That Time We Talked About Buying Your First House

This is episode number 72 of The Homeowner Show. Whether you're DIY or looking to hire, we're here to help you find the best information and options for you and your home. My name is Kevin Hackett, and here with me is Craig Williams.

Hello, hello, hello, and welcome to The Homeowner Show. We're glad that you could— this is— I say this because it bothers Kevin— dial in today.

Yes, from the '80s.

We actually, we have one sitting right over there. It's got a dial on it. So I mean, like you could, you could dial into Lone Star Community Radio and listen to us on Wednesdays at 11.

There you go.

Yeah.

It's possible.

People could be dialing right now.

And you could also just turn on your internet and listen through the World Wide Web.

You could do that.

Okay.

The options abound. So to find the Homeowner Show.

Hey, whatever it takes, whatever avenue you've got, do it.

That's right, man. Everything going good?

Yeah, everything's good. I mean, just, I mean, it's a new year, new things on the horizon, and, um, yeah, looking forward to a big weekend that we got coming up. And, uh, yeah, just living life. How about you?

I'm ecstatic.

Ecstatic.

This is probably my favorite day of the year.

Oh, that's true.

This— I, I know why. I live for this day.

Yeah, I already, I already kind of played into it a little bit. And like, it's coming to— I hate that it's even coming to a close because it's Has it been all that you were hoping it would be today?

You know, it never is everything that I hope it will be, but it always delivers.

It always strikes the chord you're trying to play.

So today, and you know, everyone's gonna think I'm bizarre, today is Ethel Merman's birthday.

Oh, what a glorious day it is.

And it's my favorite holiday of the entire year. So this is a tradition we have in our family that's been going about 10 years now.

Yeah.

pretty much ever since the inception of Facebook. My wife despises Ethel Merman.

Hates her with a passion.

Yes, absolutely. She's in one of my, if not my all-time favorite movie, It's a Mad, Mad, Mad, Mad, Mad, Mad World, and plays the obnoxious and horrible mother-in-law, which she does brilliantly.

Oh, she's perfect in that role.

If you haven't seen that movie, I'll go ahead and give it 5 stars. But anyway, what I do is, every year on today, which is not Tuesday, the day that this episode airs, but you can look it up and find out. What I do is, I send out a blast on Facebook and I say, dear everyone, today is my favorite day of the year. It's Ethel Merman's birthday. If you could do me a huge favor and please post photos of Ethel Merman, videos of Ethel Merman to Brandy's Facebook page.

Yes.

Um, I'm not that difficult to find. If you guys wanna go find that, you can. It's, it's, it, it's amazing.

And, and she just despises it.

Yeah. And so like, she pretty much doesn't talk to me this entire day.

No, no.

So, so I did, I did get some recognition this year.

Oh, really?

Because she had to call me about something with our kids and she goes, you know, I saw all your posts today.

Yeah.

'Cause yeah, of course she did. So, so I, uh, I, I, Promptly this morning, I sent her a text message with, with a GIF, um, of, of Ethel Merman with Miss Piggy.

Miss Piggy.

Yeah, which is kind of a classic thing as well.

Yeah.

And, um, so I send it to her and I said, be, uh, you're welcome, and because I love Disney. And she sent something back saying, thank you, I think. So, uh, so yeah, I, you know, She, she definitely hates it, but I think it's—

it—

she would probably just be disappointed in you if you forgot.

Oh yeah, big time. Yeah, like it's one of those, like, she, she absolutely hates it, but she knows it's because I love her.

Oh yeah, it's a love language.

Absolutely.

Yes, yes, yes. And you know, and, and you know, one— the other thing about your wife is she loves attention, right? Sure.

Or maybe not, particularly from me.

Well, okay, but anyway. Well, cool. I'm glad it was successful.

It was.

I mean, you've even done a cake before, right?

Yeah. Last year, we had a cake made that said, happy birthday, Ethel, and had it delivered to a small group that she was a part of.

Yes.

Yeah. So we go all out for Ethel's birthday.

Worth it.

God rest her soul.

