home buying

YFP 353: Avoiding the Trap of House Poor: Evaluating Cost of Home Ownership

Posted on April 4, 2024April 2, 2024 by YFP Media

Nate Hedrick, The Real Estate RPH, discusses how to avoid the trap of becoming house poor, the ever-lively debate of renting vs buying a home, the costs of buying a home, and how to determine how much house you can afford. This episode is sponsored by Real Estate RPH.

Episode Summary

In this episode sponsored by Real Estate RPh, host Tim Ulbrich chats with pharmacist and real-estate agent Nate Hedrick, CEO and founder of Real Estate RPh, all about the costs of home buying. Beyond the initial down payment and monthly mortgage payment, there are a lot of expenses with home ownership. Some expenses can be expected and planned for, others can catch you by surprise, as Nate and Tim have both learned.

Hear valuable insights and resources for pharmacists looking to purchase a home, covering topics such as down payment assistance options, planning for those unexpected expenses, and creative ways to help achieve the goal of home ownership.

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 costs and webinar sign-up. [0:00]
Real estate market trends and industry news. [2:32]
Financial impacts of home ownership and student loan debt. [5:27]
Home affordability and financial planning. [11:07]
Budgeting and financial planning for homebuyers. [15:11]
Homeownership and financial planning creativity. [19:39]
Homeownership costs beyond mortgage payments. [23:25]
Homeownership costs and surprises. [27:00]
Home buying options and resources. [32:59]

Episode Highlights

“I live this every day, just as another pharmacist also owning a home, right? You have to kind of account for all those costs. And it can feel like you get to the end of the month, and every bucket has been taken up by something. And you’re like, okay, how many, you know, how many pennies do I have left to rub together?” – Nate Hedrick [11:08]

“So I like tools that have that much more broad look, rather than trying to silo things out and saying 10% should go towards your car and 20% toward your house, because I just don’t think they work for everybody.”- Nate Hedrick [16:00]

“Like that’s the biggest thing with homeownership is – it nothing is consistent, every month is going to be different no matter what you do. And building in some of that margin building in that that error is just a great way to de stress that whole process.” – Nate Hedrick [29:18]

“I think what we’re really trying to prevent is, you know, as we talk about the theme here of avoiding the trap of being house poor and really evaluating all these costs that we don’t achieve one goal at the expense of a bunch of others.” – Tim Ulbrich [29:31]

“I think most people assume or think that they’ve got to have 20% down to buy a home. The reality is, there’s a ton of different programs out there and you don’t need anywhere near 20% down.” – Nate Hedrick [33:50]

“But there are a number of awesome programs out there that can help with down payment assistance, that can lower the downpayment that’s required and still have a competitive interest rate”. – Nate Hedrick [34:14]

Links Mentioned in Today’s Episode

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 our resident homebuying expert Nate Hedrick joins the show to answer the question how much house can I afford? We discuss how to avoid the trap of becoming house poor, the ever lively debate of renting versus buying, and what costs to consider beyond the down payment and monthly payment, which includes principal interest, taxes and insurance. Whether you’re a first time homebuyer or already own your own home. Our hope is this episode will help you evaluate how home ownership fits as one puzzle piece in the rest of the financial plan. Speaking of homebuying, Nate will be joining us for a free webinar coming up on Thursday, April 25, at 8:30pm/Eastern titled, Your Checklist for Buying a Home in 2024. During this webinar, Nate will share what you need to know about purchasing a home in 2024. And we’ll walk you through important steps to take in your home buying journey to make the process easier to navigate and understand. You can sign up for this webinar by visiting yourfinancialpharmacist.com/homebuying2024. Again, that’s yourfinancialpharmacist.com/homebuying2024. All right, let’s hear from today’s sponsor the Real Estate RPh and then we’ll jump into the show.

Tim Ulbrich 01:20

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 02:05

Nate, welcome back to the show.

Nate Hedrick 02:07

Hey, Tim, always good to be here.

Tim Ulbrich 02:08

Well, this is the time of year where things start to really heat up on the home buying the home selling side of things, although you know, we continue to be in this in this unique cycle that is a little bit of an out-of-whack of supply and demand. We’ve got obviously interest rates still where they’re at. So as you go into the spring season, what’s normal, what’s not normal for you this time of year?

Nate Hedrick 02:32

I guess the only normal thing is that it is it is getting busy. My schedule is quite busy right now in the spring with a lot of buyers, a lot of sellers, which is great. I mean, it’s it’s great for our business, but it’s still a bit of a weird time, right, we’ve got interest rates in kind of a weird spot, still have a lot of low inventory out there. So people that are trying to find the right home, it’s more difficult. And then we’ve got things going on with the industry in general that that are just making it a bit of a weird, weird market right now.

Tim Ulbrich 03:03

Absolutely. And before we get too deep into the topic, Nate for any of our listeners that are, you know, in the moment, looking to buy a home, looking to sell a home, wanting to make sure that they get out in front of this, or maybe even those for those that are listening to saying, Hey, this is a three month thing, a six month thing, we you and I both know how that goes. Things can move quickly. You know, we want to make sure they get connected to you and your services, what you offer through the Real Estate RPh concierge service, they can do that by going to yourfinancialpharmacists.com. We’ll talk more about this as we go throughout the episode at the end as well. Click on home buying and from there, you’ll see an option to find an agent get connected with eight and beyond your way for for this big decision. Certainly that that it is we want to make sure that they have the resources available to make a good decision.

Nate Hedrick 03:49

Yeah, it’s funny, we even I got an email just this morning from a client that they met with me in late January, we match them up with an agent within a couple of days. And within two weeks, they were under contract and they just closed. So like I mean, it was just, it’s lightning fast when you’re in that in that space. And even if you’re three months out, it all of a sudden those three months get eaten up. So better to schedule that early and get on the horn with us so we can get you in the right spot. So yeah, definitely check that out.

Tim Ulbrich 04:14

Nate, I’d be remiss if we didn’t ask you big news that came out this week settlement by the National Association of Realtors. Obviously, you as a real estate agent, if our listeners don’t already know that, potentially something that’s going to impact you impact the industry at large. There has been news flying around all about this headlines everywhere. And I think it’s one of those things. It’s hard to really assess like what actually is going on? What’s the impact right now? And what’s the potential future impact? And I know you and David just covered this on the Real Estate Investing Podcast, episode 118. We’ll link to that episode in the show notes so folks can dig deeper on this topic, but give it give us the Cliff Notes of what’s going on and where we’re at.

Nate Hedrick 04:55

Yeah, I think it’s definitely worthwhile to try to get away from the media noise for a second on this because what I’m seeing out there is all the headlines are speculating what this is going to do to the industry rather than what’s actually occurred. So the very brief version is that several months and even a couple of years ago, there was a lawsuit against the National Association of Realtors, by some parties that are part of a consumer advocacy group. And essentially, what they were alleging was that there was there’s some sort of price fixing going on that basically sellers were told, you had to offer a commission to buyer’s agents. And if you didn’t offer them 3%, or whatever, then like you couldn’t work together, right. And that’s, that’s not really true. And the NAR has basically said, like, we’re not admitting that we did that, because we haven’t been and they’re even in the settlement, they’ve admitted no wrongdoing at all. But essentially, that’s the allegation. And what is what they decided to do is, rather than continue to go through expensive litigation, the NAR has decided to settle and to make some changes, so they’re gonna pay out about $418 million dollars over the next four years to consumers. And then they’re gonna make some big changes in terms of how agents and the MLS can advertise and for, for commissions, so they are no longer able to advertise for buyer agent commissions, and buyers are going to have to work with and this is the big change for buyers out there, buyers are gonna have to work with an agent under a contract, you’re gonna have to have a contract in place with that agent. Gone will be the days of just showing up, writing an offer with whatever agent and then like figuring out the contract stuff later, like that is not going to work anymore. You’re going to have to be established with somebody, if you want to work with an agent, because the way we get paid is going to change basically. So it’s a lot of shake up. We don’t know exactly what’s going to happen yet. But some of those details are starting to come forward here and we’re at the end of March already. And it’s it’s, it’s heating up.

Tim Ulbrich 06:46

So for those that are listening, whether it’s you know, people that are looking right now or thinking about buying the spring or summer, you know, how much of that is going to impact them right now? Are we still in this wait, wait and see pattern of when some of the changes you’re talking about are going to take place?

Nate Hedrick 06:59

Yeah, so a lot of these changes will not go into effect until probably July and even beyond. That’s really the deadline they’ve established for this. I keep in mind again, as you and I sit here and record this, the court has not even accepted the settlement yet, right. The NAR has basically said this is what we’re interested in settling on, the court still has to accept that settlement. So a lot of this is to be determined anyway. But if it all shakes out the way that they’ve proposed, then July is when this will start to make a difference. And again, if it goes, if it goes the in a bad direction, I guess for buyers, I’ll put it that way. What will likely happen is that buyers are just going to have to be a little more savvy about about that early conversation with their agent. Who is paying, how am I paying? Am I paying? Is the seller paying? Like how are we negotiating that? And how does it affect my ability to put in offers because those are all things that are going to change in in some capacity here in the next couple of months.

Tim Ulbrich 07:52

So again, you and David covered this on episode 118 of the YFP Real Estate Investing Podcast, deeper dive, we’ll make sure to link that in the show notes. And of course, we’ll keep the community up to date, as we have more information that is rolling out. And you know, we get past some of the short term news and the headlines and actually start to see some of the implementation of some of these things. So today’s theme, Nate is: Avoiding the Trap of House Poor: Evaluating the True Costs of of Home Ownership. And, you know, as you and I were planning for this episode, we were talking about, hey, for those that are looking, this is a good opportunity to make sure that that homebuying, that big rock that is a part of the financial plan, is put in the right context, right, about their goals that we’re trying to achieve, so that we have the room to do those things. But also for those that own, already own. You know, I talked with pharmacists on the regular that, you know, maybe they’re three years in, five years in, 10 years in, whatever it may be, and just over time expenses have increased. Maybe they’re perhaps still paying on student loans or other things, trying to save and invest more for retirement and really feeling like in that home, they’re in the situation where hey, I don’t have a whole lot of margin, I’m feeling house poor because of that. So whether someone is a hey, I’m going to buy or they currently own I think they’re gonna find this episode helpful. Now, I want to get your take on five things that I see on the regular that are financially impacting, you know, especially new graduates, but I think it transcends even beyond that in a much greater way than when I graduated back in 2008, than when you graduated as well. You know, first student loan debt, we’ve talked about that at length on the show. When you look at what graduates are coming out with is in terms of an average and what that means for a monthly payment. You know, that can be standard 10 year repayment on an average debt load, we’re looking at $1800 to $2,000 per month.

Second, of course, housing costs we’re gonna dig deep into that on today’s episode, but, you know, we’ve seen the rise in interest rates and the rise in home prices. We see the impact of that on a monthly payment. You put those two together, right, that’s a big portion of one’s take home pay. You know, we also see the third thing I’m thinking about is just car loans and interest rates on the car loans. Of course inflation is the fourth thing, although we’re starting to see that, you know, tamper down a little bit, and then five, I think one that we don’t talk enough about is childcare costs. And, you know, you know that well, and just the costs that come from, you know, daycare and other costs associated with with children and growing family. And so, you know, at the end of the day, what I want to get your take on is do pharmacists make a good income? And the answer is yes, objectively they do. Right? If you look at the median household income in the US, pharmacists make on average $50,000 or more above that. So objectively speaking, yes. However, when you start to add these things up, right, when you start to look at student loans, and housing costs, and childcare costs, etc, that’s where we often run into the situation of, hey, I make a good income, but I don’t feel like I’m progressing. I don’t feel like I have a whole lot of breathing room, because of some of these big pieces of the puzzle that can have an impact on the financial plan. So thoughts from your seat individually living this, and then certainly working with many pharmacists that are in that position, looking to buy trying to figure out how the house budget fits into the rest of the plan?

Nate Hedrick 11:06

Yeah, I mean, you’re spot on, right? I live this every day, just as another pharmacist also owning a home, right? You have to kind of account for all those costs. And it can feel like you get to the end of the month, and every bucket has been taken up by something. And you’re like, okay, how many, you know, how many pennies do I have left to rub together? Right? It’s just, it can feel like that, right? Especially if you’ve not set yourself up for success. And so I definitely feel that on my own personal finances, but then I also see with clients to where they will I see this all the time where someone will look at a neighborhood or look at an area of the country. And they don’t even ask the question about budget, they just say we need three bedrooms. And where I’m looking at $800,000. And the question is not, can I afford an $800,000 house. It’s just, that’s what we need. And so that’s what we’re gonna buy. And I think that’s really easy to get into, right? Like we love where we live. And that’s not unreasonable. But rarely do we step back and evaluate? Okay, am I okay with paying more to live in this particular location? Or, you know, should I consider a relocation? Or should I consider sizing down and having the kids share a bedroom? Like, all those things are not questions that I often hear. It’s usually, how can I push this? How can I lower that down payment? How can I get away from this expenses now and push those push those things down the road? So I think we’re kind of geared toward that. And having these conversations like you and I are having is how you start to reset that that metric a little bit.

Tim Ulbrich 12:33

Yeah. And I think one thing that I hear there, Nate, which is hard to implement, is just some of the mindset around these decisions. No judgment here whatsoever. Remember, Jess and I talked at length about, you know, we had an expectation coming out that we’re going to buy our first home, at the level which my parents took 20, 25, 30 years to get to, like, you know, and that was where our mindset was, and we made several decisions and some mistakes along the way. And, you know, we probably purchased before we were ready, not sure we really had enough, you know, down in the home, we ended up paying PMI that I didn’t understand how that was structured in a loan. You know, if we had more time, I could give you the list. Right? But but the point being, is I think there is a mindset component here. And you know, sometimes we don’t necessarily like the outcome or the decision when we look at the numbers. But what we’re trying to do, as we talk about this, is really take a step back and say, hey, how does the home purchase fit as one piece of this bigger puzzle, and human behavior, myself included, I think you included as well, as we want to go into the silos and make financial decisions. And especially when talk about home purchase, it’s exciting. It’s emotional, right? There’s a lot of things that are involved. But when we’re talking about a rock that we’re going to put in place that might take 25, 30, 35, 40% of our take home pay, and we’re fixed in that for 30 years, okay, we’ve really got to do due diligence, so that we make sure when we look at other parts of the financial plan, right, saving, investing for the future, pursuing other financial goals, making sure we’ve got breathing room, making sure we have margin to experience and to give and to do other parts of the plan. And so naturally, Nate, the next question is, well, if we’re talking about trying to prevent this, what is that affordability calculation? Like as you think about it, in your own plan, or in working with, you know, other buyers as well? How do you think about what what is that number? You know, is it is it a percentage of take home pay, is it you know, obviously, the what the individual thinks it is versus what the bank thinks it is, can be two very different things. Talk us through that a little bit further.

Nate Hedrick 12:34

I think that you could Google, “how much house can I afford?” and get 72 different answers, right, with all these calculators and metrics and back of the napkin math ideas, and the answer is there is no answer. However, you hit the nail on the head a minute ago and said, avoiding thinking about this decision as a silo, right? I think it’s very easy for people to say, well, I read, you could get 25% of your money toward housing. So we’re just going to do that. And that’s our number. And that’s it. Right? Or 30%, or pick, pick your favorite number, right? Where I think that becomes a problem is that especially like ourselves, right? When I, when I came out of school, a ton of student loan debt, those numbers are not accurate for somebody with a ton of student loan debt, they’re not accurate for a ton of credit card debt, they’re not accurate. If you’ve got, you know, childcare expenses that are going to be cropping up down the road, like all those things can can drastically affect those numbers. And so what I like to do, or what I advise my clients do, is to do something like the 50-30-20, which I can cover in a second, but but something that it doesn’t matter which one it is, as long as you’re taking all of your expenses as a as a bigger piece, right? So what I like about the 50-30-20 rule is that 50% of your money goes toward needs; 30% toward wants and 20% toward net worth building. And what I like, especially about that, is that that big piece of the pie that 50% It’s all your needs, food, car, medical expenses, childcare expenses, like whatever those things are, if you have to have them, then you have to include it in a number. And if all those numbers are already big, like what if your need is student loan payment, right, I have to pay that every single month, I can just avoid that. So it gets factored into that. And it can adjust those housing numbers down rather than just picking a flat 25% or whatever. So I like tools that have that much more broad look, rather than trying to silo things out and saying 10% should go towards your car and 20% toward your house, because I just don’t think they work for everybody. And I think they’re too they’re too broad.

Tim Ulbrich 16:39

Yeah, and I think to your point there, Nate, you know, obviously, everyone’s situation is different. And even, you know, let’s take two, two student loan borrowers, right, both have $200,000 of debt, how they pursue their loan repayment strategy could drastically impact the cash flow they have, right? If one person says, hey, I want to aggressively pay these off in five, seven years, the other person is on a public service loan forgiveness strategy on an income driven repayment plan, where they’re trying to maximize tax free forgiveness- night and day of what are they actually putting out towards the student loans in terms of cash flow? And what what do they have available? You know, other things I think about in terms of where are they at in terms of savings and retirement plans and goals? You know, so is, is pharmacy a second career, and they’re trying to play a little bit of catch up on retirement? Are they thinking early retirement? And maybe you need to save a little bit more aggressive, right? So so many factors that go into this equation, but I think using something like you’re suggesting is a good place, because it helps us figure out, okay, how does this payment fit into that bucket into that 50%? And I’m guessing we often get that number, we’re like, hey, we don’t like it. We don’t like what, you know, the budget is going to support it. And I think that that’s really where the rubber meets the road. But what’s helpful about that is 99 out of 100 times when you’re running your own numbers and trying to figure out what is that housing cost within that 50%. Typically, the banks can approve you for much more than that. Right. And so they’re the the take home point being is that they’re not concerned about your 50-30-20 budget in the same way that the individual would be correct.

Nate Hedrick 18:13

Spot on. Right. I never forget the first time that Kristen and I got approved for a mortgage. And the bank was like, Well, how much house you want to buy? And we’re like, I don’t know, how much can like, what will you give us? And they just do this, this quick math. And it’s like, here you can afford $600,000. And I think our budget at the time was like $250. But like, they don’t care, right, they’re looking at the numbers very differently. They’re just looking at some of the debts that you have, they don’t care if you have $0 leftover at the end of the month, the goal is to make sure that you can make those payments and just make those payments. And so that’s how they’re going to set it. So you have to be your own advocate when it comes to setting that budget and not letting the bank do it for you.

Tim Ulbrich 18:51

Yeah, I always say Nathan, the bank is looking out for themselves have a foreclosure risk? They’re not looking out for are you on track to achieve all your other financial goals? And how does this purchase, that’s an ill intent, that’s just the way the way the system is set up, and then them mitigating the risks that they need to mitigate. So you know, I think the natural follow up then, Nate, and here we are, you know, we probably should have started here that, you know, we’re not having to buy a home in 2024 where homes are at the prices they are and interest rates are where they are so different time right then when we bought a home and it’s worth saying, but the natural counterpoint is, well, I don’t want to rent either, you know, rent has been going up we know the what the data has shown in terms of rent prices going up over time and you know, I feel like I’m I’m just throwing money down the drain. I’m not building equity, right. I’m not building equity if I don’t have a house. So what do you say to that person who really feels like yeah, I hear you. Like it’s too much in terms of the percentage of my take home pay are within that budgeting system you just described, but also feel like it’s not like wrench deep. Right. And I really feel like I’m not necessarily building any equity as we continue to rent.

Nate Hedrick 20:01

I think it’s tough because some of this, at some point comes down to more of an emotional decision, right? Like, it’s just I’m sick of renting. Even if financially like, you still need to stay in that boat for a little bit, while longer just if you do the math, it’s hard to make that decision, right? I mean, I absolutely get that and I was in the same boat that you were like, we probably bought sooner than we should have. We just wanted to buy, we kind of made it work, right. But at the same time, we kept our budget very reasonable, so that we could do that, right, there are ways to mitigate that risk. If that’s the choice you want to make, right? You, you can do it, if you aren’t pushing everything, right, you’ve got to take some compromises somewhere else. So if you’re looking at it, you’re saying, look, we have to be in a home, I don’t want to be renting anymore, well, then you gotta choose an area where the home prices are affordable. I mean, just that’s all there is to it. Right? If you are a new practitioner in downtown San Francisco, and the homes are $1.5 million and above, like, it’s just not as viable as Cleveland, Ohio, where I’m from right or something like that. So you have to be able to take some sort of compromise. If you sit there and say, look, the the overall goal is to be in a home that we own. And you have to find a way to do that. It’s not just in it has to be in this market and has to be six bedrooms, and it has to be 400,000 square feet and all this right, it just you have to be able to adapt, and then do the there are other ways to get creative, too, right? Think about house hacking, for example, buying a property that you can have somebody else renting out with you, then you can mitigate some of those costs. Or looking for down payment assistance programs that are out there, right? There are a ton of grant programs for new graduates that help with down payment assistance, like you can get creative. You just have to go out and do that. Right. I think the old Rich Dad Poor Dad adage, it’s not I can’t afford a house. It’s how can I afford a house? And sometimes you have to get creative how you do that.

Tim Ulbrich 21:50

I think that, you know, it’s the creativity is an important part of that. I think this comes back to mindset you know as well. I think there’s a script that many of us have been told, I know that I don’t remember my parents saying this, it was just something I always believe, which is rent is bad. Homeownership is good. And, you know, as with most things, right, there’s, there’s more than option A and B. And when we look at homeownership, depending on your situation, depending on the part of the country you’re living in, depending on cash you have available for down payment depending on rent rates, right, you know. Ramit Sethi talks a lot about this on his podcast living in I think he’s in New York City, where it’s like, doesn’t make sense, like, you know, continuing to rent in certain markets, like, yeah, it does make sense. And you’ve got to figure out to your point, other parts of the plan, we’re sure maybe he’s not building, you know, equity in the home, which for many people becomes one of the greatest assets they have as a part of their financial plan. But for him, and for others, in higher cost of living areas, you adjust and pivot, you know, and figure out what that looks like.

Nate Hedrick 22:45

It’s funny, you mentioned that I was even just talking to a pharmacist two weeks or three weeks ago, and he rents right now, he wants to buy his first house, but he wants it to be an investment property. So he’s buying in a different location continuing to rent, so you can build equity in a home, just not the home that he’s living in. So he’s still getting into the real estate game, but not doing in a way where he’s making a bad decision just because of where he wants to live. Right. So there’s, there’s a lot of ways to get creative, I wish that we could just do it all up front, but you have to kind of pick and choose when it comes to your financial plan.

Tim Ulbrich 23:16

I like that, Nate. Creativity, I feel like it’s something we’re often lacking in, in the financial plan, right, because we see a path maybe that our parents had or others had, and it’s option A option B. But typically, there’s there’s more than than just those two. Let’s talk about some of the about surprise, but maybe costs it often gets overlooked or underestimated, especially for people that are going through this, you know, the first time you know. I remember vividly, I’ve shared on the show before Jess and I bought our first home and these numbers are laughable now saying them out loud in today’s market, but 2008/2009. So then post residency, we were paying rent $1,100 a month, I remember writing that check every single month for a townhome. We were looking to buy a home and you know, I went did the principal and interest calculations. I don’t think I factored in taxes, insurance. Maybe I did. And I remember seeing it was going to be somewhere right around there actually a little bit less. And like that was the end of my analytics. It was like buy, buy buy. And you know, I think that that’s very common, you know, that you look at, hey, what’s going to be my monthly payment, principal interest. Maybe people are thinking about property taxes and insurance. But that’s really the table stakes. Right? That’s the starting point. But talk to us about maybe those other things, either short term or long term that tend to catch people off guard, where sure, maybe that payment starts at 25% of take home pay but we quickly realize if it’s all in cost, it’s actually a lot lot more.

Nate Hedrick 24:43

I mean, I think you nailed it with the insurance and taxes. I did the exact same thing you did. I ignored them and pretended like they weren’t there and then also the bill showed up I’m like what was I thinking? But you’re right there are a number of other things. I’ll never forget we moved into our our very first his house. And one of the one of the reasons they moved again, this is why home buying is emotional. One of the reasons we moved is we wanted to space for our dog. We had a one year old dog wanted some space for her, wanted some space for ourselves. And so we’re like, oh, let’s get this big yard. Well, the very first thing we did when we moved in was like, shoot, we need a fence. And so we’re like, well, we got a fence in the whole thing. And we have, we’ve over like an acre, we have actually almost two acres. And so we wanted to fence in an acre and all of a sudden it was like a $10,000 fence. And it’s like man – nowhere like that would have covered rent for a whole year at the old place. But we didn’t even factor that in because you just it’s just the stuff that you don’t think about. So it’s everything like that. I mean, I think it’s this the surprises, the things you don’t anticipate. But it’s also the regular stuff, you know. Stuff breaks, water heater goes down, a washing machine, dishwasher, and all those things, you don’t have a maintenance department to call anymore. You have to you know the landlord to check in with right you have to fix it yourself and get it taken care of. So I think I think those are the some of the big things. The other thing that I think creeps up and it’s on top of mine right now for me because we do this thing here in Cuyahoga County in Cleveland, Ohio, where every three years, the county assessor will come out and they’ll reassess property values, and then they’ll adjust your taxes as a result. Super nice. Not not like that everywhere. Some places, they lock you into that lower rate, but we get reassessed every three years. And so every three years, my property taxes go up in some fashion. And sometimes it’s more, sometimes it’s less, but it’s always on the up. So even if we did that math nine, almost 10 years ago, right? It all worked out, then things have gotten more expensive, right. And so it’s, it’s all those little things that start to creep up over time that you don’t have the backup plan for. Now, I will say this, rent has also been increasing. So it’s not like everything’s immune to that, right. You might have started renting a place for $1,000 a month, or $1100 dollars a month. And now it’s 15. Right. And so that that’s, that’s still there as well and has to be factored in. But with a home, it just feels like all of it is on your shoulders. And it’s really just when it comes down, you have to be the one to take care of it.

Tim Ulbrich 27:00

And I had the same thought. We had a reassessment, actually, both on the commercial property, which was outrageous, but on the primary home, it was not as bad, but it got me thinking the same line of thinking you are, which is the tendency when we buy and even again, no judgment when we bought our second home here in Columbus, you know, I remember those conversations where Jess and I were kind of looking at, okay, where where do we want to be monthly payment wise, that we really feel like we’re comfortable within the budget, but you’re thinking about it in that moment in time. Right. And, you know, hopefully, incomes are going up to help offset this. But this is one of the challenges we’re seeing, I think in some sectors of our profession is that they’re not or if they are and you factor in inflation and other costs, maybe they’re not to the degree that we actually think they are even if that number is going up. And so you look at things like property taxes. Homeowners insurance is something that’s kicked up here in the last couple years more significantly, and I think we’re going to continue to see that. And then you highlighted well, you know, the fence example that’s given. We did the same thing. We didn’t have that big of a fence. But you know, I remember it was a fence, it was repairing the deck, it was the lawn maintenance, it was because we never owned a home before, you know, all of the lawn equipment, things that you had to get for the first time and, you know, obviously furniture, you look at the home and you’re like, Oh, it’s fine. We like it. And then you get in and it’s like, well, you know, what about this? And you know, what about that, and those things seems small. But you know, those add up quickly. And it goes back to the theme of where we’ve been going throughout the episode, which is, hey, will you go back to your 50-30-20 or whatever type of budgeting system you’re using, you know, margin breathing room, knowing that up is going to be the trend, whether it’s property taxes, homeowners insurance, upkeep, remodeling the home, a roof, hot water, tank, AC, whatever, it’s gonna go up, and we want to have margin to be able to plan and save for those expenses.

Nate Hedrick 27:01

If you want a way to ensure that you’re financially less stressed, build in that margin upfront. It just makes it so much easier when you have that surprise, like if you have $1,000 water heater that needs to be replaced, but you’ve built in $1000 extra dollars in your budget every month. It’s just a blip. Like you don’t have to have this emergency fund that you’re cracking open and like it just it feels so much easier to have those those bumps because it’s not consistent. Like that’s the biggest thing with homeownership is – it nothing is consistent, every month is going to be different no matter what you do. And building in some of that margin building in that that error is just a great way to de stress that whole process.

Tim Ulbrich 28:53

Yeah, I think what we’re really trying to prevent is we you know, talk about the theme here of avoiding the trap of being house poor and really evaluating all these costs that we don’t achieve one goal at the expense of a bunch of others. So you know homeownership has a ton of value. We’ve talked about it on the show before. We’re both big believers in homeownership and that it has tremendous value but also we don’t want to be in that home and then like hey, we were stressed about taking the trip or the vacation or stressed about you know not being able to stay on track with retirement or other goals along the way as well. Utilities, Nate, is another one I was just thinking about our utilities keep creeping up. And it feels like that’s another one that you look back two three years and you’re like, wait a minute, what’s, what’s the heating bill? Compared to what it was?

Nate Hedrick 30:14

I have a good story about that, too. I don’t know if I’ve told this on the podcast before but early on, when we lived in our house, the water company wanted to install this wireless water meter. And I got like one letter about it. And it was like, hey, call us schedule a time for us to come out install this wireless reader that way we can see remotely like what your water usage is, and like, we’ll come out and install it. It’s free, just let us know. And I ignored it because I was busy and everything else. And so we stopped getting water bills. And I didn’t notice. And then about a year and a half in of like that, that notice coming? I was like, Man, are we even going to water bill No, in a while. So I logged in. And I cannot believe to this day, I cannot believe that didn’t stop our water. We were over $1,200 behind. I think my agenda is we just I hadn’t been paying attention to it. And it wasn’t an auto bill. And so like one of those $1,000 bumps that just showed up. So I mean, again, I’m shocked they never turned off our water. But that was that was an example of that creep from the utility company for sure.

Tim Ulbrich 31:16

Surprised they weren’t knocking on your door.

Nate Hedrick 31:17

I know, right?

Tim Ulbrich 31:18

So speaking of…you made me think… hey, this is good story hour when Nate and Tim, but as we’re talking about cost of home ownership you don’t expect. I don’t know if I told you this one – a few years ago. So in our basement, we’ve never had a water softener system. So and, and full disclaimer, I am inept, completely inept when it comes to anything. So just keep that in mind for anyone who’s judging me as we’re talking about this. So never had a water softening system. The boys- we’ve got four boys are constantly down there throwing balls or whatever. Well, for those that have one, you know, there’s a backwash valve that will come on periodically to flush the system. Well, they had hit the backwash valve. And I don’t know you’re not down there enough? I’m not paying attention. I don’t even know what this thing is. Is it doing you know, whatever. So come to find out like it had turned on. It’s just been running. I don’t know for how long it’s been running. So I realized this, and then sure enough, like, I might have been a week, 10 days later, I get a bill for $4000. And I call it the and for those that have looked at your water sewer bill. Any water usage you’re using, you’re doubling up as sewers. So I call the Franklin County Department of sanitary engineering and I’m like, hey, listen, this is what happened. You’re not gonna believe it. I get it. I’m an idiot. And I was like, hey, I’ll I’ll write a check tomorrow, if you let me pay $2,000. And they were like, super gracious.

Nate Hedrick 31:21

Wow, cool.

Tim Ulbrich 31:27

Yeah. And so again, write things that come up that you’re just like, I never thought that this expense might actually exist. Jess and I have a running mental log of all of the damage slash expenses that have happened as a result of the boys.

Nate Hedrick 32:59

You can present that to my graduation, like oh great you owe me this now.

Tim Ulbrich 33:03

And here’s the opportunity cost. Another thing I want to acknowledge as we’re talking about affordability of home, we’re talking about some more of those ongoing costs. But also, not all downpayments, right, are created equal depending on the loan type. And not that we need to get into all the different types of loans. We’ve talked about it before in the show. But I just want to emphasize this, especially for the for the first time homebuyers, you know, there’s a range from 0% to something more conventional on 20%. But when you’re talking about a three, four or $500,000, home or more, there’s a big difference in terms of house affordability. So any thoughts or wisdom you’d have there to share based on your your conversation with clients and what they’re expecting maybe coming in of a down payment? And then as they learn to navigate this a little bit further?

Nate Hedrick 33:50

I think the most people that they’ve talked to especially like their parents, right, I think most people assume or think that they’ve got to have 20% down to buy a home. The reality is, there’s a ton of different programs out there and you don’t need anywhere near 20% down. And you can still do that lower down payment without too much of a penalty, right. There are certainly situations where you’re going to have to pay a little more in terms of either interest rate or private mortgage insurance, things like that. But there are a number of awesome programs out there that can help with down payment assistance, that can lower the downpayment that’s required and still have a competitive interest rate. The real trick I guess, at this point is to one talk to an agent that actually knows what they’re doing, working with these types of clients that can help with with finding a good lender. Or talk to a lender that knows these products inside and out. There’s a lender that I work with regularly that has like a lineup of programs that he can push people into of like, Hey, you’re a nurse, awesome. You get you qualify for the Ohio Heroes program. Let’s get you into that. Or you’re a firefighter you get you know, Ohio Heroes. You’re a recent graduate. Great here you qualify for this new grad program. It gives you $5,000, no questions asked. Like so there are programs out there there are things to help with that. And I think a lot of people just go in assuming, well, I gotta find 20% down, or I’m gonna pay a ton of money. And that’s my only choice. And there really are a lot more options out there.

Tim Ulbrich 35:09

I think to your point, you know, that relationship with an agent, that relationship with a lender, really important. Options is what I hear there too, right? I think it’s easy to get sucked into a option without kind of looking across the board and making sure you’re looking at everything. Down payment is a factor, obviously, competitive interest rates, there’s a lot going on with points and things right now making sure that you’re actually really looking at the full aspect of the product. And that is transparent, because sometimes it can be hard to compare apples to apples, you know, some offers, I’ve seen this a lot, where people in one case are looking at a rate and it has point reductions and other cases it doesn’t, and they’re not necessarily, you know, seeing the comparison and difference there. I sprinkle this into the beginning, I’m gonna come back to it again, for those that are, you know, looking to buy now or in the future. We’ve partnered with you and your real estate concierge service now for many years, and love what you’re doing to help out homebuyers. Tell us more about what is all involved in that and where folks can go to learn more?

Nate Hedrick 36:07

I mean, all of a sudden we’ve been talking about right? It’s it’s a lot to wrap your head around, and we’re only scraping the surface of all the stuff there is to know and things to navigate and everybody’s situation is unique. Right? You might be sitting there listening to this right now and thinking, well, we’ve got this and you don’t even talked about that, like what what do I do, right? And so having somebody on your team, I think is really important. And that’s that’s why we created the concierge service to begin with is to have that sort of team mentality around it, and give you somebody in your corner that that has experienced helping navigate whatever it is. So the way the program works is that you basically go to my website, we’ve mentioned that before. And you can sign up for a free call with me, do a 30 minute jumpstart planning call where we can ask and answer a lot of those questions that you have, get you connected with a fantastic agent, gets you connected with a great lender if you need it. Whatever we need to do to get you off and running in the right direction, right. And that might be that you’re ready to buy now. And you’re like, hey, we just have been popping on Zillow help us out. Or it might be that you’re nine months down the road, and you’re just starting to plan things out. Both of those are great times to connect with us. So it’s a completely free service. We don’t charge anything for that. We just again, try to offer a way to help people navigate this very complicated process with somebody that’s experienced it and lived and breathed it for several years now.

Tim Ulbrich 37:26

Great stuff, Nate. Two ways you can get there, you can go directly to realestaterph.com. We’ll link to that in the show notes. You can also go to yourfinancialpharmacist.com. You’ll see an option for home buying at the top, and then you click on “Find an agent” and we’ll get to that same exact place and then you can book a call with Nate to continue that discussion. Nate, great stuff as always. I look forward to having you back on the show throughout the year. I know we’re do some webinar stuff as well. So to our community, make sure you be on the lookout for information we’re gonna have forthcoming as it relates to some home buying materials, webinars and future episodes as well. Thanks, Nate.

Nate Hedrick 37:57

Thanks, Tim.

