Real Estate Happy Hour Show - Episode 49
Watch the Real Estate Happy Hour Show - Episode 49
Welcome to The Real Estate Happy Hour Show. On today’s show Collier Swecker and David Arnette are talking about all of the different Home Loan Programs available to home buyers today, Amazon’s New Flex Delivery Jobs, Slower Home Sales Recently Could Be Helping Buyers This Spring, and an Interest Rate Update. Plus the guys will be chatting about the stock market and personal finance. Join us every Thursday at 4pm for the live show on Facebook Live or watch or listen to the Real Estate Happy Hour on replay or listen to the podcast that can be found on Apple Podcasts, Google Podcasts, Stitcher, Spotify, and Tunein Radio.
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Collier: It’s Thursday 4 o’clock! It’s time for the Real Estate Happy Hour! (Rock music in the background).??David: Man, we are back at it, Warrant hair band is loud and in stereo.?
Collier: They are what, singing about some cherry pie! One of the great hits of the ‘80s man!
David: And they are bringing the hottest show on Facebook!
Collier: Hey, they are good, they are good, let me get this down just a hair there.
David: Tweak that a little bit, so listen we’ve got, this week we’ve got a brand new Money magazine that we’re gonna touch on and talk about some interesting stuff we’ve pulled out of there,
Collier: Ab-absolutely, got some great stuff there, then we’re gonna talk about hey getting back to the basics of real estate, talk about the different kind of mortgages and what the best mortgage for you and your family is.
David: Some loan programs huh?
Collier: Loan programs!
David: Lots of loan programs we’ve got out there.
Collier: Hey, there’s some funny ones too right? I mean.
David: Oh yeah.
Collier: It’s not that it’s pure junk, but even J. Williams wouldn’t get, also we’re gonna talk a little bit, a little bit about this crazy real estate market ‘cause it has gotten a little bit crazy.
David: Little bit about home sales and things like that, so let’s kick it off Money magazine this month listen, interesting quick little bit on the best times to fly you guys might already know this, but the cheapest best fares out there are typically in January and September.
Collier: Makes sense.
David: It’s what they said, makes sense.
Collier: Why ob-obviously, you’ve got kids in school that you, you, they’re trying to get that person.
David: January’s right after the holidays.
David: So, you’ve already spend up on your child.
Collier: And they’re, they’re trying to encourage that, that family to go out there and take advantage because most of ‘em are not, they’re gonna wait till March.
Collier: And summertime so.
David: Yeah and in September right after school starts, you know most families aren’t traveling again right?
Collier: Hey, nope that’s exactly right.
David: That’s true, worst times to fly this seems, this is probably obvious March, which you know.
Collier: I get it, Spring break.
David: Spring break (in unison with Collier) season, July, middle of the summer and December, Christmas time obviously, one of the worst times to travel, so moving on we have an article on some colors for interviews.
Collier: Yeah, you know even though I’m an Auburn guy, can you believe the, when you guys are going out.
David: The worst!
Collier: And you’re going out to get that job interview, Carrie Ballinger make sure you don’t wear that orange blouse ‘cause orange according to Money magazine, the absolute worst color.
David: Absolute worst, it’s unpro, then labeled as unprofessional, they said hiring managers prefer blues and blacks, what I thought was funny about this is they talked about what color that you wear to an interview, what does that portray about you, grey was logical.
Collier: I qualify there.
David: Ok, white is organized.
Collier: I qualify there.
David: And brown I thought this was interesting, if you know you wanna bust out a brown suit.
Collier: I don’t like brown!
David: Or something like that, dependability.
Collier: Well, I have to be that too right?
David: But so, so those portray logic, organization and dependability.
Collier: Makes sense though.
David: But, yet the higher managers prefer blues and blacks.
Collier: What and to you, what’s interesting too is I remember you know it’s funny, some people that study the presidents in times of like, when a national tragedy happens or.
David: Yeah, what they wear.
Collier: Something happens, the tie they wear and how.
David: Oh yeah.
Collier: Blue, confidence.
Collier: Whereas red will always be you know a power move.
David: Yeah, red’s always sparkle anger I guess.
Collier: I guess that’s why Trump loves it right?
Collier: ‘Cause he’s trying to get one over on you.
David: But that was the last thing, was to accentuate pops of color with a tie or a blouse for women, things like that so.
Collier: Hold on, hold on, real quick, George Mortier has been waiting for us to be on time for a long time, he, he’s, he’s, he’s a huge fan but he’s one of the smartest guys I know, good to see ya George!
David: Perfect and Michael Bruno, the purple leisure suit yes!
Collier: Well yeah, especially if you’re going to see Ben here in the morning.
David: Look if you, if you’re trying to make a statement roll in with that purple leisure suit, it’s, it’s gonna work.
David: It’s happening! Hey next up, I thought this was great, you know it’s funny how I guess, I don’t know maybe I’m, I’m just old but you know.
Collier: You are.
David: You get, you get into your lil’ community of life, your way of doing things, you don’t even notice there’s this whole world.
Collier: That some things change.