Well, that's hilarious.

She's still entertaining today.

Yeah.

Yes, she is. But we have a really cool episode. I think this is a topic that's long overdue.

I think so.

For a show called The Homeowner's Show.

Yeah.

I mean, banged the table with my ring. My ring.

At some point, you have to do that for the first time.

Yeah.

I mean, you, you can't get to your second home before buying your first one.

I mean, I guess you could just decide never to buy one.

Well, I guess there's that.

Yeah.

We don't advocate that, right? Obviously, that would put our show out of business.

Well, could be that the legend of the homeowner—

but we could have a show on mythology.

It'd be great.

That's in right now, right?

Well, I guess.

It could be. It wasn't in our prediction episode.

No, it wasn't.

That's true.

Today, though, we've got Kyle and Kristy in the studio, and they're going to talk to us about first-time homebuyers.

Yep! How are you guys doing?

Doing great! Doing awesome!

Awesome! We're glad you guys could come into the studio.

Yeah, welcome!

Thanks for having us! Yeah. Yeah. And so if, if you guys could just real quick, and I, I guess, Christy, let's start with you. What do you do and how'd you get started doing that? Well, I am, I'm a real estate agent and, um, you know, I don't know. I, I, it was something that kind of a passion of mine. Mm-hmm. That I had for a long time. Um, I, I guess I started, I, I got into it, A little bit more for the flexibility.

Yeah.

Because I've got now they're 16-year-old triplets, but at the time they were younger, so I need a little bit of flexibility. Everybody just take a minute to breathe in.

You said triplets?

That's right.

Yeah.

What she just—

I just make sure that there wasn't like a weird static that happened there.

Ponder on that for a second.

Triplets.

So what do you actually have? Because I think I've seen some pictures. 2 girls and a boy. Okay. That's what I thought. Okay. 2 girls and a boy. We've just entered into the driving phase. Oh my gosh. So are they all gonna have to share a car? Um, right now, yes. All right. Yeah, they share a car. Um, that's not gonna cause any fights? So far it hasn't, honestly. Okay.

Yeah.

Um, my son didn't get his driver's license. He has to wait a year. Okay. Um, you know, that's what happens when you don't make the grade. Okay. All right. It's, it's A's and B's for a license. Okay. Okay. I like the motivation there. Yeah, I do too. Right. And he seems to be good with it. He's got, you know, he's got 2 sisters that drive him everywhere.

He's still somehow winning.

Free Uber. Yeah, exactly. So, you know, I just, I got into it for the flexibility, not realizing that honestly, it's not really all that flexible because you've got, you know, you've got clients that are calling you 24/7.

Yeah.

So, but I love it. I love what I do. I've got some vacation rentals, so I work with those a little bit. And honestly, the first-time home buyers, they're my favorite. Nice.

Okay.

They're my favorite.

Well, I'm excited to get into that a little bit more. So Kyle, what about you? What do you, what's your function and how'd you get into that?

Sure. mortgage lender/broker, and I started in this industry back in 2002, believe it or not.

Hmm.

And, uh, I really got into it because I got tired of doing a salary job that, uh, you know, working well over 40 hours and didn't get any kind of credit for doing that. So I got into the commission world. I had a college friend that said, hey, you'd be good at this. Didn't know a lick of it, wasn't even a homeowner myself. And I quickly found out that I needed to buy a house. And I became a first-time homebuyer back then.

Okay. Back in 2002?

2003 was when I officially closed because it was a new construction at the time.

Okay.

But yeah, been doing this ever since. Love it. Love— every day is different. You know, there's always a challenge. There's always a solution to that particular challenge or hurdle you're up against. There's no 2 loans that are the same. And, you know, I never give up. That's kind of what I love about this job is that there's, there's a challenge there or a roadblock or a hurdle, and there's always a way to find out how to get by that.

So not only did you get started in 2002, but you, you survived 2008.

Oh yeah.

And are still in it.

With, you know, I got less hair now.

Uh-huh. Yeah.

But, uh, not that there's anything wrong with that. Right.

