Category: Home Buying

Tony Umholtz from First Horizon Bank returns to tackle the top 10 questions first-time home buyers often ask.

This episode is brought to you by First Horizon.

Episode Summary

Tony Umholtz from First Horizon Bank returns to tackle the top 10 questions first-time home buyers often ask. With over 20 years of experience in the mortgage industry, Tony covers essential topics like when it’s better to buy versus rent, the various lending options available, hidden costs beyond the down payment, how student loans impact your mortgage application, and more.

About Today’s Guest

Tony Umholtz is the Senior VP of Mortgage Banking at First Horizon. He graduated Cum Laude from the University of South Florida with a B.S. in Finance from the Muma College of Business. He then went on to complete his MBA. While at USF, Tony was part of the inaugural football team in 1997. He earned both Academic and AP All-American Honors during his collegiate career. After college, Tony had the opportunity to sign contracts with several NFL teams including the Tennessee Titans, New York Giants, and the New England Patriots. Being active in the community is also important to Tony. He has served or serves as a board member for several charitable and non-profit organizations including board member for the Salvation Army, FCA Tampa Bay, and the USF National Alumni Association. Having orchestrated over $1.1 billion in lending volume during his career, Tony has consistently been ranked as one of the top mortgage loan officers in the industry by the Scotsman’s Guide, Mortgage Executive magazine, and Mortgage Originator magazine.

Key Points from the Episode

• Introduction and Sponsor Message [0:00]
• Tony Umholtz’s Background and Introduction [2:55]
• Deciding Between Buying and Renting [4:05]
• Preparing for Home Purchase: Steps and Pre-Approval [6:17]
• Understanding Down Payment and Closing Costs [14:06]
• Details of the Pharmacist Home Loan Product [20:47]
• Defining PMI and Its Impact [24:35]
• Considering Down Payment and Other Costs [29:37]
• Impact of Student Loan Debt on Home Buying [38:51]
• Buying Down Points and Its Benefits [42:16]
• Credit Scores and Their Impact on Home Loans [46:38]

Episode Highlights

“One of the things that I’d always recommend when you’re looking at whether to buy or rent is, how long do you intend to stay in that city or that location? If you’re going to be in a location for five years or more, it’s normally going to make sense to own a home.” – Tony Umholtz [6:27]

“Pre approval is number one. You’ve got to be ready and have a pre approval in place. Know what your thresholds are, what can you afford? What are my closing costs? What’s my down payment requirement?  Have all the facts in place.” Tony Umholtz [9:09]

“I typically don’t like points right now because of where rates are. Rates are at this point where the Fed is about to cut, and I think it’s going to be a very gradual reduction in interest rates. It’s not going to be unless we see a recession. I think it’s going to be more of a gradual lowering of rates.” – Tony Umholtz [20:21]

Links Mentioned in Today’s Episode

• YFP Home Buying Resource Page 
• YFP Episode 380 – Understanding & Improving Your Credit
• Tony Umholtz
• First Horizon
• Tony Umholtz on LinkedIn
• Tony Umholtz on Instagram
• Tim Ulbrich on LinkedIn
• Subscribe to the YFP Newsletter
• YFP on Instagram
• YFP Facebook Group
• YFP Planning: Fee-Only Financial Planning for Pharmacists
• YFP Disclaimer

Episode Transcript

Tim Ulbrich  00:00

Hey everybody. Tim Ulbrich here and thank you for listening to the YFP Podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom. This week, I welcome Tony Umholtz back onto the show to cover 10 Frequently Asked Questions for first time home buyers. Tony has over 20 years experience in the mortgage industry and is currently a mortgage loan officer with First Horizon Bank who offers the pharmacist home loan product to pharmacists living in the lower 48. During the show, we discuss common questions that first time home buyers have, including when to buy versus rent, the different lending options that are available, upfront costs beyond the down payment, how student loans are factored into the lending equation and more. Before we jump into the show, let’s hear a brief message from today’s sponsor, First Horizon. Does saving 20% for a down payment on a home feel like an uphill battle? It’s no secret that pharmacists have a lot of competing financial priorities, including high student loan debt, meaning that saving 20% for a down payment on a home may take years. For several years now, we’ve been partnering with First Horizon, who offers a professional home loan option, AKA a doctor or pharmacist loan that requires a 3% down payment for a single family home or town home for first time home buyers, has no PMI and offers a 30 year fixed rate mortgage on home loans up to $766,550 in most areas. The pharmacist home loan is available in all states except Alaska and Hawaii, and can be used to purchase condos as well, however, rates may be higher and a condo review has to be completed. While I’ve personally worked with First Horizon before and had a great experience with Tony and his team, don’t just take it from me. Here’s what Peyton from Tyler, Texas had to say about his experience with First Horizon:  “Aaron, Cindy and Marilyn were very easy to work with. As a first time home buyer, I shopped around for lenders at the onset of the process, Aaron was always very quick to reply and provide me with any details I requested in order to move forward in my decision to select a lender. Once I selected First Horizon, Marilyn and Cindy did a great job of keeping my wife and I informed of the process. Closing was a breeze yesterday at the title office, and I sincerely appreciate the team going above and beyond to keep my interest rates locked despite extending closing due to negotiations with the seller. I’ve already shared my positive experience with many pharmacists-only groups, and I look forward my brother,  also a pharmacist, refinancing with you guys when he decides to.” So to check out the requirements for First Horizon’s, pharmacist home loan and to start the pre approval process, visit yourfinancialpharmacist.com/home-loan. Again, that’s yourfinancialpharmacist.com,/home-loan. 

Tim Ulbrich  02:41

Tony, welcome back to the show. 

Tony Umholtz  02:42

Hey, Tim, good to be here with you. 

Tim Ulbrich  02:44

Well, we’re excited, excited to have you back, and we’re going to be talking about frequently asked questions, 10 of them for first time homebuyers. And we’re excited to dive into those in more detail before we get into those. I don’t want to assume that everyone knows who Tony is, although you’ve been on the show several times before, especially for our new listeners to the podcast. So give us a brief introduction to your background and the work that you do with First Horizon.

Tony Umholtz  03:08

Sure, sure. Tim, yeah, it’s a, well, it’s been a number of years here with you, so I’ve enjoyed it. But you’re but you’re right. There’s probably a lot of new listeners out there. So I’m a mortgage banker. I’ve been in the mortgage business now for over 22 years, which is crazy. I started in October, 1 of 2002 so it’s been a while. I run a team. We’re based in Florida, but we can lend nationally, and we’ve been working with healthcare professionals for gosh, I mean, 20 years, and we, you know, we’ve, it’s been a great partnership, working with you guys and and your community.

Tim Ulbrich  03:46

Well, we really appreciate it, too. As you mentioned, it’s been several years. I know you’ve added a ton of value in education our community, and we’re going to do exactly that on on today’s episode. So let’s jump right into our 10 questions, starting with our first one, which I know is a common question we’re getting, especially in in today’s competitive market that continues to be which is, how do I know when I should buy versus whether I should continue to rent? Disclaimer, of course, every market is different, but as you’re talking with prospective home buyers, Tony, how are you helping them think through this decision of when does it make sense to buy versus potentially continuing to rent?

Tony Umholtz  04:23

Well, one of the things that I’d always recommend when you’re when you’re looking at both and comparing both is, how long do you intend to stay in that in that city or that location? If you’re, if you’re going to be in a location for five years or more, it’s normally going to make sense to own a home. I mean, because even with zero appreciation, we know historically, homes appreciate, you know, if you look at historical averages, they typically appreciate three to 6% a year. But even without any appreciation, just your amortization, your tax breaks, if you itemize, you’re usually going to come out way ahead, because most of you guys who have rented know rents don’t stay stagnant. They normally go up every year. So their cost of renting goes up, and then rental insurance goes up. There’s costs that continue to escalate there too. So I normally say, if it’s a time thing for most people, if you’re going to be in the home for more than, more than, you know, five years or five years or longer, or in that area, sorry, I would say that that that’s going to be one reason to put down roots and to own a home versus rent. In the cases where you think you may be moving in a couple of years, then renting might be a better solution, you know, because then you’re, you know, not locked into the house, and you have some more flexibility to move quickly and renting can be a better solution if you’re going to be there or more of a temporary time time frame. But I mean, if you go back in history here, it’s very hard. I mean, I’ve had this question many, many times, and I remember in 2010 people were so hesitant to buy because we just went through the credit crisis, which was just a very, very strange time where we had so much inventory built by builders. It was just very, very it was unlike anything I’ve seen and that, and there was a lot of fear. People did not want to buy. They did not want to buy. And you look back, and that was the best time to buy, you know. So it’s one of those things it’s hard to always pinpoint. I wouldn’t time the market, just like in the equities and stock market, but I would say, if it’s more of a lifestyle choice, right, are you planning to be there for the long term?

Tim Ulbrich  06:27

Yeah, I’m glad you gave that example of not trying to time the market like if the equity in the stock markets, I was thinking the exact same thing, right? We see that on the investing side. I even think about when I was buying our home here in Columbus back in 2018 right? And I remember when we moved here at the time, interest rates were at 4.625% I remember that was the 30 year fixed rate, and it was like, Ah, so high, right? So high. For that time, home prices were the highest they’d ever been in Columbus. And now looking back like that was a steal, right? So I think you kind of look at the long term trajectory of what have the markets done over time, just like we do on on the equities and the investing side and and, of course, in addition to the timeline piece, which is really important for first time homebuyers, we might have people that are in transitions, residencies, fellowships, other things. So, you know, first job, or really making sure we’re in that place where we feel good about laying down roots for a period of time, but also making sure that, hey, we’re ready. We’ll talk about down payment and other factors here in a little bit, but looking at the timeline, looking at the readiness to buy, and making sure we’ve got the financial means, and looking at other parts of the plan as well. Second question Tony, I’ve got for you is for folks that are in that position to say, Hey, I’m ready to buy. I’m looking at my first home. I want to make sure that I can act quickly on that home purchase when I find the right home. So what are some steps that people can take? I’m thinking of things like pre approval, making sure they’ve got their their documents, pay stubs, all the things that lenders are going to are going to request and require, so that they are ready to act quickly when they find that right home.

Tony Umholtz  08:05

Pre approval is number one, Tim, you got to be ready. Have a pre approval in place. Know what your thresholds are, what can you afford? What are my closing costs? What’s my down payment requirement? Have all the all that those facts in place and in but the pre approval is going to solve a lot of issues. Because if you have a credit problem where you need someone to help you with your credit, you know, my team, we often do that, you know, to help prepare folks to get either better rates or qualify, that gets you in line to be ready to move quickly. Because, because when you find that home, sometimes it can be competitive, even in this market, especially when you find the right home, the right price, but definitely being pre approved. I think you know, also having, you know, a good real estate partner, if you’re looking you’re working with a realtor, have identify one that you trust. I think that’s important. But between having, you know, the lender side and maybe in a very good real estate agent in your corner. I think that would be the best way to prep so you know which areas you’re interested into what parts of town. That’s very important as well. 

Tim Ulbrich  09:09

Tony, how long does that pre approval typically last? Reason I asked that is I talked with many first time homebuyers. I remember this was the case for Jess and I where, you know, you might have that feeling of, hey, I’m not, I’m not there yet where I’m ready to, you know, work with a lender, go through the pre approval. I’m thinking that I’m going to buy, you know, 6-12, months out, and then all of a sudden we start looking, and we’re ready the next day, right? That happens all the time. So I think that begs the question of, you know, do I wait for the pre approval? How long does that pre approval last? Where, where I can feel confident that, even if I don’t think I’m ready today, but that changes in a month,when I get to that point I’m ready to go.

Tony Umholtz  09:46

You know, that’s good question. I so typically, the the pre approvals are good, the numbers and that we’ve been provided the credit report, they’re good for 90 days, typically. But it’s very easy for us to update them. It doesn’t take long. It’s a very. Simple exercise to to update the credit report, and to update, you know, financials, if needed. So it’s a very easy exercise. 

Tim Ulbrich  10:09

Since we’re talking pre approval, let’s go to the third question, which relates to that, which is, what? What’s the difference between a pre approval and a pre qualification? I think with a lot of people, you know, searching online, there may be some readily accessible tools and things that are out there where take click a button, you’re pre qualified, ready to go. But what is the difference between those two, and why the pre approval is so important?

Tony Umholtz  10:31

Sure. So the pre qualification, like you said, very easy to access. There’s many links online that’ll you could put in your income and it’ll spit out a number for you and what you think your debts are, but the lending world is different, right? And in the respect that it’s not always that simple, and it can actually to be to your benefit too, because different liabilities can can account differently against you. So for example, your insurance premium on your car. That’s not something we look at, you know, lenders look at, right? We look at what, what are called creditor expenses, which would be student loans, car loans, credit cards, you know, any mortgages you have, you have a boat loan, any installment loan, installment debt, those are going to be the things that that the lending community would would look at as in your debt to income ratio. Okay, so a pre qualification is just you putting those numbers into the system. They’re not being validated. Your income is not being validated. So yeah, for example, if, let’s say you’re a 1099, employee, and you say, well, I make $100,000 a year, well, you plug that into the pre qualification, but in reality, you take $20,000 in expenses, you know on your schedule C of your tax return. Well, you really only make 80,000 in the in the eyes of a lender, right? But you just put 100,000 in so it doesn’t carry a lot of weight, plus there’s no credit report that’s been reviewed. So the real estate community is wised up to this. So they they call me all the time. Is this a pre approval or pre qualification? That they always call because they want to know that this buyer that’s buying their listing, or they’re about to work with on from a buyer’s, you know, perspective, is able to buy and is been pre approved. A pre approval carries a lot more weight, because that means a lender has validated the income, has validated the credit report and valid, validated the liabilities. So we also look at that means we looked at a pay stub, right? Or maybe even a tax return, and shed these people do earn what they earn, and this number is valid. So that’s the extra step that a pre approval takes, over a pre qualification,

Tim Ulbrich  12:41

And for those that maybe are listening have gone through this process, you know this right? When you go through a pre approval, you upload all these documents, pay stubs, and it has a much more in depth look at your overall financial picture, the schedule, C example, the 1099, income is a great one. And we can appreciate why the pre approval carries more weight. Tony that that that has me thinking, wasn’t a question on my list, but for those that are listening that you know, maybe we’re in a period of postgraduate training residency fellowship where they were earning $50-$60,000 now they’re out earning more of a full, full pharmacist income, $121-$130, but it’s only been maybe three, six months or less. How does a lender typically look at the earnings history and the length of history? So right now, my w2 show is, I’m earning that higher income, but it’s only been for a short period of time. 

Tony Umholtz  13:32

It’s a great question. Well, you just mentioned something. It’s W2 income. Okay, so if you, if you’ve been in training for several years, even earning $50,000 a year. And then you jump to that $120 to $130 salary on a W2 basis, the lender can use that immediately. So we can actually use that W2 salary immediately. It’s only when it’s incentive based pay that it can be a problem. So it’s really a good question, because the incentive based pay is different, right? So if it’s if you’re coming in, you say, well, I make a $50,000 salary, but I’m incentivized based on the number of procedures I do. This isn’t as much applies to the pharmacist community, but a lot of physicians it applies to. The contracts have changed where a lot of it is based upon, you know, how many patients they’ve seen, and there’s a revenue component. So we do have to know what that floor income is in order to qualify them, unless they have a two year track record. So when you have a two year track record of variable earnings, we we average that. So if someone’s 100% commission employee, or are they making mostly their most of their income via bonuses? Yeah, average those incomes together. So that’s how that works. That’s how the formula works. But if you’re coming right out of school or training and you have a base salary, the lender can use that right away in most instances. 