Tim Ulbrich 37:58

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 38:36

DISCLAIMER: As we conclude this week’s podcast and important reminder that the content on this show is provided 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 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 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.

Current Student Loan Refinance Offers

Advertising Disclosure

Note: Referral fees from affiliate links in this table are sent to the non-profit YFP Gives. Read the full advertising disclosure here.	Bonus	Starting Rates	About	YFP Gives accepts advertising compensation from companies that appear on this site, which impacts the location and order in which brands (and/or their products) are presented, and also impacts the score that is assigned to it. Company lists on this page DO NOT imply endorsement. We do not feature all providers on the market.
	$800* Loans* ≥150K = $800 100-149K = $450 <100K = $350	Variable: 5.28%+ APR (with autopay)* Fixed: 5.28%+ APR (with autopay)* *All bonus payments are by gift card. See terms	The "Kayak" of student loan refinancing, Credible displays personalized prequalified rates from multiple lenders	Check Rate
	$750* Loans ≥150K = $750* ≥50K-150k = $300	Fixed: 5.49%+ APR (with autopay)	A marketplace that compares multiple lenders that are credit unions and local banks	Check Rate
	$500* Loans ≥50K = $500	Variable: 4.99%+ (with autopay)* Fixed: 4.96%+ (with autopay)** Read rates and terms at SplashFinancial.com	Splash is a marketplace with loans available from an exclusive network of credit unions and banks as well as U-Fi, Laurenl Road, and PenFed	Check Rate

Recent Posts

[pt_view id=”f651872qnv”]

YFP 348: 2024 Housing Market Trends & Assumable Rate Mortgages

Posted on February 29, 2024February 29, 2024 by YFP Media

Tony Umholtz of First Horizon shares insights on the real estate landscape for 2024. Sponsored by First Horizon.

Episode Summary

In this week’s podcast sponsored by First Horizon, we’re joined by Tony Umholtz, a Mortgage Loan Officer from First Horizon, to delve into the housing market updates and trends for 2024. He shares insights on current rates, supply/demand dynamics, and the impact of projected Fed Rate cuts in 2024 on the market. The episode explores the pros and cons of buying a home now versus waiting and delves into assumable rate mortgages—what they are, how they function, eligible loan types, and their growing popularity.

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 in 2024, including interest rates and supply/demand. [0:00]
Housing market trends and mortgage rates. [2:37]
Home insurance costs and roof age impacting mortgage approval. [5:29]
Housing market trends and financial planning for a growing family. [11:14]
Refinancing and assumable rate mortgages. [17:11]
Pharmacist home loan options with 700 credit score minimum. [23:26]

Episode Highlights

“One of the positives are again, these are, you know, inventory levels, on average or higher in most markets. So every markets different we’ve talked about that in the past, some markets are, you can’t generalize across the country. But on average inventory levels are better in most areas. And typically around this time of year, you build a little bit more inventory.” – Tony Umholtz

“I mean, what we saw in ’21, ’22 ’20, as well, that was unhealthy. It was great to see your house price go way up, and you make made money on equity. But it was unsustainable. Having 2023 was a blessing. Yeah, I mean, look at it that way. I mean, that was unsustainable. And this was a blessing for all of us, because it would have created a bubble in my mind. And we stopped it. And the fed helped to stop that. And I think that was a win.” – Tony Umholtz

Links Mentioned in Today’s Episode

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 First Horizon Mortgage Loan Officer Tony Umholtz back onto the show. During the show we discuss housing market updates and trends for the first quarter of 2024, including current rates supply and demand and how the projected fed rate cuts for 2024 impacting the market. We also discussed the pros and cons of buying now versus waiting and all things assumable rate mortgages. What they are, how they work, eligible loan types and why they are growing in popularity. Alright, let’s hear from today’s sponsor First Horizon and then we’ll jump in my interview with Tony Umholtz.

Tim Ulbrich 00:45

Does saving 20% for a down payment on a home feels 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 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. 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 01:50

Tony, welcome back to the show.

Tony Umholtz 01:51

Tim, it’s good to be here with you.

Tim Ulbrich 01:53

We’re excited to have you back. As always we look to you to get our most up-to-date information on kind of what we’re seeing in the housing market, especially for those in 2024 that are looking to buy or sell. I know we’ve got a lot of first time homebuyers out there in our community that have been anxiously awaiting for the right right time to buy. And we’ve got people that have been in their home for a while, maybe in a starter home that are looking to sell and to move to elsewhere. And just a crazy market that I think is hindered a lot of the movement out there of people buying and selling. So why don’t we start there, Tony, of some of what you’re seeing here early in the first quarter of 2024 as it relates to the housing market, you know. What’s what’s going on with interest rates? What are you seeing out there with supply and demand?

Tony Umholtz 02:37

Well, all good questions, Tim. And as always great to be here with you. I you know, it’s been an interesting year, as we haven’t been into 2024 very long, but a lot has happened. And you know it, we kind of forecasted that this year would be a little better than 2023 as far as you know, mortgage volume and purchase volume. But we knew it was gonna be a tough year, we’re still coming out of this, this higher inflationary environment. There’s been some headwinds. But overall, there’s a lot of good things we’re seeing. And then there’s some not so good things. So I’ll start with one of the positives. One of the positives are again, these are, you know, inventory levels, on average or higher in most markets. So every markets different we’ve talked about that in the past, some markets are, you can’t generalize across the country. But on average inventory levels are better in most areas. And typically around this time of year, you build a little bit more inventory. But in a lot of places we haven’t had this amount of inventory since the 2019 are right before the pandemic, which is nice for buyers, right, because you’re finally getting an ability to find some some product and to negotiate a little bit. That being said, we’re still not in a normal market, we’re still under a normal market. Most markets are in that four month range of inventory. And an average markets probably five to seven months right inventory. So we’re still in a fairly tight environment for housing. And we’re still a bit under built nationally, meaning that we don’t have enough housing units. So that’s also you know, one of the reasons housing prices haven’t fallen, you know, despite the higher rates and the headwinds in the economy. Regarding rates, we have seen rates rise since the beginning of the year, and the rates were higher in October, early November than they are now. But we’ve seen an increase in a lot of that is due to positive economic data. Economic data has been positive on the you know, on the spending front, unemployment has been good, inflation is still there. I will say this to the last inflation report had had inflation but it was counting some inflation from last year. So like if you look past that we’re really going in the right direction. So I think the I think rates are gonna go down as time goes on. I think it’d be very slow this year. But you know, post the election, I think things can be pretty good. So I mean, it’s a roughly a year away, but I think you’re gonna see rates really get better as time goes on. But the other issue too coming back to this, you know, supply and demand we have as a mortgage company, we have so many clients we’ve pre-approved that are looking. It’s just gonna be, and I’m just one of many, but you know that it’s just going to get more competitive as those rates drop. So it’s like a kind of like a double edged sword, I think, you know.

Tim Ulbrich 03:32

Yeah, and I know we see that, Tony in our community. You know, a lot of first time homebuyers that’s it’s natural, right. As a new graduate, you finish pharmacy school, you’re looking at that home purchase. A lot of people are getting antsy on the renting front, “Hey, I’ve been renting for a while not not as long as I wanted.” They’re looking at what they’re paying for rent “Hey, I’d love to own a home, we’d love to build some equity long term.” And so certainly some pent up demand I know we see in our community. And I think that’s natural and expected to hear it broader than that, too. And I want our listeners to kind of hold that thought on, hey, if interest rates do come down, you know, here in 2024, what is the impact that that might have on the availability of the market? Because we’re going to talk a little bit about, you know, this concept of buy now versus wait, and what are some of the pros and cons. But before we do that, Tony, you shared something with me, before we hit record that I thought was of interest, would be of interest to our listeners, about what you’re seeing out there related to the age of a roof and how that might impact being able to get an insurance policy, which of course, you know, for homebuyers is a really important piece. So tell tell us more about what you’re seeing there?

Tony Umholtz 06:36

Sure. I mean, in the insurance aspect, it’s really big. And I think certain states are going to be tougher than others. So you’ve got, I’m based in Florida. So we’re ground zero for this, right? Because we’ve had, we had some legislation here in Florida that made, there were some abuses in you know, really more against the insurance industry, by various groups, and so forth. And people really has taken advantage of some of the flexibility. And it caused some challenges here. And there’s been some changes, as always, insurance companies are going to change what they insure, and one’s been roof age, right. So roof age is a big deal down here. It’s also in other states, too. So it’s not something that’s just here. And, you know, the costs of insurance have gone up a lot, right, and especially in more hurricane prone areas, or fire prone areas in the West, you’ve seen cost of insurance go up and I’ve seen like newer properties, you know, while they’re more expensive, the cost of insurance is much lower, you know, on newer construction, but it is more expensive generally to buy new construction. I would say the the age of the roof can vary a lot but and type of roof, whether it’s shingle or tile. So a tile roof typically has a longer age of life than a shingle roof. And the you know, though, sometimes we’ll cover those longer, but some insurance companies won’t touch it under 10 years, if it’s under, it’s got to be under 10 years, some are 15 years, some will go longer with what’s called a four point inspection, which not only looks at the roof, but looks at your, you know, your electrical, as well, looks at your plumbing, and other aspects of the home. But those are some things you may need to do. And it can become harder to get insurance or get the insurance that makes sense for you as far as costs go and coverage go. But it’s definitely an issue right now. And then, you know, with repairing a roof, it’s a lot of times it has to be done prior to closing. It’s not something you can essentially escrow. Right? You know, so, you know, if you’re selling a home and you have an older roof, repairing the roof is gonna help you get a much better deal on the house as far as the seller goes.

Tim Ulbrich 08:51

I’m glad you said that. That’s exactly where my mind was going. Right? If people are thinking about selling a home, this has an impact. If people are thinking about buying a home, it has an impact. And obviously every area of the country is different in terms of the risk and the exposure here. But it’s just another good reminder when you talk about rising insurance costs that you know, especially for that first time homebuyer, it’s very easy to fixate on purchase price of the home, right. Purchase price of the home. And we want to be thinking about the whole financial picture. So yes, it’s the purchase price of the home. It’s the mortgage that we’re going to carry the principal and interest but it’s also the taxes. It’s also the insurance, it’s also the upkeep, you know, and all those things involved. So here we’re talking about an older roof and being able to get an insurance policy if you do those insurance costs potentially going up. On top of that would be obviously that potential replacement costs to be thinking about of the roof, as well.

Tony Umholtz 09:38

That’s right. I have one little trick and secret. This is something we’ve we’ve done for 20 plus years and it doesn’t have a bearing on anything with mortgage. But sometimes clients will say, “hey, I need to get this insurance down.” And you have to have an you have to have a certain amount of coverage to get a mortgage right. So, but one thing you don’t need is, I’ll see these policies come in with $600,000 worth of personal property coverage. Yeah, well, as a lender, we don’t care about personal property. Now I recommend if you got valuables you have some coverage, right. But a lot of folks, especially buying a first home don’t have $600,000 worth of artwork and other collectibles to insure. So a lot of times taking that down, we’ll give you some premium savings. And we’ve done that quite often, over the years or suggested that.

Tim Ulbrich 10:25

Good reminder, right, to kind of look at line item of your insurance policy and what you do or don’t need, especially if you’re looking at if you options. Tony, as an aside, but related to that I we had a unfortunate fire in our neighborhood of a home, just down the street. And ever since then, we’re now a year and several months out where there’s been no movement on the house. And I presume it’s related to something being tied up in insurance. I don’t know the full backstory. But ever since then I have looked differently at my replacement cost line item, as well as the relocation piece of, you know. When you think about how long might this go on? And what are the expenses associated for relocation. So good reminder to look and understand your homeowners insurance policy.

Tony Umholtz 11:08

Absolutely.

Tim Ulbrich 11:10

Tony, I want to get your opinion on buy now versus wait. Obviously, we’re talking broadly, this, of course, is specific to one situation. But what made me think about this is I had a conversation with a colleague a couple of weeks ago, this individual is about seven years into their career, dual income household, young family just had their second child bought their first starter home about three years ago. And they’re now itching to move, right. Family has grown. They want to get a better location a little bit closer to commute to work. But naturally, as a part of that they’re facing some headwinds, those headwinds are obviously the market that we’re in. Interest rates are higher. Home costs have appreciated, of course, and in this case, they’re moving to an area that the homes are just more expensive altogether. And so when I was asking some questions, you know, what I heard, and what made me think that this is probably resonate with a lot of our community is that there’s several barriers that they’re facing. Yes, the current market conditions, but also, hey, we’ve got these student loan payments that are still hanging around, right. We’ve got daycare costs, which are rising, you know, quickly, especially now that they have a second child. And they really feel like they need to be saving more aggressively for retirement, they feel like they’re behind on retirement. And I think this is a great example of someone that I will talk to, on a regular basis that’s in this new practitioner phase of their career that feels like they’re not on track with their other financial goals, and is feeling somewhat trapped by this home situation that they’re in. And, you know, if we were to consider a move, potentially, knowing what’s going on in the market, knowing where interest rates are at, you know, potentially do we buy now, when rates are not at the highest, as you mentioned, but they’re quite high and hope we can refinance in the future? Or, do we wait and see what happens with interest rates come down with at that point, running the risk that, hey, as rates come down, I think it’s safe to assume we’re gonna have a lot more, you know, sellers are gonna have a lot more buyers that flood the market. So just would love to hear your thoughts, you know, knowing that this is a common situation we probably would hear and see in our community.

Tony Umholtz 13:10

Sure. I mean, it’s a great question. And it’s very common across the country right now. We’re seeing some of our clients, you know, growing families outgrowing their home or have to relocate because of employment situation. Very common. So I would say I mean, like we take a step back, we kind of touched on at the beginning of our discussion here is, if you look at the overall market, we’ve got lower than average inventory in most areas still, even though inventories building which inventory buildings a good thing, because we need it going into the spring season. But the you’re likely going to see pretty stable housing prices, right? Probably escalating like even if you look year over year, prices went up over last year. I mean, certain pockets fell. There’s certain areas that you know, fell. I think, but but on average home prices actually went up last year. Even with all those headwinds, right. So I think you’re getting into a pretty stable investment, as well, you know, if you if you’re moving up, like in a situation with the colleagues you spoke to, I mean, moving to a better part of town, a bigger home. I mean, all these things could be meaning more appreciation on the house, too. So yes, the cost is more, but there is the upside of appreciation. I do think we are going to all see, like anyone that bought in the last year, year to year and a half, almost two years now. They’re going to get opportunities to refinance in the future. I can’t tell you exactly when. But we’ve even seen some that are popping up that made sense. Now after these last few weeks of rates rising. We had a few clients and some of them had to pay their loan for six months just because that’s a guideline for the type of program they were in. And we couldn’t refinance them, but they the rates have dropped over a point they could have refinanced already. There’s people that have already refinanced. So I think I think you’re gonna see opportunities for that as time goes on, where your cost of ownership will actually come down. But it is tough right now, it’s very tough. There are less buyers buying. So I think you’re gonna be able to negotiate better with sellers, which is the is the benefit. But it’s a tough decision. I mean, this is where you look at the whole financial plan. Yeah, right, you’ve got to look at, okay, I’ve got daycare costs rising, I want to save more for retirement. You know, that brings me to, like, you know, making sure you’re utilizing all your company matches, right. And all the things you can do if that other buckets going up for housing, you know, and in there is no question, housing prices have trended higher, and, you know, they may, what would be healthy and really, I’ll take a step back here. I mean, what we saw in ’21, ’22 ’20, as well, that was unhealthy. It was great to see your house price go way up, and you make made money on equity. But it was unsustainable. Having 2023 was a blessing. Yeah, I mean, look at it that way. I mean, that was unsustainable. And this was a blessing for all of us, because it would have created a bubble in my mind. And we stopped it. And the fed helped to stop that. And I think that was a win. It made my business a lot harder. I don’t mean a lot of people. But it was one of those things where it was it was a blessing for this industry, I think and the housing market in general. So you know, just again, to clarify, I think you you are going to see a fairly flat market, I feel like this year, I do think you’re going to see a lot people stepping in, I will also mention that builders are opportunistic. And the builders know, there’s an opportunity right now, because we’re under built, we didn’t build enough homes from 2010 to 2020. So they’re going to be building. We’ll get to equilibrium, eventually, in the next few years. And I think things will be a little different then, but I don’t think prices are going to collapse in most markets, you know. And I think there’s been a bit of a pullback in certain areas. But for the bread and butter communities where most people are owner occupied, you’re not going to see a lot of variance.

Tim Ulbrich 17:11

Great perspective, Tony. And I think what really resonated with me with this conversation that I had is, you know, yes, there’s the objective math part right of buying a home, and we want to make sure that it fits in with the rest of the financial plan. But it also, there’s an emotional part of this that is important, you know, for I know firsthand for us, our home is we spend most of our time in our home. It’s it’s a place where we’re making memories and experiences. And so there’s this tug and pull that I see with a lot of pharmacists, which is a healthy kind of balance that we’ve got to strike of, hey, how do we have a reasonable percentage of our income going towards our home so that we can achieve other financial goals, right, we don’t want to be house poor. But also we recognize that, you know, part of living a rich life today is potentially the home and what we’re going to be able to build in that community and our experiences and so forth. And this is the tug and pull, right that we’ve got to think about. I do have one question and I’m hesitating even ask this because I have a feeling the answer is it depends. But when you mentioned the the example of a 1% reduction and refinance, and you know, in that example, they hadn’t yet got to that six month timeline that you mentioned with that loan product. Is there a general rule of thumb that you think about in terms of rate differential and where someone starts to begin to think that a refinance, of course, when you consider costs involved in doing that may be advantageous? Is it at that point? Is it less is a little bit more? Or is it just too much of it depends?

Tony Umholtz 18:37

Well, I don’t want to say it depends, but there’s a lot of variables, and one of them is clearly is the loan size. Right? Which is, I mean, it might 21 plus years doing this in this business, I mean, generally said 1%, but I’ve had numerous, especially when we do what’s called premium pricing, which means we as a lender pay the closing costs, which is a way to do that. Now, you don’t get the same rate that you would if you paid the customary costs, right. But like I’ve had larger loans, where we’ve done it at as little as 50 basis points, which is a half point. But if you have a million dollar loan, and there’s no closing costs, and you’re saving interest, you’re going to do it. So we’ve we’ve had all kinds of scenarios, but generally I look for 1% and that tend to people on the loan size and the state, certain states have higher closing costs than other states you know, so that would be the two variables.

Tim Ulbrich 19:31

Yeah, reason I asked I think to your point is we’re gonna see this come up, and maybe we’ll have to do another episode later this year if we start to see things trending because we haven’t talked about it right much in the last couple years for good reason.

Tony Umholtz 19:42

I wouldn’t be surprised if we get into the third quarter and closer to the election, we start seeing some movement. So we’ll just watch it.

Tim Ulbrich 19:50

The next thing I wanted to pick your brain on was around assumable rate mortgages. So I read an article on Wall Street Journal a couple weeks ago that really just piqued my interest about this topic and I know one we haven’t talked about on the show before, and obviously in the current rate environment that we’re in, I have a feeling some of this information starts to go viral. And people are like, Well, wait a minute, Can I get an assumable? rate mortgages? So can you define for us? What is an assumable? Rate Mortgage? You know, how do these types of products work? And then give us the, you know, the real life of how viable these may or may not be as people are considering their options?

Tony Umholtz 20:26

Sure, well, they do exist. It wasn’t just an article in the Wall Street Journal. They do exist. They’ve been they’ve been out there for a long time. And there’s really only three programs that are that are available that are assumable. And one is called an FHA loan, which we’ve touched on the other ones, a VA loan, and the last one is at USDA loan. So they’re all three government programs. And the interesting thing about VA is you don’t necessarily have to be a veteran, you can assume it, you still have to be approved by the servicing lender. But you don’t have to be a veteran, which is interesting, you know, and so, you know, couple of the the pros and cons, obviously, the big pro is, first of all, you have to find a seller willing to do this, right? That’s the number one thing. The other thing would be, I had someone call me on one of these just asking my opinion. And it was it was there was the ability to assume the loan, it was a low fixed rate, it was around three and a quarter or something like that much lower than today’s environment. But the amount of appreciation above what that loan is, and you have to pay the seller for all their principal reduction, but the home was worth so much more now on the down payment is huge. So like in this, I’m just kind of give you an example: They may have borrowed 300,000, but the house is worth $420,000. Yep, so you’re gonna have to bring $420,000 to get to the what they owe, or sorry, $120,000. So it’s $120k. It’s a big down payment. So with these assumable loans, a lot of times the new buyer has to come and compensate the owner for the difference and it’s a huge amount, right, normally, because the markets run up so much and you may have put money down. Now those three programs do, I mean FHA does carry PMI, but the rates are so low, that it wouldn’t matter in a lot of these cases. The VA loan, you have to get approved by the servicing lender, okay, so they will have to approve you for the product, that means you’re going to have to meet all the criteria for the loan size, just like any other loan, it’s not going to be the same as communicating like with a team, like myself or another lender that is originating every day, you’re not going to get that service level, it’s going to be more like a we’ll get to it, we get to that type of call. And but it is possible, it’s just not easy. You know, and not only do you have to find the proper owner in home, you know, the home you like with the owner that’s willing to let go of a loan, you’d also have to compensate them and have to have some cash for a down payment. There’s a there’s those are the various that’s why I don’t think well, I read the article too. And I saw there was a guide starting to start a tech business to, it’s just going to be really hard. At the end of the day, you got to you got to make it all work and meet all these guidelines. And, and and just I just think it’s going to be a detriment since the amount of money folks will have to bring to get that rate.

Tim Ulbrich 23:26

And that’s a piece, Tony, to be honest, I didn’t think a whole lot about right that what you’re highlighting the example the, you know, $300,000 home that’s not worth $420k, and they’re bringing $120,000 of cash, like you then have to factor in all of this what’s the opportunity cost of bringing a bunch of cash? Not not even a hey do you have it, but what’s the opportunity costs of that $120,000 of cash and not just focus on the rate comparison? Great stuff. Great stuff. Well, let’s wrap up by talking about the pharmacist home loan product that we’ve collaborated in sharing with our community, Tony, now for several years available through First Horizon. You know, I think more than ever, this is an area that we see of interest among pharmacists, even though there’s gonna be less that are out there in the market right now that are buying obviously, we’re gonna have more coming in the future. But as we’ve seen appreciation, as we’ve seen, the home values go over time, obviously that down payment for a new practitioner, especially that first time homebuyer can be a huge barrier. And you know, one of the questions that comes up is, hey, how can I potentially buy a home, get into a home without having to put down a conventional 20% down as I’m trying to focus on student loans, daycare costs, investing all the other goals that we talk about. And so I think that’s why we were so excited about this collaboration several years ago and continue to be excited about the collaboration is what this product can do for for pharmacists in that position. So tell us a little bit more about the pharmacist home loan product who it’s for, minimum credit scores, maximum loan amounts, how the PMI, all of that works.

Tony Umholtz 24:55

Sure, sure. Well, you’re the minimum credit score I’ll start with that is 700. You have to have a 700 credit score. And and if you’re a little below that my team, we have ways to help give ideas and actually help with even giving like a scenario to roll up for quite a few folks to show them what they can get their credit scores to by consolidating debt or paying down a credit card, wherever it might be. The max loan amount right now it’s in most counties is $766,550. But there are areas of the country where we’ll go higher based upon that, that the, you know, the, the counties maximum loan amount. So especially like in California, in and around like Northern Virginia. There’s certain areas where we can actually lend a higher loan amount because the loan sizes are higher, even a $900,000. And there is no PMI, which is the big big driver. And that’s like a car payment for most people when they buy a home, so we can save that with this program. There is no prepayment penalty, which is big too, we need you need that that reassurance that you refinance, if rates drop. The, you know, with the reserves and so forth, there really isn’t a big need for that. There’s even the ability for the seller to give some concessions, which we have to watch that as things go on. But that’s something that, you know, if you want to get some of your closing costs covered, to keep more cash back, that’s something else it’ll allow too. And that’s bigger now, you know, Tim, where I see when a home needs a little bit of cosmetic repair, just that extra $5000-$6000 that the seller is willing to pay or compensate. That can be the the ticket to getting that work done. So those are the things that that that it’ll allow. So there’s a few extra little pieces there. But 700 is a minimum credit score, we do look at debt to income ratios around 43%, not to get too in the weeds, but income to debt ratio. It does take a lower factor for student loans than like a traditional Fannie Mae loan would we do or FHA. So there’s a little more flexibility but yes, pretty pretty much a quick summary.

Tim Ulbrich 27:10

And you may have said it and I didn’t hear it but remind us of a percent down required for a first time homebuyer versus second.

Tony Umholtz 27:19

Good catch Tim. Yeah, so first time homebuyer is 3% down. No PMI. If you’ve owned before, it’s 5% down. That’s the difference.

Tim Ulbrich 27:30

And we have all of this more information on our website. If you go to yourfinancialpharmacist.com/ home-loan. We’ll link to that in the show notes. As well, you get more information on the pharmacists home loan product and offering. We also have a form that you can fill out quickly there that will get you connected to Tony and his team to learn more as you’re looking at options. Whether you’re in the Hey, I’m ready to buy now, or I’m thinking about buying in six months, make sure to check out those resources and fill out that form so we can get you connected to Tony and his team. Tony, this has been great as always. Really appreciate your perspective. The other thing I just want to say to our community, if you have a question, you know, whether you’re buying, selling, thinking about buying and selling in 2024, you have a question that you’d like us to tackle. We’re gonna be bringing Tony back on the show here in a couple of months. Just send us an email [email protected]. In the subject line, just put home buying, home selling question, and we’ll make sure to tee that up for Tony on a future episode. So Tony, thanks so much for taking time to come on.

Tony Umholtz 28:24

Hey, thanks for having me. Tim. Great seeing you.

Tim Ulbrich 28:26

You too. Take care.

Tim Ulbrich 28:29

Before we wrap up today’s show, I want to again thank this week’s sponsor of the Your Financial Pharmacst 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% 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 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 29:12

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 to 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 Pharmacist unless otherwise noted, and constitute judgments as of the dates, publish them. 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.

[END]

Current Student Loan Refinance Offers

Advertising Disclosure

Note: Referral fees from affiliate links in this table are sent to the non-profit YFP Gives. Read the full advertising disclosure here.	Bonus	Starting Rates	About	YFP Gives accepts advertising compensation from companies that appear on this site, which impacts the location and order in which brands (and/or their products) are presented, and also impacts the score that is assigned to it. Company lists on this page DO NOT imply endorsement. We do not feature all providers on the market.
	$800* Loans* ≥150K = $800 100-149K = $450 <100K = $350	Variable: 5.28%+ APR (with autopay)* Fixed: 5.28%+ APR (with autopay)* *All bonus payments are by gift card. See terms	The "Kayak" of student loan refinancing, Credible displays personalized prequalified rates from multiple lenders	Check Rate
	$750* Loans ≥150K = $750* ≥50K-150k = $300	Fixed: 5.49%+ APR (with autopay)	A marketplace that compares multiple lenders that are credit unions and local banks	Check Rate
	$500* Loans ≥50K = $500	Variable: 4.99%+ (with autopay)* Fixed: 4.96%+ (with autopay)** Read rates and terms at SplashFinancial.com	Splash is a marketplace with loans available from an exclusive network of credit unions and banks as well as U-Fi, Laurenl Road, and PenFed	Check Rate

Recent Posts

[pt_view id=”f651872qnv”]

YFP 337: Key Real Estate Trends for Homebuyers in 2024 with Tony Umholtz

Posted on December 7, 2023December 5, 2023 by YFP Media

Join Tony Umholtz from First Horizon Bank as he forecasts 2024 housing market trends and offers expert insights. Sponsored by First Horizon Bank.

Episode Summary

With inflationary pressures historically high and inventory tight, many people are feeling understandably nervous about the housing market as 2023 comes to a close. But what can homeowners and homebuyers expect in 2024? To help us answer this question, we are joined once again by Tony Umholtz, a mortgage loan officer with First Horizon Bank. In this episode, we tap into Tony’s 20-plus years of experience in the industry to get his input on current trends in the housing market, what makes this cycle different from 2008-2009, the correlation between presidential election years and interest rates, and what prospective homebuyers should be doing right now to get ready to buy a home in the new year, plus so much more! For a comprehensive overview of the key market trends that pharmacists and healthcare professionals need to consider when buying a home, be sure to tune in today. Episode sponsored by First Horizon Bank.

About Today’s Guest

Tony Umholtz 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

Key market trends for pharmacists and healthcare professionals looking to buy a home.
How this cycle differs from the global economic crisis of 2008.
A reminder to maintain perspective when it comes to affordability in today’s market.
Why you shouldn’t necessarily wait for interest rates to fall before you buy.
Some of the ways that the presidential election might affect mortgage rates.
Tony’s take on the consolidation of lenders and what trends to expect going forward.
Getting on strong financial footing and other tips for preparing to buy a home in 2024.
What you need to know about the National Association of Realtors (NAR) commissions ruling.
Recommendations for getting your pre-approval process started.
Insight into the First Horizon Pharmacist Home Loan.

Episode Highlights

“Every market is different, every challenge is different.” — Tony Umholtz [0:07:43]

“Don’t just buy to buy – Buy if you find a home that suits your family and your needs.” — Tony Umholtz [0:13:57]

“Making sure that, overall, you’re on strong footing financially – is the right thing to do.” — Tony Umholtz [0:23:42]

“Your timeline depends on when you’re looking. If it’s in the summer, May, or June, then maybe you wait until after the new year to get an actual pre-approval. But it’s never too early in my opinion.” — Tony Umholtz [0:29:02]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[0:00:00] TU: 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 back onto the show, Tony Umholtz, a mortgage loan officer with First Horizon Bank. During the show, I tap into Tony’s 20-plus years of experience in the industry to get his input on current trends in the housing market, what makes this cycle different than 2008/2009, his take on the connection between presidential election years and interest rates, and what prospective homebuyers can be doing right now to get ready for buying a home in 2024.

Okay. Let’s hear from today’s sponsor, First Horizon, and then we’ll jump into my interview with Tony Umholtz.

[SPONSOR MESSAGE]

[0:00:41] TU: 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. We’ve been on a hunt for a solution for pharmacists that are ready to purchase a home loan with a lower down payment and are happy to have found that option with First Horizon.

First Horizon offers a professional home loan option aka doctor or pharmacist home loan that requires a 3% down payment for a single-family home, or townhome for first-time home buyers, has no PMI and offers a 30-year fixed rate mortgage on home loans up to $726,200. 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.

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.

[EPISODE]

[0:01:52] TU: Tony, welcome back to the show.

[0:01:55] ToU: Hey, thanks for having me, Tim. Good to be here.

[0:01:58] TU: Excited for this conversation. We’re going to pick your brain, tap into your expertise, Tony, on what you’re seeing in terms of current market trends. We’ll talk about what may be ahead in 2024, especially for those that are making the decision or want to make the decision to buy a home early in 2024. And then we’ll wrap up by talking about the pharmacist home loan option as one option that pharmacists may consider as they’re looking at some lending solutions for buying a home.

Let’s talk about current market trends. I think every time we’ve talked on the show in the last year or two, we’ve said something along the lines of, hey, this is a crazy market. This is a weird market. Here we are, end of ’23, it seems like interest rates are starting to stabilize a little bit. But we’re heading into a new year, obviously, market volatility. We’re going into a presidential election year.

What are you seeing right now, Tony, as your boots on the ground working with many other pharmacists and healthcare professionals that are looking to buy a home?

[0:02:53] ToU: It truly is a unique year in a lot of ways. I know we’ve said that before. The one thing about the mortgage industry and the real estate industry is ever-changing. It’s constantly changing, and you’ve got to constantly adapt in our industry. It’s constantly evolving. Some things that are just truly unique right now is obviously interest rates, how quickly they’ve risen. I think it’s the fastest they’ve risen since the 70s. They definitely are meeting some resistance now. It’s not to say they can’t keep climbing higher, but we’ve seen a little bit of a pullback here recently, primarily based on the consumer price index numbers, which have been slowly coming down.

We’re getting to that threshold where lenders, like in the lending world, when we look to sell a loan to Fannie Freddie, or to some dealer, or investor, they don’t see rates going any higher. So they’re not paying a premium for higher coupons, which are rates. You can kind of see that we’re kind of getting towards the top here, but it’s just a truly unique time.

I think there’s other headwinds here. I don’t want to dive too deep yet, but we’ve got to be careful because we may not be out of the woods. I mean, the fiscal stability of the US is another thing we really have to watch, because bonds could be priced, government debt and rates could really be priced based on the solvency of the US government and the debt ceiling. Getting through these debt ceilings and the debt ballooning like it is could be a pressure on rates in the future.

[0:04:22] TU: Yes. One of the things I love, Tony, about your perspective when you come on the show is, just giving us some of the macroeconomic considerations of what’s happening. There’s what we know now, and then there’s what may or may not happen in the future.

One of the things I wanted to ask you about is, knowing the experience you have 20 plus years in the industry, knowing you’ve lived through some of the cycles that we’ve seen,’08, ’09 is the one that kind of jumps out to me that that was a very challenging season for many. Obviously, we saw the impact on real estate, we saw the impact in terms of foreclosures that happened in that period. What makes this cycle different than what you saw back in ’08, ’09?

[0:05:02] ToU: In ’08, ’09, it was such a challenging time, and I got into the business right after the 9/11 pullbacks, was a little bit of a recession there too. But the ’08, ’09 was just devastating, especially in the southeast, in Florida where I’m located. We saw some property values get cut in half. But the dynamics were completely different than they are today. We had an oversupply, overbuilding of homes. We had mass speculation. In the run-up to that, you had clients that could get as many mortgages as they wanted based upon a credit score. There was no fundamentals, there wasn’t a debt-to-income ratio.

There was mass speculation, people building homes based on credit, may not have had even down payments. So it was just it was completely a bubble driven by both speculation and easy money, right? When ’08 and ’09 came, and the crash came, we still were very busy. There was a lot of inventory. Now, granted, a lot of the transactions were short sales. Lots of people wanted to refinance because rates started falling into recession. But the challenge was that a lot of folks would have to come to the table with money to refinance because the loan-to-values didn’t change. The market corrected like that. The government came in and put different policies in place. But it was amazing how the market corrected. Investors would not buy certain things. It happened very, very quickly.

Then, of course, the regulations stepped up. The regulations that were put in place post ’08 and ’09 have really helped make – now, it made lending very tough, and buying a home very difficult, but it’s loosened some since then, but not a lot. So you still have to show a very tight debt-to-income ratio, credit scores are important. All these things are important in buying a home. So it’s made the credit side of the housing market much more healthy.

Now, we basically had from 2010, to 2020, and even 2021, we were underbuilt as a nation, like our population was growing. But we weren’t building enough homes to keep up with that. I mean, so many builders went out of business in that timeframe. I knew really good builders who pretty much – who had been in business for decades before that pretty much shut down for a number of years before they reemerged. We were underbuilt all those years.

Now, we’re in a situation where we don’t have enough inventory, right? We have more demand for housing. This crisis is different in a lot of ways. It’s more of an interest rate-driven crisis, right? It’s driven by interest rates being high and not enough inventory. Those are the two issues we run into today. Every market is different, every challenge is different. That past cycle, in ’08 and ’09, was just a rational exuberance in lending, and then in construction, it was crazy. Everyone was just building to build, there were investors lined up.

I remember clients coming to me, Tim, saying, “I just got my name picked in the lottery,” and basically, all they were going to do is flip that house. They were going to put their number in, and they were going to flip the house when it was done. I can’t count how many of them did that. There was so many of them who did that. A lot of them got burned at the end. They got in there, the home finally was built. Then the property values fell. Now, they did come back over time. Now, we’re in a situation where we just don’t have enough inventory, and that’s the biggest challenge now, and the affordability with rates being high, and the combination –

[0:08:39] TU: I was just thinking about affordability, Tony, as you were talking. Thinking about many of our listeners, especially those that are on the front end of the career, maybe first-time homebuyers, it’s a totally different world out there than when I graduated in 2008. I think about today’s graduates. We now have student loans that are turned back on after a three-plus-year freeze on interest rates and payments. If they have other fixed expenses, like car notes and payments, obviously, interest rates have gone up. Now, we look at what’s happening in mortgage rates. Not just on the interest rate, but also in terms of the home prices and appreciation.