True story. Yeah. But in 2008, obviously with the collapse, Uh, I was working for the same company that I started with in 2002, and they did shut down all North American operations.

Really?

So I did have to find another job.

Okay.

At that time, and, uh, landed in the bank world, learned about the bank side of things and, and whatnot, worked my way up. You know, I, I managed 21 loan officers at the peak of it all, and, uh, you know, that was really fun, but also figured out there was more to this world than Just that bank side. So here we are now.

Yeah, very cool. And, and so you guys work together pretty regular, right?

Yeah. Yeah.

How long have you guys been shuffling houses now? Well, this past year, um, Kyle and I have been working together, and I think we share, I don't know what, 20 texts a day back and forth between— Oh wow.

Oh yeah, it's nonstop. I mean, in a good way, not in a bad way, right? Yeah, communication is key in our So, you know, we'd stay on top of things with our client, mutual clients, and, you know, we update each other on what's going on.

You know, I think one of the coolest things that we did with this last client is just the group text thing where, so we're just, we always know who's got what going on. Right. Between the buyer and the lender and the agent. That way nothing's getting lost. Yeah. You know, no communication flaw there. And that might actually be a good thing to help people clarify. I mean, because if we're trying to talk to like first-time homebuyers, what is the relationship between their real estate agent and the broker on the other end trying to help them get that loan? How does that relationship function?

Well, it can vary, to be honest, because there could be a nonexistent relationship.

Right.

You know, depending on what the homeowner chooses to do, if they go out on their own to find, you know, uh, the, their financing first, and then they find their, their, uh, realtor to help 'em out.

Mm-hmm.

In a separate path, you know, they haven't, there's no relationship there to begin with. Mm-hmm. Uh, I don't advise that in that sense because you want to have 2 people on your side and on the same page at the same time.

Okay.

Uh, fighting for your cause, fighting for your, you, the best deal you can get. Um, so, but that relationship is critical, you know, because there's been many a times in my experience, um, where there's been failures in that communication between the, the broker and the real estate agent, and, and it just caused a bad experience for the customer. So it's one of the biggest things to, to have is that relationship where the communication works well, that we're on the same page, and we can get to the, to the finish line, uh, in the best means possible.

Yeah.

And so, you know, to that point, I think it's interesting, uh, that you say that, um, because that was a question that I had as well. But I, I think that a lot of times there are things that we like to have relationships with people for. Like, for example, we've talked on this show many times about, you know, if I have a plumbing issue I'm calling the Burks. I, I'm just gonna— I'm just gonna call them. Yeah, and you know them as well. And, and I'm gonna call them because I trust them. I know they're gonna do a good job. I know they're gonna be quick, and I know they're not gonna gouge me doing it,

right? But with, with the mortgage lender, it's a little bit different in that you just need to make sure that loan closes. And so the second, the second time you buy a house, you don't necessarily— I know we're first-time homebuyers on this, you know, this specific episode. But the second time you buy that house, or a second house, you, you don't necessarily have to use the same mortgage lender in order— because the goal isn't, uh, the most perfect relationship as much as it is we got to have this loan close, right? Am I, am I wrong about that, or does that sound right?

It's kind of both in that sense, because here's the deal: when you have the relationship that works well, the only thing that really does come out on that outcome is you close on time without any problems. And closing on time is one aspect. You also want to have a good deal, whether that's, you know, the, the best interest rate or the good interest rate, good, you know, low cost, those types of things matter just as well. And when you can package that together, where it's the agents doing all the things that need to be done on your behalf as a homebuyer, and then the lenders on the same page doing the same thing for you, and they just make it seamless. I mean, you can't beat

that experience. And the goal with that, as if this, you know, first-time homebuyer is to get into that relationship with, with that partnership there and beyond. I use that, the terminology of, I want to be your loan officer for life. So my goal is to make this the best experience and to give you the best deal that you possibly can get and do that again for you over and over as you progress through the chapters of your life.

Sure.

