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

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

• Subscribe to the YFP Newsletter
• Tony Umholtz
• First Horizon
• Tony Umholtz on LinkedIn
• Tony Umholtz on Instagram
• First Horizon Pharmacist Home Loan 
• YFP 285: Cracking the Code on Home Buying Loan Options
• YFP Planning: Fee-Only Financial Planning for Pharmacists
• YFP Real Estate Investing Facebook Group
• YFP Disclaimer
• Tim Ulbrich on LinkedIn

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]

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