David: A whole world of things going on around ya.
David: And, and these little side jobs, a side hustle that people call ‘em, you got Lyft.
Collier: Uber, some of the Eats, the.
David: Yeah, GrubHub.
David: You got Shipped, you got all kind of stuff, well now Amazon has Flex, it’s a Flex delivery service jobs, you know it’s, it’s sim, very similar to all these other part-time gigs.
Collier: Absolutely and it, it’s not just the ones that are driving the mai, the Amazon Prime van that’s not what we’re talking about.
David: No, this is very similar to like Lyft and Uber, where you have your own car, you have an app on your phone where you sign up for blocks of packages and you go pick ‘em up, it’s, it’s, it’s a last mile and they quoted a guy from Auburn actually, talking about.
Collier: (Laughter), ain’t they smart.
David: Last mile delivery, so these people pick up and deliver that last mile for Amazon it was amazing, customers bought over 180 million items from Amazon between Thanksgiving and Cyber Monday.
Collier: That’s crazy!
David: That’s only 4 days.
David: A hundred and 80 million items.
Collier: And UPS just gets overloaded year after year after year.
David: And if you’ve ever bought anything from Amazon, most probably everybody has, not everything is put together right? So, those 180 million that, that takes a lot of people delivering.
Collier: Well, you know one thing that is you know, I know that the article talks about them paying well, but my question is whether or not after they pay for their gas, all those things ‘cause they’re not paying expenses back.
Collier: Obviously, they’re not dumb enough to make you an employee.
David: Right, right.
Collier: Right? So they’re not putting you in a contract, are you really making ‘cause you know they say the average Uber driver makes less than 10 dollars an hour at the end of the day.
David: Yeah and it’s funny they said, they said that the initial pay starts from about 18 to 25 bucks an hour, sounds great but after expenses you’re looking at roughly about 5 dollars to 11 dollars an hour, now the article did mention that Bezos has committed to paying everybody 15 dollars an hour.
David: Amazon employees, but Flex.
Collier: Watch out for nobody when they do that, but.
David: But Flex is not part of that.
Collier: Oh, ha!
David: Flex is not part of that.
Collier: ‘Cause you’re not an employee, but at the same time one other thing to remember is that you know I know, I’ve talked to a number of folks that were Uber drivers or Lyft, whatever and one of the problems that you really gotta look at is making sure your car insurance will cover you.
Collier: In the evet that you’re even carrying one of these packages.
David: Now that you’re running a business out of it.
Collier: Yeah! I mean because you know Uber and Lyft have had to come in and go ok we’ll insure over you, but what happened to some people is that their own insurance career went well hold on, if you’re driving for them we’re dropping you.
David: Yeah and it, it was amazing how competitive this was between the drivers like they, they had one guy talking about he’s, he has figured out his Camry so well that he knows how to pack his load and he’s got everything planned out. He uses Waze app instead of the Flex app ‘cause he feels like it’s better, he won’t even drink any liquids an hour before taking a block because he’s.
Collier: It wouldn’t matter for me.
David: Doesn’t wanna stop and use the restroom, man I even read about this one guy who created a contraption designed to automatically grab blocks, he, he put together a clicker with cardboard styluses and a computer fan.
Collier: (Laughter), people are nuts!
David: Because, because they weren’t able to get ‘em quick enough.
Collier: What, what about, what, what have they said about what, one concern that I’ve had about this whole business model is what happens when a package arrives broken?
David: Yeah and oh yeah, that, that’s a very interesting topic plus the porch pirates that they, they.
Collier: Yeah, what happens if I put it out there correctly and then a lot of the guys are actually, I’ve noticed from another story is taking pictures of it.
Collier: Once it arrives.
David: Yeah, they take pictures and send you the picture, but the porch pirates is a thing, I saw something on the.
Collier: It sounds so bad, the porch pirates.
David: Yeah, they, they see your Amazon packages and run up and take your stuff.
Collier: Well it’s, it’s sad that we have to deal with that, but what.
David: But these guys actually have to plan around it.
Collier: What do they say about that though, do they say anything about what happens if it’s broken or any of that happens?
David: No, they didn’t say anything about that, but they did say they do try to you know be conspicuous, either you know put it around the side of the house or hide it in some way around the front door.?
Collier: Right, right, well it is what it is.
David: Amazing, amazing, a whole, whole business they got a whole community, YouTube channels, all kinds of stuff around this.
Collier: People will find a way to make money and they’ll try, they’ll find ways to make ancillary money from this, people or these drivers.
David: Very, very interesting, very interesting.
Collier: Moving on!
David: Moving on, next we have got our interest rate update, man, they keep, they’re trickling down ok?
Collier: Just a little trickle.
David: Yeah, which is nice if, if everything goes according to plan, the Fed might have pulled this off temporarily right?
Collier: The, the Fed came out yesterday and gave some guidance and just it was not official guidance.
