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How To Financially Prepare To Buy A Home VI
More Tips For First Time Home Buyers From The Finances Mini-Series, And Some Real Life Stories As Well
In 2019, I decided to focus on a huge problem. The problem is the empty wasteland of decent information that is out there for first-time buyers. Trust me, I’ve looked and I’ve seen. If it’s not this show, if it’s not my Facebook page or not my YouTube channel, it’s usually wrong or it’s trying to sell you something. I know that sounds incredibly narcissistic, easy for me to say. I know it sounds like I’m completely full of myself, but there’s a reason for that. It’s that the industry doesn’t think that there’s enough money in it, so they bailed on you and they went to go work with the sellers. If you think I’m kidding, go ahead. Google it right now. Google first time home buyer, you won’t find a realtor out there. As a matter of fact, I did see a guy on Instagram and Facebook who is selling a workbook for $250. A workbook and some videos to tell you how to buy your first home to anybody in the country. I wanted to remind you how much you paid for this show. It is absolutely free. I haven’t seen it, but I’m willing to bet that he’s not being as straight as I am with you. He could be a great guy. God bless him. Thanks for trying to help. The bottom line is you are the smarter consumer for grabbing all this information for free. We’re going to continue our six-part mini-series on how to financially prepare to buy your first home. A look at the download numbers that I’ve seen online, apparently this topic is seriously of interest to you. Because this mini-series is the thing that I’ve done, which means that it’s been on the internet for the least amount of time, yet it seems to be hitting the most downloads. In fact, I’m going to encourage you to DM me, go to my website, shoot me an email, text me with a list of topics, something that you’re interested in. All I’m doing is looking at the numbers and go, “I think that’s what they want.” This is for you. For now, I’m pulling topics out since I’ve got a list a mile long, thirteen years of this, 82 first-time buyers and three more in escrow too. I’ve got tons of experience and tons of different stories. What do you want to know? Get involved.Story Time With David
Before we get to part six on our financial preparedness, let’s start with some great news. We’ve got number two. Nicole in Green Bay reached out to me. I hooked her up with a unicorn realtor named Kevin in Green Bay. She’s closing. We’ve got yet another nationwide person closing. This show is here for you if you’re years away. Some people found us when they were pretty close. This brings us to a segment that we call Story time with David. It’s just like an elementary school assembly presentation by some crazy artsy people in primary-colored shirts with white overalls. That was my job when I was nineteen. Though this is going to be in story format, I’m going to do like the people try to do when they come to your elementary school and they do those assemblies. They try to sneak in the ethics and the morals wrapped up in the themes, the motifs and the plot twists. The difference is that you actually asked for this information as opposed to being forced to sit criss-cross applesauce on a cold multipurpose room floor, getting all those secret morals shoved down your throat and you don’t even know about it. This show is here to educate and help you. Rather than continuing reading this for a little while, let me tell you a story directly from one of our friends. There are lots of great first-time buyer home lessons in here including some of the financial ideas that we’re looking to talk about with this episode. This comes to us by Simonette and Dave from New Orleans. Here’s their story. Sim writes, “Dear David, I’d been meaning to write you for some time now. I wanted to thank your show for your truth, your willingness to share information. Without you, my husband, Dave and I would still be renting a cramped space and throwing money away each month. I was doing that when I started listening to your podcast. I’m an artist, so I started listening while I was on a three-week job restoring some sculptures and paintings at our local zoo. Each morning, surrounded by the calls of the animals, just walking up a lush jungle within the zoo, I would learn about credit financing, mortgages, realtors and all the things that seemed like amorphous, big bad fears. You made these things concrete, something that could be explained, research and understood. The episode where you broke down how much people could afford based on their income was a real game-changer for me. I realized that I could totally afford a house in my city.” She’s from New Orleans and says that it’s getting pretty expensive. “I didn’t have to save up to 20% down contrary to what my parents had told me my entire life.” It’s true. That alone was huge. Even the most prepared folks still need an opportunity to ask more questions. Click To Tweet “I was painting an elephant sculpture when I heard that part and I remember stopping pacing around for a moment and being like, “I can actually do this.” Before that day, I wasn’t sure what I could afford. I’m 34 my husband is 38. We’ve thrown a lot of rental money down the drain and we would have kept on doing it if it weren’t for your show. I keep painting and keep listening. I’ve already had some in my savings. I’d started saving, I wasn’t sure how much I’d need. I get to the episode where you talk about exactly how much money you need to close in the house and that information