father of my grand , two of my grandchildren. So , uh, in terms of looking at the demand side , uh, for homes starting on the new year, demand seems to be plenty. Let's look at supply. And so the data that I'm about to share is for single family homes and condos in the five county Milwaukee metro area. Courtesy of the multiple listing service of which I'm a card carrying member and through my academic realty advisors , uh, uh, real estate brokerage. Well, so Tim, the last two January, so 2023 and 2024, we have seen just over 1200 new condo and single family homes come onto the market. Just to give you some Okay . Uh , perspective. Yeah. It's kind of looking like we're on pace for about the same number because in the first 15 days of January we had 592 listings Sure. Show up on the MLS if you compare that, you know, it's always what are you comparing to? So I'm gonna say it's probably gonna be similar to 23 and 24. Yeah. But if you go back to look at 2019, the last kind of pre covid normal year , normal January , uh, we're gonna be shy by about 1500, I'm sorry, not 1500, 500. Oh okay. Listings. So we're gonna be about 30% lower , uh, or the last three years, you know, including this year. Yeah . Compared to that. So is it a buyer's market, a seller's market, or a balanced market here in southeastern Wisconsin? For that, we look to the current number of homes listed, which is 2,400, and then do we divide that number by the number of sales in a particular month? And so the question is, do you divide it by December when we had 1,317 close sales, or do you divide it by more like a typical January, which is more like 830 close sales. Right . Do you have an opinion on that? Which way would you go? Um , I would probably go January. I would too. All right . And so if we do that, we are at a three month supply, which is kind of at that upper end of still being a seller's market. Yeah. You know , where there's tight inventory or tight inventory. Yeah. Um, four to six month supply would be kind of in the middle Right. Balance . Yeah . Right. Yeah . And then , uh, six or greater would be a buyer's market. So I'm gonna say we're, we're kind of still in a, a , um, seller's market. Yeah. By the way, I went on the publicly traded Redfin website, and they do a thing called a , uh, uh, market heat index. And so they have the city of Milwaukee rated at a competitive index of 67, which they call somewhat competitive. Hmm . Okay. And where they observe that quote, some homes get multiple offers, the average home sells for about 1% below list price and goes pending in about 45 days. Hmm . Sure. Uh, hot homes can sell for about 3% above listing price and go pending in about 29 days. Other municipalities that I just thought I'd pick on Brookfield is also 64, somewhat competitive. Franklin also somewhat competitive with a Redfin score of 64 WWA ranked at very competitive with the numeric score of 77. And West Dallas gets an 82

Speaker 3: 9:30

Wow.

Speaker 1: 9:30

Competitive score

Speaker 3: 9:31

Up and coming West Dallas .

Speaker 1: 9:33

All right . Yeah. Where they observe many homes get multiple offers with the average home selling for about 1% above listing price and goes pending in 36 days. And by the way, hot homes they say in OSA can sell for about 6% above list price.

Speaker 3: 9:47

And I think , I think it's smarter to look at more , uh, narrow data like that, Brian . For sure. I mean, if you look at just the five county average, very few people are shopping in that wide of a radius . Right? Well , nobody is. Yeah . Nobody is . Yeah. Yeah. I would venture to say nobody. So really the, whether it's a buyer's market or a seller's market is gonna vary way more about specifically where you're looking. If you're looking at a , you know, TOSA bungalow Yeah. It's gonna be a hot market, right ?

Speaker 1: 10:17

That's right . You're probably gonna be facing multiple offers and that's where your buyer's agent has to be your coach. Exactly. Right. To say, okay, what do we f against here? Right?

Speaker 3: 10:24

Right. If you're making an offer on a house that's been on the market for 180 days and they've had a couple price reductions, it's like, okay, you know, you know, people aren't lining up around the block to make offers on this place. And you can adjust your strategy accordingly.

Speaker 1: 10:36

As for where home values go from here, the latest numbers I have from Zillow where they actually go out on a limb and they predict where do we think home values are gonna be in a year? Okay. Uh, they're saying up 2.4% for Milwaukee, up 2.8 for Madison Green Bay up 4.4 Appleton up 4.1, Racine up 2.8 , uh, Eau Claire up 3.4. So due to that imbalance of, you know, supply and demand, where we're still tilting, you know, in that there's not enough inventory out there. Yeah . By the way, I saw some stupid article, frankly, <laugh> on MS NBC or not msn , bbc , CNBC, that's said , why are, are , uh, first time homes , uh, starter homes hard to find . And , and the answer they took, you know, several paragraphs to say this is 'cause builders don't build them anymore. Yeah.