Collier: Spoke out and basically said why they did what they did in this last, last meeting when they said that they’re gonna slow any movement on interest rates because they, they just felt like they did not wanna slow the economy at all. And probably they are correct that, that was a real concern ‘cause when you started seeing not just the Trump wing of politics, but you had Democrats going hey hold on a minute, things are going pretty good.
David: Yeah, yeah.
Collier: They simmered down a hair.
David: Yeah and I think they, I think they really backed off because they saw some of the effects, they quickly rippled into the housing market and that, they don’t want to mess with, they don’t wanna shake the housing market too much.
Collier: Heh well no, no and, and ‘cause the housing market’s taking care of itself, shake, we can shake ourselves.
Collier: Without any help.
David: Right and so, so right now 30-year interest rates average, this is again Freddy Mac mortgage market survey, average 30 year rates 4.35 average, 15 year is 3.78. Now those do come with some points and fees, so if you wanna look that up, go do it and.
Collier: But one thing to remember is that that 30 year, he’s at 4.35 today, when you were on your cruise back early November ‘cause it’s how I remember it, we were pushing right at 5.
David: Yeah no, early November was really the, the changing point that first week or so of November was when the Fed came out and reversed their statement and then rates.
Collier: And you look at that.
David: Came, came falling down.
Collier: And you look at that point 65, some of you might be saying hey that, you know that’s not really a lot, but in terms of where we’ve been over the last 10 years and we’ve stayed right at that 4 and we didn’t deviate from that 4 too much, up or down we never swung that fast up and we came right back down. I mean what I’m saying is that point 65 is a big swing.
David: Yeah absolutely, absolutely, that’s a big deal and you tell anybody you know that we’re you know 4.25 or 4.375 today versus 5%, I guarantee they’re a lot happier to hear that than the 5%.
Collier: Absolutely! Who wouldn’t be?
David: So moving on, slowest home sales in over 3 years could help buyers this spring, now this kinda, kinda tails right off of these interest rates on what’s going in this market.
Collier: And let’s give credit where credit’s due, this comes from our friends over at CNBC who I actually like, I don’t like anything else NBC, but I do like CNBC I think they run a good operation, sales of existing homes fell 1.2% to their lowest level in 3 years nationally. Now I would say that 3 years in Birmingham, Alabama is 10 years not 3 years, we are, we are way low here in the Birmingham market, but as they, as they said that prices you know are staring to cap off, but they still rose to their lowest levels though right?
David: Yeah, so prices are, are rising but at the lowest levels like you said, you know interest rates obviously have something to do with this, but you know I think last year we, we really had some shakeup in the market with, with rates running up, with the inventory problems, you know multiple buyers, you know it’s still February so, we’re still ramping up into our regular real estate seizing, which is really March, April and I think things have definitely picked up, things are definitely better than they have been on average the last 3 months. So, I think all this is just coming together right now and it’s got, I think it’s really gonna help out.
Collier: Well the market, I think one thing to remember is that, when you act like we were in a very overheated market right? It was very overheated, I mean the fact is we have prices rising faster than they should have been.
David: Yeah, we have no inventory.
Collier: No inventory, things were happening like they could finally, appraisers were giving us values.
Collier: ‘Cause we were seeing a little bit of pushback at the beginning of that.
David: So, so, this, this low home sales actually helps us out because we’ve got inventory adding on which is what we needed, we’ve got rates cooling off which is what we needed, and you know the low home sales just means that this stuff will build up to make more of healthy market, when it, when we swing back in March and April.
Collier: And one thing.
David: In my opinion.
Collier: Well it’s your opinion, but it’s a good one, no, one, we’ve talked for weeks about the affordability of the lower end entry level housing, that’s right around the 100,000 for our market right? It’s at, we’re down 15% compared to a year ago, that’s very important because what happened, a lot of that for many years.
David: Thank you Dave.
Collier: Was coming from builders actually building houses for that demographic.
Collier: And they just totally abandoned it and what we, we have got to get housing in that area because what’s happened is what used to be a 100,00 dollar house is now 130, 140 and those folks can’t afford, that entry level person can’t afford it and then it affects all the way up the chain.
David: Yeah absolutely and, and any bump in interest rates affects first time home buyers, especially because they’re, you know they’re, they’re new to this and they can’t stand you know shocks to the budget and then also, you know the down payment options definitely change from 100,000, 130, 150, so.
Collier: Oh! Yeah, well here’s my problem is you, if you can’t afford a down payment call me crazy, but if you can’t afford a down payment on a 100,000 house, I’m not so sure you really need to be buying a house right? I mean, I’m just saying and I sell real estate.
David: And that’s, and that’s his name’s Collier.
Collier: Yeah well it’s true, you know what got us into the problem was.
David: You know we’re gonna talk about some loan programs here in a second, one of a, the ones we were making fun of earlier, but it’s true you know in order to, to, to be a part of this. And, and make an investment in yourself and, and to invest in housing, you know it does take a little bit of financial management, money management.
Collier: Call me crazy!
David: Saving some money, put a little bit money down.
Collier: Be wise with your money.
Collier: That’s all I’m saying! Be wise with your, I mean look, look at what we talked about a few weeks ago with that movie, what was it “The Big Short”?