And, and that works really well if you stay in the same area. But if you're moving to a new area, moving to a new state, moving to a new town, then that changes, obviously. Um, or, or at least it could. It could, because then again, like I, like I was trying to get to, is that, I mean, maybe I've got a relationship with you as a lender and a broker for that. But then I moved somewhere else, and now the realtor is having to work with someone that he or she doesn't know as well. So then we get back to the other thing of relationships are great, but they can also cause breakdowns if they're not between the right people.

Correct.

Right.

So that's just something that I think— this is one of the things that I think a first-time homebuyer stresses out with more than anything else, because this is a lot of money. This is the biggest commitment financially that I've ever made, most likely. And, um, you know, even more so than college for most people. Um, and so, you know, doing that well is really, really important.

Yes.

Which leads me to my next question, which is, so, Christie, you as a realtor, you're going to advise me most likely, if I don't already have my financing in place, You probably need to talk to Kyle. He's fantastic. I've worked with him a number of times. He's a great guy. He's gonna— I trust him. You're gonna say that to me. How do I know that that's the best thing for me as a buyer?

As a buyer, you, you really need to go out and, um, you can take the advice of your agent and definitely listen to your agent, but your agent should really give you probably 3 other options as well. So as an agent, I can't specifically say that Kyle's the person that you need to see. That's the person you need to deal with. You need to have options.

Okay.

So I think Kyle's fantastic. I love working with him. I personally would use him, I can't force any of my clients to use them, and I encourage them to go out and get other bids, talk to other lenders. Yeah.

And so what kind of questions am I asking to know whether or not I'm getting the best deal or someone who's going to work with me well? What, as a first-time homebuyer, what should I be asking that person? Like you, if I were to call you, Kyle, and say, Hey, I've been working with Christie. She recommended me to you. I don't have any idea what I'm doing. I just know I need to get a good deal, get the best deal I can get. What kind of questions should I be asking of a broker?

On any loan aspect, as a first-time homebuyer, you want to make sure you get it in writing. If they're going to quote you a rate, if they're going to quote you costs, You want to get it in writing so that you're not being told one story and when you get down to the finish line, it's something totally different. So you get it in writing. Secondly is you do want to compare. I mean, the bottom line is the, the way the system is set up is that you are allowed to shop around for the best mortgage deal. Now, but just like any industry, are you always going to go with, say, the lowest flooring guy? you know, to put— install your floors and buy your floors from? What's their

quality of work like? Do they finish the job on time? Is there going to be extra expenses? Those are things that you need to account for, and it's really hard even as an experienced home buyer to identify that up front. So relying on the recommendation of others who have gone through that path already— your neighbors, your friends, your realtor, things like that— is very critical. And that's one major reason why you should listen to the recommendations given to you or the reviews or the experiences that you, you hear about. Social media nowadays, there's reviews that, that, you know, people can pull up. You can Google that. That's how today's environment is. So that does carry a lot of weight with

it. But if you're going to get recommended to somebody, that's— there's generally— if somebody's going to put their name on that recommendation, they're putting their their business on the line just as well. That's how I look at it.

There's even podcasts that cover these kinds of things.

Yeah.

What do you know? What do you know?

Right. Well, what, like you mentioned some, like when people put on like added fees and things like that. So like what, what are some of those fees? And then how are, how are you guys able to compete against other, other lenders then? I mean, 'cause it's, it, it would, I mean, I don't know what I'm talking about, but it seems like you guys would be operating off the same rates, you know, And, and things, you know, you know what I mean?

Yeah, I mean, that's a great question. Um, yes, there's a marketplace for where the rates come from, but between Company A and Company B, the rate will vary depending on overhead, depending on cost expenses, things like that, level layers of management that they have to pay out. So in the end, the consumer pays for all that within the rate that they get. So when that's All said and done with, you know, what they want to look at when you get that quote in writing, you want to look at each section. There's different— it's broken down into sections. There's origination costs, points, underwriting fees, processing fees, things of that nature. That aspect can vary. Some will show you zero there,

others may show you a couple thousand dollars. That's a lender-specific setup on how they operate their business. Discount points, that's based on the rate that you're choosing or that they're showing you and what that rate costs on the market for them to give that to you. Beyond that, there's third-party costs now. So that's lender-specific that we just mentioned. Third-party costs can range from appraisal costs, title costs, closing costs with the title company or an attorney. You've got additional costs like surveys, Uh, you know, there's recording fees with the county.