Tim Ulbrich  14:57

I think for most of our listeners, it would be that w2 income. Um, may not have the the length of history. We do have some folks that may have be more commission based, bonus based, I’m thinking about some of the industry pharmacists that are out there that receive, you know, larger bonuses, or maybe even the self employed individuals that are listening where there’s a longer track history of earnings that are going to be needed to be able to prove that qualification when it comes to the pre approval process. Number four on my list of top 10 questions for first time home buyers relates to the different lending options that are available. So we know there’s conventional loans. People might have heard of FHA loans, pharmacist home loan products, VA loans that are out there, and all of a sudden the questions are swirling of, you know, what are the differences? And how do I go about finding the right loan product that’s available? So what are your thoughts there, Tony?

Tony Umholtz  15:50

So there are a lot of products out there, and this is what makes our job fun, is, is finding the right solution for each individual person, because everyone’s different. And there’s pros and cons to each product. I will say that even a number of of of your clients, in the past, we’ve even used FHA, and the reason why is, depending on your credit score, depending on your situation, sometimes that pricing is much better. The rate is much better. Even though there is PMI, there’s exceptional rates sometimes, which, for some borrowers, is better. So if your credit score is not above 740 that can be a better solution. So we look at, you know, everyone individually. I will kind of give a quick summary of each just to just to help, because I know these are, these are floating around out there. So conventional loans are probably the most common mortgage out there, and those are loans that are, are basically backed by Fannie Mae and Freddie Mac so, and I’m a, I’m kind of a finance nerd. We’ve talked about that. Tim, I don’t want to, I don’t want to bore people here. I don’t want to bore but I will give you, for those that are analytical and like some information, I’ll give you a little more detail. So they’re called the GSEs, Government Sponsored Entities, and they back the majority of mortgages originated in our country, and thank God we have them. They they do a tremendous amount for our housing market, supporting our housing market this country. So those most conventional mortgages are written through them. They’re backed by them, okay? So that means they have very little risk to the investor and so though, and the investors, I’ll tell you who the investors are. A lot of them could be you guys, right? If you buy a mutual fund, yeah, but invest in bonds or Ginnie Mae’s securities, that’s what or, or mortgage backed securities, that’s what it is. So they’re basically, you know, mortgage instruments that are turned into investments. But conventional loans do have PMI if you don’t put 20% down, and that PMI can factor can change based upon your loan to value your credit score, even some geographical implications based upon your income level. There’s some products that they offer based upon your income level and zip codes and things like that, but, but sometimes it’s a very compelling product, because that PMI factor can be very sometimes not a big number. And given the interest rate and the fact that you can pull it off in two years, sometimes paying the PMI is fine. It’s not a big deal, because you’re going to have a chance to pull it off in two years anyway. So that’s conventional loan programs. 20% down. There’s no PMI above that, there’s a there’s a factor, and it’s basically skewed towards your loan to value, how much you put down, and your credit score, and actually your debt to income ratio as well, is a is a component, too. Then we have what’s called FHA loans. FHA loans are, are basically a Federal Housing Administration loan there. There’s a lot of restrictions on FHA as far as loan size. Every county has a different loan size in this country, and they’ve gone up with the housing market. But, you know, there they can be a lot of times they’re capped in the 500 to 550 range for most areas, sometimes lower, sometimes higher, for higher cost. The beauty of FHA is it allows three and a half percent down. It does have a PMI component that is lifetime though. No matter what you do, you cannot get rid of it. But often the rates are subsidized and are pretty attractive so, and they’re very much, they’re much more flexible on credit score as far as rate. Conventional, if you have a lower credit score, the rate gets impacted heavily, and it’s not as much on FHA. VA loans or Veteran Administration loans are really only they’re only available to veterans, right, who have served, and they’re a great product, and we, we love doing them for veterans. It’s just there’s only a couple we’ll do here and there per month, typically, just not as many out there. But there’s a great product, 100% financing, no PMI. There is a VA funding fee, but excellent rates and then there’s unique products, right, like niche programs, like our product for pharmacists, right, with no PMI limited amounts down. We have Doctor loans with no PMI limited amounts down. Those are more loans that are going to be derived from the balance sheet of a bank or a lending institution. They’re not something you’ll find as much on the mass market, so they’re more of a niche program.

Tim Ulbrich  20:21

And I’m glad you outlined them the way you did, because it becomes obvious, hopefully to the listener, that, Hey, can I find a lender that I trust, that I like, that I feel like has a as an understanding of my situation, obviously an awareness of the different products that are out there, and they can help me kind of mesh together these variables of where do I live? What do I have available for the down payment? What’s my credit score? And really look at the total package and then be able to say, hey, for you, we really feel like the best loan product is x. So I know you’ve given an example before that some of people from our community might come to you and say, Hey, Tony, I’m really interested in the pharmacist. Home loan product makes sense. I’m a pharmacist. I like the idea of a low down payment, hopefully no PMI. I’ve got a higher credit score. But there might be variances where you look at the total package and decide you know what an FHA loan does make more sense. And I’m so glad you framed it the way that you did, because I think we tend to look at these things in silos or black and white, that hey, PMI is always bad, not necessarily true. I mean, when you zoom out and you look at, you know what, what’s the interest rate, what’s the cost of the loan over the life of the loan? You know, just like we talk about other areas of the plan, you might give a little bit of here, but get more there where it makes sense. And so I think really having that relationship with the lender is so important that we can hopefully guide the person in the direction and path that makes the most sense for them, even if they maybe that’s different than what they came in with an idea of where they would go. 

Tony Umholtz  21:49

That’s exactly right. 

Tim Ulbrich  21:51

For the pharmacist, home loan offered through First Horizon, I think some of our listeners are privately familiar with the physician, doctor loans that are out there. Similar type of product or offering. Here we’re focused on our community audience of pharmacists. Tell us more specifically about that in terms of down payment required, minimum credit scores, maximum loan amounts.

Tony Umholtz  22:12

Sure. So the minimum credit score is 700 for the product, and obviously, the higher your credit score, the better pricing you’ll get but there is no PMI, so that that’s been very attractive for a lot of folks. So you have no mortgage insurance, you can put very little down. If you’re a first time home buyer with this product, you only have to put 3% down. If you’ve owned before, it’s 5% down. There’s no prepayment penalties, really, no reserve requirements either. So that’s another big, big piece for younger buyers, especially that haven’t had a chance to save as much, you know, cash. The the max loan amount is typically matches up with the conventional loan amount for the area. So like, as of today, it’s seven, 766, 550, but guys, it’s going to be over 802,000 very soon. So Fannie Mae is basically made that announcement. We’re going to, we’re going to kind of be in coattails with that. So it’ll be over 800,000 and it already is higher than that in higher cost markets now.

Tim Ulbrich  23:19

And that’s not, that’s not purchase price, that’s the loan amount you’re talking about.

Tony Umholtz  23:23

That’s the loan amount so that it’s going to be, I think we can start taking those applications here pretty soon, even though it’ll be official like January 1. I think they’re going to allow us to start taking those applications in November. So, you know, that’s kind of a nice, nice benefit, to start that early, get a jump start, but, but, yeah, that’s the minimum. That’s the, sorry, the maximum loan amount, the minimum credit score, again, I’ll mention is 700. The no prepayment penalty, no PMI, is really the big pieces to this product, and the, you know, but also the flexibility to do, to do loans all over the country. Yeah, it’s not really. There’s not a geography base outside of Hawaii and Alaska. We can offer this product pretty much everywhere.

Tim Ulbrich  24:12

Yeah. And again, for folks that want to learn more about that product, get in touch with with Tony and his team to see if that’s a good fit, and go to yourfinancial pharmacist.com/home-loan. We’ll link to that in the show notes. We’ve got a great educational page. It talks a little bit more about the pharmacist home loan products, break down some of the math of what’s involved there. Talks about the maximum loan amounts, what are the features, benefits of that product? And then again, an opportunity to make that connection to Tony. So we’ll, we’ll link to that website in the show notes. Tony, we’ve talked about PMI, you and I have both thrown around the term. So let’s go there with our next question. Define PMI for the first time homebuyer who maybe hasn’t heard that that term, and what the purpose and point of PMI is.

Tony Umholtz  24:53

So PMI private mortgage insurance is what that stands for, private mortgage insurance. So. So what it what it means is, you know, when you when a mortgage is under 80% loan to value, there is actually, if that loan were to default, there is recourse for the lender on the balance above the 80% so like if you were to sell as a as a mortgage lender, let’s say we had $100,000 mortgage that we or purchase price, and we lent 95% for simplicity, $95,000 on this mortgage to in Fannie Mae insured it or bought or accepted it right, 80% LTV, there’s no risk If it defaults. But that $15,000 tranche above the 80,000 between the 80 and the 95 that would be a liability for the lender. And what PMI does is basically, is it ensures the lender that, if it did default, that you would no longer that the lender would not be responsible for that. So that’s the reason there is that you know that that premium is an insurance premium on the mortgage, and again, the higher the balance of the loan, the higher the PMI typically, right? The higher the loan to value, the higher the PMI. So it’s risk based adjustment. It’s just like any insurance, like, if you’re in auto insurance, right? If you’ve gotten in a lot a lot of speeding tickets, premiums higher, well, it’s kind of the same thing with PMI, right? If your credit score is lower, if your debt to income ratio is higher, right, things that are deemed risky, or your loan to value is high, 95 versus 85 Yeah, and that’s going to increase your premium slightly. Now, we mentioned this earlier. PMI comes in different forms, so PMI through the Federal Housing Administration, FHA loan, that ensures that pool of FHA loans, right, that is lifetime of the loan, right? And there’s an upfront component and a monthly component.. Doesn’t go away. And you have the upfront component. Now on conventional, you only have the monthly component that can go away once you’ve paid it for two years, and you can prove that the LTV is below 80%. The other thing I’ll say, I’ve had clients do this. I had a client one time put 5% down conventional loan. They sold their house, and they got extra money, and they put the additional 15% down based on the original purchase price. They were able to get the PMI waived so you can get it inside that year, if you go back and and get the LTV under 80. So mortgage insurance is just a tool to help people afford, you know, homes with less down. It’s been around for, you know, forever, and it’s something you don’t want to pay. If you can get around it, it’s just saves you money, right? So it saves you a lot of times. It can be a car payment per month for some people, but it is. It can be a useful tool to get into a home with less down.

Tim Ulbrich  28:01

So give us a for instance. No one’s going to hold you to exact numbers, but let’s say someone’s buying a half million dollar home. Let’s assume a conventional loan. They put 10% down, so 50 down, they’ve got a $450,000 loan. What are we talking about roughly, for PMI on something like that?

Tim Ulbrich  28:19

And I’m thinking back to our first home, and again, this was an FHA one, back in 2009 before I knew about what you shared of, you know, some of the indefinite nature of PMI and FHA loans. And I want to say it was in like the 131-140 range, if I remember right now, lower purchase price, right? This was 2009 so, you know, we’re not talking about a half million dollar home.

Tony Umholtz  28:19

Well, I got to be careful here because there’s so many variables, credit score, right, loan value, you know, debt to income ratio, usage of home, second home versus primary home, there’s all these different factors. I mean, it could be a couple 100 bucks depending on the risk profile. I mean, I’ve seen I can tell you, for risky folk, riskier folks, I have seen those premiums approach 500 a month. Pretty sizable, right? 

Tony Umholtz  29:11

I would say two, 250 ish to 350 depending on your profile, probably, you know, it’s probably a good range on that, I would think. But the, you know, one, one thing is there, there has been a regional effect, Tim, and again, this was a while ago. I don’t want to say but, but I remember, there was a couple areas that had more foreclosures, and others, I remember, for some reason, the PMI was higher regionally. I don’t know if that pricing is still around. I don’t think so. But there was some things like that, like macro effects as well. That was more after the credit crisis, it’s been a long time, so I think it’s, it’s changed, but it’s mostly based upon, you know, your loan to value again, your  debt to income ratio, and you know what your credit score is, right? So someone with a 660 score. Versus a 760 score is gonna pay a different premium, you know as well.

Tim Ulbrich  30:05

Let’s talk about down payment as our sixth question. We mentioned this briefly when you talked about the different loan products, but I still talk with a lot of prospective home buyers that you know they’ll share with me. Hey, Tim, I’m thinking about buying a home in the next six or 12 months, and ask a couple other questions, and one of them being, Hey, what are you thinking in terms of down payment? Because we know that for many first time homebuyers, this can be the biggest barrier right to getting started, depending on the loan product that they ultimately choose. And it’s one of those questions I think that catches people off guard of like, Oh, I haven’t thought about, you know, if it’s 20% down or 10% down or 5% down. But if we’re talking about something like a half million dollar home, these are big savings numbers, while people are often trying to prioritize other financial goals as well. So, you know, the question here is, how much should I be ready to put as a down payment for a home purchase? And I know in part, the answer is, it depends, right? Based on the products we talked about.

Tony Umholtz  31:00

Yeah. I mean, it’s, it’s, it’s, you know, down payment is going to vary, right? I would say that normally, let’s say you’re going to utilize the pharmacist product. If you’re a first time buyer, you could put 3% down. So 3% down is all you’re going to need. In that scenario, I would say five, 5% down if you’ve owned before I have, and some in our community, in your community, have have put 20% down. So it is something that we we see, and they just want to do that from a payment perspective, right? Because obviously the more you put down, the lower. But the you know, I would say planning ahead to have at least 3% down, right? If you’re a first time home buyer in and then also, you have to budget for closing costs, right? You closing costs and prepaids. And sometimes the prepaids can be more than the closing costs, depending on the state you’re in. Okay, for example, in Florida, closing costs are a little higher. Ohio is less than Florida, but your prepaids might be higher in Ohio. So it just depends on what you know. Prepaids are insurance, homeowners insurance and your tax escrow. Okay, so you’ll pay one year of your insurance premium up front. So depending on where you are in the country, that can vary, if you have an older home versus a newer home, that premium can vary, but those are some of the things you have to be prepared for. Your down payment, closing costs and prepaids. You want to make sure you’ve got a good number of what all of those are, and reserves, if you require them. We don’t look at reserves for the programs I mentioned earlier, really isn’t a reserve requirement here, but some, some do. Some have very strict reserve requirements, six months, 12 months, you know. So there are requirements out there. You want to make sure you’re prepared for for all of that. 