Speaker 3: 11:29

It's true. They're building $500,000 homes, right?

Speaker 1: 11:31

Yeah . They're not building 1400 square foot, you know, starter homes , uh, that are affordable. So I think we're gonna still see the , um, supply in in the year 2025. I'm gonna go on , on a limb and say, yeah , uh, it's still gonna be a generally sellers market. Well, with that in mind, let's , uh, turn the page. We usually talk about in terms of what buyers can do to make their offers more attractive, I thought, let's take a look at, hey, if I'm a seller Sure. And I'm entertaining multiple offers, what should I be looking for there ? There you go . Yeah . Let's do that . When we come back, you are listening to the Academic Mortgage and Realty Show on Wisconsin's radio station. AM six 20 WTMJ, getting

Speaker 2: 12:10

You into the home of your dreams. Here's more of the ACU Net Mortgage and Realty Show with Brian Wicker on WTMJ.

Speaker 1: 12:18

Welcome back and thanks again for hanging out with us , uh, here on Sunday. Or if you're getting this on a podcast whenever you're listening to it. So if you're a seller out there in this , um, still seller's market, in the most case , uh, what you're looking at, if you're getting multiple offers, you know, obviously you're looking at the price.

Speaker 3: 12:35

Right? That's al that's always the big one. That's the big one. But it's not that simple either.

Speaker 1: 12:40

It's , it's not the end of the story. Yeah. Uh, you know, for some sellers it might be when can you close, may maybe you wanna wait closing, you know, maybe that's important to you. Uh ,

Speaker 3: 12:50

You want fast , maybe you want , maybe you want to close fast, but then have post-closing occupancy.

Speaker 1: 12:53

Right? Yeah . Right. So good, good buyer's agents and listing agents will communicate that with each other. Hey, what's, what's I , I'm about to submit an offer says the buyer's agent, what's really important to, to your client? The seller? Yeah . Um , so the, the major contingencies, 'cause obviously what you want as a seller is a cash offer <laugh> . Yeah . That has no contingencies. Yeah . Hey, I will buy your home and I don't care what it appraises for, I'm not gonna inspect it. Whatever. I don't need mortgage.

Speaker 3: 13:18

I I have the money, I'm just gonna do it. Yeah. That, that's the best,

Speaker 1: 13:21

That's the ideal. But not very many go that way. In fact , uh, I'll tip , uh, we do have the , uh, December home sale , uh, information and 22% of offers in December were cash offers. Okay. So , um, so the majority, vast majority are not

Speaker 3: 13:37

Cash offers are not .

Speaker 1: 13:37

Yeah. So the one contingency that no seller wants to see, of course, is the sale of home contingency because hey , it's like, I don't wanna be waiting for you to sell your house. Yeah. Who knows what kind of house that is or how crazy you are about the asking price. Yep . The next one is the home inspection. And of course, you as the seller would love it if the buyer waived the home inspection, but that's risky. So the next best thing when the buyer clicks that box on the offer is that the buyer gives you as the seller the right to cure any defects. Sure. And I would say we see that a lot. Yeah. Pretty , it's common almost percent . Yeah . Yep . And , and then the other thing you'd like to see if they're asking for home inspection is that, hey, I, the buyer will actually pay for the first fill in the blank dollars mm-hmm <affirmative> . And any repairs Yeah . For defects that come up on the home inspection. Oh, that's nice. Yeah. Um, and then I , when I sold my last house, by the way, the, the , um, it was without an inspection contingency, but they said, Hey, we still wanna do an inspection just for informational purposes only. Sure .

Speaker 3: 14:36

No problem. That was great.

Speaker 1: 14:37

Yeah . Alright , here's the, here's the trickier one, the appraisal contingency. So on the Wisconsin offer to purchase , um, there's a box, and if it's checked , uh, it means, Hey, my offer's contingent upon an appraisal. And the default , uh, is that, man, if the appraisal comes in $1 less than the asking price, I the buyer can scratch the deal. Yep .

