Podcast

Ep. 28 – If I pay $500, $1000, $1500, Or $2500 In Monthly Rent, Can I Buy A Home With The Same Payment?

HBH 28 | Low House Down Payment

Most people don’t even THINK about trying to buy their first home because they think their monthly payment will skyrocket – maybe not. In this episode, learn how and why you don’t always need a 20% down payment to own a house. In fact, in today’s market, you can buy a home with 3.5% down payment, and often, your monthly payment is exactly what you already pay in rent. Discover the people who have listened, done it, and succeeded. Numbers aren’t always sexy, but they sure can be when they tell you you can stop renting and start owning!

If I pay $500, $1000, $1500, Or $2500 In Monthly Rent, Can I Buy A Home With The Same Payment?

How First Time Home Buyers Can Pay A Low Down Payment And Pay The Same Monthly As Their Current Rent

Can you buy a home and still pay close to the same monthly payment if you pay $500 a month in rent? What about $1,000 or $1,500 or $2,500, do those numbers work? Yes, they do. Let’s talk about it. We’re going to run all the numbers, do the math and get all equations and stuff. Let’s start with our first number. Our first number of the day is 82 first time home buyers since 2006. I’ve got three more in escrow so we’re 85 in total in thirteen years. What’s so important about those numbers? Let me explain for those of you who don’t know how many homes realtor sell in a year and therefore, can’t quantify how many real estate transactions are a lot, how many are truly experienced or have expertise, Keep this in mind. The average realtor sells four homes a year and makes about $30,000. If the average realtor selling four homes a year, maybe one of those might be a first time home buyer, you don’t know. Maybe none of them are, maybe 2 or 3 of them are. You might hear that a real estate agent, a friend of yours, a cousin, an uncle, someone’s got a license and they’ve been doing it for five years. You think they’re experienced. That’s a long time to work on a job.

If they’re doing the national average, that means they maybe have sold twenty homes in five years and maybe only a couple of them have been a first time home buyer. What about a successful realtor? Someone above the average, someone making $100,000 a year. If the average home in your area costs $250,000, that means a realtor has to sell thirteen homes a year to make $100,000. Did you know that? Did you know that your successful $100,000 a year realtor is only selling thirteen homes? If you’re like where I am, where a condo costs you $500,000, then you only have to sell 6.5 condos to make $100,000. If you throw in 1 or 2 expensive deals throughout the year, like a $700,000 or $800,000 home, then you only have to sell 3 or 4 total. When I tell you guys out there that I’ve helped 85 first time home buyers from the very beginning planning process all the way to the end, that is a bunch.

My numbers, I average 6 to 7 first time buyers a year, which is almost double the national average that a realtor sells total all kinds of buyers and sellers. Why am I emphasizing this number to you? I’m finally going to be able to bring my expertise to you with the most all-important number in your life. I know this from personal experience and I know this from 85 different experiences from people out there. This is the big number. This is what matters to you. Does your rent equal a payment for a home? Can that number that you pay every month be the same? The same as for what you pay when you’re your lowly renter or instead paying the same money and you couldn’t be a sexy homeowner.

I know we’re not changing the world with this information. This equation isn’t going to break the theory of relativity. We’re not going to blow up Twitter and we’re not going to break the internet with this exciting equation for you and your own personal finances but you will be able to see exactly where you fit in the real math of buying your own first home. Here’s how we’re going to answer that question. A while ago, I asked a question on Facebook. I asked some of my folks in the How to Buy a Home Facebook page, what are you guys paying rent? Here are the answers that I got from all over the country. After I give you their answers, then I’m going to give you the super sexy numbers and all the math and stuff. How much could these people purchase for the same monthly payment and how much would they need to put as a down payment in order to make that happen?