What you could buy if you think about in terms of a monthly payment, which is what a lot of people are looking at in the context of the budget, what you could buy three, four, or five years ago, very different, in terms of what you can buy today, and especially when you factor in not only is the monthly payment only going to go so far but obviously, home prices have gone up in that period as well.

What I’m hearing a lot of anecdotally, Tony is, people that are looking at their interest rate and saying, “Whether it was those that were first-time homebuyers or last decade that maybe they thought this was their starter home, and now they’re looking at, and saying, “I ain’t moving. I’m not trading my 3% rate for an 8% rate.” So they’re kind of staying in the home longer, maybe they’re spending more of their money on remodeling the home, and doing other projects, or spending it elsewhere, instead of moving.

Then, those that maybe are in that phase where they’re nearing retirement, maybe thinking about downsizing, going from a two-story to a one-story home, and they’re looking at the same thing. If we don’t have to, can we wait so that we don’t trade our 3% rate for an 8% rate? I think that’s obviously furthering the issues around supply.

[0:10:21] ToU: Absolutely. Absolutely. There’s no doubt about it. There’s a lot of pent-up demand. I mean, we all feel it. Families are growing. There’s more additions to the family. Even extended family moving in. All these things are happening now, Tim, and it’s pent up. In talking to a couple veteran real estate agents that I know, that had been in the industry 20 plus years, their thoughts to me were – you can get a better deal on a house right now. Yes, it’s expensive, but you’re going to get a much better deal on a home right now in the current climate. And most people see rates coming down in the future when refinancing and affordability comes back.

Definitely a very, very challenging time, obviously. I mean, the one thing that I would say, I don’t want to discredit the student loans and everything that’s going on. But just looking back at the ’08, ’09, 2010 crisis, the job market was not nearly as healthy as it is now. We all have to remember that. We look back at history, and we think we may have it so tough. But I always look back, and my gosh, my dad had it way tougher than me. When my grandfather was alive, and I’d speak to him about what he went through, his perspective hit home, working three jobs. All the things he did, it was just a different time. Yes, things were cheaper, but wages weren’t where they were, and opportunities weren’t where they were.

We look back and I look at ’08, ’09, and the job market was not near as healthy as it is today. So there’s much more opportunity for people right now. It’s an overabundance of opportunity to be employed, but the costs are higher. Part of that’s inflationary, part of that was – we don’t want to get into all the details, but there certainly is an issue with the cost. I do think you’ll see slowly the rates come back to normal. Rates should not be this high. They should be – it should be 5% to 6% on a 30-year. that’s probably where they should be. That changes a lot of numbers in the sevens. I mean, it changes things quickly.

[0:12:29] TU: Let’s talk about that for a moment, Tony, because you said something earlier about pent-up demand. And when you’re talking about 5%, 6% rates, if, which is a big if, but if we see that transition happening, that pent-up demand, there’s going to be an explosion of buyers into the market, which further challenges the supply and demand issue. I think, as we were talking offline before we hit record, I think the tendency, especially of a first-time homebuyer in this type of market is to say, wait, and I want to wait for prices to come down. I want to wait for interest rates to come down.

Obviously, someone’s got to be ready to buy. We don’t want someone to go down that pathway before they’re financially ready. However, does that potential waiting mean there’s more people that are flooding into the space? So maybe rates do come down, but now, you’ve got more competition in the market, and you pay more for the home. I think there’s an interesting balance here, and I just want to get your thoughts on, might there be a place to buy now, and even if rates come down, then there’s an opportunity maybe to refinance in the future?

[0:13:29] ToU: Well, I think that’s exactly what I’m hearing from some of the real estate agents that I know, is that, as soon as – I mean, they all have a lot of buyers that are on the sidelines that they represent. They sense it. As soon as rates come down to a little bit more meaningful level, they’re all going to want to come back in. What does that do? This creates a lot of competition. In the areas where you’ve seen a little bit of a buildup in listings, it’s a good opportunity to get a much better deal on the home.

I will say this though, you don’t just buy to buy. You buy if you find a home that suits your family and your needs. I always say if you’re going to be in a city for five years, it makes sense to buy. It always makes sense to buy versus rent. But if you’re only going to be there for a transitory period, then it probably doesn’t make sense. You want to just continue to rent, but rental costs are likely not falling much if at all, probably will go the other way. The cost of renting versus owning over time will be more.

I would just say, just from what’s been shared with me is, it’s going to get a lot more competition quickly if you wait. I do think we’ll see rates fall. I don’t know how quickly or when, but you can just see it. You can kind of already see it in the market. I don’t want to call it, Tom, but I told a couple of my friends that are CFAs, which are certified financial analysts. I said, “Watch, the 5% on the 10-year treasury will be likely be a peak. So far I’m right. I don’t know [inaudible 0:14:55]. They go, “No, it’s not, Tony. It may not be. This and that.” One of them said, “You might be right, because they’ve rallied down. [Inaudible 0:15:03] now.”

I think, the economy can only take so much, and I think, that’s the issue. I think we’re getting to that point. If you can afford it now, you’ll get a better deal if it’s the right home. I think you’re going to be able to lower the cost of ownership later, I really do.

[0:15:23] TU: One thing I want I want to get your perspective on is, I’m already seeing rumblings out there on social media and the news about the connection between a presidential election year and what historically has happened in the economy here. We’re talking more specifically around mortgage interest rates. Again, disclaimer, we’re not trying to predict what may or may not happen, but I do think it’s just an important piece of information as we head into 2024, which is a presidential election year. Give us your insights, Tony, of what you’ve seen in previous election cycles.

[0:15:52] ToU: You can’t go in saying it’s going to happen, that rates are going to happen. There’s a couple things that I’ve seen, and nothing’s a guarantee, but it’s typically a rocky year for the stock market in an election cycle. Stocks are usually volatile, typically, on the downside.

[0:16:09] TU: In case, we haven’t had enough of that, lately, right?

[0:16:12] ToU: Yes, right. We haven’t had enough of that. But crazy enough, the S&P is up this year, primarily because of big tech names. If you equal-weighted the S&P, it’s not doing well. But on a relative basis, it’s up because of those big tech names. But, typically, the stock market does not do well in an election year. What does that mean? That means, bonds usually rally, because money flows. Although we’ve seen bonds and stocks more correlated than ever this year. But typically, that’s what it represents.

The other piece is just the uncertainty, people rally to bonds. There are some people that say, I don’t necessarily believe this, but they say, “Hey, there’s political pressure by the incumbent party to keep getting rates to come down.” I don’t necessarily believe that, but some do. Typically, you will find that rates will normalize or get a little better in an election year, on average. If you go back through history, it typically does. I don’t think we’re going to see a huge rally, but we could. I mean, it’s interesting, UBS, some of the big brokerage firms are actually calling for – I think UBS calls for 275 basis points and Fed cuts by next fall. That’s huge. I would never predict that.

I think Morgan, Stanley, and Goldman are calling for maybe not that high, but close. So my personal feelings are, the Fed is going to wait till the job’s done. I just think they’re going to do it. They’re going to stick by their mandate and make sure inflation gets down, and it’s going in the right direction. The last report was 3.2%. I think that continues. Then, the other thing is economic decline. We’ve just got to watch the job market, the health of the economy. Walmart had some comments this morning in their earnings, and the stock was really getting hit. It’s around consumer spending. If we start seeing these things decline, that’s going to be a deflationary signal, and that will cause rates to decline.

[0:18:08] TU: Yes. The last thing I wanted to get your insights on as we’re talking about current market trends here, and something you brought up in our discussion as we’re preparing for this episode is, what you’re seeing out there in terms of consolidation of lenders. Which makes sense. It’s been a challenging market. It’s been a challenging period. Is this a space where kind of the top are getting stronger, and the weaker are falling out? But I think that’s important to discuss, as people are making the decision of who they’re working with as a lender. Just to understand what the landscape is and what’s going on right now.

Give us a quick recap of what you’re seeing of consolidation of lenders, and what trends we may expect going into the new year.

[0:18:47] ToU: Yes, sure. I mean, just to be very transparent on the mortgage industry, it’s a very, very low-margin business. At the end of the day, it’s a huge transaction for individuals. But with all the costs involved in origination, and the way the secondary markets, and the hedging work, it’s a super low margin business. It really is one that has to be done on volume and units. A lot of lenders are really struggling right now.

Most lenders that have what’s called a servicing book, that means they’re servicing loans, that can show some profitability. I will say, even some really big lenders are in jeopardy right now, like really big names, possibly even publicly traded. It’s not an easy industry with these margins. A lot of consolidation is going on in the independent mortgage bank. I don’t want to get too technical for the audience, but I just think it’s always good to be as transparent as possible. So independent mortgage banks are non-bank originators. There’s been a lot of consolidation in those groups. They’re acquiring the ones, and sometimes it’s fire sale because they’re losing so much money, that they’re just being gobbled up for their assets, and their technology, and their people, basically. More or less their people. You’re seeing a lot of that right now.

I think it’s going to get worse over the next 60 days, though. It’s going to get real magnified here. I’m hearing about it. There’s some wholesale lenders that are closing up access, but that’s more for the broker community. So if you’re a mortgage broker, and you’ve got a couple lenders you broker to, you’re seeing more wholesalers go wholesale side, lenders that are pulling out of the business. I noticed that a big one was pulling out, they won’t take applications after December 6th. Some of that stuff’s happening, and it can affect people. I mean, I’ve had people tell me in past cycles that, “The funding stopped. My loan was approved, and now they don’t have a loan.” I wouldn’t frighten a lot of folks. I think most lenders are going to be okay, but there are going to be some that don’t make it.

It’s just hard to predict, because the originators themselves don’t know really what’s going on. Like I said, it’s such a low-margin business that the folks operating it, running it don’t always share with their salesforce what’s happening. But I think you will see continued consolidation, and probably some big names that maybe merged to hide the failure. That’s usually what happens. Oh, these two are merging. Well, there’s a reason why they’re merging. It’s going to be – unfortunately, it’s been a tough time.

[0:21:18] TU: With that uplifting message about the current market trends and where we’re at, let’s shift gears and talk about how someone can get themselves ready to buy a home in 2024. Obviously, thinking about the spring season. If we do see those rate reductions, we’re talking about, obviously, the pent-up demand coming into play. I think it’s something I know, Tony, we’ve talked about this on the show, but just from my own personal experience. We often think this is a longer-term decision, and then it just starts going really quickly. I mean, just human behavior is – especially for first-time homebuyer, wanting to get a home, and I’m going to have all my ducks in a row, and we’re going to do this in March or April 2024.

Then all of a sudden, you get on to Zillow, you get into Redfin, you drive by some properties. Next day, you’re talking to a lender, you’re working with a realtor, and all of a sudden, you’ve got an offer. That’s it. These things can move quicker. I think anything that folks can be doing to prepare, and put themselves in a good position to come with a competitive offer, to have a strong lending application. This is the time as we wrap up 2023 to be thinking about that.

From your perspective as a mortgage loan officer, what are some of those key things that individuals should be listening for, especially the first-time homebuyer who maybe hasn’t gone through this process to make sure that they’ve got a good financial house in order as they look at seriously purchasing a home?

[0:22:40] ToU: Sure. I mean, I think the first thing, just make sure you have margin in your life. What I mean by that is, how much are you paying in debts? What’s your income coming in every month? Create that margin, your budget. What do I want to spend on housing, and this property. I think creating that is important. Obviously, paying debts down, keeping your liabilities to a minimum is important. The other thing is just looking at your credit score, making sure your credit score is where you need to be. I think, for a lot of folks, especially first-time homebuyers, it’s the revolving credit. It’s the credit cards, and that balance on their credit card compared to their utilization.

If they have a $10,000 cap on their spending, $10,000 limit, and they run it up to $9,000, that’s going to hurt their credit score. Keeping that down, that ratio down at 50% or below, I find is the best. So if you can keep it down there, that’s going to help your credit score. Just making sure overall, you’re on strong footing financially, I think is the right thing to do. Having some savings for a downpayment if you choose to. We’re obviously going to provide the best we would in any lender, most lenders should, would provide clarity as to the best options for you as an individual, whether it’s a low downpayment option, or one with more down payments. You’ve got to think through that. Do I want to have 20% to put down or 3%? Am I eligible for 3%?

Savings is important, start creating that savings, that savings piece. You have to have enough foreclosing costs as well. There could be, depending on the timing of this and what state you’re in, and I don’t want to touch on this too much now, because it’s very much preliminary. But there was a big ruling on real estate commissions through the NAR.

[0:24:31] TU: I just saw that.

[0:24:32] ToU: It could change – I don’t want to get to, because it could be some back and forth with this.

[0:24:38] TU: Supreme Court decision, right, that happens?

[0:24:40] ToU: Yes, that’s right. But I think two states have already accepted it. I think Missouri and New York I think are implementing it. We’ve just got to watch how buyer commissions are impacted. I think, overall, it’s going to bring – I mean, my opinion, if this goes through, I think it’s going to bring the costs of commissions down tremendously for the end user. Selling a home will be cheaper than it’s been in the past. But my concern is, under representation of buyers, because they’re going to be going straight to the listing agent. They’re not going to understand the schools, the area, and they’re not going to have the representation. That’s my concern.

I also think it’s going to cut maybe 30% of the realtors out of the business immediately. So it’s going to be huge changes in that portion. I think ultimately, it’ll save people money, but it could underrepresent and provide less service to people. So that could create an additional expense for some buyers in some areas. They may have to pay their agent something. That’s typically coming out of the sales price now.

[0:25:49] TU: Tony, for those that have not been following the details of this decision, we’re talking about more in the podcast in the future. But I think what you’re saying is a really important point about potentially the underrepresentation of buyers as this shakes out. Just explain more about why that may happen.

[0:26:04] ToU: Well, if the real estate industry adapts where you have to basically pay a buyer’s agent to represent you directly, it might be tough for a lot of people to do that. Even though you’re ultimately going to save the money on the home purchase because the seller doesn’t have to pay 6%, they’re paying 3%, you’re basically paying whatever portion, difference. I don’t know what it’s going to be in that area. But let’s say it’s 3%. So if you’re paying 3%, seems like a lot. A $200,000 our home, it’s $6,000. So if you’re coming out of pocket with that, that’s additional expense. Sure there’s maybe a way we can roll it into the price somehow. Seller concessions, things like that, but there’s additional costs.

I think a lot of people will say, “I don’t need that. I’m going to go right to – I found this home on Redfin, or I found it on Zillow, I found it online. I’m going to go right to this house.”

[0:26:54] TU: The seller, yes.

[0:26:56] ToU: Well, the seller’s agent, listing agent represents the seller. So they may not give you all the details on the area, the property. Is it the right school system for your kids? Is it the right area? I mean, I just think there’s going to be an underrepresentation for some buyers in certain areas if they don’t engage that buyer’s agent. Just over the years, that’s what I’ve seen the value, is those agents do provide clarity and help on what’s the best area. I mean, if there is value there, and I think, some people may give that up. That’s the concern I have when initially reading through the ruling.

[0:27:31] TU: Great insights. Again, that’s evolving as a story, and new news to me. I hadn’t heard about the couple of states that already adopted it. We’ll keep an eye on this to make sure we’re sharing information as we have it.

Last thing I want to ask you here, Tony, about getting yourself, someone getting themselves ready for 2024 would be about the pre-approval process. If I’m listening to this, and it’s end of 2023, and I’m thinking about buying a home, let’s say in March, April, sometime in the spring. What recommendations would you have in terms of when they should be thinking about starting that pre-approval process?

[0:28:04] ToU: Well, I think just what we touched on earlier, Tim, about making sure your margins and your budget, starting to plan now. For some people, it might make sense to actually engage a lender now, just because if it’s – if you’re talking about closing in March, April, or May, it’s coming faster than you think because you’re going to start looking at homes. You want to know you’re eligible for these houses. The other thing is, you may want to be under contract for 60 days. One thing I’ve always said, if someone has their house listed during the holidays, they are a serious seller. They want to sell that house. They’re having people through the house with your family, and ornaments up, and all that, you know they’re serious, and they’ll probably negotiate more.

It can be a good time to pick up a deal usually, versus the spring when there’s more people. But let’s just say, you’re waiting, and you may want to get pre-approved now if you go under contract in January or in sometime in February, and it’s a 60-day close or 45-day close. Your timeline I think depends on when you’re looking. If it’s in the summer, or May, or June, then maybe you wait until after the new year to get an actual pre-approval. But it’s never too early in my opinion, especially if you might have a credit issue because lenders have ways to like – we have a system where we can run simulations of what their credit could be. They pay certain things off. That’s been really valuable, not only in getting people approved, but also getting the better interest rates and better programs, getting someone from maybe 660 credit score to a 700, or 700 to 740. It adds a lot of value and I think it can take some time. That’s where I think pre-approvals are important to get ahead of it.

[0:29:49] TU: Let’s wrap up here by talking about the importance of knowing your lending options. Specifically, I want to talk about the pharmacist’s home loan product that you all offer at First Horizon. We talked about on a previous episode, 285, which was cracking the code on homebuying loan options. We’ll link to that in the show notes. We covered the variety of options that are out there from FHA, to VA, to conventional, to the pharmacist home loan.

One of things you already said, I think it’s really important point to reiterate, which is, when working with a lender, ideally, they’re helping you kind of understand what those different options are. To see based on interest rates, based on your credit score, based on cash available, what’s the loan option that makes the most sense for you? It might be for some, it’s an FHA loan, and they’re not thinking that that would be the best option. Or it might be a conventional, or perhaps it is the pharmacist home loan products.

Tell us about that offering through First Horizon. I think many people, if this is new terminology, they might have heard of doctor loans that are out there. Many of those lenders may exclude pharmacists or they might be available in certain states. One of the reasons we’ve been partnering with you guys for four-plus years now is the national reach. We know we’ve got a national audience that’s out there. Who is this product for, and what is the makeup of the product?

[0:31:05] ToU: Sure. The product that we offer to pharmacists, of course, you have to be a practicing pharmacist. You have to have to be in the field, and be actively working in the field to be eligible. The program really is not just for first-time homebuyers. This could be your third or fourth home. It just changes with the downpayment. If you’re a first-time homebuyer, I know we’ve discussed this in the past, but I’ll repeat it. It’s 3% down if you’re a first-time homebuyer. It’s 5% down if you’ve owned a home in the past, so those would be the two differences. There is no mortgage insurance. That’s a really big benefit. We really do not have a reserve requirement either, which is fairly significant as well.

There’s a minimum credit score of 700 on the product. Obviously, the advantages are not putting a lot of money down into the house, and having no MI I think is the big advantage. We’ve had a lot of folks who, especially over the last four years, who have taken advantage of this loan and put 3% or 5% down. Obviously, the values of homes have gone up, and they’ve really been able to get great investment in your money, get great return on their money. It’s been a really good program. But like we mentioned earlier about the market constantly changing, and the mortgage market evolving.

The secondary market, and how things have worked with trading, it was interesting. For some clients, their credit scores may not be really, really high, but it’s still good enough for the pharmacist product. Sometimes FHA loans have been unbelievably good, like the margin was so much better on the 30-year fixed pricing. We’ve been able to offer that. That wasn’t the case two years ago or a year ago.

We try to just look at what the market is offering us because sometimes, these other programs can be better if the rate is significantly lower. Anyway, that would be how we look at things. Obviously, the pharmacist products, the first thing we look at, if you’re a pharmacist, it’s the first thing we’re going to look at, but we will compare. Everyone’s situation is unique, and that’s why we will look at other options too. There’s plenty of other options that we carry.

[0:33:13] TU: The maximum loan amount on that right now is what, Tony?

[0:33:17] ToU: It’s 726,200, but I believe I’m about 90% certain, after Thanksgiving, traditionally this will come through. But I think we’ll be at 750 or a little higher by next year. I’m pretty sure it will happen. That’ll be the max loan amount. That’s the max the loan amount you can go to.

[0:33:34] TU: We’ll wait to update the website, so we’ll leave it.

[0:33:37] ToU: Yes, I would wait. If you think about that, someone’s looking to buy next year, potentially, you could buy $800,000 home with $50,000 down or less. That’s pretty good with no MI. That’s going to be on the table here pretty soon, I think.

[0:33:54] TU: So just to recap the highlights and we’ve got more information on the website, if you go to, yourfinancialpharmacist.com/home-loan. We’ll link to that in the show notes as well. You can see all this information and some additional resources. But 3% down for first-time homebuyers, 5% down if it’s not a first-time homebuyer, no mortgage insurance, 30-year fixed rate option, maximum loan amount of 726,200, potentially going up, and a minimum credit score of 700, available nationwide except in Alaska and Hawaii.

Great option for folks be considering. Again, the point you’re making is such a good one that, when working with a lender, you want to feel confident that they are looking at all the options that are out there. You’ve highlighted well that that can change, will change based on what’s happening in the economy and with the different products that are available.

Tony, as always this has been awesome. Really appreciate your insights for our community. If folks want to get connected with you and again, learn more about that offering, yourfinancialpharmacist.com/home-loan. You can click on Get Started, that will provide a quick questionnaire, and that will get you in touch with Tony and his team. So Tony, thanks so much.

[0:35:06] ToU: Thanks, Tim. It’s great being here with you.

[0:35:09] TU: Absolutely. Happy Thanksgiving. Take care.

[0:35:11] ToU: You too.

[END OF EPISODE]

[0:35:12] TU: Before we wrap up today’s show, I want to again thank this week’s sponsor of the Your Financial Pharmacists 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 townhome 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.

[DISCLAIMER]

[0:35:56] TU: 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 on 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 analyses 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.

[END]

Current Student Loan Refinance Offers

Advertising Disclosure

Note: Referral fees from affiliate links in this table are sent to the non-profit YFP Gives. Read the full advertising disclosure here.	Bonus	Starting Rates	About	YFP Gives accepts advertising compensation from companies that appear on this site, which impacts the location and order in which brands (and/or their products) are presented, and also impacts the score that is assigned to it. Company lists on this page DO NOT imply endorsement. We do not feature all providers on the market.
	$800* Loans* ≥150K = $800 100-149K = $450 <100K = $350	Variable: 5.28%+ APR (with autopay)* Fixed: 5.28%+ APR (with autopay)* *All bonus payments are by gift card. See terms	The "Kayak" of student loan refinancing, Credible displays personalized prequalified rates from multiple lenders	Check Rate
	$750* Loans ≥150K = $750* ≥50K-150k = $300	Fixed: 5.49%+ APR (with autopay)	A marketplace that compares multiple lenders that are credit unions and local banks	Check Rate
	$500* Loans ≥50K = $500	Variable: 4.99%+ (with autopay)* Fixed: 4.96%+ (with autopay)** Read rates and terms at SplashFinancial.com	Splash is a marketplace with loans available from an exclusive network of credit unions and banks as well as U-Fi, Laurenl Road, and PenFed	Check Rate

Recent Posts

[pt_view id=”f651872qnv”]

YFP 323: 5 Tips for Selling Your Home

Posted on August 31, 2023 by Tim U

Nate Hedrick, aka The Real Estate RPh, joins the show to talk about 5 tips for selling your home – valuable information for buyers and sellers alike!

Episode Summary

Most of our real-estate episodes to date have covered the topic of buying a home, but today we’re putting ourselves in the shoes of the seller. If you think this episode isn’t for you because you’re only interested in buying a home, think again! Being able to see things from a seller’s perspective will add huge value to your home-buying journey. Today’s guest is Nate Hedrick, a pharmacist, and the founder of Real Estate RPH. It’s a seller’s market at the moment and he is here to share five top tips for selling your home for its maximum value. From the benefits of enlisting the help of an agent to getting to grips with price-setting strategies and understanding buyer versus seller costs, this conversation will equip you with the tools you need to navigate current chaotic housing market with confidence!

Key Points From the Episode

Introducing today’s guest, Nate Hedrick
An overview of Nate’s recent interview with first-time home buyers, Neal and Katie Fox.
Why this episode will benefit you if you are a home-buyer or a home-seller.
An overview of the current market from Nate’s local perspective.
Two of the main pain points for newly practicing pharmacists.
Costs you can expect to incur when selling a home with the help of an estate agent.
The benefits of enlisting an agent to help you sell your home.
How most people choose an agent.
The difference between an excellent and a mediocre agent.
Examples of how good agents can maximize value for their clients.
Benefits of depersonalizing the home.
Different types of pricing strategies that can be used when selling a home.
How the appraisal process should work.
An overview of buyer costs versus seller costs.
Understanding the concept of seller’s credit and the problems that can arise when this strategy is used.

Episode Highlights

“If you’re a first-time home buyer, you have no idea what it’s like to sell a home, right? You don’t have an idea what it’s like to buy a home. Being able to put yourself in somebody else’s shoes as you’re going through that journey, it can give you some perspective and it can be really helpful.” — Nate Hedrick [0:03:23]

“It’s still a seller’s market. We have a lot of people who are sitting on three and a half percent or lower interest rate loans that they refinanced over the last three or four years, and they don’t want to move if they don’t have to.” — Nate Hedrick [0:04:19]

“The list price of a home is completely made up. The market value of the home is the number you want to determine.” — Nate Hedrick [0:25:15]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[0:00:00] TU: Hey, everybody, Tim Ulbrich here. Thank you for listening to the YFP Podcast for each weekly strive to inspire and encourage you on your path towards achieving financial freedom.

This week, I welcome back onto the show a familiar voice Nate Hedrick at the Real Estate RPH and co-host of the YFP Real Estate Investing Podcast. We discuss five tips for selling your home, helpful information whether you’re looking to sell now or in the future, and even for those looking to buy a home to gain some insights and understandings to what the seller is going through.

All right, let’s hear from today’s sponsor, Real Estate RPH, and then we’ll jump into my interview with Nate.

[MESSAGE]

[0:00:38] TU: 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 could 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. 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.

[INTERVIEW]

[0:01:24] TU: Nate, welcome back to the show.

[0:01:25] NH: Hey, Tim, always great to be here.

[0:01:27] TU: Well, I’m excited to be back in the host seat. Not too long ago on the podcast episode 316, you interview Neal and Katie Fox about their journey and lessons learned as first-time home buyers. What a neat episode that was. Just to recap for our listeners that maybe haven’t heard that episode already, tell us about that interview and the story with Neal and Katie.

[0:01:47] NH: Yeah. Neal and Katie were just an awesome couple that I got a chance to work with as home buying concierge clients. We got them hooked up with an agent, helped them buy their first home together. It was just really cool to be able to sit down and talk to them about what it’s really like to buy a home in this market. We went through everything from A to B or A to Z and just got their perspective on it, right? Somebody that doesn’t have experience, right?

I sometimes forget how long I’ve been doing this. There’s things that I don’t even think about anymore, as a first-time home buyer. So, to actually talk to first-time home buyers and see where their pitfalls and strategies came from, that was just, it was fun. It was really cool to talk to them.

[0:02:24] TU: Yeah. Great interview. They had some really interesting tidbits, lessons learned, things on financing, importance of working with an agent, who you’re working with and the value of that relationship. We’ll link to that episode in the show notes if folks haven’t already heard it. Today, Nate, we’re going to be talking about a topic we haven’t really covered in depth before. I’ve lost track. You’ve been on the show at least 10 times now, maybe more, obviously co-host of the Real Estate Investing Podcast. We talk so often about buying a home, but we haven’t really talked about selling a home.

Now, for those that are in the home buying journey and are listening to this and saying, “All right, I’m turning this off, they’re talking about selling a home, that’s not applicable,” hold on, right? Because I think as you and I talked about before the show, as a buyer, if you can really understand some of these tips and components as it relates to the seller, that is going to be helpful to you and the buying journey as well.

[0:03:17] NH: Yeah, 100%. Understanding that other side where the other person’s coming from, it’s really difficult, especially if you’re a first-time home buyer, you have no idea what it’s like to sell a home, right? You don’t have an idea what it’s like to buy a home. So, being able to put yourself in somebody else’s shoes as you’re going through that journey, it can give you some perspective and it can be really helpful.

[0:03:35] TU: Now, before we jump into five tips for those that are selling a home, and again, the relevance of that to buyers as well, important to talk about context, right? We’re recording this episode in summer, 2023, wild times just in terms of where the market’s at, what’s happening with interest rates, where the economy is at. I do think that context is really important to understand things like leverage, right? As a seller or as a buyer. Nate, just give us a quick update knowing that every market is, of course, different, but you have a unique perspective working with pharmacists and agents all across the country. What are you seeing right now?

[0:04:07] NH: Yeah. Obviously, real estate is local, right? What I tell you that we’re seeing may not be exactly applicable in your area, but broadly what we’re seeing is low inventory, right? It’s still a seller’s market. We have a lot of people who are sitting on three and a half percent or lower interest rate loans that they refinanced over the last three or four years, and they don’t want to move if they don’t have to, right?

You’ve got people that want to buy, as there always are, but people that aren’t really ready to sell their home yet. So, that’s causing a lot of low inventory. We’re seeing high prices still and just things are moving quickly. It’s not as crazy as it was in 2021 and early 22, but it’s still an interesting and difficult time if you’re a buyer and a pretty good time if you’re a seller in most parts, because you can typically move your houses pretty quickly.

[0:04:54] TU: Yeah. It’s really interesting. Jess and I often talk about this. We love our home, right? But it’s just a natural point of conversation where it’s like, “Well, what about moving here? What about doing this?” When you look at what interest rates are doing right now, not only what our interest rate is, refinance close to three, but seeing what you’re going to be buying at, but then also just the elevated prices, because of the supply and demand, it’s a double whammy effect, right?

[0:05:17] NH: Yeah.

[0:05:18] TU: For existing home buyers to give up that loan, to take on a new higher interest rate loan, as well as a higher mortgage on price of the home. So, that makes sense, what’s happening there on the supply side. Then to be frank, Nate, I’m feeling for the first-time home buyers right now, right? Many of them we know in our community are also facing significant student loan debt. Here we are now ready to have those payments turned back on.

I think that’s a topic we just aren’t talking enough about. We know from our community, student loans and home buying are for many people, two of the top pain points, right, especially for that new practitioner group. I think when we look at the rising home prices, rising interest rates, student loan, payments turning back on. We’re looking at more challenges that I think are being added to this. Doesn’t mean it’s impossible, right? Doesn’t mean it’s a goal that can’t be attained, but it means we’ve got to be a little bit more diligent in the planning process to make sure we’re looking at the broader financial plan.

[0:06:13] NH: Yeah. I appreciate you keeping it at the forefront, because I know if it were me 10 years ago, just starting out, dealing with loans, if they were on pause, I don’t know, it’d be in that bucket of, “Well, I’ll figure that out when it becomes a problem,” right? I 100% know that would have been me 10 years ago. Talking about it is super important, because don’t wait to figure it out, start figuring it out now, before it really becomes a problem.

[0:06:36] TU: Yeah. This is where the strategy, we’re not going to dig into student loan strategy right now, we’ve done that many times on the show before, but this is where that strategy part becomes really important, because not all student loan repayment plans are created equal in terms of the impact they have on monthly cash flow. For example, someone who’s pursuing loan forgiveness versus someone who’s doing an aggressive debt repayment. Those are going to have very different impacts on the budget, which obviously is going to change also how much money is available, discretionary income available, potentially for a home purchase.

Another example yet of where these puzzle pieces need to come together. Let’s talk Nate, five tips for those that are selling a home. Number one, not all agents are created equal. I’ve experienced this on my own home-buying journey. Not only that, but also there’s the using an agent versus not using an agent for those that are thinking about potentially a for sale by owner. Talk to us about tips as it relates to the agent and why that piece is so important.

[0:07:31] NH: Yeah. I think something you mentioned there about the first, the for sale by owner versus an agent. I think a lot of people are, they look at the market, they look at how, “easy” it is to sell a home. The first thought becomes, “Well, can I just do this myself? Couldn’t I just kick the agent out of the whole process, save a ton of money on commission?” Truthfully, it can be quite a lot, right? Typical way the commission structure works to peek behind the curtain, right, is that it’s going to be about five to 6%, depending on the agent that you work with, is what the seller is going to pay toward the commission. That, that seller paid commission is what goes to both the buyers and the seller’s agent.

It’s usually split 50-50. So, if we say 6%, you’re talking about 3% for the buyer’s agent, 3% for the seller’s agent. That can be $18,000 if you’re talking about a $300,000 home, which is a huge chunk of change. I think it’s natural for people to think, “Man, I can just do this myself. Why bother? I don’t want to pay that $18,000.” But there’s a couple of pieces I think that I think what people should realize before just jumping to that route. Only about 10% of homes in America are sold for sale by owner.

Again, there’s a reason for that. One of the stats that I like to throw out there, and it’s biased, so I’ll lead with that, but that is that according to the National Association of Realtors, and this is looking at 2021, for sale by owner homes sold for about, on average, $225,000 in that year. The typical agent-assisted home sale was about $330,000. About $100,000 difference. Now again, I think that’s biased. I think a lot of four sell by owners tend to being like friends and family. They bring the prices down intentionally in some of those cases right or wrong. I think that there’s some bias to that number.

Let’s say that $100,000 number, let’s just cut it in a fourth, right? Let’s quarter it to $25,000. If you have a $300,000 home, that $25,000 difference is more than the 18 grand we talked about in terms of commission sales. I still think there’s a lot of value there. The typical agent is going to bring a lot more value to the actual home and getting it for the right price, just on a dollar-for-dollar basis, even if again, we take that number and cut it in the fourth. I think that’s an important number to look at and to think about is that the agent is going to be able to bring more value or get more value out of the home on average than you might as a for sale by owner.

Then the natural next question to that becomes, “Well, why? What are they doing that’s different?” I think a lot of it comes down to just their experience and their ability to price the home appropriately and get the maximum value there. One of the things that an agent’s going to do if you are ready to sell a home, and we can dive into more of these details in a moment, but they’re going to come in and they’re going to help figure out, “Here’s where I think your house sits today. Here are some things that you could change to improve that value, whether it’s curb appeal or decluttering or whatever. Then here’s where I think the market value is on that property.”

Once you know market value, then you can start to come up with strategies for how to price that home. That’s where an agent’s really going to come in, right? Let’s say we were going to price it 10,000 under asking or under market value rather to try to generate a lot of business or let’s say we’re going to price it right at market value and try to get the most dollars we can for it right up front. There are a lot of different things that go into that strategy that I think an agent brings to the table that a typical home seller might just not have access to that information or be aware of.

Then if you go beyond the dollar amount, I think that that’s where the agent comes in with paperwork and helping with all the legal paperwork. There’s a lot of legality that goes into home sales and a lot of this a title agent or a good lawyer can help you with, but the agent takes all the guesswork out of that, right? Everything’s been predetermined, pre-established by a broker. It’s all going to be put in front of you in the way that it needs to be. There’s a lot of value that can be created from that.

[0:11:15] TU: Yeah. The other thing too here Nate, great points, that stands out to me would just be peace of mind knowing that there’s coordination, assuming, and we’ll talk here in a moment about why all agents are not created equal here. We’re talking about agent versus for sale by owner. Peace of mind assuming you’ve got the right person on your team, right? That’s coordinating all of these, but also time. I’ve gone down this pathway and I don’t think I would do it again, to be frank.

I think even though it was someone within the neighborhood and it was a pretty easy process, there were a lot of those questions about pricing it appropriately and is this fair, right? Now, you’re not dealing with, what does the market say the home’s worth. But it gets more emotional when it’s just one party with another party, right? Is this fair between two parties? But then just the time and the coordination, the title, and there’s this lingering feeling of like, is everything being done correctly and coordinated?

I remember, maybe part of that is just my type A personality a little bit, as well, but this is a podcast of busy healthcare professionals, like I think they can appreciate, especially if the ROI is there as you mentioned, how important it could be to really make sure that you’ve got someone in your corner. Now, that’s an obvious one, I think for many would be the agent versus the for sale by owner, especially considering folks are busy.