Collier: If you look at the movie “The Big Short”, I mean you had a stripper owning four houses that were very expensive as investments.
David: Absolutely, I mean there was, there was the, the mortgage business in general wasn’t taken seriously, you know we were giving anybody loans that could fall off a mirror.
Collier: Not you!
David: And we were.
Collier: You were only giving good loans.
David: While we were coming out with, with all kinds of ways to put people in houses, regardless of the ramifications to the ball room really, because at the time we thought real estate was never gonna go down all right? Real estate was on a ramp to, to the moon and everybody was buying as much as, as they could. More back to this story I think it’s interesting that, you know first time home buyers lately have been about 29 to 30%, it goes to your point that you were just talking about on the affordability side, that in the past they have always averaged about 40% of sales and right now that’s down around 30%.
Collier: So 11% difference, more than that I guess you can get a difference, but down 11% from where they should be and you said you know what? I’m moving up into a 500,000-dollar home, how does that affect me? Well, somebody has to buy your 250,000-dollar house right? And that’s usually those people that are on 125.?
Collier: That are doubling up.
Collier: That are getting a bigger house, so it directly affects that chain and you know some, somebody asked me today well, what about those loans over a million dollars, well that has a totally different environment because there’s so few people. At least in Birmingham, so if you watch nationwide who cares or if you’re Sarah Adams you can afford a million dollar house.
David: Oh, of course Sarah can.
Collier: I mean she, that girl is loaded! But anyway, so just think about that.
Collier: (Laughter), if we go through into this market ‘cause it is a weird market, there, there are deals to be had out there, you just gotta have to act fast when you do see it ‘cause there’s a lot of folks that still wanna get out of their house and.
Collier: There’s so many loan programs that are available to buyers and that’s what we’re gonna talk about next.
David: Yeah and, and my takeaway is just that the market is coming right into where we needed it to be, with the time and years that it is we’re adding some houses, that’s probably Sarah Adams laughing at us. But, we’re adding houses rates are staying put, so should be great to get some people into these loan programs right?
Collier: Absolutely and, and one of my favorites is the conventional loan.
David: So let’s just talk a little bit, let’s set some highlights on some of the different loan options out there, first one being a conventional loan, a lot of, it’s interesting when I talk to people the information that they do have and what they come up with. Some people prefer an FHA loan first and they, they just really don’t know the difference really, I’ll start off with credit score and we’ll talk about this briefly, but anywhere from 600 to 700 typically I’ll lean towards an FHA, 700 to 800 I’ll lean towards a conventional loan.
Collier: Say that again, say that again ‘cause that, that was very fast.
David: Usually from 600 to 700.
David: On credit score.
David: I’ll lean towards an FHA because in my experience that’s probably gonna give you better overall financial picture, 700 to 800 we’re gonna lean towards a conventional loan and, and look at the numbers.
Collier: And what if you’re like Sarah Adams and you have an 880?
David: Oh, Sarah Adams definitely conventional.
Collier: Conventional, ok.
David: So, the benefits of conventional obviously, you know a lot of programs have low, low down payment, anything less than 20% down on a conventional loan we’re gonna require mortgage insurance.
David: That’s private.
Collier: Less than 20, I get mortgage insurance all right?
David: Yeah that’s private mortgage insurance, you can use this for a purchase or a refinance, and typically you know the mortgage insurance is also based off a credit score, so you can save some money with your credit score and that mortgage insurance as well.
Collier: So, credit score is and then when I go get my homeowner’s insurance through the same process.
Collier: I’m, I’m getting that pulled too.
David: Yeah, you’re gonna save some money on the homeowner’s insurance.
Collier: Got it.
David: With a good credit score too, so back to you know fiscal responsibility right? Saves you money all the way around on that conventional loan, next one is FHA now our conventional I’m sorry, conventional starts off around 3% down ok? So.
Collier: Yeah, let’s walk through that because.
David: It gives you 97% financing.
Collier: Five percent.
David: Five percent down will be 95% and then.
Collier: (Laughter), that’s right.
David: Ascend to 20.
Collier: Ninety five plus 5 equals 100, so.
David: So, 3 to 5.
Collier: Where does it, we’re getting to that George we’re coming! We’re coming to ya.
David: Yeah we’re coming to that VA, next let’s hit the FHA, so FHA is 3 and a half percent down ok? The biggest difference is on FHA, is that FHA is more lenient on credit ok?
Collier: And now, one thing that I think is a big misnomer is not stand for anything regarding first time homebuyer.
David: Look Jessie Adams joined us too, look at that fella.
Collier: Sargent Carter.
David: Was that first time homebuyers?
Collier: Yeah, first time homebuyers and a lot of folks think FHA stands for some kind of first time homebuyer assistance or something like that, it’s, it’s Federal housing authority.
David: Right, right, it does not stand for first time homebuyer.
Collier: They don’t use it.
David: There are, there are very few first time homebuyer programs, which is funny, they are, they are out there, but some, you know some people like to call programs just to make ‘em sound good.