was good. I was like, “I have a realistic goal.” I was thinking I’d be in the $300,000, $350,000 realm, so I needed to save $20,000 saved up and I already had $10,000. You said that some people use money from retirement accounts for a down payment. My ears perked up. Dave and I work as scenic artists and sculptors in the film and television industry. We’re a part of a film union, IATSE. Part of our contract, our employers pay into an annuity fund. We have way more than enough in our annuity funds to cover down payment. I made a series of phone calls, sent some emails and then two days later, I was told we can withdraw the estimated cash to close from our annuity funds so we can buy a house, have enough to cash to close and even get a 10% down payment covered. This was huge. I would never even have thought to ask about this, had it not been for you. We’ve got our fabulous sassy unicorn realtor, Loren Hodges,” for anyone in New Orleans, “Who I interviewed using some of your questions. She’s a true bad-ass. We started looking for houses, but with an actual realtor and in person instead of just flipping through the pictures on the internet like I’d been doing for the past six months. We were pre-qualified and knew that we could what we could afford. We found one in our neighborhood and got into a bidding war and lost by $5,000. We kept on looking at houses. As people familiar with construction and finishing working on movie sets, we have to be meticulous about this stuff. We were surprised and appalled by some of the details in the homes that we saw. Things look so different in the pictures. Plaster in great undulating waves. Every outlet in the house was crooked, giant gaps areas where it was obvious the house has been recently flooded and the waterline hadn’t even been hidden or treated from Katrina. Shelves barely attached to the walls. All of these need renovations. Attention to detail is everything. If you could see it on the surface, what about the stuff that’s behind the wall?” That’s a very good point. If you see mess and stuff in the house, then what’s underneath the hood? That’s what I always say. When my clients and I see a house and everything’s meticulous and orderly, I bet you the water heater and the plumbing, the electric is all in order. “What’s looking and waiting to come out to be your very next expensive money pit horror show. There were other houses that were nice, but for some reasons, they just weren’t right. I got an email notification from my realtor.” Yes, an email notification. It is very important to work with a good realtor. “I got an email notification about a house that wasn’t in an area that I expected, but I clicked on it out of curiosity. It was not only gorgeous inside, but it had everything we wanted. It was the right price and had a lush tropical backyard with an outdoor fireplace and an outdoor shower and it opened right up to the Mississippi River levee.” The bottom line is it’s their dream house. She sent me a link to it. It is gorgeous. “We made an offer $10,000 under asking and after Dave’s nervous pacing, wondering and waiting, it was accepted. Loren recommended a fantastic mortgage agent, Ted, who is a local guy and sounded so much like you when he started talking enthusiastically about first time home buyers and throwing money away on rent that I had to laugh. He brought lunch to the inspection. It turns out that he gave him a great rate and he knows some of their friends.” She continues. “We’re under contract through inspections and scheduled to close. We’re trying to decide if we should use the money we save for a down payment to make a larger down payment, which would save us $50 a month on the note or if we should spend a little on new furniture and put the rest in a house fund bank account, as our mortgage agent suggested.” This is a good problem to have.
Tip # 19: PMI
Let’s get back to the list of things that you need to do to financially prepare for a home. I mixed in some things within that story, but we’re going to go right back to our list. If you’ve been binging the episode, this is going to be tip number nineteen. This is what I talked about before. What is PMI? This is not something that you need to do to prepare, but it’s something that you need to understand and know about. PMI or MI stands for Private Mortgage Insurance or just Mortgage Insurance. It’s an extra fee dropped on top of your monthly mortgage if your down payments less than 20%. The banks think that anything that doesn’t have 20% money into it down could be a risk for them because God forbid something happens and you can no longer pay on the house, if they’ve got 20% of a buffer, they feel more comfortable. You have to pay an extra few hundred dollars. Sometimes it’s a $100, $200, $250 a month in what we call your PMI. If you would like the privilege, and that’s how I see it. The privilege of being able to have a bank loan you $200,000, $300,000, $400,000, they’re going to want to protect that investment. That’s a lot of money and they’re going to ask you a lot of questions. Some people actually get pissed off at how much they scrutinize you to get a loan. Ever since the mortgage meltdown, the banks require way more paperwork. Sometimes it feels like they want a blood draw or your elementary school report cards and your firstborn or your pet. It’s insane how much they ask for, but that’s a good thing. It means we’re not going to have another foreclosure crisis and a housing meltdown because any yahoo out there could get a loan. It’s totally changed. It’s important that the banks are protected, but it’s also important that they give you an