Again, not all agents are created equal. I think this is interesting, right? We talk about this a lot on the show about financial planners. I think we’ve done a really good job highlighting how the term financial planner in and of itself, doesn’t mean a whole lot and how there’s so much variance between planners in terms of credentials, and experience, and how they charge, and transparency. I don’t think we give the same diligence to real estate agents. I don’t know why, but the more I started to think about this, I’m like, “Well, this is really interesting. Experience matters a lot.”

Somebody understanding my local market matters. Connections, right? Someone who can, you shared before we hit record about an example of a deal you’re working on where some pretty simple work needed to be done and you’re able to line up a contractor and move that forward. That matters, those relationships. Talk to us about why the right agent matters and how do people vet this? How do they find that?

[0:13:28] NH: Yeah. It’s certainly tricky. I think what most people do, I’ll tell you what most people do and I’ll tell you what I’d recommend, right? What most people focus on is the commission, right? They want to find out how they can get this on for as cheap as possible as –

[0:13:39] TU: Like an interest rate on a mortgage, right?

[0:13:41] NH: Right. Exactly. Yeah. “I want the guy that’s five and a half percent.” Now they got it 6%, right? People focus heavily on that. Again, in the grand scheme of things, that 1% difference that you might find across the market, that’s not where your focus should be, but that’s what a lot of people like to focus on. The other thing to focus on is when you do a listing presentation, when I present to a seller and say, “Look, this is what I’m going to do for you.” They’re really focused on the number. “Well, what do you think you can sell my house for?”

I’ll tell you, there’s only so much an agent truly can do with the home that’s in front of them, right? The same home, the same parameters, different agents are not going to be able to sell that house for more, just being upfront. What a good agent’s going to do is come in and tell you, “Here’s how to maximize the value of your home. Here’s how I can sell it for more.” Not, “Here’s the same house as the next agent’s going to be selling, we’re not changing anything.” They’re not going to ink more value out of that house just by being a “better agent,” right?

What a great agent it’s going to do is come in and say, “Look, if you declutter this a little bit, if I let you borrow this storage unit that I have specifically for my sellers, we get a couple of these pieces of extra furniture out of here. We take down some of the pictures.” We hear the things that we’re going to do, that’s how you’re going to maximize value.

[0:14:52] TU: Yeah.

[0:14:53] NH: When I’m talking to a client and what I recommend everybody do out there, if you’re interviewing a seller’s agent, talk about, “What are the things that you’re going to do to maximize the value of my home?” Not, “How can you sell this for as much money as possible?” Those are closely related to the same question, but they’re not the same question.

[0:15:10] TU: Yeah. Future episodes, I just took a note, we should do a future episode on questions that you should ask right when hiring an agent. I think that’s a really good, really good one to consider. In your experience, working with other agents, but also in your own experiences as a realtor selling homes, what are some ways that you’ve either stood out? I mean, experience, let’s say that’s a given or that you see another agent stand out.

[0:15:32] NH: Yeah. So, I think there are a lot of big-ticket things that people stand out with that are attention grabbers. The one I mentioned was the storage unit. I’ve seen agents that will offer those pods. They’ll say, “Look, if you sell with me, I will give you a pod to put all your extra furniture in. Just put that in storage for a while, while we sell the home.” There’s definitely some value to that. I’ve seen agents offer staging, especially if the home is vacant, or if you’re in the process of moving out and things are hodgepodge, you can have the home staged and that can be really advantageous, and some agents will offer that as a big incentive.

I’ve also seen a lot of – this is pretty common on billboards with big-ticket, high-volume agents, where they’ll offer a guarantee, right? We’ll list your home and if it doesn’t sell in a month, then we guarantee, we’ll buy it from you. There are a lot of stipulations to that, but I’ve seen that as a big-ticket thing.

I’ll tell you where I try to offer value. Again, these are things that I might pepper in where it makes sense. Most sellers actually don’t need a lot of those services quite frankly. I try to just make things as easy as possible. You mentioned earlier, if you’re a busy working professional, if you want to hire an agent, you’re doing so because you want to take all the guesswork out of it and all the legwork out of it, right? It should be as painless as it possibly can be. That’s what I try to come in and show them how I’m going to be able to do that. That’s what I encourage other sellers to look for when you’re talking to a good agent.

[0:16:53] TU: Yeah. I think, Nate, the huge advantage that you have, the relationship piece, asking good questions, you’re a pharmacist that has gone down the path of a first-time home buyer, you’ve obviously worked with many individuals, you understand what it means to buy a home when you have student loans and the considerations. Certainly, it’s not financial planning, but it’s being able to ask good questions that really help people self-reflect and understand and not just like, “Yup, I’m ready to sell your home,” right? Whether or not that’s maybe in their best interest.

[0:17:25] NH: Even if it’s something as simple as, “Hey, you want to sell your home. What’s more important? Getting every single dollar we can out of it, or closing in the next 30 or 40 days so that we can move into the next place?” Or whatever.

[0:17:37] TU: It’s a goal.

[0:17:38] NH: Just a simple question about, what’s the goal of getting this home sold, right? Is it just to move it as quickly as possible, or is it to maximize value and starting from there?

[0:17:47] TU: Great stuff. That’s number one on our five tips for selling a home. Not all agents are created equal. Number two, you alluded to this a little bit already, but I want to dig deeper. That’s really, in terms of determining what is or not worth it, right? Upgrades, repairs, boosting curb appeal, staging the home, right? Maximizing the value of what someone may be able to get out of the home is what you mentioned just a few moments ago. What tips do you have here for sellers?

[0:18:11] NH: Yeah. This is something where a good agent can really make themselves worth it, right? Because there is a ton of stuff. I look around my house today and think like, “Man, if I was going to sell it, I have to fix that and I gotta paint that.” There quickly becomes this list of stuff that you could do before selling a house. What’s the ROI on that? A great agent is going to know the local market, is going to know the comparable properties that have sold recently and is going to be able to see what those high-value items are that you should focus on and what those low-value negative ROI things are that you could just ignore, right?

There’s always going to be stuff to fix on a house. The trick is finding the things that you can do now that are going to be not very labor intensive and we’re going to maximize the overall value and the speed with which we can sell that property. It’s a myriad of items. It varies based on the home itself. Generally speaking, you’re looking for things where, “If I don’t fix this, is it going to prevent somebody from making an offer?” That’s a really common one. Let’s say, the roof is actively leaking. A lot of people are not going to be interested in jumping into a $10,000 or $20,000 fix right off the bat. Those are things that are obvious that, “Hey, if I fix this, yeah, my ROI might not be huge, but it’s going to make people want to offer whereas, they may have not previously.” Thinking about things like that.

Then also, thinking about things like, hey, if other homes in the area that have a deck, for example, a back patio, or a deck, all of the deck houses are selling twice as fast as all the houses that don’t have a deck, right? You’re in a very similar community. That might be something that’s worthwhile putting in, right? Especially if you’ve got a sliding door already out there and it’s ready to go, it’s just begging for a deck. That might be an easy ROI item that you could tack on. It’s going to be high cost, but it might make that home sell for that much more. It’s those things that a really good agent’s going to be able to jump in and give you advice on to make sure that you can maximize that value.

[0:20:05] TU: Yeah, and that’s a great example with the deck, right? Because I think about, again, if we put ourselves in the buyer’s shoes, all of a sudden, I see the home as having a new outdoor living space. Maybe it’s not all the way there, but you’re providing vision, right? For somebody to come in and say, “Whoa. Wow. I’ve got maybe a smaller square footage home, or maybe it doesn’t have all the bells and whistles that I wanted, but I can really see how I could use this space differently.” Great insights there. I think that’s just so important.

Again, putting yourself in the buyer’s shoes, the roof example, the deck example, especially first-time home buyers are not coming with a bunch of cash sitting in the bank to do some of these things, right? Minor upgrades, minor improvements. But things that you can do. Obviously, the question, “Is there an ROI there or not?” is really going to be helpful to those buyers. I also think, Nate, be curious to hear your perspective here. Where you’re at in terms of price point of the neighborhood, I think could be really important here on potential ROI, right?

If I am the biggest house, the most expensive house in the neighborhood already, and I add a $10,000 deck, hoping I can raise the price $20,000, maybe not as much if on the low end. Is that fair?

[0:21:16] NH: Yeah. It’s spot on, right? Again, that’s where a good agent is going to be able to come in and say, “Look, here are the comparable properties that have sold. This is what people are going to be looking at.” Or better yet, one of my favorite things to do is to look at is what else is on the market today. If I’ve got a $300,000 home and there are three other $300,000 homes for sale in the same community, how am I differentiating? I don’t need to undercut them by $5,000 and just be the cheapest game in town, but I also can’t be $30,000 more and expect to be the first one that everybody buys, right? Unless, there’s some real big value item that I’m bringing and it’s different than those other homes. That’s where an agent can come in and really try to help that out.

[0:21:52] TU: Great stuff. Number three on our list, why it matters to depersonalize, or neutralize the home. This gets a little bit to what we’re talking about, wanting the buyer to really have a vision of their own. I know this is something that you hear all the time, you read about, but as a buyer, myself going through the process twice, I was amazed at how often this wasn’t done. Tell us about why this is important and what this may look like.

[0:22:16] NH: Yeah. I think everybody gets – you get really comfortable in your own home, right? You know what you like. You’re used to it. You think it’s perfect, because you live there. Why wouldn’t you, right? It’s a natural thing to do. I think it’s easy to miss some of the stuff that might come across to a buyer as making it feel not welcoming. That might be something that to you, again, is very welcoming. Families, family photos, all the furniture that you love, the beat-up chair that you love to sit in every night before going to bed, right? That’s your spot. I get it.

But somebody else walking in might look at that and go, “Oh, my God. That’s been scratched by the cat for 20 years. This looks horrible.” You have to be able to put perspective on that, as if you were a total neutral party walking into that home and trying to envision it as the place they want to live. You have to be able to reset that. One of the ways that I encourage sellers to do that is to really try to neutralize things. Like you mentioned, neutralize the home to where they can see that it’s someone living there, it’s comfortable, it’s a place they want to be, but it doesn’t feel like it’s not their space yet. They can start to envision themselves in that space because it’s not so personalized, or so specific to one individual.

[0:23:27] TU: Yeah. I think of things like paint and photos and odors in the home, right? Good, bad, indifferent. You gave some great examples, like the chair that we like to sit on at night. Some of these, what’s great about this is it’s not wildly expensive, typically, right? Neutralizing paint colors. I have vivid memories of going into houses where it was red carpet, lime green walls, and it’s like, man, that is such an easy – or dark paint that made the room look smaller. Miniscule changes in light fixtures and other things that can really open up a room and make it look bigger.

[0:24:02] NH: You mentioned smells too, like you hit the nail on the head with things that are unique can be the problem, right? Maybe it’s an air freshener you have that you love, and it’s like tropical oasis or whatever.

[0:24:11] TU: In your face.

[0:24:12] NH: It’s like pineapple when you walk in or whatever, right? That stuff can be just as bad, even though it smells good, it can be just as off-putting to somebody. I’ll give you a great example. I had a client that was real sensitive to the candles. We’d go into any house, even if it smelled phenomenal to me, she would immediately say like, “Oh, I feel like I’m getting a migraine, like is driving me crazy.” Yes, it’s a good smell, but it’s not helping your case. It’s all about neutral. That’s the way you’re going to maximize that potential value and the people walking in and out of your home are going to have a good experience.

[0:24:41] TU: I like that. That was number three. Why it matters to depersonalize. Why it matters to neutralize the home. Number four is setting the price. I’m really curious, Nate, I have not yet gone through the buying or selling process in this chaotic market that we live in. Just curious about what you’re seeing in terms of pricing lower to try to generate more interest. Maybe you have somewhat of a bidding war, pricing it a little bit higher because of the market and where things are at. Again, all markets being local. What are your thoughts here?

[0:25:10] NH: Yeah. I think the biggest thing here, and I tell this to every single client I work with. The list price of a home is completely made up. The market value of the home is the number you want to determine, right? All pharmacists here, we’re all interested in facts and numbers, right? I don’t want to just make things up. That’s why you want to determine market value first and adjust from there, right? A good agent’s going to come in and tell you, “Look, this is the market value of the home. It’s between 340 and $350,000.” They should be able to give you a pretty tight range.

“And here are the factors that I’m basing that on. If I were to list your home today, here’s the pricing strategy I would use.” Like you said, it can be anything from listing it at that 340 or 335 mark to try to generate a lot of activity. Typically, we’re going to do that if there are many other homes on the market, right? That’s more typical in a neutral market or a buyer’s market, where I want to be the first one of the five that are available that people go see. The reason they’re doing that is because it’s priced lower than everything else, right? I’m still going to get close to market value for it, but I’m going to be the first one that everybody looks at, especially –

[0:26:10] TU: Yeah. I think of the filters, right, on realtor, right?

[0:26:13] NH: Exactly.

[0:26:13] TU: Or filtering by price. Yeah.

[0:26:14] NH: Exactly. The other strategy is, hey, if there’s nothing available, if you’re in a market like the community that I live in, where a home goes on the market and it sells in two days, because everybody wants to buy and there’s not enough inventory, you can push that market value quite a bit, right? If we determined that it’s 340 to 350, I might list it 375 and see what happens, right? You might get a bite at that price and as long as it appraises, awesome. You’ve gotten more than market value out of your home, but you have to start with what is the market value before you can determine a strategy.

So many agents, I hear this all the time from prospective sellers, they will just throw these giant numbers at people. They won’t tell them market value, they’ll say, “Well, if I were to list your home today, I’d list for $400,000.” Why? Just because it’s the biggest number and you want me to work with you, or do you have a real reason behind that, right? That’s the kind of questions you want to be asking.

[0:27:03] TU: Since you brought up appraisals, I want to talk about that for a moment, because in my experience, it feels like appraisals are a little bit like the Wild Wild West, and just a ton of subjectivity. I know that’s supposed to have been tightening up. I don’t know, it just feels like it hasn’t when you think about the process and how it’s completed. What are you seeing, again, small sample size in your area, but what are you seeing in terms of, for people that are pushing price point, that maybe is x% above market value? Like how tight is the appraisal of the market value right now?

[0:27:34] NH: Yeah. Appraisals, unfortunately, are just still so subjective. Typically, what I’m seeing is that if you get a home that is over market value, but there are multiple offers on that home, the appraiser is at the point where, and again, this is not actually how they work, but what it feels like is that they’re looking at it and saying, “Look, this is an arm’s length transaction.” That’s a real estate word for basically, it’s on the market and anybody can buy it. This is an arm’s length transaction. There are multiple people interested at 380, and it’s probably worth 380, right? If lots of people want it, I don’t have –

[0:28:05] TU: Yeah. That becomes the market value.

[0:28:06] NH: Yeah. I don’t have the empiric evidence to say it’s worth more than 350, but I do have six people who all threw an offer at this house at 380 and near it. Maybe that is the value, right? I don’t think that’s actually how appraisers are doing it, but that’s how it feels. They’re supposed to base it on comps. They’re supposed to base it on recent home sales. Ideally, it’s based on homes within a mile or less radius, really even less than a half a mile within the last six months. There are certainly times where it doesn’t feel like that’s being followed, good or bad, right? Negative or positive, they’re picking other homes or whatever, but that’s the ideal state.

[0:28:39] TU: Yeah.

[0:28:40] NH: It’s also a tough job. Not every home is built the exact same way, right? You don’t have just the same cookie cutter house across every block. It’s not an easy way to determine. That can make it difficult.

[0:28:51] TU: Yeah. That’s a good point, right? We all know that a four bedroom, two to four bedroom, two thousand square foot homes can be very different.

[0:28:57] NH: Absolutely.

[0:28:57] TU: So, if you’re just looking at those bones for comps, that may not be a fair comparison. I’ve been in those situations where you’re in areas that aren’t as populated, and they’re trying to draw in comps within a reasonable geographic range. You just know like, “Ah, that’s so different.” Right? Now, if you’re in an area where you’ve got multiple subdivisions and the same type of home and thousands of them, maybe that’s not as significant of a difference. All right. Number five on our list of tips for sellers is understanding buyer versus seller costs. Who is typically paying for what? Tell us more, Nate.

[0:29:35] NH: Yeah. This is a big point of when you get a house when someone’s actually buying your home and get it under contract, there’s going to be a lot of negotiations about who’s paying for what. This can be state-specific. Some states lay out exactly how it’s supposed to be. Then you can deviate from that. Others are just up in the air, right? You determine what’s normal for your market.

It can be everything from the taxes, right? How are you splitting the taxes? It can be the title fees. The actual process of transferring that title, who’s paying for that. Typically, it would be split 50-50, but maybe in this market, you want the buyer to cover everything or whatever, right? That’s all part of the negotiation. There are some things that I think typically fall on one side of the other, so things like inspections typically fall on the buyer. I can’t think of a single transaction I’ve ever done with the seller, helped to cover inspection fees, but I suppose it’s out there.

Then closing costs. Closing costs are usually split, except for the buyer-specific stuff, like down payment and rate lock fees, and all that other stuff. There are a lot of different ways you can slice that up, but typically things are cut 50-50 and then anything that’s very buyer-centric is going to be covered by the buyer and vice versa. That’s what I typically see, but you can certainly build it any way you like.

[0:30:48] TU: We were talking before the show, that’s all when things go as planned, right? But there’s situations where once someone’s under contract and then a problem’s identified, right? Typically, under inspection or something else comes up, major, right? Septic tank, roof types of things. Tell us about your experiences here and how that may impact this item.

[0:31:09] NH: Yeah. So, one of the items that typically comes up is a seller’s credit, is what it’s called. Typically, if you are selling a home, you might be providing some credit back to the buyer. The most common version of that is what’s called a closing cost credit, where you’re basically saying “Here, I’m going to give you $3,000 toward your closing costs to help you with some of the cash that you’re going to need to buy the house.” What I often will see is somebody that says, “Hey, look, if the house is listed at 340 and we’re close and we’re negotiating down to 335, maybe we can agree on 340, but you give me 5,000 back in the form of closing cost credit that will reduce the cash that I need as a buyer.”

The seller still makes the same amount, right? The net value is still 335, but it’s helping the buyer out quite a bit. That’s very common, but what you mentioned where we’ve got a problem that might come up down the road or someone’s trying to push that seller’s credit beyond the typical amount, that’s where you can start to get into some issues. I had a deal a couple of years ago. I was actually representing the buyer. During inspection, we determined that the house needed a new septic tank and it was way out in the woods. It was a five-bedroom home. It was pretty large. It needed a huge new, I mean old type of tank dugout, new one put in $10,000 fixed. Easy. Yeah.

It became a question of like, “Well, how do we do that? When do we do that? Right? Is it before closing? Is it during after? Like what does that look like?” There are a lot of different ways that you can build that in. For this particular deal, what we ultimately determined was, we had two companies come out, give quotes. We basically all agreed that this was the company we were going to go with. Buyer and seller agreed to that. The seller provided a $10,000 credit toward that septic system to be installed after closing.

There are certainly risks to the buyer to doing that. There are risks to the seller to doing that, but it was what we landed on. It’s something where if and when those problems come up, you want to talk to your agent about, “Hey, what does this look like if I do X, what are the ramifications? If we do Y, what are the outcomes?” Then you can make the best possible determination. There are lots of different ways that you can build that.

[0:33:14] TU: Great stuff. Another example, right? We’re a good agent with experience. Where it really comes in, right? I have been through this scenario. I’ve seen how this is done, multiple ways this has been done. Seeing how all of this ties together. Well, there you have it. Five tips for those that are selling a home and also for things to be aware of that those that are buying a home and to have the helpful insights. Nate, as always, really appreciate your time, your insights, your expertise, and for coming on the show.

[0:33:39] NH: Yeah. Thanks for having me, Tim.

[0:33:41] TU: Nate and I have covered a ton of information in this podcast. 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.

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.

[DISCLAIMER]

[0:34:20] TU: 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 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.

[END]

Current Student Loan Refinance Offers

Advertising Disclosure

Note: Referral fees from affiliate links in this table are sent to the non-profit YFP Gives. Read the full advertising disclosure here.	Bonus	Starting Rates	About	YFP Gives accepts advertising compensation from companies that appear on this site, which impacts the location and order in which brands (and/or their products) are presented, and also impacts the score that is assigned to it. Company lists on this page DO NOT imply endorsement. We do not feature all providers on the market.
	$800* Loans* ≥150K = $800 100-149K = $450 <100K = $350	Variable: 5.28%+ APR (with autopay)* Fixed: 5.28%+ APR (with autopay)* *All bonus payments are by gift card. See terms	The "Kayak" of student loan refinancing, Credible displays personalized prequalified rates from multiple lenders	Check Rate
	$750* Loans ≥150K = $750* ≥50K-150k = $300	Fixed: 5.49%+ APR (with autopay)	A marketplace that compares multiple lenders that are credit unions and local banks	Check Rate
	$500* Loans ≥50K = $500	Variable: 4.99%+ (with autopay)* Fixed: 4.96%+ (with autopay)** Read rates and terms at SplashFinancial.com	Splash is a marketplace with loans available from an exclusive network of credit unions and banks as well as U-Fi, Laurenl Road, and PenFed	Check Rate

Recent Posts

[pt_view id=”f651872qnv”]

YFP 322: Checklist for First-Time Homebuyers

Posted on August 24, 2023October 5, 2023 by Tim U

Mortgage loan officer Tony Umholtz joins the show to discuss available loan options (including the pharmacist home loan), why a preapproval matters, and things to consider when choosing a lender. This episode is sponsored by First Horizon.

About Today’s Guest

Episode Summary

If you’re a first-time home buyer, this episode is for you! This week’s episode, sponsored by FirstHorizon, features Tony Umholtz, a mortgage loan officer at First Horizon Bank with over 20 years of experience in the industry, and he is here to share important factors that you should be taking into consideration before purchasing your first property. By the end of the episode, you will understand how banks decide whether or not to approve a mortgage application, the pros and cons of the various loan options that exist, the difference between preapproval and prequalification, things to look out for when choosing a lender, and more! Buying your first home isn’t something to be taken lightly, and Tony’s insights will leave you feeling well-equipped to make decisions that are going to serve you well, now and in the future.

Key Points From the Episode

Tony shares a number of current market trends that are important to be aware of.
Factors that are putting huge pressure on housing affordability (particularly for first-time homeowners)
What a debt-to-income ratio is and how banks use it to determine which mortgage applications to approve.
Why Tony recommends an income-based repayment plan for student loan debt.
A question you should ask yourself before applying for a mortgage.
An overview of the traditional lending options that are available to first-time home buyers.
Advantages and disadvantages of taking out an FHA loan.
Benefits of the Fannie Mae and Freddie Mac conventional loan programs.
Examples of additional loan programs.
Details about First Horizon’s pharmacist home loan.
Factors to take into consideration when choosing a lender.
The difference between preapproval and prequalification.
Advice for choosing a real estate agent to work with.
Implications of a ruling that is likely going to be passed by the Supreme Court.

Episode Highlights

“We’re in an environment of higher interest rates than we’ve seen in a long time. We haven’t seen rates like this since the early 2000s.” — Tony Umholtz [0:02:13]

“Just because the lender says, ‘We can give you this loan,’ it doesn’t mean it’s what is best for you.” — Tony Umholtz [0:15:43]

“There’s a tremendous amount of liquidity for first-time home buyers. So I would ignore a lot of what you hear in the media.” — Tony Umholtz [0:16:59]

“It’s a good time to buy because the inventory levels are low, prices are stable, you can get a better deal than you could a few years ago when the market was so hot you couldn’t even order an appraisal sometimes.” — Tony Umholtz [0:24:05]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[0:00:00.8] TU: Hey everybody, Tim Ulbrick 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 back on to the show, Tony Umholtz, a mortgage loan officer with First Horizon Bank. During the show, I tap into Tony’s 20-plus years of experience in the industry to form a checklist for first-time home buyers. We discuss how to determine how much home you can afford, the different types of loan options to consider, what to look for in choosing a lender, and much more.

Okay, let’s hear it from today’s sponsor, First Horizon, and then we’ll jump into my interview with Tony.

[SPONSOR MESSAGE]

[0:00:36.6] TU: Does saving 20% for a downpayment 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, meeting that saving 20% for a downpayment on a home may take years.

We’ve been on a hunt for a solution for pharmacists that are ready to purchase a home loan with a lower down payment and are happy to have found that option with First Horizon. First Horizon offers a professional home loan option, AKA, doctor or pharmacist home loan, that requires a 3% down payment for a single-family home or townhome for first-time home buyers, has no PMI, and offers a 30-year fixed rate mortgage on home loans up to USD 726,200.

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. To check out the requirements for First Horizon’s Pharmacist Home Loan, and to start the preapproval process, visit yourfinancialpharmacist.com/home-loan. Again, that’s yourfinancialpharmacist.com/home-loan.

[INTERVIEW]

[0:01:48.5] TU1: Tony, welcome back to the show.

[0:01:50.5] TU2: Tim, thanks for having me, great to be here.

[0:01:52.1] TU1: Excited to have you back and I’m going to start with my standard question to you, given the ongoing volatility that we’re seeing in the mortgage landscape. What are the market trends and realities that you’re seeing right now that our listeners should be aware of?

[0:02:06.9] TU2: Well, there’s a lot to digest right now with what the federal reserve has done this past year and you know, we’re in an environment of higher interest rates than we’ve seen in a long time. We haven’t seen rates like this since the early 2000s and, you know, a couple of things to watch right now, the big news last week was that our US treasury needed to borrow an additional 275 billion that they didn’t have in the budget. So that kind of pushed rates a little higher across the board. It does help fixed-income investors because rates are higher for investments but for mortgage, mortgages, and borrowers, especially if you have variable rate like credit card loans and things like that and home equity lines, those rates are really taking a hit here recently.

[0:02:51.9] TU1: Yeah, 275 billion, small details, right? That we need to be planning for, you know, we talk about a balanced budget on the personal side. We don’t have that luxury, right?

[0:03:00.5] TU2: That’s right, that’s right. You know, I was teasing my wife about it too. I said, “You know, look, it’s important that we keep a good budget because we can see what’s happening in our national debt,” but I think, you know, it’s funny. Back to that point you know overall, I’ve seen – this is – I’m going into my 21st year of this industry, and people on average I feel are better stewards with their money than they used to be.

Like I look back in the mid-200s, it was a lot different. People were always coming to me very indebted, not that everyone’s perfect now but it just seems like people are better educated and better stewards overall from what I’ve seen. It’s been a choppy market and I think we could be in for higher rates for some time unless we see some big global macro event.

You know, a bank failure or unemployment spike or, you know, GDP really collapse, those sort of catalysts would cause rates to get worse. On the bright side, most markets around the country, inventory levels are low and there’s just not enough homes. So home prices have continued to go up in most areas and that’s been a challenge too because you have higher interest rates and higher home prices.

I don’t think home prices are going to fall, given the inventory levels, because that’s how you measure price stabilities, inventory. I mean, there’s always areas that are going to be suffering more than others. So we can’t generalize that every city is the same but the majority of the cities in the US right now have a lack of inventory and that’s causing prices to be stable and even going up despite the headwinds.

[0:04:40.0] TU1: Yeah, and it feels like there’s several factors, you know, we’ve talked about this before on the show about inventory being an issue. Obviously, rates where they are, which I think is putting a lot of pressure on first-time homebuyers.

We’re going to talk in a little bit about student loans here coming back online and the impact of that for first-time home buyers and then I think there’s the reality of, you know, Jess and I talk about this often, so many of us that locked in homes at the high twos and low threes pre-pandemic and the beginning of the pandemic, unless there’s a significant reason to move, a lot of people are saying, “I don’t want to give up that rate,” right? “Why would I give up you know, 2.8, 2.8, 3% to take on a 7% plus rate?” So I suspect that probably is worsening, you know, some of the supply and demand as well, is that fair?

[0:05:26.1] TU2: Absolutely, I think that’s a big, very fair, big driver of why inventory’s tight, right? Because people, even though they may need a bigger home, their family’s grown, they don’t want to give up that interest rate. But it’s interesting, we’re starting to see, and it’s just a few cases, but I’m starting to see people that have so much equity. They have that 30-year at 3% but they have so much equity and they built up other debts. So you know, credit card debt mainly. Other liabilities, auto loans that are higher interest rates than that, where even if you took a rate in the sixes to cash out, refinance it, and pay off your debt, you’re saving a thousand dollars a month in cash flow.

So I think, at some point, you know, being married to that super low rate on a small loan balance, even a higher mortgage rate could pay off for some people to consolidate because cash flow is the key, right? Payments, what you’re paying. And it’s not all about rate one mortgage, you gotta look at your whole debt profile but there are a lot of people with those low rates and it’s just one of those things, right? You know, you don’t want to move when you’ve got a payment like that and even though you have but you are sitting on a lot of equity.

[0:06:36.3] TU1: Yeah, it’s interesting. I appreciate the comment about looking at the whole portfolio. You know, something like debt consolidation may be a factor or you know, to your point, where at one point in time, especially as you’re getting started and you don’t have a lot of equity, that low rate can be a huge advantage but at some point, you’ve got a lot of equity that’s sitting in your home, right? And depending on what else is going on in the financial plan, there may be other options to consider.

So today, Tony, we’re going to cover a checklist for first-time home buyers that includes determining how much one can purchase. We’ll talk about affordability, evaluating the loan options that are out there, factors in choosing a lender, and also in selecting a real estate agent. So let’s go through this one by one. First on our checklist is the determination of affordability, right?

Relevant topic just given what we talked about here over the last few minutes. I think as we’ve seen, as you mentioned, escalation or at least stability of home prices, rising interest rates, we talked about that and for many of our first-time home buyers, federal student loan payments are going to be coming back online for the first time in over three and a half years.

All of this is putting pressure on affordability, especially again for those first-time home buyers that may not have equity built up in a previous home. So let’s start with how the bank determines affordability, AKA, how much mortgage they will approve, and then we can talk about how the individual may also determine affordability. So give us the rundown. I know this is fluid in some cases but how does the bank look at the affordability of how much home one can ultimately afford?

[0:08:08.9] TU2: Sure. Well, you know, for the majority of the products, Tim, the debt-to-income ratio that we look for is 43%. So what that means, debt-to-income ratio, is your total income, total debt, your debts cannot be higher than 43% of your income. Now, that’s gross monthly income, okay?

So if you’re W2 wage earner, then it’s going to be before tax, right? So that’s going to be – a quick example, if you make USD 10,000 in household income per month, your total liabilities including that new mortgage payment cannot exceed 4,300. So that would be the basic calculation of a debt-to-income ratio. That’s what the majority of lenders look at. Now, there’s ways to get like, we do have the ability, especially for those who are putting more money down like more than putting 20% down for example, we do have the ability a lot of times to go up as high as 50% debt-to-income ratio.

But you typically have to have compensating factors like, you know, 20% down or more, higher credit scores, you know, liquidity, things like that. So that’s normally when you see some of the higher debt-to-income ratios but I would say 43 is where you want to be at for a safe number. That’s what the majority of the lenders in our country are going to look at.

[0:09:33.4] TU1: And just to reinforce what you said, that’s not just mortgage payment, that’s total debt loads, right? So if there’s debt commitments, that could be credit card, debt commitments to car payments.

[0:09:43.7] TU2: Right.

[0:09:44.1] TU1: Debt commitments to student loans. Let’s talk about that for a moment. So we, again, we’re coming back online here in the fall. Many of our listeners, especially first-time homebuyers, may have upwards of USD 200,000 or more of student loan debt.

Now, depending on how they pay that off, they could very aggressively pay it off if they want to. The standard repayment is a 10-year default option, in that case, they would be looking at monthly payments, 1,800 to USD 2,000 a month, or they could take that out over a longer period of time, which is probably most common, on something like an income-driven repayment plan, which will lower their monthly payment.

So lots of nuances in student loans and I’m curious to hear from your perspective as a lender, someone who has had a lot of experience in this industry, working with pharmacists as well, how do they look at the student loans?

[0:10:31.5] TU2: Well, it is, it’s a great question. I mean, the first thing is normally, I find that the income-based repayment plan is going to give you, especially now, it’s going to probably give you the best ratios for most of our listeners, for most of our potential clients here. There is a factor we use.

For example, if there was no payment, right? Or if you’re in sort of deferment, we’re going to use a factor of the student loans, which is better than like Fannie Mae, Freddie Mac, and FHA would use but that factor can still be higher than what most have as an income-based repayment, I find.

But there is the factor that we use for the student loan payments that we’ll use to kind of generate a payment that will service that liabilities monthly obligation, and that factor again is less than like, for example, Fannie, Freddie are 1% of the balance per month. So if it’s a USD 200,000 balance, you’re at USD 2,000 per month.

[0:11:30.4] TU1: Yeah.

[0:11:30.8] TU2: Which is pretty unaffordable. This product is 0.5%, which is still high. I mean, at 200,000, it will be a thousand a month. So it’s a more generous way but it’s not, I find that the income-based repayment is typically better. So that’s normally what we recommend.

[0:11:50.9] TU1: I’m glad you brought that up because we do have people that may be deferring for whatever reason. Obviously, we’re in the pause period right now. So understanding again, we talk about all the time that we can’t be thinking about one part of the financial plan in a silo. This is a great example where how you approach your student loan may certainly have an impact on affordability and determination on the mortgage side.

Tony, you mentioned just a few moments ago that something like a higher credit score or greater down payment may be able to push that percentage upwards from 43%. Can the opposite be true? So, you know, a low down payment, and we’ll talk about different financing options here in a little bit, or a lower credit score, could that ultimately work in the opposite direction where maybe it’s not 43% but it’s a lower percentage?

[0:12:38.9] TU2: Sometimes yes. Yeah, there is such scenarios where it might need to be – if the credit score is rocky, although I mean, when we have a little bit of a credit challenge with low down payment, I always look for FHA loans because conventional the answer would be yes, there would be some challenges with Fannie Mae, Freddie Mac, conventional loans.

But with FHA, that serves as a good niche there and FHA serves that market really well. A lot of times, the interest rates are much better too for that borrower that has a little bit of a credit ding for conventional style, will pivot to that product but yeah, that is exactly right. If you have a higher debt-to-income ratio, low down payment, it’s going to be a more challenging situation for sure.

[0:13:26.5] TU1: So we’re talking here about you know, affordability. What the bank is going to determine that they are comfortable lending you with, and it’s important to call out and remember that the bank’s calculation ultimately is a CYA for the bank, right? It’s to minimize their risk on you as the “lendee” for closing on that loan.

So they’re trying to determine the likelihood of being able to repay that loan but it’s certainly not a calculation to determine what is or is not ultimately in your best interest with looking at the whole of the financial plan, right? It’s really on the individual borrower to determine what the monthly budget can afford with other goals and priorities in mind and that is a huge piece to consider.

We often say, Tony, that someone really should start with their own budget, and then obviously, there’s going to be most often, maybe a bigger number in terms of what the bank will determine as affordable and to be able to reconcile that as they go out and search homes. What we’re trying to really do is prevent a situation where someone gets into a home and then pay cut, temporary job loss, something happens and they feel like they’re really strapped month to month. So I would really encourage people, when they look at personal affordability, to answer the question, how much of your monthly take-home pay do you want to be taken up from a home purchase? And being able to feel comfortable with that.

And this is really a place to mention, you know, principle interest, taxes, and insurance is certainly a portion of that but there’s a lot of other things that we need to be thinking about, right? It could be association fees, it could be maintenance, it could be upgrades. We all know getting into home, things break, we want to upgrade things and so making sure we’ve got margin in the budget to be able to do that as well is really, really important.

[0:15:09.1] TU2: HOA fees are going to be included so if homeowner’s association fees, something else called CDD fees, which are community which developers pass along to the new homeowner in a lot of parts of the country for new construction communities and those can be, they’re like a non-Ad Valorem tax that gets added on to your property taxes.