Speaker 3: 15:00

All

Speaker 1: 15:01

The power is in the hands of the buyer. So that's the least attractive to you as a seller. Right. The next box, which I think is probably the majority that we see, I don't know . You can, is that what you're saying? Yeah . Thinking Yeah . Yeah. Because it says, Hey, you know what, if the appraisal comes in low, we're gonna give the power to you, Mr. Seller. Right. And say, if you,

Speaker 3: 15:21

You , you can drop the price down and match the appraised value kind of

Speaker 1: 15:24

Unilaterally. You can just say, I'm gonna force the transaction forward Yep . Uh , at this lower price. And then the , um, buyer is pre agreeing to sign that amendment. Right. And then the third option that I don't think we've seen so much during this winter period, but uh , sure. We're seeing it in , in this spring and summer of last year, is where the buyer says, Hey, I will still pay you, let's say $500,000 for this house, even if it appraises as low as four 90. Right.

Speaker 3: 15:55

We call that the appraisal gap , uh, modification, if you will. Correct.

Speaker 1: 16:00

'cause that again, is giving you peace of mind as the seller. Um , and , but then here's where you really wanna be careful as a seller, you wanna see that the terms you're seeing in the contract, if the buyer is getting a mortgage, do they match the terms of their pre-approval letter?

Speaker 3: 16:15

Right.

Speaker 1: 16:15

So for example, if you're saying, Hey, I'll still buy it at 500, even if it appraises at four 90,

Speaker 3: 16:22

Can they still get a mortgage if it appraises for

Speaker 1: 16:24

Four 90 ? Right . Don't you want to see that? Yeah . On , on the pre-approval letter? And if you Oh , you

Speaker 3: 16:28

Should. Yeah. <laugh> ,

Speaker 1: 16:30

I doubt that many of them do that.

Speaker 3: 16:32

No, because the, the sneaky inside baseball is that if they write that really nice modified appraisal contingency to make the sellers feel good about it, but if they actually couldn't get their mortgage approved, it had , if it appraised at four 90 in this example, they can just get outta the contract by exercise in the financing contingency.

Speaker 1: 16:51

Correct. Well, and that, that leads me to another thing that I've seen at least once or twice where the appraisal box, the appraisal contingency box is not checked. See , I don't, I don't have an appraisal contingency, but the buyer is putting three or 5% down. Yeah. <laugh>, that's a big red flag for you as a seller, because as you just pointed out Yeah. That is what I call the stealth appraisal contingency.

Speaker 3: 17:12

Absolutely. Yeah. You're really just leaning fully on the financing conting, you know, contingency as the safety net that the buyer would exercise to get out of the contract, whether it's due to a low appraisal or , or any other reason that they couldn't get a mortgage.

Speaker 1: 17:25

Exactly. So, so again, you know, that's why sellers intuitively like a bigger down payment. Right. Because they kind of know, well, if the appraisal comes in a little low Yeah . They

Speaker 3: 17:34

Probably got the It

Speaker 1: 17:35

Shouldn't creator the deal.

Speaker 3: 17:36

Exactly. Yeah . Right .

Speaker 1: 17:38

Um, and , and so then a couple of other things, and I think we're gonna have to take care of this after the break in comparing the financing contingency terms to the actual wording in the , uh, preapproval letter. Mm-hmm <affirmative> . That's critical. We're gonna cover that , um, after we take this break. And Tim, you've also got a great story about some first time buyers Oh yeah . Who you met with this last week and , uh, along with one of their fathers mm-hmm <affirmative> . And how they kind of came in with one idea on how dad could help, but left with a different idea after some good consulting by you. We'll cover that right after this news break . Right now it's time to turn it over to the WTMJ Breaking News Center.

Speaker 2: 18:18

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: 18:25

Welcome back and thanks again for , uh, hanging out with us. So , uh, I'm Brian Wicker, the elder. That's Tim Holdman, the younger and , uh, senior loan consultant , uh, with academic mortgage. And so , um, we're just talking about if you're a seller, you know, and you're really comparing offers , uh, between A and B here, or a B and C, maybe you got three offers and , and the , and, and a couple of your buyers have financing contingencies. Take a close look at how well does the preapproval letter match up with the terms and the financing contingency. And I am amazed when I've seen some other deal, other preapproval letters Yeah . How they are

Speaker 3: 19:02

Lacking

Speaker 1: 19:03

Light on the facts. So thing number one is, does the preapproval letter have an interest rate? I've seen 'em where they don't Yeah.