Tim Ulbrich  32:50

And that was my seventh question. I’m glad you you addressed that with the down payment, which was, what else should I be considering beyond the down payment? Because I think that becomes the primary focus and goal for right reason. I mean, even if it’s 3% which isn’t the 20% we’re talking about conventional, that’s still a big savings goal, right? Again, if we go to a half million dollar home, you know, we’re looking at $15,000 that we need to come up with and have saved, that’s, that’s no small amount, but, but other things I hear you saying could be closing costs, prepaids, reserve requirement, if they exist. And then we’re, of course, seeing about more of the ongoing things that could be PMI, that could be, you know, property taxes and obviously upkeep maintenance in the home, HOA fees, etc. So we’ve got to kind of zoom out here and look at the budget, but more of those one time costs upfront, in addition to the home payment closing costs, prepaids. Tony, funny story with that. I remember the first time we bought our home going through this when you don’t know things like escrow, right? You’re not thinking about prepaids of homeowners insurance and taxes. I remember seeing those, and I, I had to ask a question four different times, I think, to the lender, because, like, is this? Is this? Right? Like, I just wasn’t expecting it. I wasn’t anticipating it, and it caught me off guard. But if you put together closing costs and prepaids that that that can be another sizable amount of money that someone has to have ready at the point of close,

Tony Umholtz  34:10

Absolutely, yeah. I mean, it’s a depending on where you’re located, it can be very sizable, right? Premiums can be pretty high. Yeah, absolutely. And you know, a couple things just about, you know, we’re talking about all these things. Tim about, okay, down payment, closing costs, prepaid, it’s very intimidating, right? It sounds intimidating like, wow. So a lot of lot of cash out, out of the pocket, and it is, but the amount of clients that like, for example, your $500,000 home example, where they put 3% down. And I’m not talking about during COVID, when things were shooting up, but yeah, that put think about $15,000 down, and maybe you had another six to 8000 for closing costs and prepaids. And now that house is worth. 550,000 a year and a half, two years later. Where can you get a return like that? Let’s say you put 25,000 into a home, and you have 50,000 a year later in equity. That’s, that’s a remember, this is on top of, you still have the equity in the home, right that you put down, plus you’re amortizing the loan, you’re building equity, paying the note down. Now your home’s worth 550 and I can’t tell you how many situations I’ve had like that and seen and you know. So on a positive note, home ownership is very powerful, and it’s one of the best returns you can you can get as and it’s not looking at this as an investor. It is a home, it’s a lifestyle, but I’ve also argue it’s one of the best investments I’ve ever seen, the leverage wise. I just I’ll give one example. He was a physician, and I met with him his first day. His mother came in the office with about 15 years ago, he had just got into his residency at the University of South Florida, and he wanted to buy his first property. And he bought a town home at the time, it was maybe 140,000 or so, and it was a big deal to get that. He sold that town home after his schooling was over for like $270-$280,000 rolled that equity into another home, and he just bought a home for 1,000,001.4 5 million that we helped him with. It’s just a great story of just utilizing equity. And that’s what he told me, he’s like Tony. I just built my my sem I had all the student debt, I did all these things, but I built up the down payment through owning property. And it’s a good example of how just, you know, we’re not talking about flipping property, but owning for a set number of years and paying down the note and you roll to the next one. So I think I didn’t mean to get off on tangent, but to you, I was like, you know, I don’t want this to come across as like, oh, it’s all these things to worry about, and it’s, there’s a lot of positives too and you have to be prepared. You have to have the down payment ready. You have to have the prepaid and closing costs. And a good lender is going to tell you exactly what that’s a good estimate of what that’s going to be, yeah, and then, then you can go out and you can start house hunting, but you just know that that that power of ownership can really, really provide a great financial return for you as well.

Tim Ulbrich  37:22

Yeah, I really appreciate saying that, right? Because there’s a balance here, which is true of many parts of the financial plan. You know, obviously, what we want to avoid is someone getting in way before they’re ready, and then we’re over our head and we’re not, not ready to take on that expense, or we’re, you know, a job loss or job cut hours away from, you know, being underwater on a home that’s one end of the spectrum. But the other end of the spectrum also is being too conservative. You know, in the decision, ultimately, there is an investment here. There is an asset that hopefully is going to build in value over time, even potentially an asset that we could leverage, you know, the equity in the future, if and when that were to make sense. And so, you know, I think that’s where the conversation comes in, which is an interesting one of does 20% does making extra payments on your home to pay off the mortgage early? Does it make sense? Does it not? It depends, right? It depends on what else is going on in the plan, or the interest rates and so forth. So, good reminder that here we’re talking about expenses and cost, but also, yeah, an asset and an investment that we’re going to grow, hoping over time.

Tony Umholtz  38:22

That’s right. And Tim just remember, there’s guard rails on the lending community too. I mean, we do not typically allow debt to income ratios, right, without compensating factors above 43% right? It’s going to be, you’re going to have to have compensating factors to get it above there. So there are guard rails. But everyone you got to be prepared to once you sign on that mortgage you’re obligated to pay, and so you got to understand what your costs are and what you’re getting into, and plan properly. You’re exactly right about that.

Tim Ulbrich  38:54

Since you said debt to income ratios 43% let’s go there with the next question, because I think many of our listeners that are first time homebuyers also have student loan debt. And so naturally, the question is, how does my student loan debt, along with any other debt, could be a car debt, could be credit card debt as well. How does that get factored into the equation, and how that’s looked at by the lender? 

Tony Umholtz  39:15

Yeah, great question. So yes, the student loan debt is just like a car payment, just like a credit card, all those things, count on your debt to income ratio the student loan typically, we’re going to look at that income based repayment amount. So even if you owe a large number, we’ve seen 250,000 or more from folks you if that payments only 900 a month, that’s what we’re using, so or 800 a month, or 1000 a month, whatever that number is what we’re going to use. Now, in instances where there’s no payment, there is a factor we use, but I’m seeing less and less of that, Tim  They have a an income based payment that we know what the obligation is going to be, and that’s how we’re calculating themajority of debt income ratios. So it’s not the balance. And that’s what some of our clients have said in the community, is like, Hey, I owe this amount. What is how’s that going to impact my affordable ability to buy home? Well, again, it’s just coming back to whatever that income based repayment is. That’s the liability we’re going to use.

Tim Ulbrich  40:18

So you mentioned the 43% we’re looking across all all liabilities. Obviously, student loans is a big part of that for many first time home buyers, but you’re, you’re typically looking at the income driven repayment amount. Let me ask you this. I’m getting in the weeds a little bit, but I’m guessing some of our analytical listeners are thinking about this. So if I’m listening and I have $300,000 of student loan debt, you know, if that person were to opt into the standard 10 year repayment plan, they’re looking at a fixed monthly payment round numbers, probably somewhere around 2500-2700 ish, I’d have to check my math on that, but it’s probably pretty close versus if they opt into an income driven repayment plan, even though they can make extra payments if they want to, the income driven repayment plan, by definition, is based off of your income, and has nothing to do with the total amount of debt that you have. So you could have $300,000 in debt, but because of your situation, your income situation, you might have a monthly payment, as you mentioned, of 800, 900 1000 so there is some strategy there to be had, potentially if you’re looking at buying a home of how does my student loan repayment plan selection and strategy align with my home purchase decision? 

Tony Umholtz  41:11

Yeah, that’s an excellent point, absolutely. Because if you’re looking to buy a home and you have that option right Tim, you want to try to get that payment probably as low as you can in the interim so you have that affordability, and it won’t impact your ability to purchase and then down the road, you can influence that more after you’ve qualified for the loan that you want. 

Tim Ulbrich  41:48

Yeah, and this is another example, I know we’re not talking about student loans, but another example where something like those that are on a public service loan forgiveness track, you know, has multiple benefits, because in that type of pathway, what we’re typically trying to do is pull all the levers that we can to minimize the monthly payment, get more forgiven and forgiven tax free. But here then that lower monthly payment would also have some peripheral benefits that it’s going to show as a lower amount when we’re looking at the debt to income ratio. Good stuff. All right. Number nine on our list is related to the topic of buying down points. This is a question I get a lot. So Hey, Tim, I talked with a lender, and they offered me this rate, and they mentioned something about buying down points. But I don’t really know what that means, or how I can actually evaluate whether or not that makes sense. Tell us more about that.

Tony Umholtz  42:33

Sure. So, so what points are is, I mean, some lenders will charge points, and it appears that they’re buying the rate down, but they’re not always buying the rate down, if that, if that makes sense to you, like it could be some margin built in. I mean, I don’t want to get into too much of of how all lenders work, but there’s different types of lenders out there. There’s banks, which is what we are, there’s there’s mortgage brokers, and then there’s correspondent lenders, and they definitely have different models. Typically, the products that we’re discussing are going to be through a bank, right? The broker community is a little bit I have some friends that are brokers that are great, but they normally will write more challenging loans, like lower credits for people. Typically higher cost to originate type business but, but points are something you can utilize to to your benefit. I’m, I will say this, I’m not in this environment. In my background is finance too. So I’m, even though I’ve been in the mortgage business long time, my degree, my masters, are in finance, I’m, I’m pretty analytical as well. I typically don’t like points right now because where rates are. Rates are in this in this point where the Fed is about to cut, and I think it’s going to be a very gradual reduction interest rates. It’s not going to be unless we see a recession. I think it’s going to be more of a gradual lowering of rates. If you look at the Fed dot plot, which is what the Fed is telling us they’re going to do with rates over the next few years. Early 2026 has rates substantially lower than they are today. So you know, if you’re going to pay points today, how are you going to get the payback period? Yeah, payback period is the most critical piece to paying points. How quick do I pay back those points? So for example, one point buy down, it might get you a quarter to three eights in rate. Right from what the par rate would be, par rate means no points. One point is a buy down in the rate. Now, if you say I’m going to stay in this home for let’s say it’s three eight of a point. So it’s point 375, percent. So at the point of three years, you’re going to more than pay back the loan at three years between your interest rate savings. If you’re only going to be in the home two years, you don’t want to do it right. But if you’re going to be in there over three years, it would make sense now, but the only argument I’d give is you’re likely going to have a chance to refinance in the next three years. So why pay those points now? I would rather see you pay them when the rates are lower and buy the rate down even further. Okay, so that’s that’s how points work. It’s a buy down of the interest rate, and it can be to your benefit in some instances. It also can be the way you qualify, right? If your debt to income ratio is a little tight, we’ve used that this year, where we’ve bought the rate down three eighths of a point or a quarter, whatever it is, and that got their payment a little lower to qualify. So there is times we will do it, but generally speaking, I don’t promote it to clients. There are some that ask, but majority of them, once I speak to them, they say, I get that just given where the deal curve is. But I did, I will say this during COVID, I had a few these, like, really low rates. And I remember the rates were low and I and they were going to stay in the home, and they paid a point, and they got the rate even lower, and are never going to refi that loan. So it’s like, you know. So there is some some, some instances where it makes sense. So, but also, the other big thing is, will it truly be a long term hold, just being, being in the business, as long as I’ve have been, I’ve seen a lot of families move up, and you think, well, am I going to be I’m going to be here for the long term, right? That I hear that, but then it really isn’t reality. You know, things change. Your family grows. You need a different school district. So, you know, I think those are the things you think through if you’re looking to pay points, because it’s a lot of times it’s a little bit better not to, you know, unless you really are getting a big time benefit.

Tim Ulbrich  46:35

Great stuff. Our last question for you on our top 10 FAQs for first time homebuyers, and then we’ll let you off the hot seat. Tony. 

Tony Umholtz  46:43

No problem at all. The pressure, you know, I was a kicker a long time ago, so I like the pressure. 

Tim Ulbrich  46:50

I love it. How about kicking in the NFL these days? Man, they’re like, stretching the limits. It’s pretty fun to watch. It’s reminding me the four minute mile of like, once you realize something’s possible, right? We just keep going. Anyways, our last episode of the podcast, episode 380 just couple weeks ago, we talked about understanding improving credit. And so my final question for you relates to credit, which is, how much does my credit score impact, not only my ability to get a loan? We talked about that a little bit with a minimum credit threshold for something like the pharmacist element, but also how competitive my rate will be,

Tony Umholtz  47:26

right? Yeah. So, so remember, higher credit scores are always going to help your interest rate, that that’s going to be a benefit, especially like with the pharmacist product, a 740 score will be better than 720 and better than 700 so it does help you to have a higher credit score. Some products have a threshold. I mean, the pharmacist product 700 if you are 690 you you’re going to be too low, unless we can get your credit score higher, you know. And but there, you know, credit scores are important. You know, even FHA, like our our FHA minimum is 620 is what we have. Some lenders will go down to 600 you know, as well. But we have a 620 credit score floor to get qualified for FHA or conventional and those rates get impacted, you know, the higher your credit score, like, I’ve seen amazing rates with FHA on 760 and above credit scores, like, at one point, I mean, before rates went up again, yeah, memory. I mean, we had rates at 5% with no points, 30 year fixed. That’s why I had to write some FHA loans. The rates were so good, you know. So it was just one of those things where we had to look at the opportunities for people. And it made sense for, you know, 30 year at that level. But, yeah, credit scores are super important. You want to take care of them. One of the big pitfalls I’ve seen for the first time, home buyers out there. Let’s say you move into a new apartment, right? You’ve done a really good job. You keep your credit your credit cards, under wraps. You don’t charge over 50% of the limits. That’s a big thing that I find is a problem. But let’s say you go to Best Buy, right? You buy a TV, you buy this surround sound, you put like, 2000 $3,000 Oh, there’s no interest for zero a year through Best Buy credit. Well, what they do is they report it to the bureaus as a maxed out credit card. Yeah, a lot of furniture stores do this too. Just be careful of that. I’ve seen that happen when people furnish their apartments or their homes or, you know, it happened. Happened to me when I was young. I remember I bought my first time I did it, and I my credit score went down 60 points. I was like, Wait a minute. Went from 760 or 740 to like, you know, 680 or something like that. And that’s what happened, is I went and I did that, I bought furniture, and it didn’t know it, so I learned it firsthand when I was in my mid 20s. So I think for all of you out there, that would be one thing I’d watch. You know, don’t max out credit cards, even for those types of arrangements, I would keep your credit cards, just keep one or two good ones. You don’t need a bunch of them. You don’t need a Dillards card, A Macy’s card, a Home Depot card, you know, you name it, just take, you know, one or two good ones, and that’s, that’s all you’re going to need, and keep your, you know, pay, make your payments on time. That has the biggest effect, okay, that and the balances are the most critical pieces of your credit. 

Tim Ulbrich  50:17

Tim and I talked about that on 380 and again, we’ll link to that, to the show notes of what are the individual factors of the credit score. And as you mentioned, on time, payments and percent of your balance that you’re using make up nearly two thirds of that of that credit score when you look at the total factor. So focusing on those areas to improve your credit, making sure you’re not making some of those blunders leading up to the home buying process. And then when you’re in the process of buying the home, the lender doesn’t want any surprises, not the time to be going out, taking out a car loan or other things. So go through the home process, and then you can think about those things.

Tony Umholtz  50:52

If I can, I’ll just expand on that real quick, and I want to point but the on during the process do not get further credit. We even know if somebody looked at your credit. So the services now lenders know if you’ve gotten any sort of, you know, additional, you know, credit. We know. I mean, I in the past, before we had that, I remember, I’ll never forget going to a closing and a guy bought a Porsche before closing. I mean, I saw some crazy things. This was a while ago, but like now we know everything that happens. So everything is going to be like, don’t buy anything till after closing, if you can. If you do have to buy something, just we have to add it in, because we’re going to find it. We’re going to see it on the report. The other thing that I would say is, and what it is, is, during the process, we get it’s not that even though we’ve closed, we’ve pulled your credit post the credit report poll, lenders know if we have any other liabilities that have that have been created, so we know about it. Now, the other thing I’ll just a point I’d make for first time homebuyers that might help is a credit questions I’ve gotten in the past is, I don’t really have a lot of credit. I have the student loan. Yeah, my parents paid for other stuff. I just I didn’t really have a credit card. What do I do to build my credit? And one thing I will say is getting a simple credit card, even if it’s like a $500 you know, limit, and charging some groceries or gas and paying it off immediately at the end of the month without any interest on the statement balance. Do that over a few months, and it’ll really help your credit score. So that’s one thing I’d encourage. Like, if you think you need to develop your credits credit, you’re younger and you just haven’t had a credit card yet, getting a small credit card, it doesn’t have to be anything crazy, and just putting a little balance on it and having a discipline to pay it off immediately and not carry it. Do that over a several month time frame, it’ll already start helping your credit

Tim Ulbrich  52:46

Great stuff, Tony. What a fun discussion. There you have it. 10 Frequently Asked Questions for First Time Home Buyers. Lots of great information that you covered during the episode. As a reminder, head on over to our home buying resource page at YFP, by going to yourfinancialpharmacist.com/home-loan. You can get more information there and then have the opportunity to connect further with Tony and his team. Tony, thanks so much for for the contribution. As always, we appreciate you.

Tony Umholtz  53:12

It’s great to be here. Tim, always enjoy it. Always have fun with you.

Tim Ulbrich  53:16

Thank you, Tony. 

Tim Ulbrich  53:19

Before we wrap up today’s show, I want to again thank this week’s sponsor of the Your Financial Pharmacist podcast, First Horizon. We’re glad to have found a solution for pharmacists that are unable to save 20% for a down payment on a home. A lot of pharmacists in the YFP community have taken advantage of First Horizon’s pharmacist home loan, which requires a 3% down payment for a single family home or town home for first time home buyers and has no PMI on a 30 year fixed rate mortgage. To learn more about the requirements for First Horizon’s pharmacist home loan, and to get started with the pre approval process, you can visit yourfinancialpharmacist.com/home-loan. Again, that’s yourfinancialpharmacist.com/home-loan. 