Those are another cost that’s factored into the debt ratios and so that’s something to consider but again, yes, home repairs, furnishing, all that has to be considered. Just because the lender says, “We can give you this loan,” it doesn’t mean it’s what is best for you.

[0:15:51.6] TU1: So that’s number one on our checklist. Number two for our checklist for first-time home buyers is evaluating the different loan options. Tony, something we’ve talked about before in the show and we’ll link in the show notes to some of those previous episodes where folks can dig in in more detail but it’s worth revisiting as it’s an important part, a really important part for a prospective homebuyer to understand the various options and products that are out there.

You’ve already mentioned a couple of these, FHA, you mentioned the conventional loans offered through Fannie Mae and Freddie Mac. Give us a brief overview of the traditional lending options that are available for our first-time home buyer, and then we’ll also talk in more detail about the pharmacist home loan option available through First Horizon.

[0:16:33.0] TU2: Sure. So there are a lot of programs available for first-time home buyers and for residential financing in particular. I mean, you’ll hear some things in the media about financing tightening up, lending tightening up. It’s primarily on the commercial side and some of the high-end bank portfolio side, whether they’re, you know, you have two million dollar loans, stuff is tightening. But there’s a tremendous amount of liquidity for first-time home buyers. So I would ignore a lot of what you hear, you know, in the media regarding that.

The first product I’ll mention, which I mentioned earlier, FHA is a very common program for first-time home buyers, especially if your credit is a little lower, if it’s under 680. A lot of times, that’s the best product option from a rate perspective. The benefits of it is you can put as little as three and a half percent down and the loan limits are going to differ by county. So it’s going to depend on what county you’re buying in and that will determine the loan limit, the max loan limit available.

The downside of FHA is it’s got permanent lifetime mortgage insurance. You cannot get rid of the mortgage insurance for the life of the loan. It’s always going to be on the loan and it’s something that gets added on to that monthly payment every month. So that’s the downside of FHA but one of the positives of FHA, and I write a few of these a year, is that it’s the best primary multi-family loan program out there.

I have some really good success stories over the years of young professionals buying triplexes and fourplexes and duplexes, living in one unit, renting the rest of them and it becomes this great lifetime asset. So there are some benefits to FHA financing. There are some good things, some flexibility on down payments and you can get gift funds and so forth, so there are some good things there.

The other is Fannie Mae and Freddie Mac, which are conventional loan programs. They have, again, some really good programs here as far as you know, 3% down, 5% down options. The PMI on those loans is not lifetime, it can be removed, typically after two years of paying it and even sooner if you come up with the down payment.

Like for example, I’ve had clients that put 10% down, and then literally, six months later they say, “Hey, you know, we ended up coming up with another 10% and we want to put it down and get rid of that MI,” and you can do that, you can do it within that two years. It’s based on the original purchase price but you can get rid of the MI that way too.

And then the other side of that is, we’re starting to see and this is, again, I gotta be careful how I say this but I’m based in Florida so I’m really familiar with these programs in Florida but there’s some state-based programs for first-time home buyers.

Like, we have one in Florida right now where you can essentially get 100% financing. We’ll do a Fannie Mae first mortgage or Freddie Mac first mortgage, and then the state will give you a second at 0% and there’s income caps on that one and the majority of your listeners, Tim, are probably not going to qualify for these interstates because there’s income caps. Like, you can’t earn over a certain limit. The Florida one is very generous, it’s 130,000. So that’s one of the highest I’ve ever heard of but that we’ve got some loans we’re working on here for that down here in Florida but there’s some nichey programs that can fall on our conventional with certain states.

Then the other – I say, the last one is going to be sparingly used, but VA loans. If you have someone that’s a first-time homebuyer or even if their spouse served in the military, VA is a great program for buyers. I mean, it’s just tremendous. No PMI, 100% financing, and some of the best interest rates on the market. We have no lender fees for them. It’s a very, very good program for that audience.

And then lastly, you know, the nichey programs like the one we offer for pharmacists and professionals with no PMI and again, you have to be a pharmacist or be in a certain field to qualify. But that can be as little as 3% down with no PMI if you’re a first-time home buyer and 5% down if you’ve owned before and that loan amount will go all the way up to USD 727,000. So it really covers the majority of first-time home buyers, maybe except those in California, you know, it is still pretty expensive there but for the majority of our audience, that will satisfy that need.

[0:21:17.9] TU1: Great overview Tony, I think that highlights well, you know, we’ll talk in a moment here about choosing a lender but when working with a lender, especially one that’s well-versed in all the options and nuances especially, you know, you’ve referenced several times here different cases where, you know, in working with many pharmacists, people have maybe done a house hack. That might be really attractive for an FHA. Or got a low credit score, maybe an FHA or availability of down payment or access to a VA loan and I’m not from there, it’s the first time I’m hearing about some of the state-based programs. So you know certainly, your expertise in Florida, although you work with pharmacists and others across the country as well.

So I think that’s an interesting one for our community to look into further and I know we do have folks that are listening in Florida that may be just hovering around that one, you know, 30 mark. So depending on applicability, I think that would be worth reaching out to inquire more about as well. I want to make sure our folks are well aware of the pharmacist home loan option via First Horizon.

You just covered some of the basics in terms of down payment, maximum loan amount. One of the reasons that we’ve been excited about this collaboration over the years is the national availability and the lower 48 of this product, knowing that our community is based all across the country. Tell us just a little bit more about that eligibility. You know, I’m thinking about things like credit scores.

So you mentioned no PMI, you mentioned the down payment, you mentioned the loan limits but are there folks where credit score may become an issue here that would point them to an FHA loan? Any other details that individuals need to be aware with this product?

[0:22:49.3] TU2: Sure, sure, good question. The minimum credit score, there’s no maximum but the minimum credit score is 700. So 700 is going to be the minimum credit score for the product and then if you’re under that, we do have ways to help boost credit scores. We have a technology where we can evaluate credit and we can actually see what your score can get to by certain activities, paying certain debts down, maybe a percentage of your credit card, and we’ve helped numerous clients with that. You know, it is almost on a monthly basis. That’s a good tool to get the credit scores higher but 700 is kind of that line in the sand. We can’t go below that for the no MI product, so it’s going to be your minimum score.

You know, as far as the overview of the product, what I love about it is there’s no reserve requirements. A lot of these products have hefty reserve requirements and we don’t have that for it because that really helps first-time home buyers that may not have a lot of savings built up yet or investments built up yet. There’s also no prepayment penalty, which I think is very important because I really believe in the next two years that we’re going to see some really good opportunities to refinance.

That’s why I still think it’s a good time to buy because the inventory levels are low, prices are stable, you can get a better deal than you could a few years ago when the market was so hot you couldn’t even order an appraisal sometimes. It’s still one of those times where I think you’re going to have a chance to get the home you need, build that, and actually have a chance to lower your payments in the future.

I do think we’re going to see that happen. The other variable would just be, we only offer a fixed rate on the product, so it is only a 30-year fixed on this particular option, there’s no 15-year. The last thing I will mention too is it does a lot of duplexes, the three and the fourplexes are allowed but it requires a pretty hefty down payment, it’s usually 20%, where the duplex is only 15% with no MI.

So we’ve used that a few times for pharmacists that want to get into their first property and utilize this program. Quick high level of it. To me, the biggest factors are the no MI, no prepayment penalty, and the flexibility on reserve.

[0:25:10.2] TU1: I’m glad you mentioned the reserve requirement because I think that’s something we’re going to be seeing as more of an issue. You mentioned first-time home buyers naturally that is but especially with student loan payments coming back online that are going to eat into the ability to be able to save up those reserves. Over time, I think that is going to be an important factor that individuals are looking for.

We’ve got some great information on the website, we’ll link to in the show notes as well. You can to yourfinancialpharmacist.com/home-loan, click on “get started,” we’ve got a brief form that you can fill out, and then we’ll get you connected with Tony so you can learn more about that product.

Tony, third on our checklist for first-time home buyers is choosing a lender and getting pre-approval. Obviously, you’re biased in terms of the work that you do for good reasons and the value that you provided to many pharmacists out there that are listening, but from your perspective, what are some of the top factors that one should be looking for when choosing with a lender that they want to move forward with?

[0:26:06.9] TU2: Sure. You know, I would say communication is one of the biggest pieces. Being able to communicate is critical in this process because there’s a lot of questions, there’s a lot of things that come up in the home-buying process, so I say communication is number one. The other piece would be service.

You know, I think a mistake a lot of people make is they kind of chase interest rates on the Internet and it can backfire because a lot of times, that’s how they get you in the door to call them and things change once you get in the door and get the application in and the, you know, I think that the service side, being able to close on time, meet the milestones of your contract is really important.

So finding a lender that communicates well but also can meet all those timelines, can close quickly if you need to because if someone – you can close in three weeks or under 30 days. Sometimes, you can go back to the seller and save five, USD 10,000 on the purchase price of the home. It’s a big deal, so I think having bid.

I think in service of meeting the commitment letter date, making sure you use local appraisers. Because some of the bigger lenders will actually use an appraisal management service, where you can have more challenges with the appraisal process than some of the smaller local lenders. So I think that again, it’s a comfort feeling, it’s communication, it’s service, and then having a competitive product I think is important too. You know, having a product that’s a good fit for your needs is important as well. I think those three.

There are a lot of good lenders out there. There really are. It’s getting hard. It’s tough on the lending industry, the volumes have dropped 40% from last year. A lot of lenders are leaving the business, so it is a much tougher environment for the mortgage market right now but there are still good lenders out there for sure.

[0:28:00.3] TU1: Once somebody choose a lender, quickly after that is going to become a preapproval so they can go out there seriously look at homes, be ready to make offers and I think this is an area we see a lot of confusion on partly because of the online shopping of rates and quick access and easy solutions and that being the preapproval versus the prequalification. So tell us briefly about the difference and why the preapproval process is so important.

[0:28:24.3] TU2: So when you go looking for homes, a lot of the real estate agents will ask you, and now we’re going to talk about real estate agents shortly, but they’re going to say, “Do you have a preapproval letter?” You know, that’s going to be the first thing before they even want to engage with you, they’re going to want to make sure you have that and the difference between the preapproval and prequalification are that the lender has checked your income, and checked your credit report.

Those are the two major factors, right? We verified the income, we verified your credit. The prequalification, which a lot of us can get online, is pretty simple. It’s more verbal than anything, right? So verbal verification, where a preapproval, you are actually providing the information to the lender and they’re reviewing it and making sure that from a high level, your income is accurate and your debt-to-income ratio works.

A lot of listing agents won’t even allow you into the property unless you first get that preapproval. It’s either, “Can you pay cash or do you have a preapproval?” Because they call us. We get calls from the listing agents all the time, “Is this client qualified?” And that’s a big factor when you make an offer, is what does that preapproval letter say? And because there’s still multiple offers and sometimes, you know, multiple buyers looking at a home, we still get those phone calls and that I think is very important to have a strong preapproval. That’s going to be the factor in a lot of times, moving forward and it gives you peace of mind.

I understand, you know, “Hey, I don’t want my credit run,” things like that and you know an inquiry on a credit report, having one or two lenders look at it is going to have no impact on your report. It’s when you have multiple types of creditors looking at one time. So if you come to our team and get your credit run and then you go to Bank of America and have them run your credit for a mortgage but then you have Dillard’s run your credit for a credit card, you have Macy’s run your credit for a credit card, and you have a car loan, well, those are different types of creditors all at one time that will impact for sure, but it still won’t be much, it will be a few points.

Where I find people get confused on this and start to go off on a credit tangent is, you know, you can go to a Best Buy, right? And buy a TV and they’ll say, “Okay, here’s that USD 2,000 TV with no interest for a year if you take this credit” and so many people will do that. That will whack your score 40 to 50 points immediately because it shows up as a maxed-out credit card.

[0:30:51.3] TU1: Yep, high utilization.

[0:30:52.7] TU2: Those are misconceptions, I see a lot of borrowers, especially first-time home buyers, will come to me so concerned about an inquiry and they have things like that or their credit card been up to – much more impactful and on [inaudible 0:31:09.0] but yeah, it is a critical thing to have a preapproval in my opinion especially your first time out.

[0:31:17.6] TU1: So glad you mentioned about credit. I remember you saying that on a previous episode and I think that’s just a lot of ways in there, right? Because we often think about it, you know, if you’ve got a personal credit card with a max of 20, USD 25,000 and you’re charging on average three or USD 4,000 a month, you’re at a reasonable percentage of utilization that’s not going to have a negative impact on your score.

In fact, you know, utilization and timely path of credit can have a positive impact on your score but if you go out and buy a piece of furniture, a TV, or whatever, that essentially looks like a maxed-out credit card so that can have a negative impact, great point there. So we’ve talked about affordability, we’ve talked about evaluating loan options, we’ve talked about choosing a lender and getting approval.

And fourth on our checklist is choosing a real estate agent and I would certainly want to give a shoutout here to Nate Hedrick, who is a frequent guest on the YFP Podcast, cohost of The Real Estate Investing Podcast, who has a home buying concierge service intended to connect folks with an agent local in their area. We’ve got more information on the website that we’ll link to in the show notes.

I’m certainly interested, Tony, in your experiences over two decades now, where you regularly work with agents. What are the characteristics that make up a good agent that someone can be looking for when choosing who they want to ultimately go forward with?

[0:32:33.1] TU2: Yeah, a great question and I’m going to bring up something else about agents here in a minute that could change the framework of the industry here very soon but a couple high-level points. I think, you know, the first thing would be, obviously, back to the same thing as the lenders is communication, right? Communication and that rapport is very important and the other piece is just doing their homework, right? What you’re looking for.

I mean, some agents will come to us, and I’ll just give an example real quick when we do conventional loans for 20% down through Fannie Mae and Freddie Mac, oftentimes we’ll get an appraisal waiver. So that means there’s no appraisal needed. Now, you could still do an appraisal as a buyer but oftentimes, when they get that, they want to waive it because they save the appraisal fee.

A lot of the good agents will do so much work on comping the home out and the offer price and knowing what the comps are, those borrowers will feel comfortable moving forward without the appraisal, right? Because of the work that agent has done. So I think just knowledge of the area, knowledge of the process, communication, do they have a good reputation with other listing agents?

That is huge, I mean, I find that some of the – I work with a lot of realtors just around here in Tampa especially but I have some in other states. It’s amazing, even not where I can see them face to face all the time. In fact, I had a Zoom call with a great friend of mine in Miami that has a big team and we would talk this morning to his team at nine just about the market and what we’re seeing.

But I think just seeing these agents that I have worked with around rather for a long time, ten-plus years, is the ones that play well with everyone else and have a good reputation, when they bring a buyer to that other list, that other realtor’s listing, guess who gets, “Hey, this guy, he knows he’s bringing a qualified buyer. He’s not playing games, he negotiates the right way.”

So I think having a good reputation is really important and that brings me to something else which I’m kind of following from a distance but it is going to be huge for the real estate industry, and I think for the entire residential industry is right now, the Supreme Court is reviewing a case with the National Association of Realtors and basically to summarize this case is it’s going to eliminate most parts of the country.

When you as a buyer go buy a home, the commissions are paid from the seller’s proceeds, right? So the [inaudible 0:35:03.5] who represents the seller will get 3% or 2%, whatever it might be for that area and then the buyer’s agent will get the same, right? Two and a half, 3%, whatever it might be. Well, under this new rule, it would be more like the commercial market, where a buyer of a commercial piece of property in a lot of cases pays their broker out of their own pocket, right? So they pay the 3% out of their own pocket.

Well, this is really significant for the entire industry, because however you’re going to source business as a real estate agent, your buyers are going to have to be educated now because they’re going to be responsible before your pay because of this new Supreme Court ruling not allowing the listing agent. So there is a lot of moving parts here, I don’t want to speculate.

[0:35:50.0] TU1: Wow.

[0:35:50.2] TU2: But it is a huge thing that I think not a lot of people know about. Some of the big real estate companies are talking about it but it’s a huge deal because in my mind, I’m looking at it I’m like, “Well, what do we do?” So you know, we do allow 3% seller concessions, can we increase the loan amount to cover part of it? I mean, is that going to still be allowed? Because a lot of first-time home buyers are going to be impacted [inaudible 0:36:14.4] either agent two and a half, 3% of the sales price, right?

So I think in the end, it’s going to be net-net the same day everyone because it’s going to mean, “All right, so the price is a little lower because you are paying that extra 3% directly,” but it could end up being, “Hey, you have to come up with more money at closing.” So this is a moving conversation.

I haven’t followed it close enough to know exactly when it’s going to come out. I don’t think the industry knows when the ruling is actually going to come out and which way it’s going to go but it’s like a lot of really smart people in the real estate business I’ve spoken to have told me that they think it’s going to pass or it’s going to change the dynamics of the industry.

So it’s just something to watch and if you’re kind of on the fence now buy, I would say, you’re going to buy and you’re going to be – you know, kind of my thoughts on buying is if you’re going to be in a city for five years or more, it’s almost a no brainer to buy. I mean, even if property values fail by 5% or 10% or whatever, between amortization, tax deductions, escalations annually, it’s hard to lose.

I mean, home ownership in the long run is just one of the best wealth-building tools, probably a good idea to do it before that ruling, right? If it does end up going the other way and you gotta come up with that additional 3% for your agent because it’s really going to change a lot of dynamics.

[0:37:39.3] TU1: Certainly a lot to follow there and a couple of thoughts are coming to mind, Tony, was one, you know the implications of a buyer now having to come forward with those dollars, right? Already – especially first-time home buyers, you know bringing cash to the table can be a challenge, and then I thought about the characteristics you listed off of a good agent.

You know, excellent communication, experience I think is one that is really significant. You see a huge range of experience and expertise and agents in terms of how many homes are they selling or working with the buyer-seller throughout the year, and for how many years? And then reputation in terms of reputation with other agents, are they kind, do they do business in a good way? But those characteristics I think, especially with that responsibility, potentially falling on the buyer. You know, anytime somebody has skin in the game now, they’re going to be looking for more of that, right? Whereas, I think right now, the bar of entry and to somebody choosing an agent is probably pretty low because they’re not necessarily feeling the financial transaction of that.

So great insights, that’s something we’ll be following as well and really appreciate your perspective as we went through this checklist as well. For folks that want to get connected with Tony and learn more, make sure to check out, yourfinancialpharmacist.com/home-loan. You can click on “get started” and we’ll make sure to get you over to Tony. As always, Tony, I really appreciate your perspective and having you on the show.

[0:39:00.5] TU2: Thanks for having me, always great to be here. Thank you.

[END OF INTERVIEW]

[0:39:04.2] TU1: 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 townhome 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 preapproval process, you can visit, yourfinancialpharmacist.com/home-loan. Again, that’s yourfinancialpharmacist.com/home-loan.

[DISCLAIMER]

[0:39:48.9] TU1: 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 it is not intended to provide and should not be relied on for investment or any other advice. Information on 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 archived newsletters, blog post, and podcast 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 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.

[END]

Current Student Loan Refinance Offers

Advertising Disclosure

Note: Referral fees from affiliate links in this table are sent to the non-profit YFP Gives. Read the full advertising disclosure here.	Bonus	Starting Rates	About	YFP Gives accepts advertising compensation from companies that appear on this site, which impacts the location and order in which brands (and/or their products) are presented, and also impacts the score that is assigned to it. Company lists on this page DO NOT imply endorsement. We do not feature all providers on the market.
	$800* Loans* ≥150K = $800 100-149K = $450 <100K = $350	Variable: 5.28%+ APR (with autopay)* Fixed: 5.28%+ APR (with autopay)* *All bonus payments are by gift card. See terms	The "Kayak" of student loan refinancing, Credible displays personalized prequalified rates from multiple lenders	Check Rate
	$750* Loans ≥150K = $750* ≥50K-150k = $300	Fixed: 5.49%+ APR (with autopay)	A marketplace that compares multiple lenders that are credit unions and local banks	Check Rate
	$500* Loans ≥50K = $500	Variable: 4.99%+ (with autopay)* Fixed: 4.96%+ (with autopay)** Read rates and terms at SplashFinancial.com	Splash is a marketplace with loans available from an exclusive network of credit unions and banks as well as U-Fi, Laurenl Road, and PenFed	Check Rate

Recent Posts

[pt_view id=”f651872qnv”]

YFP 316: Real Tips From Recent First-Time Home Buyers

Posted on July 13, 2023 by Tim U

Neal and Kaitie Fox join Nate Hedrick, The Real Estate RPh, to reflect on the lessons learned as first-time homebuyers.

About Today’s Guest

Neal and Kaitie travelled from their hometown of Coshocton, OH to attend Cedarville University in 2011. A year later they married at age 19 and began their joint financial adventure. Kaitie began working at the University food service contractor and eventually became the Head Baker, supporting the family through pharmacy school and until the birth of their second son. Now, Kaitie is home raising Timothy, 5, and David, 1, while Neal works. Neal completed his PharmD at Cedarville and a PGY1 residency at Premier Health Miami Valley Hospital, a Level 1 Trauma Center with over 950 licensed beds and over 110 adult ICU beds. He currently serves as one of the Medical ICU Clinical Pharmacy Specialists and the Research Project Coordinator for the PGY1 pharmacy residency program. He occasionally gives lectures or hands-on training at Cedarville University while also taking APPE students from several pharmacy schools throughout the year.

Episode Summary

Buying a home can be a daunting, exciting, and overwhelming experience. On this weeks podcast, sponsored by Real Estate RPh, we are joined by Neal and Kaitie Fox to discuss how they went about buying their first home. Neal is a pharmacist and Kaitie is a stay-at-home mom, and in this episode, they tell us what made them decide to buy a house when they did, what they would say to someone wanting to purchase their first home, and how interest rates and other aspects played a role in their decision. They delve into how they chose a financial lender and why they decided to change who they financed their house with at the last minute before explaining how YFP assisted them in this process. When looking for a real estate agent, it is important that you find someone who takes your needs into consideration and communicates effectively, and Neal and Kaitie explain why they decided to change agents early on in their journey. Finally, our guests remind us to use our resources wisely and ask as many questions as possible when buying a home.

Key Points From the Episode

Introducing today’s guests, Kaitie and Neal Fox, and a brief overview of their careers.
What made Neal and Kaitie decide to buy a home when they did.
Their advice on a starting point for someone wanting to buy a home in the near future.
Why interest rates were a barrier for them when buying their first home.
Things to consider when choosing an area to look for a house in.
The importance of moving fast when you find a house you’re interested in.
How Kaitie and Neal navigated financing a house and what that process looked like for them.
Their home-buying team, changing agents, and why YFP was so helpful to the Fox family.
The importance of having clear and responsive communication with your real estate agent.
Why you must utilize your resources and ask questions when closing on a house.

Episode Highlights

“The biggest thing is to find that person who is your trusted expert in home buying.” — @ThePharmFox [0:05:10]

“Have at least two, maybe even three [financing] options because as long as your pre-approval is still valid, you should be able to pick the best option that fits you.” — @ThePharmFox [0:16:44]

“Utilize those resources that are right there [and] are helping you through the process anyway.” — @fox_kaitie [0:29:06]

“Expect the unexpected because it is a very long, complicated process and you will almost certainly run into something that you didn’t think about before.” — @ThePharmFox [0:33:51]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[0:00:00.4] TU: Hey everybody, Tim Ulbrick 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. Today, I pass the mic over to Nate Hedrick, founder of Real Estate RPH and cohost of the YFP Real Estate Investing Podcast, where he welcomes Kaitie and Neal Fox to talk about their journey as recent first-time home buyers. They discussed the lessons learned along the journey, including common pitfalls to avoid that will be helpful to anyone that is looking to buy a home for the first time. So let’s hear it from today’s sponsor, Real Estate RPH, and then we’ll jump into Nate’s interview with Kaitie and Neal Fox.

[SPONSOR MESSAGE]

[0:00:39.2] TU: 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.

[INTERVIEW]

[0:01:26.1] NH: Hey, Neal, Kaitie, welcome to the show.

[0:01:28.1] KF: Hi, thank you.

[0:01:29.2] NF: Yeah, thanks for having us.

[0:01:30.4] NH: Yeah, absolutely. I knew when we had first talked that you guys are going to be fun to work with and I’m excited we get the opportunity to talk all about home buying today with a couple of recent home buyers, it’s going to be great. So maybe for our audience, just kind of give us a brief introduction on yourselves and a little bit about your pharmacy career and we’ll take it from there.

[0:01:49.7] NF: Yeah, sure. So I’m Neal Fox, I am a 2018 graduate of Cedarville University. I practice as a clinical pharmacy specialist in the medical ICU at a large level-one trauma center in Dayton, Ohio with just over 900 licensed beds and just over 110 adult ICU beds.

[0:02:15.5] KF: I’m Kaitie, I’m Neal’s wife, and I am currently a stay-at-home mom with our two boys and I’d previously been a baker for about eight years.

[0:02:24.7] NH: And we got connected, gosh, it was back in late 2022, talking about you guys are ready to buy your first home and we wanted to help you with that and so you know, what we thought we do today is get together with you guys, talk a little bit about first time home buying with someone who has recently gone through it and you know, talk through any pitfalls or words of advice. Things you guys learned along the way because I think a lot of our audience is sitting out there looking at current market conditions, looking at the current financial situation, and saying, “I don’t know if I can do this” or “I’ve got questions but I don’t even know where to start” or, “I don’t even know enough to ask questions” right?” I think if we talked through a couple of things, talk through the process, it might help a lot of the audience out there that might be trying this for the first time. So if you’ll indulge me, I’ll be firing off the questions and you guys just give me your hot take on what it was like and we can learn from each other. So does that sound good?

[0:03:14.1] NF: Yeah.

[0:03:14.1] KF: Right, yeah.

[0:03:15.0] NF: No problem, happy to share.

[0:03:16.5] NH: Awesome. So I think, you know, one of the things we focus here a lot at YFP is kind of the “why” behind the financial decision and it could be putting money in your 401(k) or paying off your student loan or in this case, you know, buying a home. Did you have a particular “why” behind you know, buying a home like when you felt you were – you felt like you were ready to do that?

[0:03:34.3] KF: Frankly, at this point, we have outgrown our current living space. We’re currently renting a two-bedroom apartment and we have two young children and then ourselves and it’s getting very, very cramped very quickly.

[0:03:49.6] NF: Yeah, home ownership had always been an intermediate to long-term financial goal for us. We definitely were not in a position to do that coming right out of residency but over the last few years, we’ve been able with YFPs help a lot to get into a better position and now for us, the living situation, the space, you know, we’ve been room sharing with our 14-month-old for 14 months.

[0:04:16.4] KF: 14 months.

[0:04:17.8] NF: So we don’t really have anywhere else to put him. So the “why” for this year was kind of that, like we didn’t feel like we had the option to wait much. So in some ways, that made it easier because we had the resolve to get it done, to go all the way through the process.

[0:04:33.4] NH: Yeah, I love that and I am sure there are many people resonating with that of like, “I am out of space” and sometimes it’s kids, sometimes it’s pets, sometimes you know, whatever it is, right? It’s time to make that move, so I think that totally resonates. What about you know the getting started process, right? So you have this “why” and you say, “Look, we’re out of space, we got to move, it’s time to buy” but how do you get started? Like, now that you’ve done this and kind of looking backward, you know, we talk about ways to get started all the time but for you guys, specifically, like what would you recommend as a decent starting point for somebody who is thinking about buying a home in the next, let’s say six months?

[0:05:07.7] NF:1 Yeah, for sure. So I think, the biggest thing is to find that person who is your trusted expert in home buying. So obviously, I’m not that person, that’s not what I went to school for and if you’re listening to this podcast, you’re probably not that person either, right? So you know, what I’ve always said, what we’ve always said working with YFP is they’re like our money mechanics. So in the same way, that I go to a mechanic for my car because I know nothing about my car, because again, that’s not what I went to school for, I need a trusted person, a trusted expert who can tell me what’s wrong, explain it to me in simple terms and then help me make a decision very similar to how they teach healthcare professionals that you know, we need to explain things in patient-friendly language. You know, I need that same person when it comes to money, financial decisions and that’s what YFP is for us, and then home buying is another like sub-specialty within that. So that’s why we immediately went through YFP to find a point of contact, which started with you, Nate, to guide us through the first part of that process.

[0:06:21.9] NH: Yeah, I think that makes a ton of sense and again, we’re biased here, right? At YFP because we like what we offer but I think you’re totally right, you don’t know where to start, getting a great expert on your team is a great place to start, you know? We’ll talk about this more in detail but we use the home-buying concierge services with you guys, getting you connected with a great real estate agent and then getting off and running. We even had a couple of bumps at the beginning, which I think I like to talk about here in a bit but you know, having that point of contact is how you get passed those bumps. I think that will resonate really well. So I appreciate you sharing that.

[0:06:49.9] NF: It was a really good way for us to initiate a process that we felt like we had studied and talked about but didn’t really know what to do and had never been through before.

[0:07:02.8] KF: Right.

[0:07:03.3] NH: Makes a lot of sense, I like that. One of the things that I think people are talking about right now that I think is kind of scary, especially when you’re thinking about getting started is that “current market” right? High-interest rates, lower inventory, do you feel like those were a factor, a barrier to you guys buying your first home?

[0:07:18.8] KF: To some degree, especially the higher interest rates right now because you know, we had this idea of you know, we have this wide range that we are able to buy from and so then looking at our interest rate and talking to our realtor, we were able to decide like, “Okay, we need to look at this you know, lower end spectrum” to say, “You know, we’re comfortable with this monthly payment” because of the interest rates. I feel like we didn’t really run into like low inventory in our area. I mean, hundreds of houses that were for sale but again, it was making sure that they were within our budget, that we had kind of decided on, that we were comfortable with paying like every month.

[0:08:01.4] NF: Yeah, and we’ll talk about this more in a moment but there was definitely, Kaitie was doing more of the house watching and there was a decent amount of turnover even though there were constantly houses up, they weren’t staying on the market in general for very long and what we realize, so what Kaitie was alluding to is we kind of had a number for total purchase price that we thought we would be able to get to. And then we realized that it was less about total purchase price and more about what our monthly payment would be because you know, we’ve worked with YFP for years on thinking about like a zero-based budget and you know, you can have whatever purchase price you want but if that monthly payment doesn’t fit within what you can reasonably do and right now, we’re a one-income household, you know, that was the number that we needed to focus on more.

So once we realized that, the thing about the market in our area that I came to realize was that it’s not homogenous, that different neighborhoods, even different sides of the same highway, obviously different school districts and things like that, there is a wide variety in terms of what you were going to see in price per square foot and stuff like that and thinking about us, for our family, you know we’re thinking about possibly private school for the kids. So public school district wasn’t as important in considering these things, we actually shifted our focus to a different area within our geographic region that’s really only like, five minutes away or so from – at least, in terms of distance – from my work from where we are now and where we had been looking and that made a big difference in terms of the length of time that houses were staying on the market and their cost per size.

[0:09:48.8] NH: It totally shows how local real estate is, right? It can be different 20 minutes away, 10 minutes away sometimes. Just like you said, you know if you shift that locust of search from a five-minute geographic area to a different five-minute geographic area, you’re going to get totally different results. So that’s good to hear that you know, I think you guys went into it with the right mindset but were able to shift as you started to learn more and see what made sense in terms of the areas you were looking in and the numbers and ultimately, that monthly payment is what made that determination, so that’s cool. Did you lose out on any houses? I know you said that the inventory was turning over quickly, did you lose out on any houses or anything? I mean, I know a lot of people are struggling with that right now.

[0:10:26.8] KF: The first couple of houses that we looked at were super early in our process. We kind of went into them thinking you know, we probably aren’t going to put an offer on these but we want to get the feel for actually physically going with our agent to a house and looking at it and seeing what that feels like but I think both of those houses went off the market that night. Like, the night that we looked at them, they went off the market.

[0:10:49.2] NF: And both of them, we went there and either someone was already showing when we got there or someone showed up to show before we left. So that was in the initial “hotter market” near our geographic area but even though we weren’t planning necessarily to make an offer that early in the process, it did give me some trepidation. This feeling like, “Oh man, when we find the right house, we have to move really, really fast or we’re going to lose out on it.” You know, that’s how it made me feel, that was my initial impression to the market, these houses just gone.

[0:11:29.1] NH: I think a lot of people feel that way and it can feel more overwhelming, especially if you’re like, looking at a house and someone shows up and you know, waiting for you to leave so they can go look at it. That feeling is like, I’m with you. I totally get it.

[0:11:39.2] KF: It was a little scary there first, you know, not knowing if we were going to be able to get the house that we wanted.

[0:11:44.5] NH: But I like your approach of you know, even though we’re not maybe a hundred percent ready or these aren’t houses that we’re a hundred percent certain on. It’s nice to go through the process, walk through the steps, and understand that, what that looks like so that when you were ready, when that house did pop up and come along, you can make the action point very quickly. So I think that was a smart move, that makes a lot of sense. You know, so talking about looking at houses then the big thing that I think people run into at that point too is, “Okay, well now, I’m ready to look at homes, I figured out my budget, you know, all these pieces are in place but what about financing?” I think that paying for a new house is a pretty overwhelming part of the process. How did you navigate that I guess and what did that look like for you guys?

[0:12:20.1] NH: So through our local realtor contact, we first were talking to her about – we had talked with YFP over the years about the different options available to healthcare professionals like pharmacists, you know the “physician style loans” or healthcare professional loans, whatever and particular institution chooses to call them and we’d said, “Hey, you know, this is something we’re interested in because we’re pretty sure we qualify and do you know anyone who does this?” and she got a contact that she was pretty sure did. So that was the first bank loan officer that we talked to and separately, through YFP, we had a resource that let us look by our state and my degree, which is pharmacy, PharmD, and see what banks have the pharmacist included in their physician-style loan programs. So we kind of had that list and then we had this contact and we worked through the process of pre-approval and kind of talking about some of the things and we actually found out that that bank didn’t routinely include pharmacists. The loan officer was super great, she felt like she could get us an exception and essentially get us one of those style loans, and then the week that we went to get that pre-approval all the way through, get that loan kind of nailed down was the week that there was some kind of like banking crisis, some bank in California.

[0:13:53.0] NF: Collapsed?

[0:13:53.4] NH: Collapsed. Yeah.

[0:13:54.4] NF: Something like that.

[0:13:55.6] NH: I remember.

[0:13:57.1] NF: And so that bank institutions were not doing any exceptions right now.

[0:13:59.7] KF: Yeah, they completely locked on exceptions for all of their loans.

[0:14:02.4] NF: So she put together the best custom loan that she could do for us and we went ahead and got that pre-approval but even she said like, “You should talk to another lender and see what they can offer you.” So then we went back to that list that we had through the resource from YFP and talked to one of those lenders and they, who did explicitly include pharmacists in their healthcare professional loan program and we went through the process with them as well of getting pre-approved. Now, their pre-approval was a little more vague in terms of what the interest rate would be in things. It was a lot of like, “You’re pre-approved but you won’t know any details until you give us like a purchase price and a date” kind of thing.

[0:14:49.3] KF: Yeah.

[0:14:53.1] NF: So we actually ended up going all the way through the process, getting to the point of making an offer, starting off with bank B, and then when we got the final numbers, it was not good.

[0:15:04.3] KF: They were terrible.

[0:15:05.6] NF: They were not good compared to bank A, and so we ended up switching lenders in that final week of between putting in the offer and having the offer accepted. We ended up switching lenders because everything across the board between the two offers was better for bank A, even though it didn’t end up being explicitly like a physician-style loan program. So that was surprising to me, it definitely wasn’t something I was expecting. I also didn’t fully realize before the process that pre-approvals only last for a certain period of time and because they’re a hard check on your credit, you obviously don’t want to go and get pre-approved at like 10 different places. It was definitely a process but we started with our local realtor to get someone that she was familiar with and had worked with before and that’s ultimately where we ended up back and so that ultimately was a good experience but there was definitely some angst. Once we started getting –

[0:16:06.4] KF: To put it lightly.

[0:16:08.0] NF: Once you started getting those final numbers from the second place that on paper, should have been better.