Speaker 3: 19:10

Or, or they literally have one singular rate, which isn't wise in my opinion, either, because no, no one can lock in their rate before they're under contract. So what if the rates change, which sometimes they do swing pretty substantially within the course of a few days. It's like if they were gonna get 6.875 and all of a sudden they have to get correct 6.9 or 7.1, that that could be enough enough to push them out of qualifying.

Speaker 1: 19:35

So let's, let's say that the , uh, financing contingency says my, you know, offer to purchase is , uh, contingent upon me getting a 30 year fixed rate loan of this dollar amount at a rate of seven and a quarter . Right. But then the preapproval letter says 6.875, eh . Yep . That's a problem. Yep . 'cause you wanna know, as the seller, does this buyer qualify, still qualify at the rate that's stated in the contingency. Um, so that, that's critical. Another thing you wanna look at is, what does it say the lender has verified so many bank pre-approvals. I , we like to call 'em flimsy bank pre-approvals, only verify the credit. Yep . And that is not where the problems you typically lie. No, it's in the income and the down payment. And so you'll see a typical bank pre-approval letter will say, Hey, we verified your credit. And based on that and the information you provided about your down payment, <laugh> and, and , and , and job employment history and income, you're, you're pre-approved for such and such a mortgage amount. Well , uh, what if, what if you don't make what you make? Right. You know , what if you're ,

Speaker 3: 20:38

Or what , what if you don't have the money that you put down when you filled out that online form? Right.

Speaker 1: 20:43

So the benefit of course, of the academic mortgage guaranteed fully verified rock solid pre-approval is that we say we have verified not only your credit, but your down payment and your employment and income. Yep . And you are good to go. And in fact, we guarantee that with a $2,000 guarantee. Um, you know, the, the other thing that is true about , uh, preapproval letters is there's some implied property tax

Speaker 3: 21:10

That's

Speaker 1: 21:11

Right. Embedded in there. And I don't see anybody else putting that on there . No . Our preapproval letters say, Hey, this is for this purchase price at this interest rate with this loan amount and this much in And you'll property taxes.

Speaker 3: 21:22

Yeah . We enlist a maximum total monthly payment. 'cause for a condo that could include HOA dues , uh, absolutely has to include , uh, monthly allocations for property taxes and homeowner's insurance. And really fundamentally, Brian, I mean, what a pre-approval comes down to is it's telling the seller, this buyer qualifies for a mortgage payment where the monthly total house payment is up to x

Speaker 1: 21:46

This dollar

Speaker 3: 21:47

Amount. Right . Yeah. And as long as it's at or under this total monthly dollar amount, they qualify. Yeah. So property taxes are like literally the second biggest factor. Correct . Besides the principal and interest. And that can be a big deal.

Speaker 1: 21:59

You know, I had a , a customer I was working with in the Chicago suburban area recently where , uh, homeowner's insurance, and there's a big article in the Wall Street Journal a couple weeks ago about Yeah . Homeowner's insurance rates are skyrocketing. They are, yeah . And in this particular case , uh, they wanted to retain their existing condo Okay. So that they didn't have to sell, you know, and then go find a place to live. Yeah.

Speaker 3: 22:22

They can sell it later after you ,

Speaker 1: 22:23

They're gonna sell it later. Right. Yeah . And, and so our financial blood pressure or the debt to income ratio , um, we were kind of up in the upper regions. Right. Right. And so I forwarded them a , um, a website, mattick , MATI c.com , maddock.com online insurance broker where they could get a quote, they could just plug in a, a , a property that they're looking at. Sure. And I had 'em do it, and I mean, the, it came back, the lowest number was $3,800 here . I mean, that's over $300 a month. Yeah. So it's like that was important information to know Absolutely. The devil lies in the details. Hey, it's not gonna be a hundred bucks a month. Yeah. For you, it's gonna be over

Speaker 3: 23:02

300. And this is where they probably, because based on their income, they probably didn't think there would be any concern because they didn't understand that we have to qualify them with their current house payment plus the new house payment plus whatever debts they have in their credit report. You know, they're thinking, oh, well yeah, I'm only gonna have that other condo payment for like a month or two most, and they're Right. But in the mortgage world, we have to qualify them as if they never sell that condo.

Speaker 1: 23:29

Right . Right. And so on our preapprovals, if if , uh, the sale of the existing home is not required

Speaker 3: 23:35

Yeah. We put it in bold. That's right. We , we want to point that out. 'cause that's a big piece of mind to the seller, right? Correct . If they see that on the pre-approval, yes. This buyer owns a property, no, they do not need to sell it before they can buy the new property.