Tim Ulbrich  54:04

As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. Furthermore, the information contained in our archive, newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyzes expressed herein are solely those of Your Financial Pharmacist, unless otherwise noted, and constitute judgments as of the dates published. Such information may contain forward looking statements which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer. Thank you again for your support of the Your Financial Pharmacist podcast. Have a great rest of your week. 

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Nate Hedrick, the Real Estate RPh, discusses six key steps in the homebuying process for first time buyers.

This episode is brought to you by Real Estate RPh.

Episode Summary

Nate Hedrick, the Real Estate RPh, joins the show to talk about the pharmacist’s playbook to buying your first home. He discusses six key steps in the homebuying process including:

• How to determine if you’re ready to buy
• Getting clear on what is most important in a home purchase
• Key individuals to have on your homebuying team
• Factors to consider in choosing a loan
• What is/not negotiable in today’s market
• What to know when it comes to inspections, insurance, and closing

This episode is brought to you by Real Estate RPh.

About Today’s Guest

Nate Hedrick is full-time pharmacist by day, husband and father by evening and weekend, and real estate agent, investor, and blogger by late night and early morning. He has a passion for staying uncomfortable and is always on the lookout for a new challenge or a project. He found real estate investing in 2016 after his $300,000+ student loan debt lead him to read Rich Dad Poor Dad. This book opened his mind to the possibilities of financial freedom and he has been obsessed ever since. After earning his real estate license in 2017, Nate founded Real Estate RPH as a source for real estate education designed with pharmacists in mind. Since then, he has helped dozens of pharmacists around the country realize their dream of owning a home or starting their investing journey. Nate resides in Cleveland, Ohio with his wife, Kristen, his two daughters Molly and Lucy, and his rescue dog Lexi. 

Key Points from the Episode

• Home buying process [0:00]
• Home buying in a changing market with a focus on rent vs buy decision. [2:46]
• Budgeting and affordability for first-time homebuyers. [6:50]
• Financial readiness for pharmacists considering homeownership, including budgeting, ongoing costs, and prioritizing what’s important. [10:17]
• Real estate agent roles and changes in industry regulations. [16:52]
• Real estate agent commissions, pre-approvals, and loan options for home buyers. [21:41]
• Home buying process, including pre-approval, loan selection, and home negotiation. [28:01]
• Home buying process for first-time buyers. [34:47]
• Home buying process and budgeting with a real estate expert. [41:10]

Episode Highlights

“Taking a step back and spending 30 minutes to figure out what your budget actually looks like, can go so far in terms of the long term affordability and giving you flexibility down the road.” – Nate Hedrick [9:00]

“Regardless, whoever you’re working with, make sure you’re interviewing them. This is somebody that’s helping you make a huge decision and you want to have a good experience. Spend the time to make sure that you’re getting somebody really high quality and somebody that you’re going to be able to work with.” – Nate Hedrick [18:38]

“You really want to have that pre-approval letter in hand up front. It’s a pretty simple process to get done, and it’s good for, typically, three to four months. And it’s really easy to renew. So it’s pretty simple, and something that everybody should be doing up front.” – Nate Hedrick [27:43]

“Try to keep your budget criteria in mind. It is very easy if you’ve got a $300,000 budget to fall in love with a $500,000 house, right? Really try to restrict yourself from doing that because it’s just gonna cause heartache.” -Nate Hedrick [33:54]

Links Mentioned in Today’s Episode

• New York Times Rent vs Buy Calculator
• Real Estate RPh
• YFP Find an Agent
• YFP Homebuying Quick Start Guide
• YFP Real Estate Investing Podcast Episode 124: Insurance Updates and Scaling a Business with Bryan Neal
• YFP Podcast Episode 361: Four Timely Questions for Homebuyers
• YFP Podcast Episode 353: Avoiding the Trap of House Poor: Evaluating the True Cost of Home Ownership 
• YFP Podcast Episode 348: 2024 Housing Market Trends, Buy Now vs. Wait, & Assumable Rate Mortgages
• YFP Disclaimer
• Subscribe to the YFP Newsletter
• Tim Ulbrich on LinkedIn
• YFP on Instagram
• YFP Facebook Group
• YFP Real Estate Investing Facebook Group
• Nate Hedrick on Instagram
• Nate Hedrick on LinkedIn

Episode Transcript

Tim Ulbrich  00:00

Hey everybody. Tim Ulbrich here and thank you for listening to the YFP Podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom. This week, Nate Hedrick, the Real Estate RPh, joins the show to talk about the pharmacist playbook to buying their first home. We discuss six key steps to the home buying process, including how to determine if you’re ready to buy, how to get clear on what is most important in the home purchase, key individuals to have on your home buying team. Factors to consider when choosing a loan, what is and is not negotiable in today’s market, and what to know when it comes to inspections, insurance and closing. Let’s hear a brief message from today’s sponsor, the Real Estate RPh, and then we’ll jump into the show. 

Tim Ulbrich  00:42

[AD] Are you planning to buy a home in the next year or two with the state of current home prices and mortgage rates? The home buying process can feel overwhelming, but what if you can leverage the knowledge and ongoing support of someone who has worked with dozens of other pharmacists through their home buying journey, all at no cost to you. I’m talking about Nate Hedrick at the Real Estate RPh. Nate is a pharmacist who has been a partner of YFP for many years now, and offers a home buying concierge service that can help you find a high quality agent in your area and support you throughout the entire process. So head on over to RealEstateRPh.com or click on the link in the show notes to schedule your free 30 minute jumpstart planning session with Nate. 

Tim Ulbrich  01:28

Nate, welcome back to the show. 

Nate Hedrick  01:30

Hey, Tim, always good to be here.

Tim Ulbrich  01:32

So you are fresh off a trip to Iceland. Give us the good details. How that came to be, and what was the trip like?

Nate Hedrick  01:39

Yeah, man, the Land of Fire and Ice. It was, it was really cool. So the short version of a long back story is that my oldest daughter for one of her goals this year, we do goals at the beginning of every year, and one of her goals was to go visit a foreign country. And so we were quickly informed by her that Canada doesn’t count, so we had to find an alternative. So we took her to the library, checked out a bunch of books and tried to, you know, weigh the budget options with her, and anyway, she focused it on Iceland, and we made it happen just just last week. And it was, it was really cool. It was a place unlike anywhere else I’ve ever visited. The the landscapes there just so unique. The travel there is just very, very different. But it was really cool, very worthwhile trip. 

Tim Ulbrich  02:23

You and I were talking before we hit record of how cool of a first experience that is from international travel, right? It’s different enough, but there’s still some bridges where, you know, the kids can be comfortable and things so that’s great. Love that. And as our listeners know, we talk so often about this balance between taking care of the future and living a rich life today. What a cool example of that, Nate, and bringing the family into that. So I love that. 

Nate Hedrick  02:45

Thanks. Yeah, we had a really good time. 

Tim Ulbrich  02:46

So perhaps while you were there, maybe on the flight home, back back in the US, we saw interest rates drop here recently, I think you know, the lowest they’ve been in a handful of months. And what are you seeing in terms of the impact on that rate drop, something we’ve been anxiously awaiting, and how that would shake out in terms of all the people that are on the sidelines waiting to buy a home?

Nate Hedrick  03:10

Yeah, you know, I haven’t seen dramatic changes. In fact, I’ve still seen parts of our market that are still relatively slow. I think you know, what’s interesting about the rates in general, is they don’t tend to affect the day to day. I think they sort of affect these trends and these these movements, but without things changing, you know, two and a half percent overnight, you’re not going to see all of a sudden, everybody’s showing up to the bank for an application. I saw a stat float around this morning, something that the effect of even though rates are 1% lower than they were just a year ago, mortgage application rates are still down eight or 10%. So I think, you know, there’s, there’s some movement out there, there’s some improvement, but we’re not at a level where people are going to refinance yet. We’re not at a level where it’s so good that that it’s, you know, beating inflation, or anything like that. And I just think that people are slower to react, even as these rates start to get a little bit better.

Tim Ulbrich  04:03

Yeah, I’m really curious to see kind of where that goes. And as we’ve talked about many times on the show before, there’s a lot of interested buyers out there, and I think a lot of people that are itching to get into a home and we’ll see where the rate trends continue to go, and we’ll bring you back to make sure we’ve got the most up to date information for our listeners. So I think that’s relevant to our discussion today, because, as I mentioned, there’s pent up demand. There’s interest rates. I feel like there’s a lot of first time pharmacist home buyers that are out there, and they’ve been kind of stacking right on top of one another for the last few years. And so today’s focus is we want to go through a step by step guide, step by step playbook, if you will, to buying your first home, we’re going to discuss how to determine whether or not you’re ready, factors to consider prior to beginning the home search, how to select the home loan option that’s the best for you, and ultimately, what are those costs that are involved in buying a home, and what can and cannot be negotiated in today’s market? So Nate, before we get into those specific. Six let’s talk about the benefits of home ownership, because given the housing market that’s out there right now, a lot of people are questioning whether or not it makes sense to buy a home. And I think the rent versus buy question is getting some renewed energy for good reason. So how are you thinking about the rent versus buy decision? The rent versus buy calculation in today’s market, and someone making that decision, of course, knowing that every market is different.

Nate Hedrick  05:24

Yeah, it’s it’s always been a question, right? No matter what the market looks like, even when rates were crazy low, even when 2021 when home buying was at just an absolute fervor, it’s always a question like, is it better to wait? Is it better to buy now. A lot of it has to do with how stable are you looking for? How long are you going to be in that in that particular property? If you’re in a location for a year, and you’re doing your residency there, and you’re planning on moving out after that, it’s probably never going to make sense to try to beat the market, quote, unquote, by buying a house, selling it, hoping for the best, like you might make out it might be okay, but in almost all those cases, renting is probably going to be preferred. Now, as you move that timeline out a bit further, if you’re going to keep that property and rent it out, let’s say, or you’re going to move to a location that you hope to find a long term job, that conversation starts to shift, and it starts to become a conversation of how much do I have to put down? What are closing costs? What are all the factors that go into this upfront fees? And what is that gonna look like in terms of what I could rent this for? Because, as we’ve said, you know, rates are better. They’re still high, but rents have been going up too. So you’re you’re factoring into a lot of different pieces when making that decision.

Tim Ulbrich  06:38

Yeah, and you and I cover this. Gosh, it’s probably been 3,4,5,6, years ago? Now I’m not…I’d have to go back and look what episode it was! But actually getting into the weeds on that rent versus buy, very different market, of course, than what we’re looking at today. But one of the resources we talked about in that episode, we’ll link it in the show notes again, is the New York Times has a pretty cool rent versus buy calculator that really helps avoid that trap of I’m paying X for rent and the mortgage payment is Y. And comparing those right? There’s a whole another layer of cost and things that we want to evolve really evaluate to determine what’s the apples to apples, right, or as close as we possibly can get. So again, we’ll link to that in the show notes. So Nate, let’s jump into our six steps for first time homebuyers, the playbook for first time homebuyers. And if listeners want to follow along and take notes, you can download our free YFP First Time Homebuying Quick Start Guide, and you can get that by going to yourfinancialpharmacist.com/homeguide. That’s all one word. We’ll link to that in the show notes as well. So Nate, step number one is making sure that you’re ready, building on the conversation that we’ve already started. And buying a home can be a great move, but dot, dot, dot. You got to be in the right position, and that really starts with knowing your budget and considering how the home purchase fits as a piece of the broader financial puzzle that accounts for other goals, such as student loan debt, of course, very common among first time homebuyers, making sure we’ve got the right reserves and emergency funds. How do we get started with investing in retirement savings? We have all these things that we have to consider. And of course, the home all, albeit a big one, is one of many different aspects of the financial plan. So tell us, from your experience as a first time homebuyer, it’s been a while and coaching many first time homebuyers through the process how the buyer and the bank really answer this affordability question?

Nate Hedrick  08:24

Yeah, I was just thinking it’s actually going to be 10 years since first time homebuyer status, just like this month. So, yeah, it’s been a minute. But, you know, I think this is probably the most boring part of this six step guide, right? But it’s arguably the most important. And I think people are like, up, skip it, budget. Don’t want to look at it. But I can’t tell you how many I meet with somebody every week and talk about this stuff, where, if you don’t set yourselves up for success, if you just jump into Zillow and say, I need a four bedroom house, and I already live in Cleveland, Ohio…beautiful, sunny day here in Cleveland, like this is what the house is going to cost. Rather than doing that actually taking a step back and spending 30 minutes to figure out what your budget actually looks like, can go so far in terms of the long term affordability and giving you flexibility down the road. One of the things that, again, we lucked into, because again, 10 years ago, I had no idea what I was doing. We bought a house that was, you know, less than than max, right? We way undercut what we could have possibly spent on a house, and now we’re still in that same house 10 years later, and couldn’t be happier because we’ve got this nice, reasonable payment. So even as Kristen and I have cut back a little bit on work or taking trips to Iceland, the housing is so much more affordable. And I can’t tell you the number of pharmacists that I’ve talked to that didn’t lock into that right, or went the opposite direction and said, I’m going to spend as much as I can. I want this big, nice house, and then they’re paying for it later, and it becomes problematic. So it’s something I really encourage people to do, take a hard look at the numbers and and it will benefit you in the long term.

Tim Ulbrich  09:57

You know, I was thinking of Nate as you were talking a webinar I did several months ago, talking about budgeting. And as you said, right? We bring that topic forward, and people are like, end episode. I don’t want to talk about this anymore. But what was interesting is I had several pharmacists ask them to submit their budgets in advance that we would share anonymously if they were comfortable doing so. And I kind of analyze them, talk through them. And to no surprise, one of the things that we saw is the percentage of income that was allocated to fixed costs –  very high, right? And then the home, of course, tends to be along with student loans, along with car payments, along with child care costs, which is probably the big four, as I see them. But when you’re talking about a 30 year decision that for most people, is a fixed payment outside of some of the taxes and other things that will increase over time, like we’re locking in a big piece of the financial puzzle, right? And so easier said than done in today’s market, totally get it, but we want to make sure that we’re not putting ourselves in a situation where we’re looking up a year or two years later saying, Hey, I make a great income, but I don’t feel like I’m progressing. Because one of those big reasons, at least being that home purchase.

Nate Hedrick  11:08

Yeah, I think that’s, that’s spot on. And I think that it’s, it’s, again, it’s very easy to sit here and say, right? It’s easy to say, look at the budget, don’t spend too much. But then I again, I can’t tell you the number I’ve talked to, where they look in their market, and the only option is to spend 35% of their income on a house for them, like they need three bedrooms. Is all that’s going to fit. So I think it’s a lot easier said than done, but you have to at least have a wrangle on those numbers so that you can start making an informed decision, rather than just jumping in and hoping for the best later on.

Tim Ulbrich  11:36

Yeah, yeah. And to your point, if that is what it is in the market, like, what else can we be doing in the financial plan to make some shifts or adjustment, knowing that, hey, that’s just going to be a big part, because you and I both know that pharmacists salaries don’t adjust necessarily with cost of living proportionally, right? 

Nate Hedrick  11:50

100% that’s one of the risks.

Tim Ulbrich  11:52

You know think this making sure you’re ready, portion also includes, we’re in looking at all costs of the mortgage, right? Nate, I think my experience, personally, going through this and talking with many pharmacists is most folks are probably thinking about what’s referred to as PITI, right, principal, interest, taxes, insurance, but might stop there. What else should they be considering, both one time and ongoing costs when they’re they’re trying to answer this question, Am I ready?