[0:16:13.4] KF: Better for us.

[0:16:14.1] NF: But again, we’re really focusing on like, “What is that monthly payment going to be?” Of course, we were talking about like PMI, we were going to like have to have PMI with the second place and I don’t really know why. One of the big distinctions with those healthcare professional loans is the amount that you need to put down in a down payment and we’re going to have to put down a lot more for Bank B. So like all of these things, again, just everything across the board ended up being better for Bank A. So I’m so glad that we talked to them first and had the option. That’s the bottom line is have at least two, maybe even three options because as long as your pre-approval is still valid, you should be able to pick the best option that fits you.

[0:16:56.0] NH: So many good nuggets in there and I want to make sure we highlight a few because I think you guys hit the nail on the head on all that stuff, right? So point one that I want to highlight is shop the lender, right? Talk to multiple lenders, don’t just buy into one person and lock into it. I am notorious for this. I will like, convince myself that once I’ve had a decision that like, I’m just going to stick with it because I’ve already made a decision, and even if it’s the bad one, I don’t care like I’m in, right? Don’t be me on that, right? Shop lenders upfront, that’s super smart.

Then, what I loved too is that you mentioned about changing the lenders along the way. So many people don’t realize you can do that, right? Even when you’ve put an offer in already, with the pre-approval letter, you can go back and get a different lender after the fact, right? You can’t be a week away from closing and change lenders but if it’s still early enough in that process even after the contract’s been accepted, you can change lenders. So definitely approach it for you guys on that and then the other thing you mentioned too was the hard credit checks. I advise my clients, any time they’re shopping around, try to do all of your pre-approval shopping within a two-week period that will ensure you only get one credit check. It will basically you know, trunk it down to one credit check across all those lenders, and then if you have to re-up your letter in three months, you know, you can do that for another poll but at least it won’t hurt your credit nearly as much.

So really, really good stuff you guys mentioned in there, I love that.

[0:18:10.4] NF: Well good, because we learned it by doing it.

[0:18:12.7] KF: As we were doing it.

[0:18:14.5] NH: It wasn’t that we knew it going in, which again is the point of this conversation.

[0:18:18.6] NF: Yeah, that’s exactly why I wanted to talk about this stuff because it’s those things that you don’t even know to ask those questions until you’re in the middle of it and then you learn it, you’re like, “Oh, wish I would have known this.” So yeah, I’m glad we’re covering this. Talking a little about the lender piece, you’ve mentioned your real estate agent a few times. We talk a lot here at YFP about using a team, right? Especially when making a financial decision, especially in the world of pharmacy, you know just about everything can benefit from that team approach. Were there other people on your team or were there key pieces of your team that you felt like were essential that maybe we haven’t mentioned or anything you want to highlight within the team that we’ve already touched on?

[0:18:51.0] NF: When you think that you know, it started with our YFP financial planners and so we’ve worked with YFP for three and a half years about. We started early 2020, actually just pre-COVID, which was a really fun time.

[0:19:04.3] KF: Yeah.

[0:19:04.9] NF: To get started, we were actually a week away from refinancing our student loans when the lockdown hit and everything. So I mean, we were on the cusp. So all that to say just to give people some context, so we’ve had three different people that we’ve worked with as our one-on-one financial planner and we actually started with Tim Baker, which is a ton of money.

[0:19:25.7] KF: Yes, it was.

[0:19:26.6] NF: And so along the way with all three of them, we’ve talked about our goals and we’ve talked about home buying, so it always started there and we definitely went there first to get in contact with you. You got us in contact with our local real estate agent. Our local real estate agent got us in contact, like I said, with our loan officer. Those were really the main people. They kind of facilitated most of the communication with all of the other, to use medical lingo, all the other consultants, if you will. We did a little bit of emailing back and forth with like a title agent and some things like that but I don’t feel like I knew those other people the way that I feel like we knew and talked a lot with our loan officer and our realtor.

[0:20:14.4] KF: Yeah.

[0:20:15.0] NH: Yeah, that makes a lot of sense and I know we touched on this a couple of times but you know, you guys used the home-buying concierge service that we offer here at YFP, and for those who haven’t heard about it maybe, basically it’s a free service that we offer, not just to planning clients but to anybody who’s interested. You can go right to our website, yourfinancialpharmacist.com, and click on “buy a home” and right there, you can sign up for a call with me. A 30-minute phone call or less, we can talk about your goals, we can talk about what you want to achieve, kind of home you want to buy, and then we’ll get you connected with a great real estate agent and something we really like to be upfront on here, right? Is like it’s not always perfect, right? So we’re pretty good at what we do, matching people up with great agents but sometimes the communication isn’t there upfront. So when we connected with you guys with the first agent, somebody that we’ve actually used in the past for other clients and has been fantastic the communication just wasn’t there, right?

[0:21:05.2] KF: At very first, things were fine. You know, we email back and forth, we were trying to set up a date to have a not really face-to-face but –

[0:21:12.9] NF: A more in-depth.

[0:21:14.1] KF: Like a more in-depth –

[0:21:14.8] NF: First conversation.

[0:21:15.6] KF: Conversation to get to know each other a little bit and what we’re kind of looking for and I had told her, “You know, we’re free at these three or four days the following week” and I never heard back from her and two weeks go by and I still haven’t heard back from her. I’ve reached out a couple of other times and so then we reach back out to you, Nate, and we’re like, “We don’t know what’s going on. We hope she’s okay but she’s not responding to anything. So what do we do?” and you were like, “You know, I’ll reach out to her, see if we can get you guys back in contact. If not, let me know and we’ll move on from here.” I was like, “Okay, great” and then we still didn’t hear from her.

So then you got us in contact like the very next week with our current real estate agent and she has been absolutely amazing. You know, she’s been very responsive, she’s been easy to communicate with, almost overly so. You know, there have been a couple of times that she’ll email us back and you know, “As soon as I get back from the gym, I’ll call you and do this, this, and this” and like, “Wow, you do not have to email me while you were working out but okay, thank you.”

[0:22:26.2] NH: Yeah, that’s good and it just shows that like you know, real estate is like any other business, right? There are good people and bad people within every business and there are good times and bad times for those same people, right? These are agents that we’ve worked with in the past and it just maybe there is something going on with their life that doesn’t work and this isn’t the right time for that connection to take place. So one of the things we really try to focus on with the concierge service is not just giving you an agent and walking away but being part of that team, right? YFP stays a part of your team the whole way so that if you do have that, we can come back, get you reconnected, and get you on the right path.

So again, I like to be really transparent with these conversations and tell people exactly what it’s like because it’s not as easy as picking up the phone, calling the first agent with the most highest reviews and then you get off and run, right? It doesn’t always work out that way, so I’m glad we get to share that story a little bit and it sounds like once you guys got off and actually looking at houses, it was the right fit and you guys were able to close, right?

[0:23:20.5] KF: Yeah.

[0:23:20.8] NF: Yeah, absolutely. Everything went well from there and honestly, like probably would have been fine because we were starting very early in the process but just again, with so much uncertainty and ignorance, for lack of a better term, on our part we wanted to start really early because we didn’t actually even know if that was early. We thought maybe six, seven months from our target buy date might have been late. We didn’t know and so that’s why we were really keen to start having conversations with someone and so that’s why we’re willing to go ahead and make a connection with someone who’s going to be able to interact and respond to us right then. So it was really nice, like you said, to have that lifeline of being able to come back to you, Nate, and say, “Hey, is there another direction we can go?”

[0:24:09.3] KF: Yeah.

[0:24:09.7] NH: Happy to do it. I mean, now that you’ve worked with an agent and again, gotten to the closing process. Are there tips you have for people out there that might be vetting their own agents or maybe not using our concierge service, like things that you think are super important to have as part of – as a good real estate agent?

[0:24:24.0] KF: I mean, I think we already said it a couple of times but I mean, being able to have clear and responsive communication.

[0:24:31.3] NF: Yeah, reasonably responsive, you know? I don’t need my realtor text if I send an email at midnight because I’m up just worried and thinking about something, I don’t need you to respond at 1:00 in the morning that kind of thing but you know accessible was certainly a thing, especially because there were times, there were parts of the process that we were working through on weekends, in the evenings. That week of like putting in the offer and getting the offer accepted was a very hectic four to six days and it felt like we were emailing and communicating and doing stuff –

[0:25:08.6] KF: Phone calls, texting.

[0:25:09.5] NF: Finding any paperwork, getting the paperwork signed.

[0:25:11.8] KF: Scanning stuff.

[0:25:12.7] NF: Doing all of this stuff nonstop for that whole week.

[0:25:16.4] KF: For that six days, yeah.

[0:25:18.0] NF: So you know, that’s important but I’d say the other piece and you can speak to part of this honey, is like having an agent who’s really listening to what it is that you’re looking for in a home not just in terms of price and that’s the piece you can speak to but also you know, if you’re saying or you’re finding, that was something we found things that were important to us that we didn’t realize were important to us once we started looking at homes and actually picturing our self living there with our family. You know, so the simple example for us is like we really wanted a fenced-in backyard, you know, just the idea of like being able to tell the boys, “Okay, go outside and play” and not have to worry about wildlife or somebody’s dog or whatever, you know?

As I started looking at different houses, some that had it and some that didn’t, I found that that was important to me and we were able to communicate to our realtor that. And then when you see that they’re responsive and they start then bringing you homes that match what it is that you’re saying that you want and what you’re finding that you want, I think that is really key. You know, if you are working with someone and they’re continually bringing things to you that are outside of your price range or not matching what you say you’re looking for, then that person for whatever reason may not be the right agent for you to find your home because it’s about you finding your home.

[0:26:48.7] KF: Right. Our agent said that to us a couple of times. She goes, “Well, this is not my home. So you know, if you like this that’s great.” That was really fun to hear her say that. What Neal was eluding to earlier was when we had initially talked to her, we had this really broad price range that we were looking at and you know she’s like, “All right” so she put it into her system and was able to email me houses to look at. Once we got closer and we were seeing, “Okay, these houses are probably way out of our comfortable price range” I emailed her and I said, “Hey, let’s change that filter to this price range” and she did it that day and I never received a house after that that was over that price range. So that was really, really nice to see her be responsive in that way, especially that quickly.

[0:27:39.3] NH: That’s great, I love it. I appreciate you guys giving that synopsis because I think those are all super important pieces and things that, like you said really well, it’s the things you don’t realize until after you’ve gone halfway down the process, you’re like, “Oh man, this is important and I didn’t know it’s important.” So that’s really key. So I want to go back really quickly to one other thing you mentioned about that crazy six days that you mentioned, right? So after the sort of like place is under contract, now what? Anything really stick out in there, things like tips you would give to people? I know it’s a ton of hurry up and wait and 30 people are emailing you that you don’t know any of them and they all need documents from you, right? I always know that process is hectic. Any tips or words of advice you can give to our audience that like, “Hey, do this upfront so that the six days aren’t as crazy.”

[0:28:23.8] KF: Well, it’s something that we did really early on in the process with our agent before we had even looked at a house at all was ask her for all the papers that we’d be seeing at closing. So she emailed us all the blank documents, we were able to read through those. We were kind of half-familiar with them by the time we were actually signing them so that we weren’t totally drowning in all that information all at once. So that was something really good that we were able to do but then I feel like something else that we were able to do was utilize our real estate agent and say, “Okay, what does this mean? Why are we doing this? You know, is this reasonable to ask the buyers for this or the sellers for this?” or whatever. Just utilize those resources that are right there that are helping you through the process anyway.

[0:29:11.2] NF: Yeah, I’d say, you know, it’s really easy to get overwhelmed and one thing that you definitely should do is actually sit down ideally together if you’re a couple and read the documents that you’re about to sign because sometimes, there might be things in there that you don’t either understand or didn’t expect. You know, if they say that they’re taking all the appliances out of the house and you didn’t know that –

[0:29:36.3] KF: That’s a big deal.

[0:29:37.6] NF: You need to know that. So that’s like a really simple thing, it’s very easy to skip over that and there were a couple of times where we were like, “Wait a minute, why is this number this? Shouldn’t it be different?” you know, we add a lot of communication about that. I didn’t realize our final closing cost changed multiple times because it’s like a projection and it had things in the projection and then they took them out and then they put them back in.

[0:30:03.7] KF: We thought they were a different price when they put them back in.

[0:30:05.6] NF: And we actually ended up scheduling our wire transfer for amount X and then it changed like 48 hours later and we had to call the bank and change the wire amount again, change it, and that was a little stressful, you know? Because we’re talking about a lot of money so you really don’t want to mess it up.

[0:30:22.5] KF: Right, that is where our loan officer came in. You know, I talked to her three or four times on the phone a week of closing and she was very, very good about walking me through like, “Okay, this is what’s happening right now, this is why the amount says this. This is what it should be closer to actual closing” and again, communicating with her and having her be accessible as well was really good for us not to get lost in the process.

[0:30:50.5] NF: Yeah, if you see something weird or you have a question, you should ask. If you don’t feel comfortable asking, you should take a big step back if that’s a big red flag. It is too big of a decision to go into it not knowing and understanding a lot of it. Now, that being said, I felt like when we actually finally signed our documents electronically, there was like a whole set. I mean, we did a physical signing part too, that was fine.

[0:31:16.4] KF: That was it.

[0:31:16.8] NF: There was like this whole section that was basically like, what is a home loan for dummies, and all this terminology. I was like, “Why isn’t this the first thing they send you?”

[0:31:26.7] KF: Yeah, why isn’t this the first thing that you read?

[0:31:28.6] NF: Somebody take these last 20 pages and just send it to me at the beginning and that would have made things a lot easier but overall, you know because we felt very comfortable asking questions and we just did, we just asked questions all the time.

[0:31:42.0] KF: I sent so many emails and so many text messages.

[0:31:45.2] NF: That helped. I mean, being organized, you know we had a lot of our documents saved like in a folder on the computer for like home purchase documents. That made it really because you’re going to have to upload a million things. Even something as simple as if you have the ability to scan documents, if you are printing them manually, signing them, or you have the ability to sign things electronically, you will make that process go a lot faster. If you have you know, a touch screen device and a PDF editor that you can sign right there, you know, like that is so much faster than printing and signing and going to the library and faxing it to yourself, so whatever.

[0:32:23.2] KF: Yeah, you know whatever you have to do.

[0:32:25.1] NF: You know, whatever you have to do to get all that paperwork done, it’s quite a process. Yeah, so it was fun for lack of a better word and we got all the way to the physical signing and it really was what everybody tells you like you’re going to sit there for an hour and a half and sign documents and get a cramp in your hand. Something that was interesting like we never ever saw our sellers. Like they had done everything ahead of time and just have like their representatives there.

[0:32:49.8] KF: Yeah, they’d pre-signed.

[0:32:51.4] NF: Kind of wasn’t expecting that but it did made a difference. There was even like a little hiccup at our closing, where the title company wasn’t sure that we had actually given them earnest money and we had and so then there’s –

[0:33:04.9] KF: Well and our loan officer was at our closing and she was like, “We definitely have this on file, we sent this to you.”

[0:33:10.7] NF: You know, so and if the title company, you know they have just like someone that they’ve hired, a third party like be there to do all that process so –

[0:33:18.8] KF: She has no idea, she doesn’t know us at all. She doesn’t know anything.

[0:33:21.9] NF: Yeah, she just has a file that’s like four inches thick with all of their documents and these notes in it, so then she’s talking to the title company people and they’re talking to the realtor and you know –

[0:33:34.5] KF: And they’re talking to the bank and we’re just sitting there like, “Okay, better run snacks to the boys.”

[0:33:40.4] NF: It all worked out but all that to say, I think that’s to say you know, do as many preparations as you can but don’t be surprised when –

[0:33:48.5] KF: Surprises come up.

[0:33:50.2] NF: Unexpected that you know, expect the unexpected because it is a very long complicated process and you will almost certainly run into something that you didn’t think about before or you haven’t heard that term or whatever.

[0:34:04.5] KF: Yeah.

[0:34:04.9] NH: Well, I really like the expectation setting, right? Like this is going to be a little crazy, be prepared for that and all the other prep work, the tips that you guys gave and I think creating a file in your computer that’s a great one. Being able to save documents because you might have to send them multiple times, referencing them, right? In case you did send the earnest money, you’ve got a document that says, “Hey, look, this is here” just in case someone else didn’t have access to that. So again, really great tips and it’s very clear that you guys have been through the process because I’m thinking about all these pieces like, “Oh yeah, I remember that. Oh yeah, that’s a problem. Oh yeah, I see my clients running into that.” So you guys are not alone and again, it’s nice to hear hopefully for some of our audience just how overwhelming it can seem but how you can make it through with a little bit of prep work and access to good resources.

So I really appreciate you guys hearing your story today, giving some first-time homebuyers out there some confidence that they can make it through and get to where you guys are now and again, just congrats on the new home, and seriously, thank you for sharing your story. It’s been awesome.

[0:35:01.6] KF: Yeah, thank you for having us.

[0:35:02.2] NF: Hey, thanks for having us.

[0:35:03.2] NH: Yeah, take care guys.

[END OF INTERVIEW]

[0:35:04.3] TU: 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 forked, 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.

[DISCLAIMER]

[0:35:43.6] TU: 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 it is not intended to provide and should not be relied on for investment or any other advice. Information on 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 archived newsletters, blog post, and podcast 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 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.

[END]

Current Student Loan Refinance Offers

Advertising Disclosure

Note: Referral fees from affiliate links in this table are sent to the non-profit YFP Gives. Read the full advertising disclosure here.	Bonus	Starting Rates	About	YFP Gives accepts advertising compensation from companies that appear on this site, which impacts the location and order in which brands (and/or their products) are presented, and also impacts the score that is assigned to it. Company lists on this page DO NOT imply endorsement. We do not feature all providers on the market.
	$800* Loans* ≥150K = $800 100-149K = $450 <100K = $350	Variable: 5.28%+ APR (with autopay)* Fixed: 5.28%+ APR (with autopay)* *All bonus payments are by gift card. See terms	The "Kayak" of student loan refinancing, Credible displays personalized prequalified rates from multiple lenders	Check Rate
	$750* Loans ≥150K = $750* ≥50K-150k = $300	Fixed: 5.49%+ APR (with autopay)	A marketplace that compares multiple lenders that are credit unions and local banks	Check Rate
	$500* Loans ≥50K = $500	Variable: 4.99%+ (with autopay)* Fixed: 4.96%+ (with autopay)** Read rates and terms at SplashFinancial.com	Splash is a marketplace with loans available from an exclusive network of credit unions and banks as well as U-Fi, Laurenl Road, and PenFed	Check Rate

Recent Posts

[pt_view id=”f651872qnv”]

YFP 160: Navigating the Home Buying Process Through the YFP Concierge Service

Posted on July 9, 2020November 2, 2022 by yfpadmin

Navigating the Home Buying Process Through the YFP Concierge Service

On this week’s episode, sponsored by HPSO, Nate Hedrick, The Real Estate RPH, interviews two pharmacists, Shelby Bennett and Bryce Platt, about their home buying experience. Shelby and Bryce recently worked with Nate via the YFP Real Estate Concierge Service to craft a plan and connect with a local preferred agent to buy their first homes.

About Today’s Guests

Dr. Shelby Bennett

Dr. Shelby Bennett is a Clinical Assistant Professor at the University of Nebraska Medical Center College of Pharmacy. Originally from rural northwest Iowa, Shelby graduated with her PharmD from Creighton University in 2016. She then completed a community-based pharmacy residency with the University of Kansas and Balls Food Stores in Overland Park, Kansas, where she earned a teaching certificate from the University of Kansas Health System. After residency, Shelby designed and implemented clinical services at two independent community pharmacies closer to her hometown. Shelby made the switch to her dream career field and bought her first house (with some help from Nate and the YFP team!) during the COVID-19 pandemic, and she’s here to tell the tale. She is excited to be back in Omaha, where she resides with her cat, Sophia.

Dr. Bryce Platt

Bryce Platt earned his Doctor of Pharmacy degree from the University of Kansas and completed a postdoctoral fellowship in Population Health Management with Omnicell and Campbell University College of Pharmacy and Health Sciences in July 2019.

Applying five years of experience in community pharmacy practice and the same passion for improving healthcare, Bryce has worked alongside engineers, data scientists, business analysts, and executives over his career, providing clinical expertise and gaining valuable experience in improving population health. Key projects include leading clinical content preparation for a national health plan program, evaluating international markets for potential Omnicell expansion, working with international teams on protocol development for a research study, assistance with development of a new Medication Therapy Management platform, developing an opioid abuse mitigation program, and preparing business cases for innovative Omnicell solutions.

Bryce is currently the Clinical Pharmacy Specialist at Omnicell and serves as a preceptor for pharmacy students from six different universities during their rotation.

Summary

On this podcast episode, Tim Ulbrich hands the mic over to Nate Hedrick, The Real Estate RPH. As both a pharmacist and a real estate agent, Nate has a unique perspective on the home buying process and he’s used it to help many pharmacists achieve their dream of owning a home. Let’s put it this way: he’s got the insider’s view.

Nate interviews Shelby and Bryce, two pharmacists that both bought their first homes with the help of the YFP Real Estate Concierge Service. Shelby purchased a single family home Nebraska and shares her journey of real estate agent struggles, house she chose a lender and her lessons learned along the way. Bryce recently purchased a condo in North Carolina to house hack. Inspired by YFP 130: House Hacking Your Way to Financial Freedom, Bryce got to work and within months made this dream happen. Bryce talks about how the YFP Real Estate Concierge Service connected him with a preferred local agent, his most crucial team member on this real estate adventure and how he was able to get a pharmacist home loan with IBERIABANK/First Horizon for 3% down with no PMI.

The Real Estate Concierge Service is designed to help pharmacy professionals get connected with local preferred agents and have support well past closing on a home. Here’s how it works:

Step 1: Crafting a Plan. We start by designing a plan that works with your budget and your financial goals. Our 30-minute jump start planning session helps determine your needs and answers your important questions right from the beginning.

Step 2: Connecting you with a Pro. You need an agent you can trust. And one that understands a pharmacist’s busy schedule. Our network of agents have gone through a rigorous screening process to ensure they have your best interest at heart. Once we know what you’re looking for, we’ll connect you with one of our preferred local agents that will help find the perfect place to call your own.

Step 3: Staying the Course. After connecting you with a preferred agent, we stay involved well past closing. If questions come up, priorities change, or you need an unbiased opinion, we’re available to lend an ear and a helping hand.

Book a free 30-minute jump start planning call with Nate today!

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. Excited to have back perhaps the most frequent guest on the Your Financial Pharmacist podcast, Nate Hedrick, The Real Estate RPH, who’s going to be joining us as we highlight two case studies of pharmacists that worked with Nate as a part of the real estate concierge service to land really two incredible opportunities. And we’re going to talk about those in more detail on this week’s episode. So Nate, welcome back to the show.

Nate Hedrick: Thanks, Tim. Always nice to be here.

Tim Ulbrich: What’s new and exciting up in Cleveland, Ohio?

Nate Hedirck: Besides quarantining, actually Kristin and I just dove into our first out-of-state investment property. So we’re currently in the middle of figuring that whole game out. So I’ve been posting a little bit about it and I’m sure I’ll be posting more as demo gets underway. But that’s the exciting real estate world that I’m living in right now.

Tim Ulbrich: I saw your photos on Facebook, and I think for those that may not have experienced that firsthand or that experience of doing a flip and a demo, quite a project like that might give some people palpitations. But it looks like you’ve got your hands full.

Nate Hedrick: Oh man, yeah. The smell in there — and I have not been there, full disclosure — but I have been told it is horrible and the heat has not been helping. So we’re starting off maybe on a yucky note. But hopefully it will get better as time goes on.

Tim Ulbrich: Yeah, which either unfortunate or fortunately, depending on how you want to look at it with real estate, often means a great opportunity if you’re willing to work through some of that to be able to have a good investment opportunity, whether you end up flipping it or whether you keep it and BRRR it, it sounds like it might be a good opportunity. And we’ll feature that perhaps on a later episode of the podcast as well.

Nate Hedrick: Great.

Tim Ulbrich: So really excited, two awesome stories that you are going to feature, individuals, pharmacists that you’ve worked with as part of the real estate concierge service to help them with their home buying purchase as their agent and I think two very different stories. But we’ll really give our listeners an inside look into what that service is all about and perhaps even give some of our listeners some ideas about investment opportunities with Bryce’s story. So tell us a little bit about what our listeners can expect to hear from these two interviews that you did.

Nate Hedrick: Yeah, so you let me take the mic for the first time, which is kind of cool. I got to be on your side of the table, which was fun. So I interviewed Shelby and Bryce. And Shelby — both of them, actually — are first-time homebuyers. And what I think is going to be nice to share with you guys is that Shelby was really kind of your standard first-time homebuyer, looking for a place to live, you know, nothing frilly about it. And so I think moving for a new job. So she’s going to be a really great story to kind of showcase what most people are going to go into. And then Bryce is another great case study because he was looking for more of it as an investment property. And he actually ends up buying a 4-by-4, which we’ll talk about. But he’s a house hacker. So we’ll talk about what that looks like and what that’s going to do for him. But it’s two good stories of how first-time homebuyers can go in different directions and I really think it brings interesting notes to what the concierge service can provide.

Tim Ulbrich: Yeah, I think there’s a little bit of everything here for those that are listening, you know, whether they’re first-time homebuyers going about it more the traditional way, first-time homebuyers that want to do some more creative house hacking, investing, or those that have a home and perhaps want to get into real estate investing. I think there’s something to take away for everyone that’s listening. And you use as the framework for your interviews the six steps to the home buying process, which we outline in the home buying, YFP home buying guide. And so for those that want to download that guide and learn more about those steps and be able to connect that with the interviews that you did, head on over to YourFinancialPharmacist.com/homeguide, all one word. Again, YourFinancialPharmacist.com/homeguide. And hang with us, so we’re going to go into Shelby’s interview and then you’ll hear from Bryce as well and his interview with Nate. And then we will wrap up the show talking a little bit about the concierge service, connecting it back with those interviews and those stories and where you can learn more to connect with Nate from there. So let’s transition to hear Nate’s interview with Shelby.

Nate Hedrick: Hi, Shelby. Welcome to the show.

Shelby Bennett: Thanks, Nate. Thanks for having me.

Nate Hedrick: Yeah. It’s great. I really appreciate you being here. It means a lot to have you on the show. Can you dive in and tell us a little bit about yourself?

Shelby Bennett: Yeah, absolutely. So I am a pharmacist that graduated in 2016. So this is going into my fourth year of practice and recently made a big job change from an independent community pharmacy in rural Iowa where I’m from and recently took a job teaching at a college of pharmacy in Omaha, Nebraska. I went to college at Creighton here in Omaha for undergrad and pharmacy, so it’s kind of good to be back in my old college town. And yeah, I just bought my first house, which is what I’m here to talk about a little bit.

Nate Hedrick: Yeah, you just moved in — what? Two weeks ago now? Three weeks ago?

Shelby Bennett: About a month ago. I closed May 29.

Nate Hedrick: OK. Nice. And how’s the move-in process going?

Shelby Bennett: It’s going well. Everyone’s telling me that home projects never end, and I’m definitely starting to understand that. I think I’m finally to the point where all the stuff is out of the boxes. It’s just not put away yet.

Nate Hedrick: I knew that when we moved into our last house that any boxes that were there after like a year, we just didn’t need that stuff. We could just throw it out. So hopefully you’ve got everything unpacked, you’re in a good spot.

Shelby Bennett: Absolutely.

Nate Hedrick: Well we’re going to jump in and do a little bit about that experience. I again want to follow the Six Steps to Home Buying Guide that we have available through Your Financial Pharmacist. That guide will actually walk you through the same six steps that Shelby and I are going to walk through today. So if you take a look at No. 1, we are talking about making sure you’re ready. So this is before you start a Zillow search, before you do anything, you know, how do you determine if you are ready to buy a home? So Shelby, can you tell me a little bit about why you decided to buy a home instead of continuing to rent?

Shelby Bennett: Yeah, absolutely. So I decided to buy a home because I was ready for the permanence of living in one place, because I wanted to feel I had the freedom to make changes to the house or the yard without having to ask for a landlord’s permission. My last rental was a small house, and I liked not having neighbors as close as you do when you live in an apartment. But I was also ready for more space. My last place was only about 650 square feet, so I was ready to expand.

Nate Hedrick: Totally understand that. Yep. We were similar when we made our decision. So that’s great. And then if you’re like any good pharmacist like me, you’re probably extra detail-oriented. But did you dive into the numbers really deep on the budget? Or were you using something more broad? How did you set that ideal budget or how did you look at that question?

Shelby Bennett: Yeah, so this is going to be one of those don’t-try-this-at-home examples.

Nate Hedrick: Perfect.

Shelby Bennett: I discovered the YFP Home Buying Guide after I’d already started looking at houses online. So I definitely did this part in the wrong order. I started looking at house in the neighborhoods I wanted to live in and then extrapolated my budget backwards based on the houses that I liked.

Nate Hedrick: That’s awesome. You’re not alone in doing that. I think most people actually operate that way.

Shelby Bennett: My logic was, OK, so it will cost x amount of dollars to buy a move-in ready house in Dundee, like can I afford to live there? But then I got lucky in that after meeting with Tim Baker and working through some of his equations based on income and expenses, the budget I had originally set wasn’t really too far off topic. So I got lucky there.

Nate Hedrick: That’s good. Yeah. Tim’s home buying guide that he does with the YFP Planning is great. I love that spreadsheet.

Shelby Bennett: Yeah, that’s really nice.

Nate Hedrick: Great. Alright, so you’ve set your budget, maybe in a little unorthodox way, but I think probably more normal for most people, I like that. And then you’ve got to determine what’s important. You’re looking at things like location, size, flexibility, that’s our step No. 2. So this can get a bit overwhelming. You’re going from every house in a particular location and how do you narrow it down to what you’re looking for? So what were some of the criteria that you focused on when you were trying to determine what was important to you?

Shelby Bennett: Yeah, absolutely. So it was really important to me to be close to work. I grew up in a rural area, so everything that you wanted to do from a work perspective was really close, and then everything you want to do from a cultural or a shopping standpoint was a long ways away. But it was important to me to maintain the same short commute that I had had in my previous experiences. So because I’d lived in Omaha for six years during undergrad and pharmacy school, I had a pretty good idea of the neighborhoods that I’d want to live in that would be a short commute to work.

Nate Hedrick: Nice.

Shelby Bennett: And I also wanted enough space for my immediate family to visit and stay. My previous house was too small for all of us to hang out at the same time. And then as I alluded to earlier a little bit, I wanted a house that didn’t need a lot of interior work done. I figured starting a job, buying my first house, moving in a couple hours away, was enough projects to start with, especially since I’d be living in the new house during a renovation. So exterior work I was OK with since it doesn’t really affect the function of your house. But interior work, I wanted it mostly done.

Nate Hedrick: Yeah, that makes sense, especially with starting a new job and moving across the state and all that. That makes total sense.

Shelby Bennett: Yeah.

Nate Hedrick: Great. Well, were you able to hone in on that? It sounds like you had a couple of projects, but hopefully they haven’t been too overwhelming.

Shelby Bennett: Yeah, yeah. So I actually had a contractor come earlier today and look at a couple things. But yeah, I ended up picking a place that had some exterior projects that needed to be done but ended up finding a place that almost everything I wanted done was on the inside. So almost everything on the inside was already done, excuse me.

Nate Hedrick: Great. That’s great.

Shelby Bennett: So that was really nice.

Nate Hedrick: Good, good. Well one of the other important aspects that we really want to focus on too is Step No. 3, which is assembling your team. You know, there are a lot of important team members included in the home buying process, right? You’ve got a real estate agent, you talked about working with Tim, so your financial planner, maybe an accountant, sometimes a lawyer in most states. So looking back at your purchase, who would you say were the most essential members of your team?

Shelby Bennett: Yeah, so I’m going to rank my team members by how many questions I asked each of them.

Nate Hedrick: I like this.

Shelby Bennett: Definitely the award for the most questions asked and answered goes to my local real estate agent that I worked with through most of the process, Rebecca. A month out from closing and we still probably talk about once a week. So she was really great to work with. Next up is probably Tim Baker, who’s been working with me on financial planning with YFP since November of last year. So kind of around the time I decided I wanted to be buying a home soon and kind of looking at some of those things. My parents were definitely a sounding board for me when I had questions. And they came with me during showings to catch things that I didn’t. None of us are real estates experts, but it was nice to just kind of have an extra set of eyes and to think about things that maybe I didn’t. And then last but definitely not least was you, Nate. You definitely came in clutch for me during a couple of slightly awkward dilemmas throughout my process.

Nate Hedrick: Yeah, I want to talk about that because that’s actually one of the main reasons I wanted to have you on because I think this is really good. We talk about our concierge service and the home buying concierge and how that works. And in my head, it’s this perfect system, right? We match you with an agent and you get off and you find your dream home. But in reality, it’s not always perfect, right? So we originally connected you through the concierge service with Emily, right?

Shelby Bennett: Mhmm.

Nate Hedrick: And things were — it was OK, but it wasn’t a perfect fit. So maybe you can tell us a little bit about that because I think this is a really cool story to share about what this can look like.

Shelby Bennett: Yeah, absolutely. So I think I talked to you probably on a Thursday night, and I think by Sunday night I’d already received an introduction to my first agent, Emily. And I was pleasantly surprised at how quick the process was, even though you hadn’t worked with agents in Omaha before. My first interactions with Emily were pretty positive. She was quick to respond to my questions. I had requested to see a few properties that I had seen online, and she set up showings for them. I’d never really been to a house showing before. So I didn’t know what to expect except that I figured it probably wasn’t exactly like you see on HGTV. I remember not really knowing how to feel after that first day of showings. It was exciting to get out and see houses, but I didn’t feel that supported by Emily as we looked at houses. She’d let us into the house and then just kind of wait for us to be done exploring. She was available for questions but usually gave short answers I didn’t fully understand. The one house I saw that I felt like I could see myself in needed a lot of yard work and some of the windows needed to be replaced. I felt like the more excited that I got about the house, the more she seemed to be talking me out of it. Spoiler alert, that’s the house I ended up buying. But we’ll get to that later.

Nate Hedrick: Nice.

Shelby Bennett: But yeah, my situation was a little unique in that I was looking for houses during the interview process for my new job. So I wasn’t in a place to make an offer for at least another couple weeks. I think that definitely affected my experience with Emily. So the second time I wanted to set up showings, I feel like she tried to talk me out of them a little bit, saying they probably wouldn’t even still be on the market by the time I was ready to buy. When I asked if I could still see the properties to learn more about the home buying process so I wasn’t scrambling at the end when I really needed something, you know, she made me whittle down the list of places I wanted to see from five to three for a five-hour round trip drive on my part. And then all of a sudden she had this schedule conflict, and she sent another agent to show me the homes. And that was super awkward for me. I didn’t really know. I was like, isn’t that your job? I didn’t really know what to expect from her or from me or if I’d done a wrong thing. It was definitely awkward for me. But even though that was super awkward, I feel like it was the best thing that could have happened in hindsight because the new real estate agent, Rebecca, was super personable, she was exploring the houses right there along with us. And she was giving us insight about the homes and the neighborhood. And I felt like she really welcomed my questions. I didn’t feel like they were stupid questions, that I asked too many or anything like that. And we just had a great time seeing the homes. We had a lot of fun, and I left feeling just a lot more hopeful. The only thing is I didn’t know like was it possible to break up with your real estate agent? Could you switch to a new one? Like I had no idea.

Nate Hedrick: Yep.

Shelby Bennett: So thankfully, the next day, Nate, you’d sent me an email just checking in to see how things were going. And thank goodness for that. I had decided to fill you in on my predicament.

Nate Hedrick: I remember that email.

Shelby Bennett: Oh my gosh, I’m so glad I did. I feel like you just really validated all of the concerns I was having, and you helped me make the transition from Emily to Rebecca by helping me understand kind of the structure of real estate offices and kind of what to focus on when kind of asking to switch. I can’t imagine how the home buying process would have gone if I hadn’t reached out to you, taken your advice and then decided to work with Rebecca moving forward.