Collier: Call me crazy and you know you’re the mortgage guy, so I still have an opinion on this, but FHA I don’t like for a lot of cases because I, I think that I can be in a conventional loan without the, because there’s a fund, not a funding fee, but an FHA upfront mortgage insurance.
David: Yeah upfront, it’s mortgage insurance premium so the difference between conventional private mortgage insurance, FHA is mortgage insurance premium now you pay some upfront, 1.75%.
Collier: There you go, that’s the problem.
David: That’s financed in the loans, so almost 2% of your loan amount, so let’s say a loan has 200,000, you’re paying an extra 400,000, you’re gonna roll that in, your new loan’s gonna be 204 roughly, it’ll be a little less than that for those people that wanna.
Collier: All right but what about the, my, my analysis has always been I would rather take the, instead of paying a fee of 1.7, I would rather take 1.5 and throw that into my, so that I have equity.
David: Ok so yeah, so here’s the deal whenever we’re kinda splitting hairs between FHA and conventional, we really don’t have extra down payment ok? So, we are either, either fighting to get that 3 to 5% down on a conventional or we’re getting that 3 and a half percent on an, on an FHA we’re financing it. The biggest problem is financing in that upfront mortgage insurance and then the monthly mortgage insurance, which now does not go away on an FHA loan, the conventional does go away.
Collier: It used to.
David: On an 80%.
Collier: It used to and, and I just, I just think that I’d rather put that 1.5% towards it, it and then still get the seller concession for the same difference and now I have an extra 1.5 of equity in the home instead of making the big banks richer.
David: Yes! Now where, where that’ll hurt ya again it’s such gonna be credit score, I mean if you.
Collier: Yeah well.
David: If you’re looking at mortgage insurance and a rate on a conventional loan in, in the six fifties or so, then both your rate and your mortgage insurance is gonna get hit. So, that’s why the FHA a lot of times will be more conv, more attractive.
David: In that situation.
Collier: And I, you know and more in my line of thinking related to making sure we make good personal finance decisions with our incomes are. I’ve always said try to avoid FHA if you can because it means you’ve made it to the big leagues, you’ve made it to the big boys, you’re getting a conventional loan that means that you had enough money to put a down payment, you had enough money to protect yourself and we’re gonna give it to George Mortier right? About the VA.
Collier: There’s situations where in this market, where we may be hitting some peaks that George may not wanna lock in a long time in that VA right? Because of the funding fee that we talked about, so I’d rather you you’ll be putting money in.
David: Yeah see, see the funny thing is like I, I, I love the VA loan there’s a lot of good benefits to it, some realtors, some other people don’t like it, you know we just, you know we were just talking about it earlier.
Collier: I liked it better, just not the VA loan.
David: Well, we were just talking about a scenario upstairs that, where it might not make.
David: As much sense and this is definitely out there, so the VA loan, the biggest thing about it is, is 100% financing, it is only available to veterans and anybody that qualifies for that thank you for your service, Fairway is a huge supporter of our veterans and.?
Collier: No one bigger than me and David.
David: And that is a big deal.
Collier: And George, George went around the world on a big ship.
David: And the VA loan is a great benefit, the only downside, the rates are typically better.
Collier: That’s right.
David: Look and they are, they are lenient like they will let.
Collier: Stuff slide.
David: They will let stuff go like debt to income, which you may say that’s not a great idea, but.
David: In some situations.
Collier: But, you got somebody.
David: In some situations it makes sense.
Collier: But David, you got somebody like George who is, got good credit, he’s got I assume you’re being smart with your money, which I know you are and he’s, you know got a family, to me is not causing a strain to him to put 5, 10% down and be to me in a better situation, let’s give the example of what we talked about upstairs just to give him merit.
David: Yeah, yeah, so the VA funding fee typically is 2.15, 2.15% for, for first time use.
David: Of the load ‘em out.
Collier: Load ‘em out, ok.?
David: Yeah so, if it’s a you know 400,000 dollar loan at 2.15%, it’s gonna be almost 9,000 dollars.
David: Right, 80, 800, something like that.
David: So (very short pause), that was 400,000.
Collier: Yeah, 400,000.
David: Subsequent use is 3.3, now.
Collier: Subsequent use being your second time to use it.
Collier: So, if George’s already used it he’s gonna have a higher funding fee.
David: Yeah and so on that fee.
David: Example that we were looking at was a 450,000-dollar loan was 14 thou, almost 15,000 dollars.
Collier: So they’re gonna roll that back in to the mortgage, so in other words the reason we were talking it’s actually with one of my clients and we were discussing that literally they are if this market has topped off for some reason, for whatever reason. They’re 14,000 in the whole, there’s no other loan like this that’ll do this by the way, the ship just goes rolling in right? And so, they’re 14,000 in the whole before they get back to the par value, which would be the amount that they paid.
Collier: So, if they haven’t increased from that they’re now 14 in the whole, now the question that, the, the difference in this situation was there was maybe 8,000 dollars down payment right? And into, into the thing because 100% financing, very low down payment versus 35,000 and I get it there’s a big difference of.