Nate Hedrick  12:19

Yeah, the big ones that I missed in terms of ongoing were the property taxes. So when I was a renter, I didn’t really think about property taxes. I didn’t have to pay property taxes. I knew they were a thing, but I didn’t really like factor that in. And often it’s tucked into your mortgage. But what you don’t realize is that those property taxes can go up, right? So those are going to be reassessed. In fact, here in Cuyahoga County, we just had our reassessment done, and everyone’s property taxes increased. So even though I haven’t sold my house in years, it still does go up over time, and tends to go up every year. So there are little things like that that are easy to miss, even something like utilities, for example, if you’re a renter today, and maybe utilities are baked into your rent, maybe it’s even just a couple of utilities. Maybe it’s just gas or the water and sewer bills, but all those are your responsibility now. And so if we had a really hot summer like this and our electric bills were through the roof because we’re paying for the air conditioning, that’s just that comes with the territory of homeownership, and it’s something that is difficult to calculate, but you have to kind of plan a little bit of buffer for those kind of things, because now they’re all your responsibility once you take on that homeownership.

Tim Ulbrich  13:24

Yeah, and those ongoing things, to me, are so important, right? Because when we talk about, you know, fixed costs in the budget, that we’re going to try to move other pieces around, you know, utility costs, you nailed that. Obviously those have gone up, I think, across the board, property taxes, I know, for us here in the Columbus area that’s been huge. We actually have a commercial property, our office space up in northeast of the city. And we bought that property in 2021 and property taxes nearly doubled. And, you know, and, and so those are the things as an investor, you know you’re thinking about, but you’re not thinking about doubling. And great, the property value has doubled. But guess what? Like, one is related to monthly cash flow. One is not, right. So at least in this moment. And then I think the homeowners insurance increases we’re hearing about all across the country, Nate are huge. I don’t know if we felt that as much here in Ohio. I know we’re hearing from people in Florida and other parts of the country that are more prone to natural disasters that they’re seeing some more significant increases, but these are the things that we want to be thinking about that breathing room right when we’re making this decision about, Hey, are we ready to purchase a home or not?

Nate Hedrick  14:28

Yeah, you hit the nail on the head. I mean, David and I just did an episode on the REI podcast about insurance, where we talk to an insurance agent. And it’s incredible to hear some of the stories around the country of carriers that are pulling out, carriers that are doubling policy costs. I mean, it’s, it’s pretty incredible. So it’s definitely those. Those things are not something to ignore, and even if they’re a little difficult to calculate, you have to at least plan for them. 

Tim Ulbrich  14:50

Yeah, that’s right, all right. Number two on our list of six steps in the playbook for pharmacists as first time homebuyers is determining what’s important. So once. We make sure we’re ready financially, it’s really time to determine what’s important. What do we want? What’s top of the list? What’s maybe a desire, but not at the top of the list? So Nate before keyword, before we start the search. How do you think about narrowing down this list of the must haves to a few key areas?

Nate Hedrick  15:18

Yeah, and I think part of this is not just you personally knowing, but if you’ve got a spouse involved in the decision, or you’ve got someone else involved in this process, it’s how do we all get on the same page? Right? One of the things I’ll often do with couples who are buying house together is I’ll send them both these must have sheets and let them fill them out separately, and then kind of come back together. 

Tim Ulbrich  15:39

That’s cool. 

Nate Hedrick  15:39

Yeah, it’s neat, and it’s fun to see what they put on paper, because a lot of this is, like stuff you talk about, but when you’re doing it separately, and you have to, like, write it down, and then it’s like the newlywed game, right? You get to see what they actually write down. You’re like, wait, what, you want that? I didn’t realize how important that was to you. And so kind of assessing those things can really make a difference, especially if you’re taking a step and looking at all this stuff before you hit search and you say, look, hey, we’ve got four kids, and so we need a five bedroom house, or whatever the you know, the math works out to that can drastically affect things like your budget or where you’re able to buy. You might not have five bedroom houses in the in the neighborhood that you want to look in, right? That might not be an option. You might have to build. You might have, you know, so it really changes the dynamics of how you’re going to search, and it affects a bunch of other things down the line. So again, if you’re looking at, let’s say you’re looking at, you want area for your horses. We just rode horses in Iceland for the first time ever. And so if you’re like, I need to have my Icelandic horse as part of my house property. That’s a very different location, very different agent, very different financing, all those decisions that play out after that change because of that decision of what is most important to you. So you have to have that kind of criteria established upfront. 

Tim Ulbrich  16:04

And I think knowing what flexibility Nate exists or doesn’t exist, or are some things non negotiable, right? Maybe that’s the number of bedrooms, whereas other things you’re like, Hey, I’d love if we could have X, Y or Z, you know, the finished basement or a pool or a fenced-in yard or whatever. But maybe it’s not a hey, it has to, because I think that really helps with the agent relationship. We’ll talk about that here in a little bit, and really making sure that person has the information they need, that they’re not wasting their time or your time, you know, sending a bunch of properties or going to visit a bunch of properties that ultimately, you know, aren’t the right fit.

Nate Hedrick  17:22

Absolutely.

Tim Ulbrich  17:22

Speaking of agent, let’s talk about number three on our list of six steps, which is, assemble your team. Most first time homebuyers, I think, start their search like I did, which was driving by properties, scrolling listings online, but sooner or later, they’re gonna have to assemble a team to pull the trigger and ensure one of the, if not the largest purchases they’re going to make in their lifetime go smoothly. So Nate, talk to us about how the right team can make all the difference and who you’re thinking about as key team members.

Nate Hedrick  17:51

Yeah, I think this step always kind of feels overwhelming. Building a team sounds like a pretty serious endeavor, but what we’re trying to say is that you’re looking for individuals that are going to make the process easier and help you out. This doesn’t have to be a big, long, drawn out process. You want to make sure that you’ve got people that know what they’re doing to supplement right, just like you would on the team, rounding in the hospital or working in the pharmacy. You’re not doing all this stuff by yourself. You don’t have to know everything. You just have to have the experts in your corner. A lot of times, that’s going to start with something simple, either a lender or a real estate agent. Connecting with them, getting them to give you referrals to the other people that you might need, and then taking off and running from there. I do encourage people to interview whoever you’re working with, and we can. I’ve done webinars on this in the past where we go through like tips on interviewing an agent, for example, or tips on vetting an agent. But regardless, whoever you’re working with, make sure you’re interviewing them. This is somebody that’s helping you make a huge decision you want to have a good experience, and so spend the time to make sure that you’re getting somebody really high quality and somebody that you’re going to be able to work with. Well, yeah, I

Tim Ulbrich  18:51

think great advice. And again, this is something we don’t want to haphazardly walk into, and referrals can be helpful, but you know, your needs may be similar than someone else, different than someone else. So making sure you feel good about this decision and the people that are ultimately representing and working alongside of you. Nate, I think this would be a good place, just given the agent aspect here and talk about some of the changes that we’ve talked about in the podcast before, relating to the National Association of Realtors Settlement when we talked about it, three, four or five months ago is a hey, this is coming in the end of the summer, and here we are. So now that the dust has maybe somewhat settled, like, what? What is the impact that you’re seeing? 

Nate Hedrick  19:28

if you ask our brokerage, we were like, in the middle of the dust, because it just went live, where these these changes are now in effect. And so essentially, what happened is that the National Association of Realtors was sued. They decided to settle without admitting any fault. And the big change that resulted from that settlement is one, they had to pay out a whole bunch of money, as is normal, but also they had to get rid of the buyers commission that was advertised in the MLS. So the way it worked up until a couple days ago is that if I was showing a house for a prospective buyer client, I knew that there was a 3% commission, or a two and a half percent commission that is being offered by the seller, and that when I write a contract, I’m going to get that as part of working with that buyer. That is no longer allowed. You cannot advertise that that commission agreement basically. What is now required is that that commission has to be negotiated. It has to be a part of the buyer’s contract so it doesn’t go away, it doesn’t change necessarily. It’s just the way that it’s going to be talked about is very different, and it’s going to be talked about upfront. So if you’re a buyer and you’re working with an agent for the first time, there’s going to be a conversation about, hey, my job is to negotiate and work for you, to help you guys find the best house, but as part of that, I need to get paid. And so there’s going to have to be a number. Call it 2%, two and a half, 3% whatever that is in commission that I’m going to try to be getting from the seller. And we’re going to agree to what that number is right now, as a process of working with me, my goal is to get that from the seller, right? I’m going to write a purchase agreement to you, Tim, and I’m going to say the house is $200,000 with a 3% commission. For me, my goal is to get it from that seller, but there’s a possibility they come back and say, I’ll accept $200,000 but I’m not paying your agent anything. And then we have to figure out what we’re going to do. And so that’s where we are today, where that’s sort of in limbo, and we’re going to kind of see how the market plays it out. The likely options at that point are going to be either we write the contract for a bigger amount, we write it for $200,000 plus 3% and then, you know, you finance that, or the buyers are going to have to pay that 3% out of their own pocket. I think that’s going to be not the norm. I think that’s going to be exception more than the rule. But there are a lot of changes, and we’re sort of feeling out what this is going to look like as as the time goes on. 

Tim Ulbrich  21:40

And that last point you made, you know, in terms of, could this fall on the back of the buyer, right? I think that’s what most listeners that are looking at my home are wondering. And this is just such a stark change from you know, how we have thought about buying agents in the past, and, you know, I had a conversation offline a couple months ago of like, this really will, in my opinion, it’s going to take time, but this really will start to differentiate the value that a buying agent is bringing. And I’m a firm believer, and I know this from working with you and talking with other agents, not all agents, just like not all financial planners, are created equal. And when you think about the bar of entry into someone becoming a real estate agent, similar to someone else becoming a financial planner, like you know that bar of entry, you know, there is one but, but it’s not incredibly high.

Nate Hedrick  22:24

Its very low. You can say it!

Tim Ulbrich  22:29

And so really, then comes down to like, Hey, are you talking with an agent working with one that has experience? Like, how much experience? And what has that experience been like? And so this is really going to flip that conversation. And I think for buyers, is just so different, and I’m curious to know it’s so fresh right now, kind of how this shakes out and in this market Nate that we’re in, like that first option you mentioned, where, hey, we’ll write the contract and, you know, we’ll see if the listing, person selling the home, will ultimately pay it like, you know, arguably, we’re in a seller’s market, right? So is, do you see that happening? Or what do you see happening short term? 

Nate Hedrick  23:05

I think, I think yes, is the short answer your question. I mean, we’re doing that essentially today, right? If you think about again, it’s still that $200,000 house today, right now, that 3% is coming from the seller already. So, like, that’s not really changing. What I think this is going to do is going to provide a lot more transparency. Like you said, the barrier to entry on real estate is very low, and there were a lot of agents out there that would get their license, work with a buyer, knowing full well that it did not matter how good they were at their job, if they got someone to close, there was a guaranteed two and a half or 3% sitting out there waiting to be theirs, right? And I think the benefit of this change is that that that goes away, there’s no guarantee. You have to actually prove your value as a buyer’s agent now, and so I think that’s going to help the market overall. I just, I think it’s going to be interesting to see how exactly it shakes out.

Tim Ulbrich  23:53

Yeah, and this would be a good stop that I just want to pause and we’ll talk more at the end, but put a plug Nate for you and what you’re doing with your clients through the home buying concierge service. People can learn more RealestateRPh.com We’ll link to that as well as the site on YFP website, if you click on home buying on the homepage, you can get there, but you do offer value. Our listeners will get that from you know what we’re talking about here, and you have the experience. And you’ve done it, obviously, yourself. You’ve done it with many, many clients, locally. You’ve worked with a you’ve worked with agents all across the country. You’ve done this many times as an investor as well. And so I think finding that person, that relationship, that’s a good fit. You know, now more than ever, with these changes, is going to be so important so.

Nate Hedrick  24:37

I really appreciate that, Tim, and I think especially as more and more and more agents are going to require you to lock into a contract because that guarantee is gone, you kind of have to get it right the first time which, which sounds overwhelming, and I don’t mean that to be like intimidating, but you kind of have to get this one right. And so working with somebody that that has the experience you’re looking for, or being matched with somebody that we have vetted already. Can be a huge difference maker if you’re looking at buying a home for the first time, especially.

Tim Ulbrich  25:05

What do you think’s going to happen for the many people that are out there looking, who work with an agent but never actually go through with a purchase for whatever reason? I mean, is that? Like, will there be cost? I mean, there’s, there’s obviously cost of your time and stuff that now we’re looking at this relationship differently, like, will that still be no charge to the to the prospective buyer? What do you think that will look like?

Nate Hedrick  25:26

So I think there’s going to be a lot of people that try to get creative. I have already seen, and this is like on LinkedIn, so I don’t know how legit it is, but I’ve already seen some cases where someone will say, Look, I’ll charge $995 I’ll show you up to 15 houses, and I’ll negotiate one contract, and that’s the cost to work with me, right? And whether you buy or not, I don’t really care anymore. I think you’ll see people get started to get creative, but I think you’ll see the market probably wants to keep things as close to as they are now. So I think you’ll see people just negotiate these contracts with their buyers directly and then try to get them to negotiate with the sellers to pay the cost.

Tim Ulbrich  26:02

Yeah, I actually know an agent here in the area that’s doing kind of what you just shared. And I don’t know how widespread it is, but on a per listing fee, or it’s like a higher flat fee, you know, we’ll get you so many 10, I forget what it was, 10, 15, 20, but if you want to do it kind of a la carte, it’s per you know so curious to see where that where that goes. Yeah, all right, let’s talk about number four, which is choosing a loan, probably what many people are thinking about as a top priority. And before we talk about loan types, let’s talk about pre approvals, especially important in the competitive market that we’re in today. What is a pre approval? Why is it necessary? And what items are needed to get to that point of having one?

Nate Hedrick  26:43

Yep. So a pre approval plan plain and simple is someone, typically a lender, giving you a letter that is going to say, hey, there is a person out there willing to lend to this individual for a certain amount of money. So if I go with a pre approval letter to a seller and it says, I’m pre-approved up to $250,000 that seller has confidence knowing that that there’s someone else out there behind me willing to basically front that money. So it’s all that is, is saying that someone has basically vetted you and agrees to basically to back that up. The common misconception is, well, I don’t need that until I found a place, or I don’t need that until later. I actually just spoke with a potential buyer this past week, and she said, I said, Are you pre approved? You know, just want to get an idea. And she said, I wasn’t going to do that until I found the perfect house. Like, I don’t want to, I don’t want to waste my time and do that until then. The risk there is that if you find the perfect house, and there are five other people that think it’s the perfect house, and you’re not pre-approved, you’re not getting it right? It’s not going to be something that that we would even consider as a seller. So you really want to have that, that letter in hand up front. It’s a pretty simple process to get done, and it’s good for, typically, three to four months. And it’s really easy to renew. I renew mine all the time, even though, you know, we’re not, we’re not actively looking it’s just something to keep on hand. So it’s pretty simple, and something that everybody should be doing up front. 

Tim Ulbrich  28:00

And in order to get a pre approval, you’re going to have to make a case to the bank that you’re a qualified lendee, right? So you’re going to be providing paycheck information, assets, liabilities, kind of a snapshot of your overall financial picture. But to your point about, you know, not waiting on the sidelines, like my experience is that takes time, depending on the bank, it might take more or less time, and you know how nimble they can be, but to be able to get all that information, upload it, for them to make a decision on that, it’s going to take time. So you want to have that in hand, especially given that that’s good for a period of time, definitely. So once we get pre approved and we’re ready at that point, you know how we go about the loan selection choice. It’s probably one of the biggest decisions that people are going to make in the process, and I think is confusing to navigate, given the differences that are out there in the products that are available, which can vary in terms of percent down payment that’s required, minimum credit scores, whether or not there’s private mortgage insurance or PMI. So talk to us about the common types of loans that are out there, and the key features of those loans.