Nate Hedrick: Well, we messed it up to begin with, right? We gave you Emily first, so we had to fix it and get you back on track.

Shelby Bennett: Well you didn’t know.

Nate Hedrick: No, and you know, it’s hard, right? So we do these interviews, and we interview these agents. But until someone’s worked with them that we know, there’s no way to know up front. And so luckily, Rebecca was on Emily’s team and was just a much better connection point for you. She was much more first-time homebuyer-centric. And it was obvious in your email that she was someone that you connected with and that you were going to be able to work with long-term. So I’m really glad we were able to get you switched over to Rebecca. So again, the point here is that, you know, we try, we do the best that we can, but the concierge service is not perfect. But the good news is that we’re always a part of your team. So when something like that happens, you did the exact right thing, just reached out, say, “Look, this isn’t working. I need to pivot.” And we can help you make that pivot. So again, I really — I love sharing the good stuff that we do with concierge services, but I’ve also got to make sure that we share the real stuff too. And this is exactly that. So thank you for telling that story.

Shelby Bennett: Yeah.

Nate Hedrick: Alright, so then once we found a place, we found the original place and then we got talked out of it, now we’re back. Then it’s choosing a loan and getting preapproved. So a lot of people kind of struggle when it comes to getting financing. And so this is Step 4. So can you tell us a little bit about how you went about navigating that process and any tips that you have for our listeners now that you’ve gone through it once for yourself?

Shelby Bennett: Yeah. Absolutely. So I was in the market for financing in April. So right in the middle of the COVID shutdowns. So Rebecca had recommended that I choose a lender I knew I could get ahold of on short notice since not everyone was working from the office anymore. She said that delays from lenders can delay closing on the house. I definitely didn’t want that, ended up kind of a short schedule from by the time I accepted the job to the time I needed to be moving. So I knew I needed to get going more quickly. So yeah, so thankfully I have an extended family member who’s a home mortgage consultant. So I knew I’d be able to contact him if I needed. So the process I used, I got some rate quotes from both my family member’s national lending company and then I talked to others to see what rates were being offered by IBERIABANK/First Horizon, as recommended by Tim Baker. And then because I’d be putting 20% down with a conventional loan — and that was I guess a recommendation from Tim as well — and the interest rates were similar between the two lenders, I decided to choose my family member as my mortgage consultant because I wanted somebody, kind of like Rebecca, that I was comfortable asking questions to and somebody I felt like would recommend the best options for me and not just try to sell me something. I think my biggest tip is to really just use your home buying team to help you make those financing decisions. I don’t know about a lot of you out there, but I am not an expert on finances by any means. And so it was so nice to have pros to reach out to when I had questions or wasn’t really sure because I ran into another situation I was pretty sure I had all my financing ducks in a row. And then I had an immediate family member recommend I put less than 20% down after reading an article about how COVID would affect the housing market and its potential to be worse than the Great Depression, in the article’s words. And man, that really threw me off. On super short notice, I talked to both Robert and Tim Baker at YFP and to you, Nate, to kind of get your take on the situation. I knew my family member was coming from a place of care and concern for me, but I definitely didn’t want to make a decision I’d regret later, especially not one that costs a lot of money and was spread out over 30 years. So just like with my real estate concerns, both Robert at YFP and I feel like Nate, you really took the time to answer my questions, kind of justify both my concerns and then tailor your response around some of the details of my particular situation. And it was just so nice having another opinion. It made me feel like no question I had was a stupid question. And it just really made me feel like I had another person I could reach out to and I was like, I have no idea what I’m doing.

Nate Hedrick: Good, well I’m glad we could be there for you. And you’re right, the amount to put down and the type of financing and all the things that go into that, it’s so different for everybody. I think we’re so quick to say, you know, 20% is what you’re supposed to do. And it just feels like that’s what you hear about. But the reality is that it’s different for every situation and every person. So it’s always good to get those second and third opinions from someone else that knows your finances and knows what you’re going through. So yeah, definitely a tricky spot, but I’m glad you had the support that you needed. Alright, so Step No. 5 is finding your home and negotiating. So we talked a little bit about finding that home and the home search process. But I guess I’ll ask this too, it sounds like COVID did have an impact. Did that interrupt showings in any way? Or did you have any issues with seeing houses?

Shelby Bennett: Yeah, so I wasn’t really sure what to expect from that search process kind of at first. I spent a lot of time, especially early on, looking at real estate websites online. I set a lot of email alerts for houses that fit my criteria. But yeah, COVID definitely affected kind of the second half of my search process. Ended up doing a lot more FaceTime showings than in person, which with a five-hour round trip drive was actually really nice. I don’t know that I would have done as many of those without COVID. And so in some ways, it was nice because when you saw a house on FaceTime and you knew it definitely wasn’t the one, then you didn’t have to drive so far. But it was hard to get a really good feel of the house just from your phone.

Nate Hedrick: Yeah, until you’re standing in that space, it can be tricky to get a true feel for what that house is going to be like.

Shelby Bennett: Yeah, so I got really lucky in that the house I ended up buying I had seen in February before I knew I was going to be moving and before all of that. They had fixed up a lot of the windows and some of the yardwork, and so then Rebecca actually reached out, you know, mid-April to say, “Hey, what do you think about this house?” And I was like, “Funny you should mention. I feel like that was the house I liked.”

Nate Hedrick: “I know the house well.”

Shelby Bennett: Yeah, “that was the house I liked that nobody else liked for me.” COVID also made me feel a little bit like people weren’t putting houses on the market. And so it was frustrating at times to feel like I wasn’t going to find a place in time. But kind of by the end, I guess the search process was more or less like I imagined. You go to the house, you open up all the cupboards, you explore everything, and then you kind of talk about pros and cons of each place. Turns out Omaha is a seller’s market, so it was a little more stressful than I thought with fewer homes on the market and a little more buyers competition. Some houses I liked were off the market in less than a day, and so that was just kind of blew my mind.

Nate Hedrick: Wow. Yeah, no doubt. Gees. And we’re actually seeing that around the country right now. We’ve got a seller’s market pretty much everywhere. Inventory is very low. I know of very few areas in the country right now that are buyer’s markets. So that’s not totally unique to Omaha at this point. And then did you — you know, the part that intimidates most people about this step is the negotiation. Did you get into any negotiations with the seller or how did that part go?

Shelby Bennett: Yeah, absolutely. So Rebecca was really great at walking me through the negotiation process because I definitely wasn’t comfortable with that going in. So she had recommended a price range to start my offer at and actually had reached back out to Emily to kind of get her thoughts since she had seen the house as well. And so they kind of helped me understand where would be a good place to start and then helped me understand a little bit of the seller’s thought process kind of through the negotiation process and what they’d likely be thinking. And then, you know, she talked with me about common things home buyers usually negotiate on when they offer versus like what you might negotiate or put into the offer after the home inspection and kind of at different points along the way. We ended up negotiating the price of the home down about $17,000. And we got the seller to purchase the home warranty, so I was really happy about how that all ended up.

Nate Hedrick: Nice. That’s great. And it’s really nice to hear that Rebecca and Emily helped you really kind of step into the seller’s shoes for a minute because I think it’s easy to walk into a sale as a buyer and think, gosh, I’ve got to get this for as low as I possibly can. And I’m going to negotiate hard on everything. And the reality is like, there’s just two people trying to have a transaction. And so stepping into their shoes can actually help you a lot of times with that negotiation. So that’s great.
Shelby Bennett: Yeah, absolutely.

Nate Hedrick: And then the last step is Step 6, which is inspect, insure, and close. And I think a lot of this tends to run together, right? All these steps are kind of going on simultaneously. So you know, with all of the stuff that’s going in this, I guess I’ll just ask, is there anything that you learned or that you would have done differently now that you’ve gone through the closing process as a first-time home buyer?

Shelby Bennett: Yeah, so I definitely learned at the inspection that I don’t know a lot of structural things about houses.

Nate Hedrick: They didn’t cover that in pharmacy school? What the heck?

Shelby Bennett: No. My inspector and my agent were really good about explaining the significance of the findings during the inspection and kind of suggesting what to ask the sellers to fix. I definitely recommend being present for your inspection walk-through, even if it’s in the middle of a pandemic and you have to wear a mask like I did. But so you can physically see the inspection report findings, they can physically point out different things throughout the home. There were a lot of terms that I didn’t understand. But once I could see what they were talking about, it made a lot more sense. I definitely recommend that. Closing was definitely a blur for me. I was I think the first in-office closing the title company had after doing drive-through closings for COVID.

Nate Hedrick: Oh, wow.

Shelby Bennett: My title agent said she would email me the closing documents to review beforehand, and with all the craziness going on, I wish I’d remembered to reach out and tell her I never got them. But I couldn’t until it was too late, and then I closed right away in the morning. So when I got to closing, like there would be all these super long documents, and my title agent was great and would say like, “Hey, this is just a document that your lender needs to do x.” But I’m like, “It’s four pages long and this is all it says?” You know? But I definitely didn’t take a lot of time to read them being close proximity like in an office was definitely something that was very taboo kind of at the end of May with COVID anyways. And so I didn’t necessarily probably take as much time as I would have to like read everything. And then it was a bummer that Rebecca, my agent, couldn’t be there either. Turns out real estate agents and sometimes family members can be present at closing to kind of help answer any questions and kind of be there for support. And instead, I was in a conference room across from the title agent with a big plexiglass divider and just a little slot to pass papers back and forth.

Nate Hedrick: Wow. Oh my gosh, that’s so crazy.

Shelby Bennett: So yeah, so that was a little wild. So I wish I had been a little more proactive and remembered to reach back out and see those closing documents ahead of time. But overall, you know what, it went well. I haven’t discovered yet that I made any big mistakes. So you know, it all turned out for the good. But definitely something I feel like you just, you don’t know about until you have the experience.

Nate Hedrick: Absolutely. I remember my first closing as a home buyer and was just overwhelmed with the amount of things I was signing and I just wrote a giant check for a bunch of money, and it was terrifying.

Shelby Bennett: Right.

Nate Hedrick: So yeah, I totally understand. And that’s really great that you were able to share some of that with our listeners because again, step back, ask questions, and review the documents ahead of time. That’s a really good piece of advice. Well, you’ve given us some great tips, and I really appreciate you sharing your story today. Is there anything else that you want to share with our listeners that you — about the home buying process or really anything in general?

Shelby Bennett: Yeah. So really the only thing I had to share was something you just touched on. Don’t be afraid to ask questions. I think especially as a first-time home buyer, I definitely felt a little bit like I was annoying people on my team at times. But I’m like, this is your job. You know, like.

Nate Hedrick: I pay you for this. Hold on.

Shelby Bennett: I was like, home buying just isn’t one of those things, like you mentioned, like we don’t learn that in school. There’s no place to learn about it except for when you go through it. And it’s a huge decision. So I definitely say reach out, take advantage of all your resources. There’s lots of pros who’ve done this before and are super willing to help. So you don’t have to do it alone, and no question is too small.

Nate Hedrick: That’s really great advice. I really appreciate it. That’s awesome. Well Shelby, thanks so much for being on the show. It just means a lot that you would come on and share your story. And again, I think our listeners are going to learn a lot from what you had to say. So appreciate it.

Shelby Bennett: I appreciate that, Nate. Thanks again for having me.

Nate Hedrick: Hi, Bryce. Welcome to the podcast.

Bryce Platt: Hey, Nate. Thanks for having me.

Nate Hedrick: Absolutely. We’re glad to have you on the show. So I guess we’ll start off, can you tell us a little bit about yourself?

Bryce Platt: Sure. My name is Bryce Platt. I’m from Kansas originally and went to the University of Kansas for my pharmacy school, graduated in 2018 and then did a post-grad fellowship in population health management in North Carolina. I’d never been to North Carolina before until that fellowship. Spent a year there and did I guess not bad enough that they felt the need to get rid of me, so they decided to keep me. And stayed on as the clinical pharmacy specialist for pop health programs. And that’s where I’m at now.

Nate Hedrick: That’s great. That’s amazing. And you just bought a house there, right?

Bryce Platt: I did. I just bought a four-bed, four-bath condo.

Nate Hedrick: That’s amazing. Yeah, and that’s exactly why we’ve got you on the show today to talk a little bit about that experience. So again, we appreciate you being here.

Bryce Platt: Thank you.

Nate Hedrick: Great. So what I thought we would do is out on our website, on the YourFinancialPharmacist.com Real Estate page, we have a home buying guide. And it is the six steps to follow to basically have a great home buying experience. And so I thought we’d walk through those six steps and kind of see what your experience with those six steps and get some feedback from you, if that works for you.

Bryce Platt: Yeah, hopefully I can share a little bit of knowledge and help some people who haven’t done this before.

Nate Hedrick: Perfect, that’s what we’re looking for. So alright. We’ll start with No. 1 — oh, and if you’d like to get access to this yourself, you can to YourFinancialPharmacist.com/homeguide. And you can download those six steps. You can follow right along with us or work on your own plan there at home. So Step 1 on there is making sure you’re ready. So this is kind of the before you start searching on Zillow, you know, when you’re deciding that buying a home is the way you want to go, there are a number of steps that you should be taking, things like budget, things like looking at your location and all that goes into that. And so Bryce, tell me a little bit about how you decided to buy a home instead of continuing to rent.

Bryce Platt: Neither you or Tim know this, but this completely started from me listening to Episode 130 on this podcast.

Nate Hedrick: Oh nice.

Bryce Platt: It was where Craig Curelop from Bigger Pockets came in to talk about his house hacking strategy guide, his book that he had released.

Nate Hedrick: Yep.

Bryce Platt: So I listened to that mid-February and was like, I mean, my lease ends in early August. So I can go ahead and do this. It wouldn’t be any more expensive than renting, and I’d have the benefit of the cash flow and building some equity in an actual property. So I went forward with buying the book and from that first step in mid-February, I had closed on this condo by June. And before that never even considered should I look at a property? Should I buy a house? Didn’t even cross my mind at all.

Nate Hedrick: That’s great. Well, that’s awesome. I’m glad we’re inspiring a couple people out there. That’s the goal. So that’s amazing. And like I mentioned, one of the other steps to determining if you’re ready is figuring out things like budget and questions like that. So did you sit back and were you the classic detail-oriented pharmacist doing all these hard numbers? Or how did set about things like a budget?

Bryce Platt: You know, I can’t say that I had a budget. What I did was I completely looked at deal numbers. I looked at it completely as an investment. So I didn’t have a top number except for what the bank was willing to loan me. Beyond that, just did the numbers for the property work? Which of these look like the best deals and investment property? So as long as those numbers worked, it was very loose on the actual list price.

Nate Hedrick: Yeah, this is really different than buying a traditional home that you’re going to live in. It’s really more of an investment. And so approaching that like a business decision makes a lot of sense.

Bryce Platt: Absolutely.

Nate Hedrick: I guess, so that leads us really nicely into our next point, which is determine what’s important. And it sounds like house hacking was the thing that you wanted to do. So maybe you can — I know we talked about, like you said on Episode 130 with Craig, but can you talk a little bit more about exactly what is house hacking and how does that work?

Bryce Platt: Sure. House hacking is the idea of you owning a property, buying some kind of property, and being able to essentially lower that mortgage payment by having other people pay you money to live there. So that could be as intense as you buy a mobile home and live on the parking lot in front of your apartment or your property and rent out the actual property. Or it could be as minimal as you live in the house and you have like a garage that you’ve turned into an Airbnb spot. And you just rent it out occasionally for short-term renters. So there’s a big spectrum there. The traditional is you buy like a duplex, a triplex, quadplex, and rent out the extra units and you live in one unit. I tried to do that, and we can talk about that a little bit later. But this condo worked out much better as a investment property for me.

Nate Hedrick: Yeah, and so you’ve got a four-by-four. So maybe you can explain what that is for someone that might not know.

Bryce Platt: Sure. So the — if you remember, I don’t know, maybe back in college, you have this shared space where there’s a living room, a kitchen, that four people share. And then each person has their own bedroom with a door and a lock, a bathroom and a walk-in closet. So we all have our own private space as well as sharing the living room and kitchen.

Nate Hedrick: That’s great. What an amazing setup. And I’m sure that’s not possible everywhere, but it sounds like that’s a great fit for you guys.

Bryce Platt: Absolutely. It’s near the big public college here in North Carolina, so it’s traditionally been for students. But with COVID just happened in March, the students that were here broke their lease and moved out. And that wasn’t uncommon for the seller. So he had multiple properties like this that had nobody in there.

Nate Hedrick: Oh, wow.

Bryce Platt: And so he was looking to get rid of some of these.

Nate Hedrick: That’s great. And I guess we don’t have to get too far into the numbers, but I mean, is it looking good? Like are you going to be able to live for free? Because that’s the dream, right?

Bryce Platt: Yes, that is the dream. The reason I chose this property was — so I looked at multiple duplexes, which were really all that are around this area of North Carolina. There’s not really triplex or quadplex that are available. And the duplexes had decent cash flow numbers, but because of COVID, no one really wanted me to come like look at it in person.

Nate Hedrick: Oh, wow.

Bryce Platt: Because, you know, they were listed before COVID happened. So these were just people looking to sell eventually but not in a huge rush. For this condo, the numbers are much better anyways. So I essentially am doing a rent-by-the-room strategy, as you might imagine, with four-bed, four-bath. So these aren’t people that knew each other before coming in. So if we talked about the 1% rule here, this is more like the 1.5% rule. So the numbers are pretty good. And even with me living here as one of the rooms, I’m making a few hundred dollars every month over the mortgage.

Nate Hedrick: That’s amazing.

Bryce Platt: And the interest and the insurance and the taxes and the HOA fees, even.

Nate Hedrick: That’s amazing. Good for you. And for those of our listeners that don’t know the 1% rule, really popular in rental property investing, means that if the purchase price is, let’s say it’s $100,000, you should be able to bring in about $1,000 in rent every single month. So 1% of the purchase price is your goal number. And that 1% rule is kind of a quick back-of-the-napkin math for determining if a rental property is going to be worth considering.

Bryce Platt: Absolutely.

Nate Hedrick: So anything over the 1% rule is great, and it sounds like you’ve almost hit the 1.5%, which is amazing.

Bryce Platt: Right, and that’s even, like I said, with all of the PITI, insurance, taxes, interest and including the HOA fees, which are an extra couple hundred dollars on top of all of that.

Nate Hedrick: Yeah, those HOA fees can be killer, so being able to include that and including that in your budget, like that’s amazing. That’s great.

Bryce Platt: Yeah, I really am not bothered by the HOA fees because as my first house and as never having even considered doing things before this, like I mentioned, I do not want to have to figure out how to do landscaping and take care of huge roof, replace the roofs and the siding on the houses. Here, they have a pool and a sand volleyball court and a basketball court. And there’s no way I’d want to take care of those either.

Nate Hedrick: Yeah. I mean, your repair costs go basically to $0. It’s great.

Bryce Platt: Well, I wouldn’t say that because inside the condo, I have to take care of everything inside the condo. But anything that’s really — that’s typically a really large capital expenditure for a house, I don’t really have to prepare for those.

Nate Hedrick: That’s perfect. Great. Well and then I guess the next step, we’ll move along here, No. 3 is assembling your team. And there are a number of important team members that we list in our document, everything from a real estate agent, a financial planner, an accountant, sometimes there’s a lawyer that needs to be involved. So now that you’ve kind of made this purchase and you’re looking back, who were some of those most essential members of your team, would you say?

Bryce Platt: It was easily my real estate agent, Adam.

Nate Hedrick: OK.

Bryce Platt: When you’re looking for a real estate agent for house hacking specifically or any kind of investment property, really, you want a real estate agent that has done investing themselves so they know what you’re looking for. You’re not looking for the super expensive, granite countertops and the high-rise ceiling and the fancy chandeliers. You’re looking for a place that, for example, meets the 1% rule or you are able to cover the mortgage with your rent. So working with a real estate agent that understood that made it a lot easier.

Nate Hedrick: Good. And we were actually lucky enough to be able to connect you with Adam through our concierge service, right? So can you tell me a little about that experience? It sounds like it worked for you.

Bryce Platt: Yeah. Again, neither Nate or Tim paid me for this. So I will give them my endorsement.

Nate Hedrick: Uh oh.

Bryce Platt: It was super easy and working with Adam, made connecting me with Adam here in North Carolina. Because I had — like I said, I started from absolutely no idea what I was doing to getting this book and was able to eventually turn it into a condo a little over three months later. So the connection with the real estate agent was vital to doing this.

Nate Hedrick: Wow, that’s so good. I’m so glad you had a good experience. That’s what we’re all about. I appreciate the endorsement, and I’ll send you the check after this.

Bryce Platt: Yeah, alright.

Nate Hedrick: Great. Well No. 4 is choosing a loan and getting preapproved. A lot of people tend to struggle when it comes to financing. I get this question a lot that people are pretty good about the home search and what they want. But when it gets to financing, people kind of struggle a bit. So how did you go about navigating that process?

Bryce Platt: With house hacking, you want essentially the lowest down payment as possible. Obviously on Your Financial Pharmacist, I mean, I’ve followed you guys for a little while and I use the website, so I started with Credible to compare the different lending institutions and what kind of rates they had and the limits and such. But after that, IBERIABANK/First Horizon, which is a specific partner of YFP, they had the best interest and guaranteed no PMI, which is Private Mortgage Insurance where if you typically on a normal property, if you put down less than 20% on the property as a down payment, you have to pay PMI to protect the lending institution. The insurance doesn’t cover you. It covers the bank in case you default on that. So you’re paying them insurance for the bank, which is ridiculous. Anyways, and they also only require a 3% down payment. So I only had to put down 3% and was able to go without PMI and still have a pretty low interest rate. The 3% down payment, I will say was only if it wasn’t multi-family. So even if it was a duplex, triplex or quadplex, they do require for IBERIABANK/First Horizon 15% down payment.

Nate Hedrick: OK.

Bryce Platt: That’s something that both Tim Baker and I learned. And so I felt the need to share that. But if it’s not a multi-unit property, you can do as low as 3% down payment, and that’s what I did.

Nate Hedrick: Nice. Yeah. So this was — it basically is almost like a four-plex, but it wasn’t considered that because it’s a four-by-four as far as the bank is concerned.

Bryce Platt: Right.

Nate Hedrick: Oh, that’s great.

Bryce Platt: It’s a single family property.

Nate Hedrick: Yeah. Cool. Interesting. That’s a really neat mix. And for our listeners who are interested, you can go learn more about Credible and IBERIABANK/First Horizon at YourFinancialPharmacist.com/real-estate. So please take a look at that and you can learn more about those sources, just like Bryce did. Great. So No. 5 is finding your home and negotiating. So a lot of people, again, struggle with the negotiating side of this. But we’ll start with the home search, so can you tell me a little bit more about the actual search process, and it sounds like COVID kind of impacted some of that as well, so maybe you can share a little bit more about how that went.

Bryce Platt: Absolutely. So it was easier than I expected, but like I said, I didn’t really have any preconceived notions on what it was going to be like because I had never even considered this before. So Adam set me up on the MLS, the listing service, so I could see everything that was available to buy and so I could evaluate properties based on, you know, evaluating the deals and investment property whenever I wanted. And in the MLS, I could even request a showing from Adam to see these properties. This aspect was kind of impacted by COVID, like I mentioned. There were a couple duplexes that I had tried to see. But they didn’t want to open for showings, so I kept looking at other deals that were coming up and then eventually, this condo came up. And he was in much more of a hurry to sell, you know, because he had been vacant for a month or two at that point because the students had broken their lease. So it came on the MLS, the numbers were way better anyways than the duplexes, so made it a lot easier to request a showing here. And since there were no students or anyone here, didn’t have to worry about COVID stuff.

Nate Hedrick: Nice. Yeah, and it sounds like, you know, with it being vacant, you might have had a little room to negotiate there too, I imagine.

Bryce Platt: Yes. So personally, I’m comfortable with negotiation. If you guys have ever read the book, “The Difference,” about a boss — it’s an amazing book.

Nate Hedrick: Yes.

Bryce Platt: I’ve read it multiple times, both before I negotiated for this property and before I bought my car. And it worked out very well. I was able to bring the price down about 5% and keep all of the furniture that was here.

Nate Hedrick: Oh, wow. That’s amazing.

Bryce Platt: It worked out pretty well.

Nate Hedrick: Yeah. Well, we should put a link to that book in the show notes. I highly recommend that book. It’s good for business negotiations, life negotiations, I use it to negotiate with my toddler all the time. So I definitely recommend it. Very cool.

Bryce Platt: Throwing some mirroring out there.

Nate Hedrick: Exactly, mirroring works great on a toddler, I promise. That’s so cool. Well, and then the last step is No. 6, inspect, insure and close. So a lot of this can kind of get a bit nebulous. There’s a lot involved. So I guess what I’ll ask is, is there anything you learned or would have done differently now that you’ve gone through the closing process, you’ve been a first-time home buyer and made it out to the other side. You know, what are some tips you can share with our listeners?

Bryce Platt: Find a really good real estate agent because Adam made this go so smoothly for me. I had no issues. He provided me with a very good inspector. I had an insurance broker that I had no issues with, a closing agent, and had nothing that I needed help with. Zero issues with closing. And I hope that I can say that after every property I close on.

Nate Hedrick: Good, I’m so glad. And you’re totally right. That agent is so in charge of connecting you with the right people, otherwise you’re going out and finding your own lender just magically, and you’re going and finding all these different people. If you’ve got one point of coordination, it can get so much easier. So I’m glad that you had that great experience. That’s amazing.

Bryce Platt: Yeah, if people have the connections, which obviously I did not just starting, I mean, you could maybe find some good people to work with. But when you’re just getting out here in the first place, I think it’s more important to just figure out the people that your real estate agent trusts, as long as you trust your real estate agent.

Nate Hedrick: That’s great advice. Awesome. Well, good. Well those are the six steps. It sounds like you’ve made it out the other side. How is everything going with the actual finding tenants? I mean, that’s where we’re at now, right? Are we still running into COVID issues? Or how is that going?

Bryce Platt: Sure. So I had expected to rent to mostly students. As I had mentioned, it’s nearby the school and there were students living here before. As I made my listings, almost mainly following what Craig mentions in his house hacking strategy, I had many people interested. But they were mostly non-students. So right now, I have one person that’s in a similar life position as me, recently graduated out of school, so a young professional. And then one that is an intern and in school or I guess in the summer part of school. And then the third person of the, you know, there’s four rooms, I’m taking one of them obviously, so two of them are filled. The third one just applied this morning, and I expect that he will be accepted as well. So I think I’ve got it all filled out. And as I mentioned to Nate before we started the podcast that I don’t have to pay the first mortgage payment until August. So I am getting — I got my first rent payment like a week and a half ago. And that was nice to have before I even have to pay the property costs.

Nate Hedrick: That’s a cool moment. That’s when it feels real, like OK, I’m actually doing this. This is pretty awesome.

Bryce Platt: Yeah. And like I said, from starting mid-February from absolutely nothing to middle of June or the beginning of June, I closed on a property, I would not have ever guessed that.

Nate Hedrick: So yeah, so now you’re basically a landlord a couple of months later. That’s pretty incredible.

Bryce Platt: Absolutely. And like I said, no — I could have had no idea this was something I could do. But with lots of education — the YFP podcast was what kickstarted it. And then that’s also how I found Bigger Pockets, and Bigger Pockets was a huge education for me. I’m still working through all their podcasts. I haven’t even gotten through to the current ones, and I was still able to do it before I even caught up on Bigger Pockets stuff. So that’s two great communities that can help educate people to feel at least comfortable enough to take a step and do it.

Nate Hedrick: Great. We’ll make sure to put that in the show notes as well. I love Bigger Pockets, and I’ve been really diving into the Real Estate Rookie podcast they’ve been putting out recently. That’s been a great show.

Bryce Platt: Absolutely.

Nate Hedrick: Well Bryce, anything else you want to share with our listeners before we let you go?

Bryce Platt: Spending time to educate yourself is going to make you feel better about actually taking action. But you can’t stop with just educating yourself. There’s always — you have to take an action step. And after I bought that book, I kind of felt like, oh, I’ve made my step. I’m doing well now. But luckily for me, in my toastmasters group, there’s a real estate agent. And so I started talking to her about investment properties. And she kind of worked with me a little bit and wasn’t able to commit the time because she was working on her own investment property at the time.

Nate Hedrick: OK.

Bryce Platt: And then Tim Baker actually recommended I work with Nate to get a real estate agent here in North Carolina. And so that was the real action step that after I had done that, it was just a snowball effect. You didn’t have to worry about like, oh, am I doing the right thing? It was, I’m in the action phase now.

Nate Hedrick: Yeah, it’s hard to make that first jump. But once you do, it’s easier to make the next one and the next one. So that’s great.

Bryce Platt: Oh yeah.

Nate Hedrick: Well Bryce, we really appreciate you being on today. I think this has been an awesome story to share with our listeners. So just appreciate your time.

Bryce Platt: Yeah, no problem. Thanks for having me on, guys.

Tim Ulbrich: Alright, great stuff, Nate. Thank you for taking the mic and taking the time to interview Shelby and Bryce. And a thank you to Shelby and Bryce for taking the time out of their schedule to do that interview. So let’s talk, Nate, through the concierge service. Obviously they saw it come alive through these stories. But we’ll talk step-by-step what folks can expect from that service, how it works, and what they can expect throughout the entire process from looking for a home all the way to landing that property. So Step No. 1, crafting a plan. So talk us through that.

Nate Hedrick: Yeah, so just like we were talking a little bit in the interviews, the whole first step is figuring out a plan, right? We want to come into this with your goal is to buy a home or sell a home or invest or whatever the plan is. Let me help you put some framework behind that plan, so looking at things like budget, looking at things like location, what’s your goal with this property, right? Are you looking to buy your first house and then rent it out in a couple years? Or are you looking to buy your forever home? And those are all very different approaches, and they require very different agents and what they specialize in. So that very first step is really going to be our 30-minute jumpstart planning call. And during that call, I’ll be connecting with you and actually talking through those things that I just mentioned to figure out what the best course of action’s going to be. And that allows to kind of move forward with a really good mindset of, this is the goal. This is what we’re trying to achieve with.

Tim Ulbrich: Awesome. So Step 1, crafting a plan. Step No. 2, connecting you with a pro.

Nate Hedrick: Yeah, and this is where we then jump in and use that information from that jumpstart planning call to actually connect you with a local agent. And this is either someone that we’ve worked with in the past that other pharmacists have utilized or worked with recently, or it’s maybe a new person if you’re in an area where we haven’t added someone to our network yet. And what I’ll do is I’ll actually go out and interview a couple of agents, find somebody who I think is going to be a good fit, and then I’ll get you connected with that person. And it’s not just an agent too, right? Because that agent is going to become the boots on the ground leading your team. But it’s also going to lead to connecting you with lenders, connecting you with contractors, lawyers. Whoever you might need in that local area, they’re going to be the expert for that. And so we help kind of facilitate all those things with that connection.

Tim Ulbrich: And after connecting with a pro, Step No. 3, staying the course, to me is really important. Because I think while they’re going to have that interaction with the agent, obviously questions will come up. And through that crafting a plan in Step No. 1, you’ve got an idea of what they’re looking for for their situation and how that may fit, you know, in with other questions that they have as it relates to that home buying experience. So talk to us about staying the course and your involvement with them throughout the process.

Nate Hedrick: Yeah, this is the part that I think is actually most important because finding that initial agent is not a foolproof process, as you can tell with Shelby’s interview, right?

Tim Ulbrich: Yeah.

Nate Hedrick: We didn’t get it right right off the first bat. And that’s OK because we’re there as a part of your team the whole time. So even if it doesn’t go 100% the first time, we’re still involved in the process. And we’ve had a couple of clients now where we’ve pivoted a little bit from the initial person that we worked with to maybe a subagent or a totally different agent based on needs and how those have changed. So that whole idea that we are still on your team during the entire process, it’s absolutely essential to the concierge service. And it’s really the cornerstone of what we do.

Tim Ulbrich: Yeah, and I’m so glad that came out in Shelby’s story. And as you said, we’re not always going to get it right, and I don’t think we should expect to, right? As I think about so much of the agent relationship with a client and my experiences buying a home, sometimes that just comes down to personality fits. You know, obviously there’s the knowledge component and you want somebody who knows the market and who’s going to be your advocate. But sometimes, you know, an agent that works for Shelby or for Bryce may not be a good fit for me or somebody else that’s listening. So really finding that right fit and if it’s not the right fit being able to get back with you to be able to make sure that that right fit ultimately does get in place with the client.

Nate Hedrick: Yep.

Tim Ulbrich: Awesome. So as a reminder, if you head on over to YourFinancialPharmacist.com and you click on “Buy or Refi a Home,” from there you’ll see an option where you can find an agent, get a time scheduled with Nate for that 30-minute jumpstart planning session. Again, YourFinancialPharmacist.com, at the top you’ll see there “Buy or Refi a Home,” find an agent, and that will take you to get a time scheduled with Nate. So again, Nate, thank you for taking time to come onto the show again and thank you for taking the time to bring Bryce and Shelby’s story onto the show as well.

Nate Hedrick: Happy to do it.

Tim Ulbrich: As we wrap up this week’s episode of the Your Financial Pharmacist podcast, I want to again thank our sponsor, HPSO. HPSO’s the leading provider of professional liability coverage, insuring more than 100,000 pharmacists nationwide and sponsored by the American Pharmacists Association. As I mentioned before, when I was a practicing pharmacist, I carried my malpractice insurance through HPSO. And with individual policies for qualified persons starting at just under $150 per year, it’s a no-brainer compared to the cost of a claim and worth the extra peace of mind. Plus discounts are available for qualified students and recent grads. So head on over to HPSO.com/YFP to learn more. Again, HPSO.com/YFP. And as always, if you liked what you heard on this week’s episode of the Your Financial Pharmacist podcast, please do us a favor and leave a rating and review in Apple podcasts or wherever you listen to your podcasts each and every week. Have a great rest of your day.

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]

Recent Posts

[pt_view id=”f651872qnv”]

YFP 067: Rapid Fire Home Buying Q&A

Posted on September 27, 2018November 2, 2022 by yfpadmin

Rapid Fire Home Buying Q&A

On Episode 067 of the Your Financial Pharmacist Podcast, Tim Ulbrich, Founder of Your Financial Pharmacist, is joined by Nate Hedrick, the Real Estate RPh, to wrap up the month long series on home buying by taking questions from the YFP Community in a rapid fire Q&A format.

Summary of Episode

Nate Hedrick answers questions from the Your Financial Pharmacist community covering various facets of home buying process. Nate shares advice, resources, and parts of his financial, real estate, and home buying journeys to help answer these questions. The first question asks how to save for a down payment. Nate recommends using a savings account if the home will be purchased soon, otherwise he suggests to use a higher interest rate investment. The second question is in regards to comparing rates from different lenders without committing to them. Nate shares that it’s best to be upfront with lenders upon your initial conversation and let them know you are shopping around for a mortgage lender. During this process, you’ll receive a GFE (Good Faith Estimate) which is a document you can use as a comparison tool. Question three asks about tax advantages for home buyers. Nate discusses potential tax advantages for home buyers, such as buying down the rate or mortgage points, as well as property taxes. When asked about the process for building a home, Nate suggests asking pointed questions to the builders and to be wary of perks and additional up-sells they may pitch. Nate then talks about real estate crowdfunding sites which pull money together from different investors to leverage larger investments. Finally, Nate discusses buying a home while in debt with student loans.