option to buy if you can’t wait until you get to 20%. It sounds morbid, but what if you get hit by a bus a year after you bought the house? What if you bought it for 3.5% down with these great FHA loans that most of my first-time buyers use? Even this, what if that happened? What if it was after a year, the market went down 4% and you only put 3.5% in? The bank is in trouble. That’s why they at 20%, they won’t charge you the PMI because they feel like they’ve got that little cushion. Some people who have a 3% to 5% down save for down payment. When they find out about PMI and there’s an extra charge on top of what they’ve already punched in their mortgage calculator online, they freak out and they’ll say things like, “I’m not paying that. I’ll wait until I have 20%,” to which most of the time what I would like to say is this, “How long did it take you to save? 5%, eighteen months? How long do you think it will take to save the other 15%? Let’s do some basic math. What if it takes you the same amount of time? Multiply your rent by the 54 months it’s going to take you to save the other 15% and then multiply your $200, $300 or $400 a month tax benefit that you get, which is going to be a write off for you for being a homeowner. Multiply that by 54 months. Did you get that? Add that up. What’s that number? That’s a buttload that you’re throwing away. Let’s not forget that interest rates and prices can change a bunch in the next 54 months and it might go not in your favor. Of course, if the market goes up, you’re going to get equity in appreciation in the house by doing absolutely nothing but sitting on your butt and writing your mortgage check.” Let’s multiply your $150, $200 or $300 PMI monthly fee. Let’s multiply that by 54 and see how much lower that is than the other number that we added up with all those other pieces together. That doesn’t take into account the potential equity and not to mention the uncertain rise of mortgage interest rates. PMI is a privilege. It is a loan that you make to yourself and it’s a simple equation. Little payments that you pay each month in order so that you can make and save buttloads of money by being a homeowner. Don’t freak out about PMI.Tip #20: Grants And Payment Assistance
Tip number twenty is grants and down payment assistance. There are a ton of programs out there. The last time I looked it up, there were over 2,300 to help people buy homes, especially first-time home buyers. Some of these programs offer straight-up grants right to you which don’t need to be repaid. Others have deductions in interest. Some of them have tax benefits. There are all different kinds. Some for doctors, firefighters, nurses, state employees or teachers. I completed another course in this. I go and I take them all the time. At the end of this course, I ran everything, I do all the numbers and I came to the same conclusion that I’ve been coming to for thirteen years, that it’s a lot of pie in the sky.
Tip #21: Beg
Tip number 21 is beg. A lot of the loan programs out there will let you get something that they will call a gift. It truly is a gift. If you get a gift from your parents or your relatives or your friends, you can usually bring that into the loan. You don’t have to show that you brought the money in yourself. Some loans you have to check with your unicorn lender. You have to show where the money comes from and that it was yours or you have to have money in a bank account that’s been there for more than three months. That’s called seasoned money. A lot of times you can get what’s called a gift, especially with like an FHA loan. I told you this before and I’m going to continue to tell you this. The minute you start to adulting, the minute you start thinking about this stuff, make sure you tell your relatives. You never know, uncles, aunts, grandmas, grandpas, a lot of people will be so impressed with you being a responsible person that they’ll offer to throw some money in and help you out. It helps if you develop your own little spreadsheet and plan and budget the whole thing and drop a presentation on them, “Mom and dad, I was going to spend $24,000 in rent for, but this guy told me that if I did this I could build up equity, not to mention the tax benefits. For just an investment of $8,000, I’d be able to get on the road to 3.5% down payment. What do you think?” I’ve got one big one than I talked to you about with Simonette, my gal from New Orleans. Sim and Dave, the tax benefits. If you can’t buy a house because your paycheck is too small, when you buy a home, your paycheck can get bigger. I’ll explain that to you in the next episode. I encourage you to read this a few more times whenever you have a chance. Join How to Buy A Home Facebook page. You can follow me on Instagram. I’m there too, @DavidSidoni. Lots of tips there and videos, daily stuff coming up. Check out David Sidoni on YouTube. I try to put as many videos up as I can. There’s a whole bunch of different information if you look at specific stuff. Also, feel free to explore the website. Go to DavidSidoni.com. Subscribe, write a review if you can. That would be great for us. The more people we can help. We’re over 33 referrals all over the country, a couple of closings and we got more coming up. Thank you so much to everyone out there. Follow all of the advice that you can. Use this on your own. It’s free for you because you’ve got someone out here that wants to back you up because I believe in you and remember, you can do this.Important Links:
- How to Buy A Home – Facebook Group
- @DavidSidoni on Instagram
- David Sidoni on YouTube
Instagram @DavidSidoni
Tik Tok @howtobuyahome