Nate Hedrick  29:08

Yeah. I mean, this is, this is such a broad topic, we could do two episodes just on loans. I mean, you’ve had Tony on the show enough times talking about loans, right? Like this is such a big area of focus that, you know, the it’s, it’s hard to cover it all. But the basics are this, right? You’ve got to have some, you’re going to have some sort of product, and that product is going to be backed up by the bank in some way. And they can back that up through the government. They can back it up through like your job. They can back it up through federal programs, like you name it. There are ways for them to basically underwrite these loans. And the the qualifications within those underwriting underwritings are what determines things like your down payment, your interest rate, what houses you’re available to buy, so on and so forth, right? So typically, people are going to see one of three types, and again, there are 1000s of others. But typically you’re either going to have what’s called an FHA loan, or government backed loan, a conventional loan, which is sort of like your standard 30 year fixed rate loan, or you’re going to see like a pharmacist home loan or a doctor’s loan. That’s typical to our to our audience. And so any one of those have different pros and cons, different down payments, different interest rates, different terms, so on and so forth. But, but all of those are pretty viable, and again, pretty common for most people. 

Tim Ulbrich  30:17

Yeah as you mentioned  we’ll, like in the show, and so we’ve talked about, you know this at ad nauseam, in terms of the options that are available. But this is huge. I talked with a pharmacist, Nate last week that’s out in California. I want to say it was in the San Francisco area that is looking to purchase a home 12 to 24 months. Now, I asked a budget question, right? And I’m like, holding my breath. It’s California. So you know it was, hey, about $800,000 and then I asked the loan question, like, Hey, what are you thinking in terms of lending? No clue and no fault to their own there’s just, you know, not, not yet there in the process. But I was trying to really encourage them, like, start to dig in. Because when you’re talking about an $800,000 home and qualifying, and what a 3% or a 10% or 20% on a conventional down payment. We’re talking about either a ton of cash or still a ton of cash, but not as much cash, right? And how that fits in with, Hey, your student loans and all these other things that we’re trying to achieve. So this, again, is big, and probably for first time homebuyers, that down payment piece comes to front and center, because, right, they’re focused on many other goals, student loans, etc, that we’ve been talking about, and really making sure that you feel comfortable with the product. And you know, if you’re putting less down, are you giving up on anything, on rate or terms or other things, you got to look at the whole picture before you make a decision.

Nate Hedrick  31:33

Yeah, all good points and all things that are difficult and overwhelming to consider at times again, one of the ways that you can sort of make this a little easier is start to talk with your agent about this. If you start with an agent, if you know no if you have no idea where to start with a lender, start with an agent, and they’ll be able to refer you to a couple good agents. I can usually parse out, even though I’m not a lender, I can usually parse out like, hey, it seems like you’re looking for lowest down payment options, or you’re all about monthly payments. So these are the people that I’m going to start directing you toward, then you can refer them to three different lenders that they can have a meaningful conversation with, rather than starting from scratch and just Googling, you know, local lender near me. So that’s a good way to get started if someone doesn’t know where to start.

Tim Ulbrich  32:13

Good stuff. Alright, number five on our list is find your home and negotiate. So at this point, we’ve determined what’s in the budget. We’ve narrowed down the list of must haves. We just assembled our team. We’ve gotten pre approved with the lender. We know the product we’re going to be pursuing. So now it’s time to get serious with looking right? So talk to us about what’s involved in this step, and especially in today’s market, like, what is the reality of negotiation? 

Nate Hedrick  32:36

Usually this is where people start, right? This is step number one. Is find your home. Like open Zillow and look for your favorite house. So it’s funny that we’re waiting all the way to number five to get there, but it shows the importance of the prep work, right? Because it’s how you’re going to do this successfully. So right now, there are a lot of ways to search for homes, right? You’ve got Zillow, realtor.com, you’ve got Facebook Marketplace, the MLS, which is where realtors are posting their sites. All of those are great options, and really, there’s no wrong answer. I think the thing to keep in mind is that there’s sometimes a preconceived notion that if I’m working with an agent, they’re going to go find me a house, right? They’re going to find me a property. With the way things are set up today, with the automatic emails that you can get with the notifications you can set on Zillow and realtor and all those, it’s typically much easier to to set criteria yourself, or give those criteria to an agent and allow them to build you an automatic email that’s going to be looking for the houses that might fit your criteria, and then you be the one to decide, does this? Does this make sense? So I think that’s something to kind of just put in people’s heads, because I’ve talked to some out there where it’s like, well, the agent, you know, is trying to find me a house, but, but I’m not having much luck. It’s like, well, be involved as well, because they can do a lot, but, but you can often do just as much with with some of the tools that are out there today. So that’s that’s kind of part one. Part two is to try to keep your criteria in mind, right? We did all these steps one through four up front for a reason, it is very easy to, if you’ve got a $300,000 budget, to fall in love with a $500,000 house, right? Really try to restrict yourself from doing that, because it’s just gonna cause heartache, right? It’s much easier to start to stick within your parameters and roll from there. So those are just some kind of key tips when you get started with the process. When you’re actually looking at homes, that’s when kind of the rubber meets the road, where you’re going to be doing the bulk of the legwork to see, do I see myself living here? Are there? Are this is actually meeting the criteria that I was expecting? Does this match the pictures? Is it matching the things I’m seeing online and so forth, and then relying on your agent and eventually an inspector to help with things like, is this a problem, or are we worried about X, Y and Z?

Tim Ulbrich  34:47

Makes sense. And I think what’s challenging this a little bit right now is, you know, we’ve seen in our area, I’m sure, all across the country as well, is, you know, in terms of the competitiveness of the market cash buyers that are out there. Or, you know, appraisal gap waivers. That are happening, lots of things that are competing with, with people trying to purchase a home is, you know, you might set that budget at the very beginning at $300k even if you hold the line and you got the filter criteria at 300 right there, there could be a, you know, that home maybe goes at asking, slightly below, maybe, depending on the market, perhaps above it, right? And some other cash that’s needed to close it well. So every market, of course, different, but I think it’s hard right now, just given where it is, and I think all the pent up demand to really hold tight to that budget.

Nate Hedrick  35:33

You mentioned it perfectly. It’s very market specific. We have areas here where that, you know, over asking isn’t happening anymore, and other areas where every house that pops up, I don’t care how badly they take the pictures, it’s flying over asking price, right? So it depends pretty heavily on the market and the location.

Tim Ulbrich  35:49

And that’s within Cleveland? You’re talking about, like, different communities within the area? 

Nate Hedrick  35:52

Even within Cleveland, yep, for sure. 

Tim Ulbrich  35:53

Yeah, that’s interesting. All right. Number six, Last on our list, Nate, inspect, insure and close. So we’re under contract. It feels like we finally have crossed the finish line, given the steps that we’ve covered up until this point. But there’s some more important details remaining that are in between the accepted offer and the keys in hand, that being the inspection, consideration for a home warranty and closing tell us more. 

Nate Hedrick  36:15

So I always say this to my clients, that there’s two parts of buying a home that feels scary, and Part one is putting in an offer, because it feels very final. It feels like, once I put this in, like that’s it. But the reality is, is that the second part, when you waive inspection contingencies, that’s the actual, like, serious, scary part, right? Because that’s when your earnest money goes, goes solid, and you can’t get it back. That’s when, essentially, you are buying that house. So there’s a period in there, that inspection window that you have a chance to do some really good due diligence. Usually it’s seven or 10 days, if you’ve negotiated that in, hopefully your agent is helping you do that, and during that time, it’s really your moment to figure out, does this actually work, right? Are there things in the house that we’re worried about? Right? Is the roof caving in? Is there water damage in the basement? Is there you know, properties going up nearby that we’re concerned about. All of those pieces are pieces you want to be spending time to do that due diligence on, because there’s going to reach a time where that it’s too late to really do that stuff down the road. So it’s, it’s the moment to get all those things figured out. And again, you mentioned insurance in there, there’s also a piece of like, contact your insurance agent and figure out what your costs are going to be for this specific house. That’s still part of your due diligence. And so many people I talk to wait until the very end to do this insurance piece, and then they find out, Oh, well, it’s got an old electrical system, and actually the roof is 20 years old, and they won’t insure it  or it’s in a flood plain. I mean, you name it, right? So, so do that due diligence during the time period that you’ve got, because it’s super important. And it really is the the the actual last thing before the scary step of waving everything,

Tim Ulbrich  37:52

You know that that’s what made me so nervous about the period of time that we’re in. And I’m guessing there’s still some of this out there, of waving inspection is to your point in a traditional process, you’ve got point one, and then you’ve got a later point, right? So you’ve got a little bit of time to sleep on it. Do some due diligence. Take a breath, you know, look at the inspection report. Make sure you feel good about costs and things that are needed repairs, like when that inspections being waived. That’s bang, bang. Yep, right at that point. So Are you still seeing that out there much?

Nate Hedrick  38:23

Some. Not here in the Cleveland market as much. I haven’t had a wavelength of inspections in ages, personally, but I know it’s still common out there. There’s a question I get all the time, Tim. It’s, it’s Nate is now still a good time to buy a house? And I’ve literally gotten that question my entire career of real estate, which I think is funny, but the only time I say no to that question, quite honestly, is if you’re in a market that is still in that sort of a fervor – where you are waiving inspections, you are waving everything because it doesn’t give you that pause button. Like I think, I think it’s really, really scary to go into a house purchase not knowing all the information and trying to spend hundreds of 1000s of dollars. 

Tim Ulbrich  39:03

Especially as a first time. 

Nate Hedrick  39:04

Yeah, exactly. Even on things like new builds, where, you know, they’re like, Oh, it’s a new construction. Don’t worry about it. Like, there are just as many problems with new builds as there are with with existing construction. So I you know, it’s, it’s, there’s never a blanket answer for everything. But do hit, be worried, I suppose, if you’re in a market where that’s the norm and then everything’s being waived, then you kind of have to just just hope for the best. I I don’t like those personally.

Tim Ulbrich  39:30

So there you have it, the six steps that first time homebuyers need to be thinking through again if you want to download this information and a guide that you can take notes and reference it later and go to yourfinancialpharmacist.com/homeguide. That’s one word. Nate, talk to us about the Real Estate RPh home buying concierge service that you offer and how pharmacists, no matter where they are in the country, could benefit from from working with you. Tell us about what that service entails and where they can go to find more. 

Nate Hedrick  39:57

Yeah, absolutely. So we alluded to this service a little bit earlier. But the idea was that, you know, years ago, when I bought my first house, I wanted to have a great real estate agent on my team, and didn’t really know how to get that person, right. I knew how to ask a couple of friends who they used and whatever. I knew how to Google “good real estate agent in my area”. But, like, that was it right? So we wanted to try to create a service that kind of filled that gap. And so we, we did that. It’s a totally free service available through our website. You can go to realestaterph.com There’s the home buying concierge service right there. It’s a it starts with a 30 minute call with me. It’s totally free. We’re going to chat about things like budget must haves, we’re going to go through loan options, answer any questions you have, and then after that conversation, we’re going to connect you with a really great real estate agent that’s going to be specific to be specific to you guys in the area that you’re looking in. Somebody that we’ve vetted, or that we’ve worked with in the past through like an interview process or that’s actually helped another pharmacist buy a home. And then once you get connected, you get off and running with them. So it’s it’s a nice way to take the guesswork out of it and not have to do any of the legwork of interviewing these agents and trying to find the right one when you’re just trying to make, you know, ends meet and get get through the day sometimes. So that’s why the service exists – its there to really be a helpful thing for pharmacists.

Tim Ulbrich  41:10

So again, realestaterph.com, you get more information. We’ll link to that in the show notes. You can book a call with Nate. Nate, if I’m listening and I’ve got a distant thought of having a buy in the next maybe year, two years versus I’m listening and, you know, I’m ready, ready to go right now. Like, when would you advise people to begin this process and working with you?

Nate Hedrick  41:31

Yeah, great question. So if you’re in that six plus months out range, that’s probably the time to be, you know, focused on budget, focused on all the things we talked about in the kind of the kind of the guide, the first couple steps to get ready for those things. Once you reach that, hey, we would reasonably buy a house six months from now or sooner, that’s probably when it’s time to engage with me all the way up until, hey, we’ve already gone to a couple open houses, Nate, like we’re ready to look at this place. I’ve even had people engage the service knowing the property they wanted to put an offer on. Right? They’re like, hey, Nate, we found the perfect place. Like, can you help? And we can help that quickly. So anything six months and before is probably a good time to connect with me. If you’ve got you know longer, it’s probably time to keep, keep working on that budget, make sure everything’s all your ducks are in a row, and then, and then get closer and engage me at that point.

Tim Ulbrich  42:18

The only asterisk I would add there is know thyself, right? So it’s very easy. I remember this myself, where it’s, Hey, we’re looking in one year, and then you start searching, and it’s like we’re looking tomorrow, right? Just thinking about that timeline, thinking about the budget, and really using that that point in time, as you mentioned, if you’re six months out, to really look at the rest of the financial plan and the pieces to figure out how this is going to fit in to that as well. Nate as always, great stuff. Appreciate your insights. Love the way you teach us up to date information that you’re bringing to our community. Thanks so much for taking time.

Nate Hedrick  42:50

Thanks for having me.

Tim Ulbrich  42:52

Nate and I have covered a ton of information in this podcast. So imagine working with Nate one on one through your home buying journey and having his support to give you much needed peace of mind. We know many pharmacists want to feel confident about big financial decisions, including a home purchase. So if you have fears of being house poor, concerns about the impact a home purchase might have on your other financial goals, Nate and his home buying concierge service can help all at no cost to you. You can visit realestaterph.com, or click on the link in the show notes to schedule your free 30 minute jumpstart planning session with Nate. 

Tim Ulbrich  43:32

[DISCLAIMER] As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offered to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. Furthermore, the information contained in our archived newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyzes expressed herein are solely those of Your Financial Pharmacist, unless otherwise noted, and constitute judgments as of the dates published. Such information may contain forward looking statements, which are not intended to be guaranteed of future events. Actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer. Thank you again for your support of the Your Financial Pharmacist podcast. Have a great rest of your week.

[END]

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Tony Umholtz, Senior Vice President of Mortgage Banking at First Horizon, returns to discuss four questions prospective home buyers should consider. This episode is brought to you by First Horizon.

Episode Summary

Tony Umholtz, Senior Vice President of Mortgage Banking at First Horizon returns to discuss four questions that prospective home buyers must answer including buy now versus wait, rules of thumb lenders are using to determine lending limits, the potential impact of the recent settlement from the National Association of Realtors, and the current state of how student loan payments are being factored into the lending calculations. 

About Today’s Guest

Tony Umholtz is the Senior VP of Mortgage Banking at First Horizon. He graduated Cum Laude from the University of South Florida with a B.S. in Finance from the Muma College of Business. He then went on to complete his MBA. While at USF, Tony was part of the inaugural football team in 1997. He earned both Academic and AP All-American Honors during his collegiate career. After college, Tony had the opportunity to sign contracts with several NFL teams including the Tennessee Titans, New York Giants, and the New England Patriots. Being active in the community is also important to Tony. He has served or serves as a board member for several charitable and non-profit organizations including board member for the Salvation Army, FCA Tampa Bay, and the USF National Alumni Association. Having orchestrated over $1.1 billion in lending volume during his career, Tony has consistently been ranked as one of the top mortgage loan officers in the industry by the Scotsman’s Guide, Mortgage Executive magazine, and Mortgage Originator magazine.