Mm-hmm.

There's a slew of different third-party aspects that have to get involved when buying a home and using a mortgage to do so. Some of those costs do not come into effect if you're buying a house with cash, but most people that, like you and I, would probably buy a house with cash— sorry, with a loan. Therefore, these third-party charges come into play.

So those, um, you know, are those, are those like one-time fees or are those things that they sort of build into the loan?

They're one-time fees. They're separate from the loan. And with that, they can be chopped up pretty heavy.

I mean, right up front, right?

Exactly.

Everything's typically up front. Um, depending on which loan program you, you, uh, is best for you and your situation, there may be some monthly charges, something called mortgage insurance, things of that nature, right, which come into play with the amount of down payment you may make on, on buying a house. So those things may be monthly, but typically the majority of all your expenses on buying a house are one-time fee paid at closing.

Is it, is it still on the mortgage insurance that that doesn't kick in unless you're below 20% on your down payment? Is that standard across the board?

Correct.

Okay.

So, so let's, let's talk about what that is because I didn't understand what it, what it was whenever I bought a house. So, so what is PMI? What is that?

Sure. PMI stands for Private Mortgage Insurance. It's also known as Mortgage Insurance MI. The basic definition I'll give it, layman's terms, is it's insurance to protect the lender. It has nothing to do with the borrower. It doesn't help the borrower one bit. Because a loan that is made with greater than 80% loan-to-value ratio, so if you're buying a house at $100,000 and if you're not going to put 20% down, that's a risk to the lender in recouping their cost. If they had to foreclose on the property, they're thinking that they're going to get pennies on the dollar. So think of it as gap insurance, like on a vehicle. You have your typical insurance will cover it, but if you owe more than the vehicle is worth, you probably want to get gap insurance

to protect you as the borrower so that you don't owe money after the car is totaled or destroyed.

Right.

Except for in the mortgage world, mortgage insurance does not protect the homeowner, the borrower. It protects the lender. And it's a requirement. He who has the gold makes the rules, right? If you're borrowing money from a bank, a lender, in that sense, they are going to make the rules that protect them.

It is not like gap insurance that is an elected thing. It is no elective.

Correct.

So the other thing to know is that once you pay down 20% of that loan, then you can drop that.

Depending on which mortgage program loan product you're in.

Okay.

Uh, if you do an FHA loan and you put the minimum down, 3.5%, um, you're gonna have mortgage insurance for the entirety of the loan.

Oh wow.

No matter what balance you hold on it at any point.

Wow.

Typically, people would refinance out of that loan at some point down the road to get out of paying mortgage insurance. PMI.

Yeah, that's crazy.

The average life cycle of a loan is only 4.5 to 5 years. So meaning people either refinance or they move, they buy another house, things of that nature. So the 30-year mortgage never, for the most part, is completed. It's usually refinanced or paid off because they sold the house within 4.5 to 5 years.

And a lot of times, I mean, like this has happened to me several times where your lender will actually sell your loan. And so like, I mean, in that sense it doesn't last 4 or 5 years because they just send it on down the road to somebody.

It's still the same loan, it's being serviced by somebody else.

Right, yeah, it goes to a different lender.

So your loan terms don't change.

Yeah.

Therefore, the loan is still the same.

Yeah.

It's just the servicer.

It's a fancy way of shuffling money around.

Right, it is. Yeah, so, so That happened on both of the loans that I've ever had. It got sold. I bought it with one lender and it got sold to another. What does that mean? Because the first time it happened to me, I was like, wait a minute, I didn't ask for this to happen. And I wasn't informed that it was going to happen. Why am I not in any more control of where I'm paying my money to? Talk about that for a minute too.