Real Life Examples

Keep in mind when I run these numbers with you, these real-life scenarios and equations that the one thing I’m not talking about in these numbers is that these are the rents today and rents always go up. Mortgages are fixed forever. That means they stay the same because that’s what we’re doing now. We’re not doing those variable loans anymore. Most people refinance their loan a few times during the life of their loan, so that means that not only is it going to stay the same but as you live in your home, your salary and your income is going to increase over the years and your housing payment will definitely stay the same and will likely even get lower. That’s the numbers. Unless you continue to tell yourself that you can’t do this and you keep renting. I got news for you, listen to these numbers and you’re going to find out that you can do this.

I took the Facebook answers, did the research on the home sales in the area and I came up with this list of sexy numbers that I have talked about. These are the actual real numbers, practical real-life examples. I start in Wisconsin with my friend Melissa. Melissa’s paying $480 a month. The first thing you need to realize is that all of these numbers, we’re going to be including the tax benefit. She’s paying $480. She can pay more than that and she won’t feel any change in her monthly budget because of the tax benefit. I talked about the tax benefit in depth in episode 27 explaining that it’s the greatest thing that exists in the entire universe. It’s the mortgage interest tax deduction. Simply put, when you buy a home, you are then going to get an extra $200, $300, $400, $500 a month in your paycheck because owning your home has a big fat tax write off. If you haven’t read episode 27 yet and you think that I’m smoking crack, then go back and read to episode 27. It’s titled How to Financially Prepare to Buy your First Home – VII. All these sexy numbers make a lot more sense to you when you understand the tax benefits of the mortgage interest tax deduction. 

Tax benefit is the greatest thing that exists in the entire universe. Click To Tweet

Melissa’s $480 in rent would be about $600 in a mortgage payment that she could make when she throws in those tax benefits. With a $600 mortgage payment, that would get her $100,000 home, a three-bedroom home in Wisconsin, not a one-bedroom apartment like she currently rents, “That means I’ve got to get a home loan. That’s going to cost me a ton of money. $100,000 loan, the bank’s going to want a lot.” $3,500 would be the down payment for this. I’m going to keep going and I’m going to go through other scenarios for you and remember that in all of these scenarios, we’re assuming that the person who is renting will become a home buyer when they qualify for a home loan. That process is laid out for you in a whole bunch of other podcast episodes. The key is you likely can qualify for a home loan if you follow all the steps that I’ve laid out for you. You can do that much quicker and much more efficiently by finding that rare, mythical combination of an experienced yet compassionate realtor willing to work with the first-time buyer. Even working with the first time planner, someone who’s going to buy in a couple of years. It’s the magical, mythical, unicorn realtor.

Out of the land of fluffy unicorn realtors, and back to the very studious but sexy numbers. We’re going to go to my friend in Ohio. Talisa in Ohio was renting a two-bedroom, one-bath for $769 a month with the tax benefits. That means she can buy a $175,000 three-bedroom, two-bath, 1,400 square foot home with a down payment of $6,125. Moving over to the great State of Michigan, my longtime friend, Jill. She’s renting right now a one-bedroom, one-bath for $770. I don’t think she is anymore. This is an old story before she bought a house. She was renting one-bedroom, one-bath at $770 with the tax benefits in Michigan. That means she could buy a $200,000 three-bedroom, four-bath home with a ton of acres for the exact same payment and it’s $7,000 down payment.

Moving on and moving up a little bit in the numbers. We’re getting up to around $1,500 now. This is for my buddy, Adrian. Adrian is one of my friends who works at Disney. As you know, I’ve done a lot of deals with people at Disneyland. I’ve been stalking him on Facebook for years, trying to get him to buy a home but he always tells me he can’t afford it. Here are the numbers. Right now, he’s paying $1,495 for a studio that doesn’t even have a bedroom. It’s just an empty big space at $1,495 in Anaheim. He claims he can’t afford to buy it. Anything else? With the tax benefits, taking that $1,500 up to about $1,800 a month, he can afford a two-bedroom, two-bath, 1,000 square foot condo in Anaheim. Bedrooms, not just a studio and at the down payment that he can afford. It’s only $10,500. You’ve been working at Disney for so long, Adrian. I guarantee you you’ve got that much money sitting in a 401(k) somewhere.