Speaker 1: 23:48

So there's your primer on , uh, what to look for from the eyes of the seller, which of course feeds into what you need to put in your offer if you're a buyer. Right. Tim, you wanna set us up , uh, for your first time home buyer meeting that you had that we wanna

Speaker 3: 23:59

Describe? Yeah . So , uh, I think a , a couple points that we'll get into with this story, but , uh, earlier , uh, last week I met in person at my office with , uh, a really nice young couple, gonna be first time home buyers and , um, uh, the , the wife's dad who's a past customer of mine. So that's how he , uh, sent in his , uh, daughter and son-in-law. And , uh, basically he wants to help them out , uh, with some financial assistance to, you know, afford living in their new home. And he had one idea on how to do it. And then through some consultation, we actually came up with a much better game plan on how to do it. So we'll get more into the details after this next break.

Speaker 1: 24:38

You were listening to the Academic Mortgage and Realty Show on AM six 20 WTMJ.

Speaker 2: 24:44

Important home buying questions and answers you can count on. This is the Acuate Mortgage and Realty Show with Brian Wicker on WTMJ.

Speaker 3: 24:53

Good morning and welcome back to the Acuate Mortgage and Realty Show. I am senior loan consultant Tim Holdman, joined by , uh, chief Honesty Officer Brian Wicker. Uh , Brian , I wanted to share a story , uh, and this is honestly the favorite part of my job, is the, the consultation with customers and trying to help craft the smartest and best game plan for them. A lot of people can just slap together a mortgage. Sure. You know, the assembly of that isn't rocket science. Uh, but what I like to do is, you know, help balance all those competing factors that especially first time home buyers have to deal with , uh, you know, when getting ready to buy their first home and , and feel comfortable and confident about everything before they go out and find the house that they fall in love with and wanna make an offer on. So, to set the table on this , uh, I had , uh, uh, really it's the , uh, the wife's dad email me. 'cause uh , the dad is a past customer of mine that we've helped several times. And he said, Hey , uh, you know, my daughter and son-in-law, they're getting ready to maybe buy a home later in the spring and summer of 2025, we wanna meet with you . All three of us are gonna come in and we wanna figure out what they qualify for, what they can afford, all that good stuff. I said, awesome. Let's all, let's all sit down together. Let's all get together. Right ? Yeah . So they come in and the dad , uh, wants to help them out , uh, financially with , uh, you know, affording to live in the home. Okay . You know, whether that's assisting a little bit month over month with the monthly payment, or maybe gifting them a big chunk to help with the down payment. He's not really sure which way he wants to go on that yet, but he said, well, Tim, I should probably co-sign on this loan ah , you know, so that I can, my income can help them qualify for more. Ooh .

Speaker 1: 26:33

That, that, that is not a good idea. But why don't you explain, or if you can avoid it, I mean, if you gotta do it.

Speaker 3: 26:38

Yeah . Yeah . Well, right. And I , I didn't initially shoot it down right away because I didn't obviously , uh, know any about anything about the financial particulars of the kids. But I said, okay, well let's, let's dive into the details and figure out if that's even necessary. 'cause frankly, it might not be, you know, parents out there, you know, you co-signing on the loan isn't a requirement to still help your kids out. Correct . Financially, like you can do that really independent of, of the mortgage. Um, so I gather the kids' , uh, financial information. We went through a pre-approval, you know, in person on the spot. And it turns out the , the kids' , you know, excellent credit scores both above seven 80 and the husband has a really good, you know, salary W2 job , uh, as an engineer making, you know , decent money. So for the amount of house that they wanted to buy, which they told me their max price range was 360. Okay. Um , looking in the Waukesha County area, like, like many others , uh, they qualified for that with just his salary. Okay,

Speaker 1: 27:36

Great. A little high on the debt, 10 income ratio or middle of the road or

Speaker 3: 27:40

Little, little high. Yeah. But , uh, enough wiggle room where, you know, I, I felt I , I even ran it through it with the smallest amount of down payment that they would do and it still went fine. Uh , so really they qualify with just him . The , the dad's income being added on as a co-signer really wouldn't further improve that situation. 'cause qualifying for mortgages pass fail essentially, as we know. So I said to the dad, you can co-sign, but actually it would ironically hurt them in terms of the mortgage that they can put together because the dad's income plus the son's income, who together exceed all of the first time home buyer income programs ,

Speaker 1: 28:21

Ah , thresholds. Right? Yeah .