Sure. In reality, I'd say 98-99% of every loan is sold. And the reason being is that these loans are not loans that the bank is offering or the mortgage lender is offering. These are Fannie Mae, Freddie Mac, which are the government-sponsored entities or enterprises that are offering these loans. FHA is another entity.

Just real quick, so what is Fannie Mae and Freddie Mac? I mean, just—

they're a—

I know it's a complicated deal, but like—

It is, and this is getting kind of into the weeds for a first-time homebuyer, to be honest. But yeah, in real basic terms here is that it's a public company owned by the government.

There it is.

Issues out—

there you have it—

loan programs, okay, and guidelines that fit on, you know, who qualifies for that loan.

Right, right.

So the lender is actually not the one— the bank is not the one making the rules. These rules are set out by Fannie Mae and Freddie Mac, right?

They're just administering those rules.

Correct. Okay, it's kind of like a middleman issuing out the loan because you cannot go directly to Fannie Mae and Freddie Mac to get their loans. Okay, and again, the reason why such a large percentage of loans are sold is because They're done through Fannie Mae and Freddie Mac. They're their loans, so they, they own the rights to those loans. With that being said, you typically in your disclosure part, when you, when you make an application for, for a mortgage loan, you'll get what's called a servicing transfer disclosure, and that will typically say that your loan has X amount of percentage to be sold or transferred. And pretty much every loan Is done that way.

Okay, so it's not a big deal, it's not a problem.

It's common.

Yeah, but the thing you need to remember though is like, you're, you're probably still gonna, gonna get, um, you know, they're still gonna obviously want their money. So you may have to go in and set up a new account with a new company and make sure that it's withdrawing, you know, how you want it to out of your bank account and that they know all that information. So It can be a hassle, yes, for the, for the home buyer, uh, but just know that it happens regularly. And all you got to do is call that new lender and say, how do I get set up? And they'll walk you through it.

Yeah, right. And with that as well, you know, your loan terms do not change, right? Okay, the— if you have escrow set up with your loan, which is another big topic to understand as a first-time home buyer, Escrow is a variable amount because your property taxes and your homeowner's insurance, primarily those 2 aspects, will change year over year, up or down. So that part will vary, you know, year over year. But your loan terms, which is your, you know, principal and interest part of your payment, your interest rate, your loan, you know, how long you have to repay that loan, those stay the same. Those do not change when your loan servicing gets transferred.

But there is a possibility that my loan amount will change. The amount I pay for my loan will change because if you have escrow.

Correct.

And so let's talk about escrow for a minute because escrow is something that you don't necessarily have to, have to use, but many people choose to. Because of the ease, really. So help us understand what escrow is.

Sure. So that magical 20% down ratio that we talked about earlier, it applies to whether you are required to have an escrow account or not. If you are going to put 20% down to buy a home, your first house, you have the option to not, or what's called waive escrow, which is It's a collection for— I relate it to a savings account, but you don't get to control the savings account. It's your money being put aside month to month to help save when your taxes are due at the end of the year, your property taxes we're talking about, and your homeowner's insurance at whatever month of the year that it renews. It usually renews once a month— I mean, sorry, once a year

on a particular month. So, it's your money being saved up for you and administered by the lender to ensure that those are paid. One of the main reasons why that's the case is that the lender has a first lien priority. They're the number one lienholder on your loan. And if your property taxes do not get paid, the county can come in and supersede that loan by placing a lien against it.

Mm-hmm.

And then they can foreclose and basically hold out the mortgage company from maybe collecting all the money that's owed on them because the county decided to sell the property for 20 cents on the dollar, right?

Yeah, so it's protection again, but really the person that you're really protecting is yourself by using escrow, which is why your payment could change because your property taxes could change and your insurance could change. Uh, so for example, uh, this past year my loan actually went up, and part of this was because they didn't account for the right amount in escrow, my, my mortgage went up $100 a month from what it originally was. Because what, what they did was they said, your escrow account was not what it needed to be, and we've got to build that back up. So in order to do that, we've got to raise your rate $100 a month. And so, um, you know, it's why it's important to shop around for

the best price and coverage you can get on homeowners insurance. Your taxes, you don't really have a whole lot of ability to change that amount, but your homeowners insurance you do. And so getting the best rate can affect your escrow, and your escrow can affect the amount that you pay for that loan from a month-to-month basis.