Key Points from the Episode

• Housing market trends and timely questions for homebuyers with expert insights. [0:00]
• Housing market trends, including shifts towards a buyer’s market with more inventory and lower interest rates. [4:10]
• Home purchase decision-making, lending rules, and interest rates. [9:56]
• Real estate industry changes and their impact on homebuyers. [14:18]
• Real estate industry disruption, student loan debt, and lender perspectives. [20:46]
• Student loan repayment options and their impact on debt-to-income ratio, with a focus on income-driven repayment [25:04]
• Mortgage options for pharmacists with 3-5% down payment. [30:21]

Episode Highlights

“We’re seeing we’re seeing more inventory, more availability for buyers, that wasn’t there in the past. And I think that’s part of normalization. We’re still not completely normal. But we are getting closer.” – Tony Umholtz [4:07]

“I’ve always believed in 22 years in this industry, if someone’s going to be in an area for five years or more, when you look at the alternative of renting versus owning, I think it makes sense to own no matter what the environment. Rents go up over time. You don’t build equity. But with buying, you’re going to come out ahead in five years even if values are zero appreciation, right? You’re going to benefit by owning that home even if there’s no appreciation.” Tony Umholtz [6:55]

“Looking at the housing market, and maybe outside of COVID, it’s always kind of been better to buy a home when the markets are down. When everyone’s buying, then you’re competing with everyone and you just don’t get as good of a deal. I looked at that in my own life – when I buy, it seems like when things were slower in the market; I always did better versus when everyone’s looking.” – Tony Umholtz [11:20]

Links Mentioned in Today’s Episode

• First Horizon Pharmacist Home Loan
• YFP Podcast 348:2024 Housing Market Trends, Buy Now vs. Wait, & Assumable Rate Mortgages
• YFP Podcast 353: Avoiding the Trap of House Poor: Evaluating Cost of Home Ownership
• Tony Umholtz
• First Horizon
• Tony Umholtz on LinkedIn
• Tony Umholtz on Instagram
• Subscribe to the YFP Newsletter
• YFP Planning: Fee-Only Financial Planning for Pharmacists
• YFP Disclaimer
• Tim Ulbrich on LinkedIn

Episode Transcript

Tim Ulbrich  00:00

Hey everybody, Tim Ulbrich here and thank you for listening to the YFP Podcast where each week we strive to inspire and encourage you on your path towards achieving financial freedom. This week I welcome Tony Umholtz back on to the show as Senior Vice President of Mortgage Banking at First Horizon. On today’s show, we discuss four timely questions that prospective homebuyers must answer, including whether to buy now versus wait, rules of thumb that lenders are using to determine the lending limits, the potential impact of the recent settlement from the National Association of Realtors, and the current state of how student loan payments are being factored into the lending calculations. If you’re in the market to buy a home in 2024, we’ve got a good one for you this week. All right, let’s hear from today’s sponsor First Horizon, and then we’ll jump into the show.

Tim Ulbrich  00:48

 Does saving 20% for a down payment on a home feel like an uphill battle? It’s no secret that pharmacists have a lot of competing financial priorities, including high student loan debt, meaning that saving 20% for a down payment on a home may take years. For several years now we’ve been partnering with First Horizon who offers a professional home loan option AKA a doctor or pharmacist loan that requires a 3% downpayment for single family home or townhome for first time homebuyers, has no PMI and offers a 30 year fixed rate mortgage on home loans up to $766,550 in most areas. The pharmacist home loan is available in all states except Alaska and Hawaii, and can be used to purchase condos as well, however, rates may be higher and a condo review has to be completed. While I’ve personally worked with First Horizon before and had a great experience with Tony and his team, don’t just take it from me. Here’s what Payton from Tyler, Texas had to say about his experience with First Horizon: “Aaron, Cindy and Marilyn were very easy to work with. As a first- time homebuyer, I shopped around for lenders at the onset of the process. Aaron was always very quick to reply and provide me with any details I requested in order to move forward in my decision to select a lender. Once I selected First Horizon, Marilyn and Cindy did a great job of keeping my wife and I informed of the process. Closing was a breeze yesterday at the title office and I sincerely appreciate the team going above and beyond to keep my interest rate locked, despite extending closing due to negotiations with the seller. I’ve already shared my positive experience with many pharmacist-only groups. And I look forward to my brother, also a pharmacist, refinancing with you guys when he decides to do so. To check out the requirements for First Horizon’s pharmacists home loan and to start the pre- approval process, visit yourfinancialpharmacist.com/home-loan again, that’s yourfinancialpharmacist.com/home-loan. 

Tim Ulbrich  00:48

Tony, welcome back to the show.

Tony Umholtz  02:43

Hey, Tim, good to see you. Thanks for having me.

Tim Ulbrich  02:46

Always appreciate having your perspective and expertise to bring to our listeners that are potentially in the in the market for buying a house and we had you last on the podcast earlier in the spring episode 348. We discussed 2024 housing market trends. Today we’re going to continue that discussion knowing that this market is fluid, shifting, moving rapidly. And specifically we’re gonna talk about four timely questions that we think homebuyers must answer. But before we get into that, Tony, what’s the latest that you’re seeing in terms of trends out there in the market at the time of recording this end of May 2024? I know you mentioned to me before we hit record some interesting trends on inventory, maybe some levels building in certain markets, what would love to hear your perspective?

Tony Umholtz  03:30

Sure, sure. So times have changed a bit. If we look back from two years ago till now, you know, this these interest rates, the Fed has been on this mission to to quiet inflation, right? We gotta gotta get inflation down. It’s been a very tough environment for when it comes to inflation the last couple of years. And the good news is, is starting, we’re starting to see some things happen. And one thing that’s been building in different parts of the country now every part of the country can vary. But in Tampa Bay, for example, in Florida, we’ve seen a lot of inventory growth a lot of other parts of the country have too – Austin, Texas, I know is building inventory. So we’re seeing we’re seeing more inventory, more availability for buyers, that wasn’t there in the past. And I think, you know, that’s part of a normalization. We’re still not completely normal. But we are getting closer. So we’re getting closer.

Tim Ulbrich  04:25

Yeah, I feel it feels like there’s some slight shifts happening to be more buyer friendly. You know, we were just talking before the episode, you shared a story from your team of some negotiations happening where, you know, there were some concessions and things from a seller that maybe we wouldn’t have saw, you know, six months ago or 12 months ago and again, to your point every market is different. We need more inventory here in Columbus, Ohio for sure, there’s a lot of demand so everyone’s market is different, but it does feel like we’re starting to see some shifts where you know the the markets becoming a little bit more friendly to the buyer. I know for those that are searching, it probably does not feel like that right now. But, you know, be patient and we’re obviously anxiously waiting to see what happens with interest rates as well.

Tony Umholtz  05:08

Yes, I’m definitely seeing a shift, it’s becoming much more of a buyers market. Repairs are being, you know, concessions are being made or, you know, like we had talked about the sellers are willing to do some of this work to the home where they weren’t before when, when these inspections come back, and there’s little things, they’re willing to make those those those repairs now where they weren’t in the past. So some definitely some positive trends for buyers.

Tim Ulbrich  05:34

So again, we’re gonna talk through four timely questions that homebuyers must answer. Again, we’re recording here at the end of May 2024. So Tony, question number one, I think one that many people are waiting and thinking about is, you know, should I buy now? Should I wait until interest rates drop? We discussed that in a previous episode. I think this provides an interesting question because supply and demand, when rates come down, in theory, when I’m more people that are into the market searching for home, we did see rates tick down a little bit here in the last week. So what what are your thoughts on some of the trends that are happening around interest rates? And this decision of hey, buy now versus wait?

Tony Umholtz  06:11

Yeah, there’s a lot that goes into that, Tim, is a great, great question. I think, you know, the first thing we would want to talk about is, everyone’s situation is different, right? I’ve always believed in 22 years in this industry, like if someone’s going to be in an area for five years or more, when you look at the alternative, renting, right, versus owning, I think it makes sense to own if you’re in a five year span, no matter what the environment, right? I think it because it just rents go up over time, right? You don’t build equity, even if value stayed the same, you’re going to come out ahead and five years if values are zero, right? Zero appreciation, right? So you’re going to benefit by by owning that home, even if there’s no appreciation. So I think that’d be the first thing I’d say, like it’s up to the individual. But if you’re renting and that’s the alternative, and you’re gonna see escalating rents, because rents are still going up every year, I think, I think owning is the way to go. As far as like timing the market, which is always hard to do, there’s pros and cons right now. I think inventory is building is becoming more favorable, like we discussed, interest rates have come down slightly, you know, with interest rates, I’ll give you give you guys my thoughts on this. And again, I you know, this is just all these multiple sources that I monitor. And, and, you know, there’s some, there’s a couple of different thoughts here. So number one, we’re starting to see different consumers, different spectrums really being affected. Those in the lower income earners, it’s really starting to, you’re seeing credit card debt multiply, interest rates on credit card debt has gone up, there’s a segment of the population that’s really struggling, really struggling financially. We’re starting to see more defaults on car payments, not as much on mortgages, but on car payments, we are in some other different retail items. So that tells you that that could drag on the economy. So that’s one end of the spectrum. The other the other end of the spectrum is, we have a lot of people like baby boomers, for example, no debt, right. So they’re not dealing with any credit cards, their incomes slightly rising. We have financial markets have gone up. Stock bond market has risen. We’ve got high yields on CDs and treasury bonds. So they’re able to spend and they’re spending a lot, right. So we’ve got one segment of population doing really well and another not. So it’s just how long is that going to drag on the economy, and we’re seeing businesses start pulling back a little bit. So that being said, that’s all things that line up with interest rates falling, it really does, because we are seeing this gradual slowdown. Rates came down the past two weeks, because we got some got a really pretty bad number on retail sales. And those things kind of are showing the slowdown. That being said, commodity prices are going up. And what does that tell us, Tim? That tells us that that’s an inflationary sign, right? So it’s a mixed bag right now, it’s hard to say rates are gonna go straight down. It’s really tough. So I wouldn’t say we can’t completely bank on lower rates. We definitely are slowing and there’s probably an outlook that rates could be lower in the future. But we don’t always know for sure, right? There is some signal saying higher rates could be, this could be the new normal for a while. So when we’re making a home buying decision, we wouldn’t want to just say hey, rates are going to be lower in a year. That’s my buying. It’s got to say does this fit my lifestyle now? Is my alternative renting, you know, if I’m living rent free with family, and it’s not a problem to be in the you know, living with family, might be okay, but if you’re renting, and you know, you’re going to be in that area for more than five years, that’s where I think buying makes sense no matter what the market is.

Tim Ulbrich  09:55

Yeah, I’m glad you said that, Tony, because I feel like when there’s so much news coming at us as there has been with market conditions rates, will they drop? When will they drop inflation, etc, we tend to run the risk of getting down these rabbit holes that drive our decision making. And they’re important information we’ve got to consider. But we got to step back and look at the bigger picture. Where does the home purchase fit within the context of the rest of the financial plan? And if we think about this as a decision tree, from there, yes or no? Okay, how are the market conditions impacting our ability to buy a home? And what does that do in terms of purchase price, financing options, all those things, and sometimes we work bottom up, when we really need to start with those bigger questions.

Tony Umholtz  10:37

I have one more thing I’ll add just it just kind of piggyback’s on Warren Buffett, right. And, you know, you want to go against the grain on investments and in life. And a lot of ways, you know, he I think is his quote was, “I buy when there’s blood in the streets,” is when he buys stocks, right? When things were really bad. And, you know, when there’s euphoria he sells. So you kind of look at the housing market, and I’ve looked at that over the years, and maybe outside of COVID, just just what happened in COVID. It’s always kind of been when the markets down, it’s kind of a down year, I think it’s always been a better time to buy historically, in real estate too you know, when everyone’s buying, then you’re competing with everyone is just don’t get as good of a deal. So I just kind of looked at that in my own life, when I buy it seems like when things were slower in the market, I always did better, you know, versus when everyone’s looking.

Tim Ulbrich  11:32

Yeah, and I have a feeling time will tell, but I have a feeling. you know, maybe this time next year, maybe sooner, maybe a little bit later, we’re you and I are gonna be talking about, you know, an important topic around refinancing that we haven’t talked about in a long time on the show, because it just hasn’t made a whole lot of sense. So you know, what more to come in in the future. But if obviously, if we see rates drop, there’s going to be a big interest in the market out there from from a refinance perspective. Great stuff. Okay. So that was the first question, is it worth waiting to buy until interest rates drop? So by now versus wait? Second question is around some of the rules of thumb that lenders are using from a pre approval process and determining the amount of home that one can afford, one can purchase and Tony just given the rise in home prices, given the rise in interest rates, obviously driving up monthly payments, you know, pharmacist incomes have gone up, but they haven’t gone up that much. And so I have a feeling that, you know, we’re seeing the impact of home prices, and interest rates have an impact on their debt to income ratios, which are important from a lending perspective. So what are the rules of thumb? Is the 28-36 rule still relevant? What are lenders using now?

Tony Umholtz  12:41

You know, it’s it is irrelevant to some degree. But actually, the back end ratio, the 36%, is actually 43%. So, it depends on the product too. So like the product, you know, with less than 20% down, you’re typically going to have to stay at that 43% threshold. So that means your total debts, new mortgage included, car payments, student loans, the total debts cannot be more than 43% of your gross income. So it’s important remember, it’s gross income, it’s not net income, okay. So if you’re earnings of $10,000 a month, gross, your total obligations per month can be $4300. Okay, simple, simple math there. Now, if you’re going to bring more money to the table, like 20%, down, you can often get approved higher, so up to 49%, maybe even 50% in some cases. FHA loans, we can get even higher, sometimes it’s interesting. So, but those are different LTVs, typically more larger down payments are gonna give you more flexibility on the on the debt to income ratio. And that’s what again, that’s what we are approving you for as a lender and it with the lending community can approve you for that doesn’t necessarily mean it’s the right thing for me.

Tim Ulbrich  13:56

Yeah, great, great point. And so we’ve seen that kind of bump up in over time. And again, to your point, every product is different. So so no general rule of thumb. But the example there’s a good one, right? Remember, it’s gross income. So if someone’s earning $10,000 per year, you mentioned that that 36, shifting to 43. So that would be all debts $4300, right or less of the 10,000. Now, just to add on to that a little bit in this market, Tony and I’m specifically thinking of existing homeowners that are looking to move or make a purchase that are trying to get themselves in a position where maybe they don’t have to make a contingent offer, right? So hey, can I get a second loan, you know, even if they’re not going to carry that loan for a long period of time, but wanting to be able to make an offer on a home without a contingency on the sale of their current home. Just talk to us about how that impacts in that point, you then would have two mortgages, right that are going into that 43% equation.

Tony Umholtz  14:48

That’s right. So any liabilities you add, so like for example, what’s popular is a home equity line of credit. If you still own your home and you’re trying to buy a new home without selling your current home. Well, that home equity line of credit has to be counted in your debt to income ratio going forward. And it’s a popular strategy. It’s almost like a bridge loan. We have some clients that are trying to do a few repairs to their home, but want to buy this other house. And they they need to bridge that equity over for the down payment. Now, that new home equity line, for example, would count in their debt to income ratio or cash out refinance. We do cash out refinances as well, where because those rates are lower than home equity lines generally. And let’s say we pull $100,000 out that new mortgage payment would be calculated, and your debt to income ratio, so any new loans you take are calculated, and your debt to income ratio.

Tim Ulbrich  15:39

Awesome. Great stuff there. So third question, I want to talk a little bit about maybe somewhat nebulous, NAR settlement and what’s going on there, and probably more questions, and maybe we have answers at this point in time. And we had Nate Hedrick on the show early in April. Nate’s a pharmacist, real estate agent, Episode 353, we’ll link to that in the show notes, to talk about his perspective as an agent on the NAR settlement. So we don’t necessarily need to go into all of the details on the settlement, as we’ve discussed that before. But Tony would love to get your perspective as a mortgage officer, what what exactly is going on here with the settlement? And how may this impact or not impact those that are currently or soon to be in the market as a homebuyer? 