Speaker 3: 28:22

Right . Right . Whether it's WIDA or Home Possible, or HomeReady, all those things, if we added the data on as , as income, it pushes them above that income threshold where they wouldn't qualify for those programs. So I said, dad, if you co-sign, they're gonna actually get a higher rate , worse deal . Yeah. And , and a more expensive mortgage. Oh ,

Speaker 1: 28:39

Surprise.

Speaker 3: 28:39

Yeah.

Speaker 1: 28:40

So by the way, the, the limit for uh, uh, Fannie Mae and Freddie Mac special , uh, home buying programs is $81,680 in Waukesha County. And if we go with Wisconsin's , uh, special 30 year fixed rate, I never call it wida , by the way. <laugh> . Okay . Just because some real estate agents actually have a aversion to that because that's , think it's like FHA

Speaker 3: 29:02

Or something . Yeah. They don't know. It's still just a Fannie Mae back mortgage . Right .

Speaker 1: 29:05

It's Fannie back point . Good point . Point . So the limit , uh, for the income limit for a two person household is 102,100.

Speaker 3: 29:11

Yeah. Not bad. And if you have kids, which they, they do, they have Oh, they do. They have two kids. One on the way. Yeah . Oh,

Speaker 1: 29:16

So $117,415 is the three plus household person income. Yep . Okay. Yeah . So , uh, what's their down , so how else, how, how can the dad help 'em ? So

Speaker 3: 29:28

They were trying to decide, but , and they , I don't think, they still haven't decided. 'cause it's gonna vary on I think what house they ultimately wanna buy. Um, if they're gonna go with a lower down payment and have the dad help them month over month with the mortgage payment. Uh, or the dad might , uh, decide to just give a large lump sum gift to towards the down payment, in which case, obviously that would drive down the monthly payment as a result. And this was another , uh, I think a classic , uh, you know , pain point for a lot of customers is they qualify no problem for a $360,000 home purchase, but the monthly payment that would come along with that was higher than what their stated goal was. Okay . For their, their monthly payment. So really that's the, that's kind of like the, you know, the , the big competing factor with most folks is I can qualify to buy this much house, but I wouldn't be comfortable month over month. Their , their stated monthly payment goal that they would really like to stay was between 16 and 1700 a month. Okay . And the only way they get there on a $360,000 home is by putting probably around 25% down. And just from their own funds, they had enough for about 5% down. Okay. So it's either gonna be big gift from a relative, you know, to get you there, or monthly payment assistance. I

Speaker 1: 30:47

Like the idea of, hey, give them a gift, but don't use it for down payment. Yeah . Give them a gift ,

Speaker 3: 30:51

Keep

Speaker 1: 30:52

It in the bank, and then take out $400 a month. I mean, that's only $4,800 over a year. If you said, I want to help my kid $400 a month, you know that their income is gonna grow. Right. And , and so rather than giving 'em , you know, 50 grand to try to move the payment down by , uh, not that much <laugh>, you know, maybe, maybe give them that subsidy. Alright . When we come back, let's , uh, just take a quick look at December's home sale numbers. You are listening to the Accu Mortgage and Realty Show on AM six 20 WTMJ.

Speaker 2: 31:22

Find a place to call home without the headache. This is the Accu Mortgage and Realty Show with Brian Wicker on WTMJ.

Speaker 1: 31:30

Welcome back and thanks again for joining in. You know what, I decided we didn't have enough time here in this last segment to do justice to the December and 2024 , uh, home sale numbers. We'll

Speaker 3: 31:40

Save

Speaker 1: 31:40

It for next week . Yeah. We'll save that for next week. But , uh, I did have a conversation this last week with a Wisconsin past client looking at buying a condo in , um, uh, on the East Coast over near Fort Lauderdale in Florida. And , um, the interesting thing about Florida condos since that tragic surf side Yeah . Uh , collapse , uh, is that the condo projects now are under intense scrutiny. So there's regulations in which is good if you're a buyer Now in Florida, new rules that were effective, I think it was July 1st, 2024, where condo's three stories and higher must undergo an inspection after 30 years and every 10 years thereafter. Yeah . Oh, did I mention this building that he was looking in was built in 1968. Ooh .