Absolutely. And you need to keep an eye on it too. For that reason. You know, keep an eye on what's in escrow, making sure that they're taking out enough money to cover your taxes. If your taxes, if you see at the end of the year that your taxes have gone up, you want to let your mortgage company know so that they can adjust, whoops, so that they can adjust your mortgage so that you don't get hit having to pay back that money. Right. Yeah, that's, no one likes unexpected expenses. No.

Anytime. No, but you could, if you wanted to, if you, if you elected not to have escrow, if you were in that, that category of people available to do that, then you just are paying those taxes and paying that, that insurance separately. Or if you find that your escrow account is lower than what it should be, you can make a payment into your escrow and keep that other payment lower if that is helpful to you, correct?

Right.

If you, if you reach out to your mortgage servicing lender and you find that your escrow account is going to be short, or your taxes went up, your homeowner's insurance renewal went up, you have the option to put a lump sum into the escrow account so that your payment is not affected going forward. Typically around April of each year, Harris County, Montgomery County areas, they will reassess Sorry, your mortgage lender will reassess the loan. So that's not just county-wise, that's nationwide typically, or at least Texas. They'll, they'll assess the escrow account to make sure that it's either not too short or not too high. Now understand that a mortgage lender servicer cannot overcollect too much, because if they do overcollect, what you will find when they reanalyze it again the

following year They have a surplus in the escrow account for you and they will cut a check for that amount of surplus and you will get that check in the mail and you can go deposit that into your own account. Because by law, they're only required to keep— the escrow account cannot reach a certain low point or a certain high point. They're required to follow those rules.

Yeah. We had a weird situation that I ranted about a couple of weeks ago where I, I switched insurances, uh, insurance companies. And so I got a refund from one insurance company and I needed to deposit that into escrow. Um, but I, because they'd already paid for the year.

Mm-hmm.

And so they refunded me that. So I needed to go back into escrow because they were gonna pay the new insurance company. So they paid the new insurance company. I had not put this one in yet and some things didn't work out. And so I needed to go back to my old company. And so I got now a refund check from the second company and I had 2 refund checks and I got, I wound up getting a call and, and, and I was, it was just a timing thing cuz it happened right around Christmas. I wound up getting a, a call from my lender that said, you owe us money in escrow because we've paid out

twice.

And No deposits.

And you've only got one insurance at this point. We know, we can see that, but you owe us money in escrow. So, you know, it was a process. I paid and then I put the rest in escrow. But those types of things are just things you have to be aware of. And if you don't understand what escrow even is, you're going to have a hard time whenever they call you and say, hey, by the way, you've got, you got to pay us $100 more this month. And you're going, I don't even know what escrow is.

Right.

Yeah. And I want to point out, because we've been talking about, you know, mortgage Mortgages and financing now for like 20 minutes. And it's a good thing because when we initially started talking to Christie about doing an episode about first-time homebuyers, she was like, well, I have to have Kyle come into the show. And I'm guessing that's because first-time homebuyers' biggest misconception—

Absolutely.

Is mortgages and finances and escrow and all the stuff that we've been talking about for the last 20 minutes. Yeah. So like, if you're like, if you're kind of swimming in it and you're like thinking about buying a home, like pay attention to what, what's been going on here because this is the stuff that I would, I mean, I'm gathering from your experience that these are the things that people have Huge misconceptions about.

Nightmares happen about this stuff. Wake up in the cold sweats.

One of the bigger things also are the closing costs. So, I'm glad that you got into that because, you know, when you're saving for that first home, you know, you're saving your 10% or your 20%. I mean, there's loans out there that you can get in for 3% down. We just closed one that was 0% down. So, you know, just kind of depending on the loan. What a lot of first-time homebuyers don't think about are the closing costs. So they think to themselves, okay, we've got our 10% or 3% or whatever it is, and they're ready to rock and roll. And, you know, that's where having a really good lender comes in key. You want to know those costs up front. The last thing you want to happen is get, you know, a

week before you're going to closing, you're excited, your emotions are in it. Right. You've fallen in love with this house. You've already decorated it mentally.