Let’s move on to our friends in the great white North. How about from Canada? Megan in Ontario is paying $1,850 for a three-bedroom, two-bath. It’s a great place with a pool and a bonus room. You don’t want to bail on that. You can purchase a $275,000 home for that payment and still get three bedrooms. It might have to do a little work to find that cool place with the bonus room and the pool but you’d be paying yourself instead of your landlord. The down payment? It’s $9,625. Coming close to home right here in California, I got Melissa who’s in a two-bedroom, one-bath in Garden Grove and John who’s in a one-bedroom in Torrance. They’re both paying $1,895.

For that exact $1,895 plus the few hundred bucks at the tax benefits, Melissa could have a two-bedroom, two-bath, 1,000 square foot place in Garden Grove. John in Torrance who’s got a one-bedroom apartment right now, he could buy a two-bedroom, two-bath condo and both the down payments there would be $13,125. This next example will show you and even an educated individual can still be fearful of the numbers. This guy used to work on my team. He used to sell homes. He’s heard this stuff every day. He’s renting a one-bedroom apartment in Anaheim for $2,303. Nice deal you negotiated there, even you got an extra $3 on top of it. For that same price, my friend who will not be named Josh, could own a three-bedroom, two-bath, 1,300 square foot house for $14,000 down. Finally, we got a big number.

I’ve got a friend who moved here from New York. She’s in Huntington Beach. She’s paying $2,900 a month, almost $3,000 a month for a three-bedroom, two-bath house in the beautiful City of Huntington Beach, Surf City, USA. Assuming that we then go ahead and take that $3,000, pack on the tax benefits, that’s a large payment. If you’re talking $3,300, $3,400, $3,500 a month, that much money in a loan is going to be able to afford you over $500,000 loan and you’re going to be looking at a 2 or 3-bedroom house in Huntington Beach. It’s only going to cost you $17,500 down. You’re going to be looking at a 3.5% payment of $17,500. I’m also very excited to announce that we do have our first local podcast listeners that are in escrow. Their numbers are going to be really helpful to you guys too. This is Zach and Chantel. They have some fascinating numbers. We’re getting ready to close on a home that they’re very excited about. It’s going to cost them $448,000. Some of you guys on the rest of the country, that’s a mansion. Getting a house for $448,000, I don’t care where you are, that’s a big deal. Their numbers have to be crazy. They’ve got to have a ton of savings.

HBH 28 | Low House Down Payment
Low House Down Payment: When you buy a home, you are going to get an extra $200, $300, $400, $500 a month in your paycheck because owning your home has a big fat tax write off.

Here are their numbers. When they came to me, they had $9,000 in savings. They had $14,000 that they could use from their 401(k). They had about double that because you can use 50%. That’s it, $9,000 in savings and a built-up 401(k). They are approved for and closing on a $448,000 home, paying $2,900 a month or about $2,500 when they get their tax deduction. We’re excited for them. We hope that those numbers are encouraging to you guys. We’ve got other local listeners that are also getting ready to go through the approval process. Alvin and Ashley, we’ve got Akhim and Angela, Alison and Terry, Devin and Lena. They ran the numbers and they’re approved. We’re getting ready to go home shopping.

From Renters To Homeowners

As of October 2019, when I’m recording this, we’ve got 46 planners and it’s growing fast. Forty-six of you guys out there, reached out to me and helped you find a unicorn. In fact, I got another one this morning so that’s 47. She told me that they started listening to the podcast and in the exact same month their rent went up 10% and they also got their raise at work, which was 2%. That’s 8% in the wrong direction, so they reached out to me. We’re finding them a unicorn because rents will always go up and mortgages are fixed. We got 47 listeners who are in the metaphorical car that we talked about.