Collier: Of the amount, but the, the biggest question is what does somebody like George do as long as he saves that money he should be fine right? He saves a 20.
David: Yeah, you gotta.
Collier: Thousand dollars.
David: You gotta look at the, you know maybe you’re getting a better interest rate on the VA loan, maybe you know yeah, you definitely have to put that money away that you’re saving. The down payment that you would be putting on a conventional loan versus the VA, you know there’s some situations where if you receive disability from the VA that you’re exempt from the funding fee, so hey, the VA’s a beautiful loan then you don’t even have.
David: The funding fee.
Collier: So, do it to get away from that 2.8 ‘cause that’s why I don’t like it, but the other thing I don’t like is the idea of 100% financing for smart people.
David: Right plus.
Collier: I, look, not smart people can do the 100% too I get it.
David: But, but, see the deal is though on, on a VA loan you don’t have mortgage insurance, you don’t have monthly mortgage insurance, so really on the 2.15% even on this scenario we ran the numbers and I think the funding fee, the 2.1 before the subsequent use. The first time was a little over 12,000, but if I did the VA the monthly mortgage added that up over 7-8 years they’re gonna pay that maybe, the numbers were pretty comparable, it was, it was still in that 12,000 range that they were gonna pay for mortgage insurance, so you know you really just have to look at everything if you’ve got the VA option.
Collier: And, and the other thing.
David: Again, I like it.
Collier: Well and George you can talk about this maybe at some point, but the, these people that are active duty right? I’m not so sure you don’t just try to, you know protect yourself a little bit more when you’re active duty because you are gonna be spun out of wherever you are in 3 to 4 years right? You just, you don’t have a choice when they’re going George get to Japan! Oh ok I gotta sell, it doesn’t matter if I’m under or whether I’m not and I don’t want that VA to hold us up.
Collier: Because my wife went to Rooms-To-Go and decided to go crazy because we saved 20 grand, she spend it all.
Collier: I don’t know.
David: You don’t wanna do that.
Collier: Now, USDA talk about that.
David: The next one, next one USDA so, you know obviously right now I’m not a big fan of the USDA because of the Government shutdown, now having said that.
David: The Government was shut down and put us on a 4 to 5 week backlog, today we are not backlogged at all, but I think that’s because we quit taking those applications for a little while. I looked on the website today and they said they were currently reviewing files received on February 20th, which was yesterday so everything is caught up with USDA.
Collier: Talk about the USDA though.
David: The Government’s running, the biggest thing on a USDA it’s a rural, it’s 100% financing, it’s gotta be in a rural area.
Collier: You were in, in, by the way when we talk rural, let’s talk rural 1960’s and before because they really haven’t updated the maps and we’re talking rural areas that are used to be rural, but are now.
David: Yeah, you’d be surprised that a lot of areas that do qualify for the USDA.
David: It’s really easy to Google and look up where that qualifies, I know in, in years past we’ve done a lot of loans out in Chelsea.
Collier: Alabaster, I mean that’s South Alabaster, Calera.
David: Which are supposed to be.
Collier: Mark Carlo may be listening to this.
David: Very populated areas which most people wouldn’t say oh that’s, sound rural.
Collier: They have Mc Donald’s, they have Walmart, they have Cracker Barrel.
David: So I mean, you think about that and there’s income limits, I think they’re around 73,000 is the income limit, there’s a couple of other things depending on your household size and you know you can get some break on that income limit for daycare expenses, things like that. Interest rates are good, the mortgage insurance they.
Collier: Yeah, talk about that.
David: They call it a.
Collier: Is this an FHA loan type?
David: No, they call it a, an annual fee, it’s the lowest annual fee, mortgage insurance, whatever you wanna call it out there really ok? So it’s not a bad deal either, it’s just in my opinion sometimes.
David: They get backed up and, and it’s a third party getting involved doing that loan.
Collier: Yeah, Maca Doy that whole area of investment.
David: You can call us.
David: Yeah (in unison with Collier).
Collier: Right outside of Hoover.
David: Yeah so, the USDA loans are good, I’m just not a big fan of right now because of the Government shutdown, created backlog, they have caught back up right now so, we don’t have any.
David: Any change to that Government shutdown and they’ll be fine.
Collier: Well you know, you know if we’re talking about like Jessie Adams there are also things out there called Jumbo loans, what are, what is a jumbo loan?
David: Yeah, jumbo loan is gonna be anything over 484,350 dollars, that limit you know keeps rising every year, I tell ya jumbo loans are, are kind of (short sigh), to, they’re, they’re just not as common so, you know a conventional loan, you know they set guidelines for 50,000 dollars up to 484,000. So the conventional box if you will, captures all of those right? The jumbos man, jumbos are individual companies, individual investors and they can all make their own rules, they’re buying, you know most people try to break up a 500,000 dollar just to get it right under, so they’re buying 700, 900, a million, 1.2.
Collier: So when y’all finance that, are you saying?
David: One point five million dollar loans.