About Today’s Guest

Nate Hedrick is a 2013 graduate of Ohio Northern University. By day, he works from home as a hospice clinical pharmacist for ProCare HospiceCare. By night, he works with pharmacist investors in Cleveland, Ohio – buying, flipping, selling, and renting homes as a licensed real estate agent with Berkshire Hathaway. This experience has led to a new real estate blog that covers everything from first-time home buying to real estate investing. Nate’s blog can be found at www.RealEstateRPH.com

Mentioned on the Show

Splash Financial
Real Estate RPh
YFP Concierge Service w/ Nate Hedrick
YFP Episode 064: 6 Steps to Home Buying (Part 1)
YFP Episode 065: 6 Steps to Home Buying (Part 2)
YFP Episode 066: 10 Home Buying Lessons Learned
Home Buying Quick Start Guide
YFP Episode 56: Rapid Fire Student Loans Q&A
YFP Episode 61: Rapid Fire Insurance Q&A
YFP Facebook Group
Ally.com
Script Financial
YFP Episode 009: Interview with Carrie Carlton
Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! by Robert T. Kiyosaki

Episode Transcript

Tim Ulbrich: Welcome to the Your Financial Pharmacist podcast. This is Tim Ulbrich, and I’m excited to have again Nate Hedrick, the Real Estate RPH, back on the show to do a rapid-fire Q&A to wrap up this month-long series that we’ve been doing on home buying. So Nate, welcome back to the show.

Nate Hedrick: Hey, thanks for having me again.

Tim Ulbrich: So for our listeners, we’ve been all over this topic of home buying during the month of September. And if we have anybody listening who’s just jumping in at the end of this series, I’m going to quickly recap where we’ve been before we jump into the Q&A because I think that will help set the stage and hopefully give you an opportunity to go back and listen if need be. So here we are in Episode 067, and at the beginning of the month in episodes 064 and 065, Nate and I covered the six steps of the home buying process. And I think for those that are just getting started or want a refresher on home buying, that’s a great primer, and I’d highly encourage you to go back and check out episode 064 and 065. In 064, we cover three steps. In 065, we cover three more in detail. And then in Episode 066, last week, I talked through 10 home buying lessons that I have learned over the past few months, maybe some hard lessons, mistakes, lessons reinforced as my family gets ready to make the move from northeast Ohio to Columbus. And just as a reminder, along with this series, we have developed a YFP first-time home buying quick start guide that you can download for free at YourFinancialPharmacist.com/homeguide. Again, that’s YourFinancialPharmacist.com/homeguide. Nd if you’re looking to buy or sell or home or you want to get started in real estate investing or you just have a question that you want to have answered by a licensed real estate agent that is also a pharmacist, head on over to YourFinancialPharmacist.com/realestaterph, where you can get in touch with Nate, the Real Estate RPH. So Nate, you ready to do this rapid-fire Q&A?

Nate Hedrick: I’m ready. I’ve got my coffee, so I’m good. Let’s do it.

Tim Ublrich: Me too. I’m ready to go. So an early morning, here we go. And here’s the format. We’ve done several of these before. We’ve done one on student loans, insurance, and just like those, we’ve taken questions from the YFP community via email, via our Facebook group, and I’m literally going to throw them off one-by-one to Nate, and we’re going to hammer some of these. And then if we have time, I’ve got a couple at the end that are ones that are of interest to me and I know that have been asked out there before. So first question, Nate, comes from Austin via the YFP Facebook group. He says, “What is the best vehicle for saving towards a home purchase? Putting 20% down means holding onto a significant amount of money until finalizing a home purchase? So do you feel it is best to invest that money or save it in a low-interest savings account?” What do you think, Nate?

Nate Hedrick: Yeah, that’s an awesome question, Austin. So it’s funny, I’ll tell you the safe plan. And I’ll tell you what I did. The best bet is honestly to put that in a high interest savings account or some sort of rotating certificate of deposit, something that’s going to be able to basically meet or get near to inflation so that all those dollars you’re saving are basically protected and that your money is worth as much as it was when you put it in. Because if it takes you two or three or four years potentially to get that full 20% down, hopefully not that long, but depending on how long it takes, you want that money to be still worth as much as it was when you put it in. So the safe plan is a high interest savings account or a rotating certificate of deposit. But what we did when I was saving for our down payment, we didn’t have a high interest savings account. I think my savings account made .065% annually. It was a joke. So you know, I knew I was getting beat up by inflation every year that we basically didn’t pull the trigger. So what my wife and I did at the time was I took half of the money that we saved for a new home and put that in a savings account. And the other half for that down payment went into basically a short-term investment account. And I basically, the goal was to make about 6% on that investment, which isn’t outrageous. And if I could do that, basically and inflation was 3%, then I’m basically beating inflation with all that money. And so that was kind of the idea behind it. And it worked pretty well. It’s a riskier play, obviously, you can easily lose money that you’re investing, even in short-term investments, especially. So it’s a risker play. But again, at the time, I didn’t really have a whole lot of options. I suppose if I were just doing it today, I would look for some aggressive certificate of deposits, some of those online banks like Ally and whatnot are fantastic for that.

Tim Ulbrich: Yeah, and it’s nice that some of those higher yield savings accounts, the interest rate has come up a little bit, you know, so I think the last statement I got from Ally, it’s up towards 1.8% or something like that, which is nice from the .5%, .4%, .6% that we were living in. You know, to me, Nate, when I hear this question — and you alluded to this — I think about what’s the time horizon, what’s the appetite for risk? And then also just thinking about some of the tax implications and things along the way as well because if somebody’s looking at, you know, I really want to buy a home in six or 12 months, does the math on getting 6% in an account versus getting, you know, 1.5-2% in a savings account, you think about the potential risk that you’re taking out in an investment account versus a savings account, is it worth it with that time period when you really need the cash? Probably not. But if we have listeners out there that are thinking, you know, I’m in a position to start saving or maybe I have a gift from a family but I’m thinking about buying in five years or six years or seven years. When you think about that type of time horizon, to Nate’s point about the impact of inflation, I think that’s where you then start to think about, OK, how could I leverage these funds? Where yes, I’m investing them so they’re growing and beating inflation, but ultimately, I don’t necessarily want to be losing these moneys or at least minimize the risk of losing those moneys along the way. So for somebody that is thinking about investing, any other details you can provide? So you alluded to a little bit of a CD. When you talked about putting that money into a fund, were you just investing it in mutual funds out in the open market? Obviously you’re not doing that in a retirement account, I assume, correct?

Nate Hedrick: No, no. This was basically open market. Basically, you sign up with an online brokerage. I was doing individual stocks and bonds, I was doing larger investment vehicles like mutual funds, like you said, high dividend stuff. And obviously, like you said, there are tax implications to doing that. So this isn’t something you do lightly. But it’s something I had experience with and felt comfortable doing. And it was something that was, again, successful for me at that time. But I also had a larger time frame to look at. You know, we kind of started looking at that while I was still finishing up college, so I totally agree with you. If you’ve got a short-term play, you’re looking at a year, just throw it in a savings account, just protect that investment. And know that that money’s going to be worth it here in the next year, and you can use that down payment.

Tim Ulbrich: Yeah, and I think this is another good place too to think about, you know, the peace of mind variable, which often gets lost in the math and the weeds of this, right? So if you and/or a significant other or a spouse or somebody really wants to have the peace of mind that that money’s there and I’m not going to lose it, you’ve got to factor that into the equation.

Nate Hedrick: Definitely.

Tim Ulbrich: So Nate, I’m guessing some people are hearing this and thinking, 20% down? Do I really have to do this? I know we’ve talked about this on previous episodes, and you know, you do the math on this. On a $300,000 house, you’re looking at $60,000 down. On a $400,000 house, you’re looking at $80,000 down and so forth. And so we got a follow-up comment to this in the Facebook group where somebody alludes to, well, maybe you don’t need to put 20% down. So the comment here was, “I would consider weighing the option of not paying 20% down. Local credit union offers a first-time home buyer with 0% down. This avoids the PMI without having to save a boatload of money for down payment. Although credit scores were high, we were still approved, even with a pretty high student loan-to-income ratio. Keep in mind that the fixed rate was around 1% higher than going mortgage rate at the time. But with enough equity put in, we may explore refinancing to a lower percentage down the road if possible.” So we’ve talked before about in episodes 064 and 065, we talked a little bit about, OK, if you don’t have 20% down, you’re going to be paying Private Mortgage Insurance. However, there are some instances, and it looks like this is the case, where somebody’s not putting 20% down, and there’s no PMI, in fact 0% down loans. But the implications here are potentially a higher interest rate and obviously not having equity in the home. So what are your thoughts here and what are some variables for people to think about that may be leaning towards, you know what, I’m not going to put 20% down. What are your thoughts?

Nate Hedrick: Yeah. I think it all comes down to your priorities. You know, if your priority is to get into a home quickly, then yeah, I think it’s a really reasonable thing to not put 20% down. You know, before I started this financial journey, you know, our home, we didn’t put our full 20% down. We just got to the point where we had saved a good, I think we were at like 15%. And I said, look, this is the time, we’ve got to move. Our rental lease is up, and we just need a home for a couple of reasons. And so we just went for it. So it’s not for everybody, you kind of have to take that emotional side sometimes, which is harder to think about with a financial decision, and know that now, as we’re getting much, much further. We’re 10 years out now — well, almost 10 years out from the financial collapse of the housing market in 2008. There are a lot more options available to you now. I’m seeing a lot of 10% down conventional loans that have no PMI and the rates are pretty comparable. So there are products becoming more available. I think that the 20% down is very good in terms of being very financially stable and starting off with a lot of equity, but it’s by no means necessary.

Tim Ulbrich: Awesome. Next question comes from Mac via email. He says, “They say nowadays, your best off to obtain multiple loan quotes when buying a home. Sometimes it can be hard to compare rates when you are comparing apples to apples and fee structures, rates and commissions. What’s the best way to compare rates without going too far with one lender and then feeling committed to them? Or depending on how far down the road you are buying a home, is it too late to switch lenders and not put your purchase at risk in the market that we are in these days? What do you think?

Nate Hedrick: Yeah. That’s a great question. And there’s a couple aspects to it. So the first thing is I would go in with the expectation when you go to these lenders and tell them up front, I’m shopping around for a mortgage lender. My wife and I or my spouse and I or whatever are going to buying a home. And we wanted to find the appropriate mortgage lender for us. So help us make that to be you. And if you set that stage from the beginning, it’s going to be a little bit of an easier conversation. So they should be able to walk you down the road of OK, what kind of home are you looking for? What’s your budget? So on and so forth, which you have when you go in. And they should be able to give you a good faith estimate. This is a GFE document, it’s a very, very common thing. A good faith estimate shows you all of the numbers that they expect a loan to basically take. So an interest rate, it’s going to be all the fees, it’s going to be all the terms of that loan. So how long the loan is going to last, you know, are there prepayment penalties, are there escrow charges, what are the — all the aspects that go into the loan process. So that good faith estimate is that comparison tool because if you get three of those, one from each of your lender, although the individual loans may be a little bit difficult to compare, you’re going to have all that information in front of you, and you can do the math yourself to figure out how those stack up. So really once you get those good faith estimates, focus on the big numbers, APR or annual percentage rate, not just interest rate is a good way to do that. APR basically takes into account a lot of those fees. So if two loans are 4.5%, but one has $5,000 in fees and the other one has $0, that one with the fees is going to have a larger annual percentage rate, basically the effective interest rate is what they really should call it based on those fees that are built in. So you can use an APR to get a better estimate of what that loan is going to look like. The other big thing is you want to watch for — especially on your GFE — are things like rate locking and the ability to lock your rate at a certain time. That can be really beneficial. What the lender fees actually look like because these are one of the most negotiable aspects of a loan. You can basically take one lender’s fees and throw them at another lender and say, ‘Look, they’re not charging for this. I don’t think you should either.’ So that’s a good option. Watch for prepayment penalties. And then also watch for things like mortgage insurance. We’ve talked a lot about private mortgage insurance, but different loans require different amounts of it. And the GFE will basically show you exactly what those are going to look like.

Tim Ulbrich: I think that’s great advice, and the GFE, the good faith estimate to me was kind of the Aha! moment as Jess and I were going through the process. Once you can see that document, you’re like, OK, I can look at this, I can understand it, I can break down all of these costs and you can really start to get that full picture and not just focus on the interest rate, which I think is the common practice when you just get started and you’re getting quotes that are out there. So I love the recommendation of the practice of getting two or three different GFEs from companies, then you can really compare, as Mac’s question, is kind of apples-to-apples. Couple thing that I’ve learned as we’ve gone through this process here over the last month is that I think it’s very easy to just get locked in with a lender really early. And once you’re far enough down that rabbit hole, it’s hard to come back out of it. So I think really starting up front and being clear that you’re getting quotes, get those multiple quotes because I think what we’ve experienced actually on the side of those that are buying our current home is they actually did switch lenders, as Mac’s question is about, can you switch lenders? And how far down the road are you putting things at risk? And the thing you’ve really got to be careful about is that really restarted the whole process and put our sale about two weeks behind. And so you know, documents had to be transferred and how willing is a mortgage company — I mean, how readily available are they going to be to give documents over on a loan they’re no longer doing? And all of these things, and so it can certainly delay the process, so I think shopping up front is really key. And then you can go forward with one lender before you’re too far down the process. To your point, Nate, about the rate lock, I’m actually paying for this right now, this week. So I don’t know if this is something I could have negotiated up front, I think it was one of those things I looked at and said, ‘No big deal. We’re going to close on time, so why does this matter?’ Well, guess what? Closing got delayed, now the rate lock — I’m actually having to pay a few hundred dollars to get an extension on that rate lock.

Nate Hedrick: Yeah, that’s fairly common.

Tim Ulbrich: And I think that if that was something I would have played out and thought, well, what if closing gets delayed? Then I think we could have hopefully prevented that in advance. So great question, Mac. And actually, Mac had a follow-up question via email, unrelated, but on this topic of home buying. He asked, “What should be considered when buying a home to help maximize your tax advantages?” So the dos and don’ts in terms of home buying and tax advantages. And obviously, this is a big question. What are some of your thoughts, Nate, around home buying and tax advantages?

Nate Hedrick: Yeah, that’s a great question. And I’ll try to just hit on a couple of things here because like you said, it is a fairly big question. The first thing I think is important to talk about is what can you do up front? Like what can you do kind of as you’re buying that home to reap some tax benefits? And there are a number of things from, you know, first home buyer tax credits that are available depending on a number of factors. But one of the easiest things you can do is actually — it’s called buying down the rate. And you’ll hear this referred to as mortgage points or buying points. And this is something where if you have extra capital to put into a home purchase, you can actually percentages of that loan to lower your effective interest rate. So if you are buying a $100,000 home, just for easy math, every point on that loan is 1% or $1,000. And every point that you buy, every $1,000 that you spend, drops your interest rate by a certain amount, you know, whether it’s .25% or whatever. So you can put extra money on a loan to effectively lower your interest rate, which is great for the long term, right? If you had that home for 30 years and your interest rate is now a full 1 percentage point lower, let’s say, that’s going to make a big difference over the life of that loan. But in the very next year, basically as soon as you file those taxes for that year that you bought the home, you can also deduct all of that mortgage interest as a deductible on your taxes. So there’s a really cool kind of tax benefit right up front. So that’s one big thing to look at, at least early on. The other thing that you want to look at is — and this is really kind of a thing that’s changed. If you had asked me this question a year ago, it’d be a little bit of a different story. But with the new tax laws, you want to probably know, are you going to be taking the standard deduction next year? Or are you going to be doing the itemized? And with the standard deduction being raised to what it is, a lot of the individual benefits we used to get from homeownership have kind of fallen away. They’re still there, but they’re just not something that you’re going to get any benefit from. The example I have is that basically now that the aggregate amount of state and local sales and property tax is capped at $10,000 a year, people that are buying in New York and California and Hawaii, all these expensive places, they’re not going to see that benefit. You know, you’re no longer really itemizing that deduction anyway. So that cap at $10,000 is not enough to be worth it. So things like that you want to consider: Where am I buying? How am I going to be filing my taxes next year? You know, an accountant can really help with that because that may change your decision a little bit as well. And then the last piece I guess I’ll talk to is that you want to watch for the individual taxes for that area, so the property taxes. And this isn’t something that you can deduct or something that you have to worry about. It is one way to maximize your advantage, right? If I live in a township that has much higher taxes but much better schools, or do I live in a township that has much lower taxes but less amenities and maybe it’s nearby to the things that I want. You know, so that location aspect can be really important as well when talking about tax advantages.

Tim Ulbrich: So Nate, quick question for you on the buying of points, the first tax advantage that you mentioned. You know, I struggled a little bit when I got that offer on the table during the process we’re going through now. And the way I was trying to think about it — and I didn’t think about the deduction side of it, so I’m learning here right alongside the listeners as well — but what I was thinking about it from what’s the break-even point. So if I — just as an example — if I have to spend $2,000 to get my rate down whatever, .4%, you know, I can do the math on that to see that over how many months of saving that interest paid, why recuperate those dollars, and what if I would have just had that cash up front and done something else? So is that the right approach? Or how do you help your buyers evaluate whether or not that purchasing of points is worth it? Or whether those funds could be used elsewhere for other priorities that they’re working on?

Nate Hedrick: Yeah, and that’s a great point. So think about — there’s a couple aspects, and one is how long are you going to be in that home? That’s kind of the first decision. And how long do you expect to pay off that mortgage? If the answer is I can’t wait to buy this down and pay this off in 10 years or less, then buying points is probably not worth it. I think the break-even point is something around the 15-year mark or something like that.

Tim Ulbrich: Yeah, that’s what it was for us. Yep.

Nate Hedrick: Yep. And it varies based on the individual lender, but that’s usually where it’s at. So if you plan on having a true 30-year mortgage, then points can really be worthwhile. But if you plan on buying down your mortgage quickly or paying it off quickly, it’s usually not as beneficial. The other aspect to consider is that as soon as you pay that off, as soon as you put those monies in, it’s harder to get them back out, right? So that money is immediately tied up. So unless you’ve got a real excess of capital, which is obviously harder to find, it may not be worthwhile to tie up that extra money in the property.

Tim Ulbrich: Yeah, I’m especially thinking maybe for some of our listeners that are buying a home, and maybe they don’t yet have a fully funded emergency fund or they have high interest rate credit card debt or other things. So really, it sounds like buying points is an ideal scenario for somebody who is in a great overall financial position, has extra capital, and plans on being in the home for a long period of time.

Nate Hedrick: Yeah, if you’re spending 5% on your student loans every month or every year, you don’t want to be paying, you know, a couple thousand bucks to get a couple of miniscule percentage points off. It’s not worthwhile.

Tim Ulbrich: OK, good stuff. Mac, thanks for your contribution, great questions. Mindy has a question that actually came in via the Real Estate RPH contact form, which is over at YourFinancialPharmacist.com/realestateRPH. She asked, “I’m building a house, second-time home buyer. Wondering what I need to know about the process, things to watch for, etc.” So thoughts for those listeners that may be thinking about building and whether they do or don’t currently own a home, what does that building process bring in terms of new factors and items that people need to be thinking about?

Nate Hedrick: Yeah, yeah. Besides the regular aspects of buying a home, it does add a couple things to the mix. The nice thing is is that you know you’re getting kind of — you know what you’re buying upfront, right? They’re building the home new. You’re not going to find any lagging issues that the home’s been there for 60 years and now the foundation’s starting to crumble, right? As long as everything is done quality upfront, you’re going to get everything brand new, which is a really big advantage. So I think the first question you want to ask if you’re considering building a home is you know, question around the idea of quality. And I think you don’t want to go to them and say, ‘How nice are your homes? Like what’s your quality?’ Like that doesn’t tell you anything because they’re just going to say, ‘They’re fantastic.’ And then you’ve learned nothing. But you want to ask some pointed questions, you know, things like, ‘Talk to me about some of your building standards. Talk to me about how energy-efficient your homes are.’ Because those are things that are going to show you yes, they follow code, but how close do they get to modern building standards? How close do they get to really high energy efficiency standards because those are much more better indicators of quality than just, oh yeah, we always follow code. Like you wouldn’t be a home builder if you didn’t follow code. So asking the right quality questions is a really good place to start, and that will help you know that what you’re getting when you put all that money in is going to be worthwhile. The second part is really the additions or the amendments or the kind of the perks, right? So you’re going to sit down when you’re building a home, and they’re going to walk you through and they’re going to say, ‘OK, the base model that you’ve selected is $400,000. Now let’s get to some of the upgrades.’ And these upgrades can take you — I’ve seen them honestly double the price of a home from that base value. So be careful when they say, ‘starting in the $300s.’

Tim Ulbrich: Starting at…

Nate Hedrick: Yeah, exactly. Like you’ll see that advertised on the big signs for the new developments. ‘Starting in the $200s,’ and realistically, no one’s walking out of there for under $300,000. So the upgrades, the things I would caution you on or draw your attention to is that take the upgrades that you find beneficial. Don’t let them talk you into things that, oh, this ups the resale value. So if you sell this home in five years, this is what people are going to want. If you’re building a home, in all likelihood, you’re building it for you. And so you should buy the upgrades that you want. One of the things I just had a client walk into it and was working through is that they said, ‘Well, we can do your upgraded kitchen cabinets. And right now, the popular thing is to do dark cabinets on the bottom and light cabinets on the top. And that’s only going to be $10,000 more, and you get this super modern kitchen.’ Well, if they sell that home in 10 years and that’s not popular, they may have to redo that. So if you don’t want that, don’t buy it. And that’s I think a good addage for all the upgrades that go with building a home. If you don’t want it, don’t invest that money because you’re the one that you’re building it for.

Tim Ulbrich: So Nate, one of the things that I’ve always wondered about building a house — we’ve never been through the process — is how does the cash flow needed differ from a buying a existing home? So if I’m in a current home, and I’m looking at building, how does that work in terms of selling and the timing? Am I having to put down money earlier where I necessarily can’t wait until the sale of my home? Or is it very similar to buying an existing home that those things are all ironed out?

Nate Hedrick: Yeah, it’s a little different because a lot of times, you have to buy the lot or you have to put in some sort of down payment to secure the lot. And sometimes, you have to buy the lot like upfront. Like it’s a $28,000 or a $50,000 piece of land that you have to basically buy upfront, and then you move forward. Or sometimes they can say, ‘OK, well it’s a $50,000 plot. We need $5,000 to secure this.’ But generally, it’s a lot more. It’s usually on the higher end of securing that location. So depends on the popularity, it depends on how they want to structure it. But there’s really two sides to it. One is basically securing that land and buying that land, and then the second is getting the mortgage on the home itself. And you can often wrap those things together so that everything’s kind of one piece, but the builder and the developer usually wants a lot more upfront to secure that property to begin with.

Tim Ulbrich: You know, one of the things that I’ve seen in our neighborhood, and we don’t actually have a homeowners association, so this may be different in areas that have a little bit tighter regulations, but we’ve actually seen several houses go up where my guess is maybe they didn’t anticipate all costs involved where six or 12 months later, like the yard is still not in or something’s not fully finished, you know, in terms of a porch or something else. So I think just things to consider, to your point earlier about, you know, what is the starting out price? What’s the actual price? And going back to you really defining your budget before you go into those conversations with the builders or else I think it easily could be a conversation where you start at $250,000 and you end at $400,000, you know, depending on what you’re looking at. So Lauren via the Facebook group asked, “What are your thoughts about real estate crowdfunding sites like FundRise?” So talk to us a little about what are real estate crowdfunding sites and what are your recommendations on these for those that may be interested in doing some real estate investing?

Nate Hedrick: Yeah, this was an awesome question from Lauren. I actually answered it on the Facebook page because I’m in the middle of writing an article about it right now. My wife Kristin actually found FundRise — I had never heard of it before — and said, ‘What is this? Like what’s going on with this?’ And I said, ‘I’m going to find out.’ So I’m actually in the middle of writing this article right now because it’s super interesting. The basics is this: So it’s a REIT, which is Real Estate Investment Trust, but they’re calling it an e-REIT, or an electronic or online or whatever they want to define it as. But the idea is very simple. The idea is that they’re a group of individuals who buy real estate — and this is many aspects. They’re buying rental properties, they’re buying commercial development, they’re buying land, they’re buying all sorts of stuff. And you yourself wouldn’t be able to buy those pieces, you wouldn’t be able to buy the land, you wouldn’t be able to buy the commercial buildings, but if you could buy a very, very small chunk of that, you could still reap some of the benefits. So if you put in, you know, a couple thousand dollars, and 50 people do that, now all of a sudden, they’ve got the capital they need to go forward and take on these big investment and real estate investment properties and projects. So you’re basically crowdfunding a investor group to do these things. So it’s kind of like a mutual fund where you’re buying small chunks of a larger company, but instead, you’re buying small chunks of a larger real estate investing group. And I’ll say a couple of things about FundRise in particular. And I don’t have any personal experience investing with them, so I’ll say that upfront, but the reading that I’ve done and looking through their fine print, I think there’s a couple of aspects. One is that I think that their model is very good in terms of what they’re investing in, where they’re doing it. I think they’re a little ahead of the game. They’re kind of targeting areas that are still not quite on the rise but will be on the rise soon. So I think they have good investments. People in the industry that are talking about them, they’re investing in the right areas. And their current return on investments in the 10-12% area are indicators that they’re doing the right things. So that’s a good sign, right? That they’re investing in the right areas. The problems I think come in when you look at how that money that you’re giving them is being used and how you get it back. They are not a publicly traded entity. They are a publicly available entity. And those are two very different things. If I go into my brokerage account and buy a REIT, a buy a portion of an investing property, I can sell that at any time. It’s publicly traded, so a broker will take that off my hands as soon as I am ready to sell it. Just like a stock — if I buy Apple stock and then go sell it tomorrow, someone’s going to buy that. That’s publicly traded. But if it’s publicly available, I may not have someone available to buy that investment whenever I need to sell. So I could say, ‘Hey guys, I want to cash out. I’m done with FundRise. I want my money back,’ and they would be like, ‘Well, nobody’s buying right now at the price you’re offering. So I’m sorry, we ahve to hold onto your money.’ And if you read all the fine print, they actually really talk about how illiquid the money really is. They can hold onto your money almost indefinitely if it benefits the group of investors. And really, I want you guys to look at that on your own terms because it’s pretty interesting to see how that breaks down. But the idea is simply that if they find it to be in the best interests of the investor group, they can hold onto that money for a long period of time, so it’s pretty difficult —

Tim Ulbrich: That’s interesting.

Nate Hedrick: Yeah, it can be difficult to get that money back out. And I’m sure people are — right now, at least it’s fine. But who knows what it’s going to look like five years down the road? So that’s one of the big concerns that I have. The other one is that even though there have been great returns — and again, 10-12% is fantastic returns for something like this — their fee structure is a little bit high. They talk about only charging about 1% upfront, but if you really break down the fees that are built into the back end, fees can be upwards of 3% a year. So the fees can be quite high, and that’s something that you really want to take into account because that’s taking away from your gains. So all of a sudden your 12% is down to 9%, and if they start dropping and they go to 8-10%, now you’re talking about gains that are less than the S&P. And so is it really worthwhile to have this illiquid money making less than you make in a general just brokerage account. So there’s a couple of pieces to consider there.

Tim Ulbrich: Yeah, those are great points. And I would encourage to our listeners that are thinking about this, don’t forget about your tax advantage retirement savings account. So your 401k’s, 403b’s, Roth IRAs, obviously there’s inherent tax benefits of being involved in those accounts that you may not see with something like a FundRise. So don’t forget to factor that into the equation. And certainly I know in my 401 account, I certainly have the option to invest in REITs, and so is there a way that you can get involved in diversifying your investments into real estate while still taking advantage of those tax advantage retirement accounts if you’re not already doing so. Couple other questions that I want to throw out there briefly because I think they’re ones that I get often. The first one is, Nate, probably the most common question I get. And I was surprised we didn’t get it on the Facebook group is, where does home buying fit in with student loan debt? So is buying a home appropriate when I have $150,000-200,000 of student loan debt? If so, is there an ideal or a right time? And what are some of the principles I should be thinking about? And so I wanted to get your thoughts on this one.

Nate Hedrick: Yeah, it’s a great question. It’s actually a really large question. And I think the simplest answer is it fits in wherever your priorities say it does. And that’s almost too simple of an answer, but it really is the truth. If you need a home right now. If your family or your personal environment says that I need a home right now, then you’re going to make it work with your student loan debt. It’s certainly possible. If you are someone that just hates being in debt and hates the idea of owing somebody more than your salary, you’re probably going to wait. You’re going to pay off those loans first before tackling the home buying process. But it really depends on that priority set. In fact, Tim Church and I — Your Financial Pharmacist Tim Church and I have been working on an article that will be coming out probably around the time this podcast is launched. It talks all about how to buy a home with student loans and what that can look like. So it really comes down to your personal journey and where you’re at and trying to fit that in. I mean, I’ll be honest. I’ll tell you, when my wife and I bought our home, we were well into the negatives in our net worth at the time. But it was something that for us, we wanted a home, we needed a home at the time. So it was worth doing. And it really depends on your own situation.

Tim Ulbrich: Yeah, Jess and I were right there with you. And I think for me, this is such a personal, customized question that the answer to this is different for everyone, right? So you know, I think this is a great example of sitting down and really looking at all of your financial goals in terms of things we’ve talked about before on this podcast: emergency funds and how much debt? And is there credit card debt? And where are you at with retirement savings? And what other financial priorities are on the table? And I think the thing I would encourage the listeners to think about is on a month-to-month basis, depending on your student loan payment, as you look at evaluating the home purchase, you know, you really want to be cautious and not put yourself in a situation where you feel like between your student loan payment and your mortgage payment, you really got no margin to do anything else or a little margin where you’re feeling super stressed each and every month. Now, that can also be tricky because some people may say, ‘Well, I’ll opt into income-driven repayment plan, I’ll minimize my student loan payment, I’ll free up cash, and I’ll then be able to purchase a home.’ But obviously, that has limitations as well, being in student loan debt longer. So I think really taking a step back, working with a financial planner like Tim Baker or really looking at all of your financial goals to say, ‘OK. Where does home buying fit in with all these other priorities?’ And then if it fits in at this point in time, what’s the best next step in terms of how much down, what’s the overall purchase price of the home, location, all of the other factors we’ve been talking about this entire month. Nate, one last question I have here. We’ve gotten a lot of action in the YFP community about real estate investing. And I think there’s a big interest out there, rightfully so, especially while the market’s hot, of course. But we had Carrie Carlton on in Episode 009 that talked about real estate investing, which is one of our most popular episodes. For those that haven’t listened to that, I would check that out. But I think many people are thinking about, OK, where is the job market heading? You know, I want to think about an alternative revenue stream. Real estate investing may be that alternative revenue stream. So for those that are thinking about investing in real estate, whether that be for a side income, a business, diversification of investments, what is the best first step they can take? And I think with other financial priorities also in mind, such as emergency funds, debt, etc., is there a right time to jump into real estate investing? So I know this is a huge question. We could do a separate series in episodes, we probably will in the future. But I know we have listeners that are thinking about real estate investing. I want to give them something to hang onto as the next step. What do you think?

Nate Hedrick: Yeah, no, I think that’s great. And you’re right, it’s a huge question. This is why I have a website, right? This is why I have the Real Estate RPH because this is exactly where I was. I remember reading “Rich Dad, Poor Dad,” learning about passive income and real estate investing and thinking, how do I jump into this? What’s the next step I can take? So if you’re looking for the next step, I think the very first thing you should do no matter what is educate yourself. Listening to podcasts like this, checking out blog posts for our site and for Real Estate RPH, that can be a really great tool. And there are so many other resources out there. There are books, there are blogs, there are podcasts. But educating yourself about the types of investing can be a really great first or next step. And then once you’ve done that, and if you want to take a tangible action, you know, I want to do something and see what this actually looks like, I really encourage people to assess some deals in the area that you’re considering. I work with a lot of pharmacist investors here in Cleveland, and the very first thing if they’re new investors, they say, ‘Well, where do I start? What do I do?’ I say, ‘Well, I need you to assess some deals first. Understand the market in which you’re looking in so that you know what a good deal looks like.’ And there are a number of tools that can help you do this. But really, the best thing is just go pen and paper and a calculator. But seriously looking at what available homes are there on the market right now? What are rents looking like if I’m going to rent that? Or what are flips looking like? Or comps looking like if I were to flip that home, depending on the type of investing you’re going to do? And just figure out if that is a good deal, a bad deal or something in between. And then once you have that pulse on the market and you understand it and you’re doing the education and the background, it becomes that much easier when a good deal comes along, you can actually pull that trigger and look at seriously putting an offer on that home.

Tim Ulbrich: So for me here, I think it’s all about learning. Reading, blog posts, books, listening to podcasts, engaging in communities like this one. And I love your advice of really looking at deals and doing the math on them. And I think when I think about real estate investing, Nate, I think all of us have either a family member or a friend or somebody who’s doing this and who is encouraging us to get involved in real estate investing and talks about all the upside of real estate investing. And of all the things I’ve read, for every good, positive return on investment story when it comes to buying homes, there’s probably five that have gone bad that maybe you’re not going to hear about. So really doing your homework, doing the math, making sure you understand all of the costs, everything involved. But we’ll definitely have more content coming on this topic in the future, so stay tuned in the YFP blog, podcast and Facebook group as well. So Nate, this month has been a ton of fun. We are super excited about the partnership between YFP and Real Estate RPH. So thank you so much for taking the time to come on the podcast, contributing to the blog. And for our listeners, again, we continue to bring you content around real estate investing, buying and selling homes. If you have a question that you’d like to get answered by Nate, head on over to YourFinancialPharmacist.com/realestateRPH, and Nate will get back to you in regards to your question. As we wrap up today’s episode of the Your Financial Pharmacist podcast, I want to take a moment to again thank our sponsor, Splash Financial.

Sponsor: If you’re looking to refinance your student loans, head on over to SplashFinancial.com/YourFinancialPharmacist, where in just a few minutes, you can check your rate. Splash’s new rates are as low as 3.25% fixed APR, which can literally save you tens of thousands of dollars over the life of your loans. Plus, YFP readers receive a $500 welcome bonus for refinancing with Splash. Again, that’s SplashFinancial.com/YourFinancialPharmacist.

Tim Ulbrich: Hey, thank you so much for joining me for this week’s episode of the Your Financial Pharmacist podcast. Next week, Tim Baker and I will be talking about the pros and cons of Dave Ramsey’s seven baby steps and how they do and don’t apply to the pharmacy profession. This is a good one, you’re not going to want to miss this episode. If you’ve liked what you’ve heard on this week’s episode, please make sure to subscribe in iTunes or wherever you listen to your podcasts. Also, make sure to head on over to YourFinancialPharmacist.com, where you’ll find a wide array of resources designed specifically for you, the pharmacy professional, to help you on the path toward achieving financial freedom. Have a great rest of your week.

Join the YFP Community!

Recent Posts

[pt_view id=”f651872qnv”]

Episode Summary

Key Points from the Episode

Episode Highlights

Links Mentioned in Today’s Episode

Episode Transcript

Episode Summary

Key Points from the Episode

Episode Highlights

Links Mentioned in Today’s Episode

Episode Transcript

Episode Summary

Key Points From the Episode

Episode Highlights

Links Mentioned in Today’s Episode

Episode Transcript

Episode Summary

Key Points From the Episode

Episode Highlights

“The list price of a home is completely made up. The market value of the home is the number you want to determine.” — Nate Hedrick [0:25:15]

Links Mentioned in Today’s Episode

Episode Transcript

About Today’s Guest

Episode Summary

Key Points From the Episode

Episode Highlights

Links Mentioned in Today’s Episode

Episode Transcript

About Today’s Guest

Episode Summary

Key Points From the Episode

Episode Highlights

Links Mentioned in Today’s Episode

Episode Transcript

Navigating the Home Buying Process Through the YFP Concierge Service

About Today’s Guests

Summary

Mentioned on the Show

Episode Transcript

Rapid Fire Home Buying Q&A

Summary of Episode

About Today’s Guest

Mentioned on the Show

Episode Transcript

Join the YFP Community! I Want In!

Subscribe to YFP Money Matters and get financial tips, money resources, and the latest podcast episode sent straight to your inbox every Friday morning!

Join the YFP Community!