They get in that metaphorical car in Los Angeles and driving to Nashville except they’re using a roadmap to get to our metaphorical city of home-ownership. Using that unicorn hookup, we’re helping people today, giving them the roadmap, helping them become buyers and helping some of them become planners and looking to buy in a couple of years. This episode, we’re going to shout out some of those planners. Cece in California, Claudia in California too. I talked to Ellie for a little bit who was working on thinking about buying an investment first before she bought her own place. Spoiler alert, buy your own place first. We talked about it. She’s got a plan now. Leah in Los Angeles, Riah in Northern California. Another guy who thought about investing first but after some serious late-night texting with me, we’re working on getting him home up there in Northern California first. Then, he can buy more property and take over the world.

We’ve got Caleb in Tucson, David in Seattle, Doreen’s thinking about moving to Arizona. Finally, our last shout out today is to 24-year-old Faith in North Carolina. She was doing dishes in her parents’ kitchen sink when she heard and realized what I was talking about when I was discussing the privilege of paying PMI so that you can buy a home with 3.5% down instead of waiting to try to save up to 20%. All you need is 3.5% like Zach and Shantell here in Southern California. One of our other success stories, Sam and Dave in New Orleans. These are the numbers that are there for you and for our people out there planning, they can do it. In fact, we’ve had five people that have closed. Five might not seem like a lot and I get it but we’re a young new group and we are growing daily. I know that even though we’ve got five closed, we’ve got a bunch of you out there who’ve already started your plan and if you haven’t started your plan, reach out and let get you a unicorn.

It’s five new homeowners, thanks to the podcast. That’s a big old deal. Congratulations to Chris and Jacqueline in Denver. You can check out their story on my YouTube page. They also have a sweet hack that might be helpful for you if you’re trying to figure out your budgeting for buying a home. Nicole in Greenbay, Jason in Santa Clarita and Ashley this morning in Portland, congratulations. We just closed and loves her unicorn realtor in Portland. Finally, Sam and Dave in New Orleans. I talked about them before. They should be your inspiration. For all renters out there and especially some of you guys who I mentioned from the Facebook page, read their story here, what Sam and Dave in New Orleans said because they didn’t think they were even close.

Here’s what she said, “The episode where you broke down how much people could afford based on their income was a real game-changer for me. I realized I could totally afford a house in my city, New Orleans, which is getting expensive. I realized I didn’t have to pay 20% down, contrary to what my parents have told me my entire whole life. That alone was huge. I remember stopping pacing around for a moment and being like, ‘I can do this.’ Before that day, I wasn’t sure what I could afford. I’m 34 and my husband’s 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 the podcast.” I told you these numbers are sexy.

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She goes on to say, “I get to the episode where you talk about exactly how much you’ll need to close on a house. This information was good. I was like, ‘I have a realistic goal.’ Finally, I was thinking I’d have to be in the $300,000 to $350,000 range and I need at least 20% of that. That was a ton. I realized I need $20,000 and I already had $10,000 saved. You said that some people use money from their retirement accounts for a down payment. My ears perked up. Dave and I work as scenic artists and sculptors. We’re part of a union and as part of our contract, our employers pay into an annuity fund.” Her employers paid in. “We have way more than enough money in our annuity fund to cover down payment.” She made a series of phone calls, sent some emails and two days later, she’s told that we can withdraw the estimated cash to close from our annuity funds. “We can buy a house, we have enough cash to close and we even get 10% down payment covered.” They bumped it up to 10% and got the whole thing covered. “Without you, my husband, Dave, and I would still be renting a cramped space and throwing money away each month. I was doing that just months ago when I started listening to your podcast.”