Collier: Are you saying that Fairway still sells the loan right?
David: Yeah we still have to, we still had, there’s still an in, investor on that jumbo loan so.
David: If you’re the one taking that 1.5 million dollar loan and you’re reviewing it, you’re obviously gonna review it pretty right?
Collier: Ha! Yeah, pretty private yeah.
David: Yeah and there’s something you don’t like about it.
David: I mean, we can’t go to a guideline book ‘cause they’ll go well no! Right here tell me, we’re ok!
Collier: You have to take it!
David: I mean, you have to pretty much play by their rules, so that’s not to say, just, just to say that, you know any kind of a strange scenario really needs to be thoroughly examined and that’s where your loan officer comes into play on, on looking at guidelines, reading you know what, what you have to do for different situations because you know you go back to that BAR 3 or 4 times asking for clarification and more details, more paperwork. They’re gonna get frustrated, especially at a price range.
Collier: Well and I think.
David: When you use a jumbo loan.
Collier: Well you, you mentioned it.
David: Like Jessie Adams.
Collier: Well yeah, you mentioned it just a second ago the splitting of the, the loans and what, what he was talking about was taking only, getting 1 loan at the max of 4 what would you say? 46?
Collier: And then another loan for the amount above, so they can stay in the conventional area.
Collier: And have the normal guidelines and then.
David: So see, people like Jessie they’ll just put his wife on the loan and he’s like man, I’ll just sign the title.
David: And then, you only got 1 bar word, so you only have 1 set of questions.
Collier: Man, he’s loaded!
David: And he’s like.
Collier: If he ain’t, they have a swimming pool.
David: And he’s like I don’t even have to worry about this.
Collier: Well, one thing that he does not need is the FHA 2 or 3K loan that I’m telling ya go to your average lender, they love these.
David: Man, you know it’s interesting, you know we did 2 or 3 cases and I think it’s a great idea, listen.
David: You know the renovation piece of it but I, I just find that.
Collier: It’s very cumbersome.
David: A lot of clients that hear about it, once they get into the details they’re not interested.
Collier: That’s right, it’s, it’s, it’s, it is expensive to, relative to a normal loan, you do have expenses percentage wise that come out of it, for face as you now have to pay the lender to come out and take a look, not David but they send us a what do you call? What do you say? An inspector out?
Collier: And every time there’s a draw on the, you have to hire license you can’t.
David: You can’t do that you work yourself.
Collier: Absolutely not! Why and it makes sense why, I mean there’s a lot of.
David: And they’re not gonna give you a check.
Collier: Yeah and there’s a lot of rules that the, that the Fed’s created, that these big banks have created that is dumb.
David: I think it’s a good loan.
Collier: But this is good, it’s a good loan, but you guys don’t like it ‘cause the problem is.
David: No I mean, we don’t, I don’t have any problem with it, I think clients don’t understand it.
Collier: Well that’s, that’s what I mean.
David: Once, once we get into the details and explain it to them, they’re not a big fan of it.
Collier: Well, not when they can go and buy another house for 20,000 more and get everything they needed in there.
Collier: You know the next one is and this is somewhere where if you’re working with a mortgage lender like David, they’ll work a plan on how to do this but as your typical construction loan, which can also be an alternative to this.
Collier: Two or 3.
David: Yeah, a construction loan we are just a mortgage company, so we just do the residential mortgage, first mortgages, a construction loan is more of a short-term, local bank type of deal, so we don’t really get into those a whole lot. We do the permanent financing on the bank side of a construction loan, if that’s what you need, but you know a construction loan we typically refer to a local bank that’s gonna be a short-term.
Collier: Brick and mortar!
David: Short-term 6 to 12 month deal, where you’re, you’re building a house.
Collier: In my opinion, in my opinion only, it’s that the brick and mortar are terrible at mortgages, only do the construction part with a brick and mortar bank. They, they, they are gonna fee to death, they’re gonna under ride it 10 ways till Sunday. It’s like going to that big account that has to have 8 reviews of this and that, just so that they can justify the billing right? Same thing here, be real cautious about getting caught up in the loop of the big banks.
David: And this far, we’re the largest mortgage company in Birmingham.
Collier: Yes! The stage coach somehow I, I do not know how.
David: They’re a bank.
Collier: They’re a bank, you’re the largest mortgage guy yeah, y’all should’ve been number 1.
David: We are.
Collier: Well no, you’re a big deal, but you’re a bigger deal than they.
David: We are.
Collier: Yeah all right, a couple of other things.
David: Let’s talk about Alabama housing real quick.
Collier: Well let me say, ok, can I mention one more thought? ‘Cause I know y’all don’t do this, but if you’re a medical professional out there and you are, it’s called a doctor loan, medical residents get ‘em, can get ‘em I should say. But, there’s only a few banks SunTrust, BBVA Compass.
Collier: And a few.
David: We have 1 that competes with ‘em.
David: We do, we do OK with it.