Tony Umholtz  16:22

It’s, you know, it’s a moving target to some degree. It’s, you know, from, from our perspective, as lenders, I know, any other thing I just like to address -we don’t know all the details yet. And I think we have to look at the different regional MLS’s too. I think there could be some regional impacts and ways of doing business that could could change, it may not be a universal thing is what I’m saying. Different areas may adopt different rules. But just in my communications with with real estate agents that we’ve worked with. And, you know, clearly the big thing is going to be, I think it’s going to narrow the amount of realtors that are out there. I think to some degree, I think the more established agents will be still be in the markets and still do well and probably will do better. For a lot of the newer agents that may not have as big of a following or book business may not make it, right. My concern too, is there are going to be some areas where the buyers may not be able to afford to pay the buyer’s agents. So I think I think what it’s going to do is it’s going to professionalize a lot of things. I think, buyers. First of all, I want to say this, I’ve worked with real estate agents for over 20 years. And they some of them work extremely hard. It’s a very tough occupation, when you talk about driving people to maybe 20 houses, negotiations. I mean, even this weekend, I had an agent call us and they were making an offer on a really competitive house, this one was priced really well to sell. And like, you know, they’re still going up against multiple offers, they’ve been working with these buyers for months. I mean, it’s it’s a challenging occupation. And this doesn’t make it any easier to some degree. But I think having a buyer’s agreement with that agent, so when you select an agent that can help you, because there’s a lot of value add that agents bring, you know, just in my view, we all have the internet, we all can search for properties. But when we’re new to an area, we don’t know everything about the neighborhoods, we don’t know the history of the neighborhoods, the history of that area. Was it built on an old Waste Management facility? I mean, there’s so much that goes into this, what kind of schools are here? What’s the history of these schools? What’s, what’s the history of this part of town? Is this area going to appreciate? Is it a growing part of town? Or is it a time, there’s so many aspects that agents do bring value? So I think, getting off on a tangent, but I guess what I’m getting at here is you want people to be served have the ability to be served by agents, right. And you don’t want to eliminate that. So they’re all going to have to sign some sort of buyer’s agreement. And there will be a commission involved. And that commission will either be paid by the buyer themselves directly or could still be negotiated with the seller. And I do think especially as we pivot into this buyer’s market, that more sellers are going to be willing to pay that. And it may not be advertised that way. But I think they’re going to be able to negotiate that in so the sellers, essentially still paying it. Yeah, but if the buyer does pay it out of their pocket, they’re probably still getting a little lower sales price. So in the end, I think the consumer is going to do fine, but it’s really not going to change a whole lot. I think it’s going to change how the business is done. And it may eliminate some of the agents in the industry is what I think could happen. The good news of all this is that Fannie Mae, Freddie Mac, right and HUD, basically came out said that if the seller does pay the buyer’s agent commission, it’s not going to impact the allowance for seller concessions. That means is on a on a conventional loan, if you’re putting 5% down and you can normally get 3% in sales concessions, right? That let’s say the buyer agents owed 3% in commission, the seller can still pay that and still pay your 3% concessions, closing costs and prepaids, which was is helpful, I think is a big deal. Because then we’re not having that challenge as well, buyers, because many people take advantage of that, to have their closing costs and prepaids paid. So that’s, that’s kind of where we are, I think we’ll know more by the end of the summer, and we can definitely dive in more. And that’s just kind of my high level, you know, perspective. I’m not an expert in this. But just, you know, that’s kind of what I think could happen. And I’m hopeful that this is a good thing for the industry. And it’s not not a negative thing.

Tim Ulbrich  20:45

Yeah, great summary. And I’m just really curious more than anything to see how this shakes out. You know, if you look at listings right now, it’s business as usual. You know, most listings that I see are in the Columbus area, you know, a list of 3%, two and a half percent, something like that. So that ability to list is something I think we’re going to see that change, and there certainly will be questions and some unknown territory, but how quickly will this evolve? How quickly will the disruption happen? Or not happen? You and I were talking a little bit before the recording about, you know, some of this shifting more on the front end. And having that agreement agreement with the buyer’s agent, especially for the first time homebuyers where that downpayment and coming with cash to the table for down payment closing costs, is so precious, right, that’s hard, hard to do. If there’s more cash that’s needed, from the buyer to pay the agent in a market or historically where that wasn’t happening,  you know, I think that’s going to be an interesting trend to watch watch into the future. But what a lot of questions, you know, I think the example you gave is, was a really good one, have you know, an agent, understanding a local area, understanding the school’s understanding, maybe some of the things that aren’t going to be put on a listing, you know, such as, hey, this was built on an old facility and just going through this process a couple of times, especially if you’re coming from out of the area until you are in the area, living in it every day, where you are actually driving around experiencing it, living life like you normally would, you just can’t know that. You have to rely on, you know, other people that have expertise in the area. But I think it’s also worth saying there that not all agents are created equal from a value standpoint, you know. It’s no different than our industry, in the financial services, where the word financial planner doesn’t necessarily carry a whole lot of weight. As a consumer, you have to really do your homework to say, Hey, what are the credentials this person has? What is the experience? What is the value that they’re charging? Is there a return on investment? And I think, you know, one of the positives of this is really shifting, you know, that pressure, maybe some consolidation in the agent market, to really, you know, for agents to make that case, from a value standpoint. So curious to see what that looks like. Yeah,

Tony Umholtz  22:49

100% agree. It’s, it should professionalize a lot of the industry in a lot of ways.

Tim Ulbrich  22:57

My last question for you, Tony, I know a lot of our listeners are curious about this is related to student loans. You know, it’s it feels like we have to come back and talk about student loans at some point on every episode. Many of our listeners, of course, are facing, you know, significant amounts of student loan debt, especially, especially in that first decade or so of their career. And there’s just changes upon changes related to student loans that have been coming over the last year. And what one of them that’s coming to top of mind for me is with the with the new save repayment plan, that new calculation is going into effect this summer, which is going to have some benefits for most, not all because what’s interesting about that repayment plan is the monthly payment can exceed the standard repayment plan, which isn’t true with all of the other income driven repayment plans. But for most borrowers, I think because of the adjustments to that calculation, where the federal poverty limit multipliers going to be going up, and then the multiplier for graduate undergraduate loans might drive down the monthly payment a little bit as well. In theory, we’re gonna see many people that might have a lower monthly payment on that save plan. And so my question is, we just talked about debt to income ratio, how does that feed into what you’re seeing in terms of how lenders are looking at student loans and just the nuances and how quickly this is changing? And how that feeds into the calculation of what that amount of student loans impacts their overall debt load?

Tony Umholtz  24:27

Yeah, that’s a great question. And it’s, you know, as far as how lenders are viewing the student loans, there’s two two things that I would say are the main factors that we look at, right. So the so when, when a pharmacist or physician is getting out of school, they secure the first job and they have quite a bit of student loans. We see cases you know, across the board but hundreds to hundreds of 1000s of dollars sometimes the the there’s two ways and the main the the way, the best way and what we see the most is we just use the Income Based Repayment repayment number, right? So, a lot of times when we’ll run a credit report for someone that’s newly out of school, it’ll state that they owe all this balance, and there’s a zero payment, right? So because they haven’t started making payments, so when we run a credit bureau through Equifax, TransUnion, and Experian, it’ll come back that way, right, to saying zero is the payment amount. So that’s where these two different avenues go. So number one, if you get the Income Based Payment letter, so let’s say it’s $250,000, is still student loans. And that comes back at $800 a month income based repayment, or $500 a month, that’s what we’re going to use. So it’d be $500 a month on that letter, even though it’s not on the credit bureau. Now, if it’s in deferment, or you’re not repaying it right, then we’re going to use a factor. So in case the product we use for pharmacists is going to be a point 5% factor, okay. So in that case, you’d be looking at a $1250 payment versus $500. So $1250, because it’s half a percent per month, of the total $250. So your your ability, your buying capacity has narrowed if you don’t have that income based repayment. So because that factor is going to is going to provide a larger payment than then the income base. Now, that being said, that factors lower than like an FHA loan, or you know, some other products that are out there, we’re gonna use 1%. Right? Yeah. So so it’s still better than, you know, the other options, but it’s not as good as the income based. So my advice is, once you start working, and you’re on that payment plan, that’s what the lender is going to use, and make sure that they have that information that way they calculate it correctly, because the lenders may turn you down saying, Hey, you owe 250, saying zero, our factor’s 1%, it’s $2500 a month, you can’t qualify for anything. Yeah. So that’s the advice I’d give. I’ve seen that happen quite a bit over the years. So I just, you know, do your homework on what that that income base payment will be. And if it’s better than that factor, which a lot of times it is, that’s what I would, you know, use that to factor into your planning ahead of time.

Tim Ulbrich  27:18

Yeah, Tony, this is a great example, one of many where two parts of the financial plan come together, you know, we’re talking about student loan repayment. And obviously, there’s a whole set of strategy with that. And from a lending perspective, you’re buying a home, what that monthly payment is, and how that feeds into your debt to income ratio very relevant. And one of the common things we talked about is, you know, deferment. In my opinion deferment, there’s still some old advice out there from people that graduated back when I did have like, hey, defer your loans if you can defer your loans, especially during like a postgraduate training period. And the problem with that you’ve highlighted one here, is that for those individuals, that’s going to put us into that, you know, more of that de facto calculation, that most likely is going to be a higher number that contribute to the debt load. The other thing we often talk about is, especially for those that might qualify for something like public service loan forgiveness, deferment, doesn’t allow those to count as qualifying payments. And because the income driven repayment, as the name suggests, is using your income to come up with your monthly payment, even when you’re in a postgraduate training period with a thought might be, hey, I’ve got a lower income, therefore, I need to defer, that calculation might end up, you know, even if you have 150 $250,000, that you might actually have a very low monthly income driven repayment plan, which would be favorable here, but also be favorable, when it comes to something like loan forgiveness payments and those payments counting. So not advice, by any means. But certainly something to think about. And a good example, just have a how these pieces are very much interconnected.

Tony Umholtz  28:48

Absolutely.

Tim Ulbrich  28:49

Tony, if I could put you if I could put a fifth question in front of you, that actually was just thinking about as we’re recording, you know, knowing we’re in this higher interest rate market, I would suspect this is a time period where we’re seeing more ARM products out there that are being promoted. So ARMs, adjustable rate mortgage products, what what are your thoughts and kind of, you know, people looking at those where hey, maybe an ARM product as you’ve been promoted, you know, something, and if something like a 10 or 15 year ARM, even if it’s ammoritized over 30 years with the idea that hey, we’re gonna save a little bit of interest now, but there’s this question in the future. So, you know, when I refinance my home last in 2000, and somewhere around the pandemic, you know, 30 year conventional at high twos, low threes to no brainer, right? Obviously, we’re in a different interest rate market. So just quick thoughts on on kind of ARM products in this market.

Tony Umholtz  29:43

You know, it’s funny, the ARM products, especially right when the Fed took off with their interest rate, rising raises and ARMs had a pretty meaningful spread below the fixed rates. So the only area I see and I’ll give you the pros and cons of ARMs, the only area where I’m writing a good amount of arms are on jumbo mortgages right now, just because those jumbo fixed rates are still higher, more elevated than the ARMs, and it but it’s, it’s compressed a lot. So it used to be like a 1% spread maybe in early, mid 22 and an end of 22-23. It just kept doing this, you know why? Because the Fed kept increasing the short end of the yield curve, right. So that’s where we had this. That’s why we have an inverted yield curve. So what you don’t want to get into too much technicality, but like the two year treasury note today is actually higher than the 10 year and a 30. Year, right. So it’s inverted, short term rates are, are higher than the long term rates, which typically leads means rates are going to come down in the future, right? is typically what that means. But ARMs still makes sense on the higher end loans it possibly could on conventional loans, the only challenges with ARMs, they typically are considered riskier in the eyes of the lender, meaning we want more money down, right. We’re not going to do a three or 5%. The only product we have one product that’ll do 100% ARM for MDs only, MDs and DOs. But outside of that none of the products really make sense unless you put 20% down, so no one has 20% to put down the ARM could make sense. It used to make even more sense. But the yield curve has gotten pumped up so much. And frankly, the fixed rates have come down. The 30 year fixed is getting better on especially on conventional loans. FHA loans are incredibly – the spread on FHA loans are way down. I mean, I think the other day, I mean, I hadn’t seen them down in, you know, pretty far down in the sixes for FHA now, so there is PMI. But anyway, I guess what I’m getting at is, I think there’s better fixed rate options for most people right now, unless they’re higher end loans if that makes sense, but it’s a great question. The ARMs are definitely still viable for larger jumbo loans. And in most markets, that’s over $766. 

Tim Ulbrich  32:09

So you answered my question, I say, hey, what do you define as a jumbo loan for folks that are listening, wondering, so awesome, thank you. Let’s wrap up by talking about the product that you offer at First Horizon for the pharmacist home loan. You know, I think many of our listeners we’ve talked about, hey, some of the challenges potentially of getting into that downpayment, obviously that downpayment amount of getting a conventional 20%, where home prices are today versus five years ago, that’s put further pressure on that, you know, cash for the downpayment. So talk to us about the pharmacist, pharmacist home loan through First Horizon, who it’s for maximum loan amounts, downpayment requirements, and that will point our listeners to more information from there.

Tony Umholtz  32:47

Sure, sure. So the again, the product has been it been a great option for many, and we’ve been really neat to see so many people benefit from it. And it allows if you’re a first time buyer, you can put as little as 3% down. And if you’ve purchased in the past, then or owned a home in the past, it would be 5% down, okay. No PMI. So there’s no mortgage insurance, that’s the real benefit. There’s no prepayment penalty either. So you can refinance in the next couple of years if we see rates dip, like we think could happen. There’s also a minimum credit score, it’s 700 to the minimum credit score hurdle is 700. And the maximum loan amount is $766,500. Is the maximum loan amount. So that’s a quick snapshot of it. And there’s not a hefty amount of reserve requirements. It’s a pretty user friendly loan for most, especially if you’re buying your first home. And we generally have, you know, 30 year fixed options under that product. 

Tim Ulbrich  33:53

So for those that are listening, that are in a higher cost of living area, saying, Hey, I’d love to buy under $766. But I live on the West Coast, I live in the northeast, I live in, you know, the DC/Virginia area, you know, this doesn’t mean there’s not an opportunity to work with First Horizon, Tony mentioned the jumbo loans or other options available when you get to those higher loan amounts. And I think Tony’s we’ve talked about on previous shows a good lender is not going to put one solution towards everyone to take. For your individual solution, what is the best option? Is it the pharmacy some loan? Is it a FHA loan, you know, perhaps a VA loan or other products? So that lender relationship and really determining what the best fit is so important, and we’ve got more information available on the website. If you go to yourfinancialpharmacists.com/home-loan, you can learn more about the first horizon pharmacists home loan product, and from there, we can get you in contact with Tony and the team to learn more. So Tony, as always great stuff. Thanks so much for coming on the show. 

Tony Umholtz  34:50

Hey, thanks for having me. Tim. Always great to be with you here.

Tim Ulbrich  34:52

Thank you. Have a good one.

Tony Umholtz  34:53

You too.

Tim Ulbrich  34:56

Before we wrap up today’s show, I want to again thank this week’s sponsor of Your Financial Pharmacist Podcast First Horizon,. We’re glad to have found a solution for pharmacists that are unable to save 20% for a down payment on a home. A lot of pharmacists and the YFP community have taken advantage of First Horizon’s pharmacist home loan, which requires a 3% downpayment for a single family home or townhome for first time homebuyers, and has no PMI on a 30 year fixed rate mortgage. To learn more about the requirements for First Horizon’s Pharmacist Home LLoan and to get started with the pre approval process, you can visit yourfinancialpharmacists.com/home-loan. Again, that’s yourfinancialpharmacists.com/home-loan. 

Tim Ulbrich  35:41

As we conclude this week’s podcast and important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding material should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. Furthermore, the information contained in our archived newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyses expressed herein are solely those of your financial pharmacists unless otherwise noted, and constitute judgments as of the dates published. Such information may contain forward looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward-looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer. Thank you again for your support of the Your Financial Pharmacist podcast. Have a great rest of your week.

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