Do you hear that, renters? Months ago, wandering aimlessly with no information. Suddenly, people who’ve been renting for decades with this information in two months, they are now homeowners. All of this is dependent on if you can get approved for a loan, but you don’t know what you don’t know. What’s the worst thing that could happen? Is it that you’re going to find out that you don’t qualify? If you’re sitting there being cats and cynical and you think you can’t qualify, what’s the worst thing that can happen? The only risk that you’re taking is finding out that you can do this. The only thing left is you have to wrestle with your own insecurity. Get over it and get yourself the down payment. You can’t figure this stuff out on your own. All of it takes time to set up to maneuver and to get you in position. Did you hear that? This takes time. By not starting and acting today, you’re pushing the clock back. Every day that you waste, not planning with a professional is another day that you’re tacking on, adding on to your own personal life calendar of the day that you purchased a home of when this can happen and when it will happen in your future.

Reach Out

Why don’t you find out right now if you’re ready? All you’ve got to do is reach out. Talk to me. We’ll get you a unicorn pro and now you can go back. Work with a unicorn. Listen to more podcasts, keep preparing, find ways to save money and then you’ll be ready sooner. The whole reason why doing this sooner is not that it’s a notch on your belt to look like a cool person to say, “I bought a house when I was 23.” It’s that every single day that you are a homeowner and not a renter, you are putting more money into your own personal finances for the rest of your life. You’ve got to figure out how to do this. I want you to realize that you’re going to be professional guidance along the way. You’re going to have to figure out how to do this and you’re going to need professional guidance along the way.

There’s a great thing that they talk about in business. They say that a plane going from Los Angeles to New York is off-track 90% of the time. How on Earth does it get there? It’s constantly auto-correcting along the way using a guidance system. Now, you can try to be your own guidance system, but you’re likely going to end up in Mexico or Canada or inside of a mountain. Get yourself a pro guide that’s going to help you with the corrections for 90% of the time when you’re not going the right way. Your guide is the person that will correct as you started on this journey and not only get you there the right way, it’ll get you there a heck of a lot faster. It’s not complicated.

This is not a wacky, sci-fi, time-travel script with all sorts of parallel dimensions and rifts in the time-space continuum. This is easy. If you want to build a sandcastle, it doesn’t start until you pick up the sand, period. The longer you wait, the longer before you’re sitting there looking at your finished sandcastle. Buying a home truly is easy as 1, 2, 3. Step one, listen to the podcast, done. Step two, decide to do this. Reach out to me and get yourself a unicorn realtor and let them do all the planning and the work for you. If you do step two, you might discover that you’re already ready today and you could buy in two months as Sam and David did in New Orleans. You could be two years out, which means getting you a unicorn today. It means that you’ll be headed down the right path and getting there in the most efficient and most economical way possible. Step three, work the plan. That’s it, 1, 2, 3: listen, get a unicorn, work the plan. Get yourself approve someday and you’ll get yourself approved way sooner. Not probably, definitely will. Just go out and buy a house.

If you’re too stubborn to reach out to me and get your unicorn, time is wasting. If you still need some more convincing and some more success stories or general support like one of those people who travel on their plane with a support parakeet, then we got all kinds of places for you to find some support. You can join the How to Buy a Home Facebook page. Check out more information. Follow me on Instagram. I do everything @DavidSidoni on Instagram. There are lots of great tips there. Check out David Sidoni on YouTube. You guys can always explore the website, DavidSidoni.com. That’s a place you can get written transcripts and references and links for everything that we talk about in the podcast. Every episode’s got one.

HBH 28 | Low House Down Payment
Low House Down Payment: You don’t have to pay a 20% down payment to own your house, as people usually believed.

I encourage you, print them up, highlight the sections that make you sound like you’re responsible and put it in a nice fancy binder and give it to your parents and then ask them for money. This info is for you. For me, I’m your secret insider. I’m not selling this to you. You didn’t swipe your credit card on your phone today to get this podcast to play. This is free. I’m not getting rich off this, but I know that many of you will get rich. It’s going to be in the super sexy, slow as molasses building block way. That super slow financial building of creating a foundation, of stability through homeownership.