Speaker 3: 32:27

So getting up there. Yeah.

Speaker 1: 32:29

Dang. Is that 50 years? Uh, yeah, over 50 years. Almost

Speaker 3: 32:32

50

Speaker 1: 32:33

And

Speaker 3: 32:33

Almost 60.

Speaker 1: 32:34

And then this will determine whether the building is structurally sound and if repairs are needed on top of that, buildings that are already 30 years or older must have inspections completed by the end of 2024. And luckily in this case they did.

Speaker 3: 32:47

Okay. That's good.

Speaker 1: 32:48

Uh, condos over three stories or higher must review reserve funds before the year is over, meaning 2024 and every 10 years thereafter , um, to make sure you're saving up enough money to do the repairs. And obviously that

Speaker 3: 33:01

Was once they come Yeah.

Speaker 1: 33:02

A bone of contention. Right. Because the surfside condo building had millions of dollars worth of repairs that were needed. Yeah.

Speaker 3: 33:09

And they weren't doing, and they were ,

Speaker 1: 33:10

They were not doing. And then , uh, also condo projects must have a budget adopted on or before January 1st, 2025 based on the findings and recommendations of the Yeah . Review of reserves and

Speaker 3: 33:23

All these rules do make it harder to get a mortgage for these types of properties. But I think it's worth noting that like, as a potential buyer, you should want these things. Absolutely. Like, yes, they do make getting the financing in place more difficult, but it's really the mortgage lender doing a lot of the legwork that you should want to know to make sure that the property that you're buying has adequate reserves, has money saved up for repairs that are, it's a matter of when not if Right. These things are gonna be coming down the pike at some point. So,

Speaker 1: 33:53

So again, is that , so those are actual regulations from the state of Florida

Speaker 3: 33:57

Right.

Speaker 1: 33:58

Irrespective of mortgage lending requirements. Oh , I see . Yeah, yeah. In mortgage lending, we would have the association do a more detailed questionnaire, give us any engineering reports mm-hmm <affirmative> . We don't necessarily have to look at the budget or the reserves. Right. And then Well ,

Speaker 3: 34:12

If it's, if it's less long form , if it , well yeah, actually yeah. For a second home condo with 30% down, 30% down , uh, or more, we do not have to, if it's less than 30% down, we still have

Speaker 1: 34:21

To get the structural Yeah .

Speaker 3: 34:22

Report. We do have to do a full condo review at less than 30% down. But yeah .

Speaker 1: 34:26

So luckily amazingly this project that they were writing the offer in had already done all that, in fact Awesome. We looked it up in Fannie Mae's condo project management software. It was already pre-approved. Oh , fantastic . As long as we closed before February 25th. Okay. And they wanted to close on the 20th of February. So I'm thinking, okay, this looks good. Yeah. So the other part of this story is though they wrote it using the Wisconsin No, I'm sorry. The Florida offered a purchase form called the as is contract <laugh> . And so there was a cash offer Okay . As is . But the weird thing about this particular form in Florida is you have 15 days to cancel the transaction for any reason. Right. And you can still get an inspection. Okay. You just can't, you can spike the deal for any reason

Speaker 3: 35:09

Within 15 days within

Speaker 1: 35:11

That inspection contract. That's right. And so they did get an inspection. There were a few minor things wrong, and they ultimately decided to cancel the transaction. Wow. And in , in the text message that I got, it really wasn't about the inspection so much, it was about the fact that the HOA dues were $15,000 a year. Whoa . Then you got taxes on top of that.

Speaker 3: 35:34

That's why they have so much in the budget <laugh>. Correct . Yes . They're

Speaker 1: 35:38

Charging people for it . Yeah . Right . Because they are now maybe making up for lost time. Yeah. So ultimately second homes are expensive. Yeah. Uh ,

Speaker 3: 35:45

And you got, I think you got it ultimately comes down to you want it , you have to want it bad enough. That's right. And if you don't, that's fine.

Speaker 1: 35:50

It's not a great use of money, but it's Sure. Can bring a lot of enjoyment. Hey, that's all the time we have for today's show. Thanks again for tuning in. You've been listening to the Academic Mortgage and Realty Show on Wisconsin's radio station AM six 20 WTMJ.

Speaker 4: 36:04

The proceeding was a paid program. Advice and opinions expressed during the ANet 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.