Collier: But, the problem is most of them you’re, you’re gonna buy over your head, most of the buyers I’ve seen do it because they’re stroking these banks not y’all, but a lot of these big banks are stroking egos right? ‘Cause they want in the deposits when they become rich doctors. So they give ‘em no down payment, no this, no that, no this.
David: Which makes sense I mean so, so the doctor program is developed behind increasing income and yes you are paying more interest upfront to do that doctor loan, there are no instances or buts about it. Doctors when they sign on, they probably realize that but they’re, they’re banking into that.
Collier: Well then listen.
David: Increased income.
Collier: But the problem that I found with it is that they then get, they get, I can call 5 for 3, they’re making 25,000 a year right? And then they go ‘cause they’re in their residency and then they, they go well they said I could afford a 350,000 dollar house. I said just ‘cause they said you could afford doesn’t mean you need it right? Because we wanna set I mean, so, this is the one time for those kids they can set those future up properly right? Because I’ve seen too many of ‘em get through that residency and not be able to sell for what they bought it for and now they’ve encountered trouble right? Because maybe if they’re gonna do another fellowship, sure their income goes up a little bit, but so does the cost of having 2 houses ‘cause now you’re going to Minnesota, you’re leaving Birmingham and going to Minnesota. Are you able to afford those 2 payments? That’s the problem I see.
David: Yeah absolutely, now the last part I wanna touch on is Alabama housing, it’s a down payment assistance program. We’ve got an FHA form, a conventional form, so you’re gonna put the 3 and a half percent down on FHA, they’re gonna give you a 3% down payment assistance as a second mortgage, the rates are the same.
Collier: So you’re saying 2 loans.
David: Two loans, the rates are the same on the first and the second, on a conventional you’re, you’re putting your 97% first, 3% second. Again, this is a good program for the people that works there.
Collier: Entry level?
David: Yeah the people that works for, the closing costs are a good bit higher on that loan, it’s the only drawback that I have with it, actually I typically try to work people into a 3% down loan rather than.
Collier: Is there income limitations on that?
David: The income limitations on that are closer to 93,000 so.
David: It’s a good bit, well qualifying no.
Collier: So whoever’s on that.
David: US, USDA is gonna be a household income, Alabama housing has since changed to qualified income, which helps out so your family could make 170,000, but you.
Collier: So if I made 93, my wife made 14, I can de qualify on, only under my own name even though my wife made 14,000.
David: Right, right.
Collier: She needs to get a job, a better job right? If she’s only making 14 ain’t that right? I’m just saying, mine come on mine.
Collier: I mean, if your wife makes 14 that’s your.
David: So that’s it on all the loan programs, hope that was helpful for you guys. Man, the only stock market update I have right now is Nike.
Collier: Boy, you talked about real world affecting stock value, look what happened in the Duke-North Carolina game last night, when their star is he a Power Ford?
David: Zion Williams, I mean he is the, he is a beast! The, the best player in college basketball blew up his shoe, his Nike shoe, he’s probably like a size 24 so.
Collier: Blew it up no, no, and he says it literally, literally.
David: Yeah and they probably don’t make that many shoes that big, so I mean understandably the margin for error if you only make like 4 size 63 shoe.
Collier: (Laughter), yeah 63.
David: So, you might screw it up every now and then.
David: Yeah, literally he was planting a foot pushed out of the shoe and hurt his knee ok? I saw today he’s got a terrible injury, but he’s definitely gonna be out for a little while, he was out for the game.
Collier: The Kentucky fans are excited.
David: But yeah, so that was, that was bad press for Nike, now we do own shares of Nike, so.
Collier: At a full disclosure.
David: I’m not happy about it, but I mean this is, you know what happens with the stuff we talked about, the other thing was Nike also has put out a shoe that has the shoelaces tied to an app.
Collier: Oh yeah.
David: And apparently they all locked up brick the shoe, so you can’t do anything because the app is controlling the laces and you they won’t.
Collier: They won’t (zip sound).
David: They won’t do anything.
Collier: Zip and tighten up.
David: They won’t do anything.
Collier: One more thing on that is that it’s very interesting, Duke thank goodness had taken out an 8 million dollar policy on behalf of the player, that should he suffer a devastating injury he would be covered.
Collier: So good for them taking that and so one, he’s part of that recruiting process we can’t pay you now, but we can pay you later right?
Collier: So they’ll.
David: If he plays another game, then he’ll probably won’t get that policy but.
Collier: Yeah well.
David: I guess he will.
Collier: Well let’s, let’s say no you know he’ll probably play, I mean like.
David: Yeah he’ll be fine, he’ll be fine, he’s, he’s a beast.
Collier: Well thanks so much for stopping in this week, don’t forget the podcast! The podcast, yes we have a podcast! We’ve had it out for a while now and you can head on over to anywhere there’s great.
Collier: Great pods, like Apple podcast, Spotify, what is it? Google podcast!
David: There you go.
David: We’ll be there.
Collier: ‘Cause we’re kind of a big deal so, anyway we’ll see you next week 4 o’clock like we do every Thursday.
Collier: All right, have a great week!
David: See you guys.
Collier: Bye bye!