I’m killing it on my ‘Gram appeal, being the boring number’s guy but there’s a reason. It’s that you’ll benefit and I see that happen right now. We’ve got five people that have bought a house and 40 or 50 planners out there working on it. This is for you. I hope that you guys are taking this and starting to give yourself your own call to action. This is taking a lot of time for me but it’s the best way that I’m finding out that I can enlighten you. That this is something that you shouldn’t be scared of and it’ll help you save tens of thousands of dollars by achieving your dream earlier than perhaps you even expected. I’m glad to do it. I’m working late, working longer hours because I truly believe in this mission. It’s a blessing and a curse and it’s working. I’m going to keep doing it and you guys can help me out. People are responding and getting the help they need to live their best lives sooner rather than later. You guys help me out and I’ll keep working the longer hours. I’ll keep putting in the extra work. I’ll keep ignoring my children and ignoring my friends and have an entire relationship with this microphone. I’ll keep doing it. This is an extra thing I do because I believe in it but I’m at the point right now. I’m getting such great response to you, guys.

I’d love for this to grow and then I can dedicate more time to it, give you more information and we can get more success stories. I can turn into the Dave Ramsey of specifically buying a house, the building block of the American dream. Imagine how many people could be celebrating for themselves out there. Help me out. If you find valuable at all, spread the word, share this podcast. If you’ve got a minute, write a review. It helps us get out there. Our numbers are growing. If you’re getting any value out of this, share this podcast. You can do your good deed for the day and help someone else discover the exciting and helpful news that’s helping you give that optimistic feeling to other people. All you’ve got to do is write a little review. I’m not crazy. My goals aren’t gigantic. I want to fix a bazillion dollar industry that’s jacking with your inalienable right of shelter. By screwing all you first-time homebuyers, they’re taking that inalienable right away from you. I want to fix that. That’s all. It’s one dude with a mic trying to fix what’s broken out there, trying to spread the word and make people happy, doing these incredibly unsexy things. Let’s start the revolution. Thank you for sharing. Remember, my ultimate goal is to start a revolution that changes lives and we can start by changing yours. Where are you today? What are your numbers? You can do this.

Important Links:

 

This podcast was started for YOU, to demystify things for first time home buyers, and help crush the confusion. After helping first timers for over 13 years, I knew there wasn’t t a lot of clear, tangible, useable information out there on the internet, so I started this podcast. Help me spread the word to other people just like you, dying for answers. Tell your friends, family, and perhaps that random neighbor you REALLY want to move out about How to Buy a Home! A really easy way is to hit the share button and text it to your friends. Go for it, help someone out. And if you’re not already a regular listener, subscribe and get constant updates on the market. If you are a regular and learned something, help me help others – give the show a quick review in Apple Podcasts or wherever you get your podcasts, or write a review on Spotify. Let’s change the way the real estate industry treats you first time buyers, one buyer at a time, starting with you – and make sure your favorite people don’t get screwed by going into this HUGE step blind and confused. Viva la Unicorn Revolution!

 

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I hope you are getting your questions answered about this crazy process. I know there’s not a lot of clear information out there on the internet, so that’s why I started this podcast. To demystify the whole thing and get you first timers the help you deserve!  Help me spread the word to other people just like you, dying for answers. Tell your friends, family, and perhaps that random neighbor you REALLY want to move out about How to Buy a Home! A really easy way is to hit the share button and text it to your friends. Go for it, help someone out.  And if you’re not already a regular listener, please subscribe.  If you are a regular and learned something, help me help others – give the show a quick review in Apple Podcasts or wherever you get your podcasts. Let’s change the way the real estate industry treats you first time buyers one buyer at a time – and make sure your favorite people don’t get screwed by going into this HUGE step blind and confused.  Viva la Unicorn Revolution!

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