Oh yeah.

And then all of a sudden— It's a no-go. I got to come up with $10,000. What do I have to come up with for this house?

I thought it was just 3%.

Right, exactly.

And now it's another 10?

How?

And it doesn't even go to my loan?

Yeah, no.

Wow.

That's frustrating.

It is.

And I don't have $10,000.

That's right. Right. So, you know, that honestly, that is where, that's where the really great lenders come into play. You want somebody who can predict where the costs and what you actually are going to need when you sit down at that table to close.

Okay.

So let's talk about closing costs for a minute. We kind of glazed over it a minute ago. There's a lot of things that go into closing costs, but at the end of the day, people have to get paid in order for you to buy a house. And part of it is because, um, people— well, besides the fact that people have to make money, right? Um, but you mentioned a number of things that have to happen for you to be able to buy a house. Um, so let's talk through what, what kind of goes into closing costs.

Sure. So I'm going to break this up into different sections. Basically, you have your, your origination or your lender type of cost. Typically you're going to see underwriting costs, processing costs, maybe loan origination fee or loan origination points— maybe another terminology that's used— and/or discount points for the particular rate. The next section that you want to really pay attention to is, is the title side of things. You have to perfect the title Uh, it's real property. You want to make sure it's done correctly. You want to make sure that no old liens pop up prior to you owning the property and you have to deal with it.

Mm-hmm.

So there's things like lender's insurance, lender's title insurance, owner's title insurance. Uh, there's endorsements that, that will come into play that the title company, uh, does to protect your vested interest in the property once you buy it. The title company has Their fees on top of it where they're going to get paid. The insurance side of it, the title insurance side of it, is regulated by the state of Texas. So, you know, whether it's title insurance company 1 or A and title insurance company B, they're going to have the same title insurance costs. Their escrow closing fees and all the other added stuff, whether it's courier fees or this, that, you know, the add-ons That will depend from, from one company to the other. Your next section that you want to focus

in on is going to be what's called prepaid items. Prepaid items is your escrow for the most part, and prepaid items are going to be homeowner's insurance, prepaid interest— and I'll get to that, I'll come loop back around to that portion, what that really means— and your taxes. You're going to prepay into your escrow account. That's the Best way to kind of think about that, a certain amount of months to build up your escrow starting balance depending on what month of the year you're closing in.

So I don't have to have the full year?

Correct. Okay. Now with homeowners insurance, you do have to pay the full year at the time of closing, and then you get the 2 or 3 month cushion on top of that that goes into your escrow balance. So you will prepay your first full year of homeowners insurance. Your taxes will generally be 3 months worth, 2 to 3 months worth of cushion because your seller, the seller of the property, will generally— in the state of Texas, it's common that they will prorate or pay for the taxes all the way up until the day of closing. So you'll get a credit from the seller because you will pay the taxes at the end of the year, but you didn't own the property for the entirety of the year. So So the title company works that piece out. Your lender

will work that piece out for you for the most part upfront. The prepaid interest. So when you buy a house, if you buy it mid-month of whatever month that you close in, you typically don't want to be set up to where you turn around in 15 days, you owe your first mortgage payment. You just came to close with your down payment, your closing costs, your prepaids. Pre-proc, right.

Yeah, I'm chafing at this point.

So generally every loan is set up where your first month's payment is not the first of the very next month, it's the first of the following month. So depending if you close at the 15th of January, let's say today, right? You know, in this instance, you won't have a payment in February on the new mortgage loan. You'll have a— your first payment will be March 1st. So you kind of get a little bit of leeway, breathing room.

Yeah, you need—

Before you make your first payment. The reason for that is prepaid interest. From once you close on a loan, your interest is starting, the tab is running. So you're going to have days counted up for from the 15th of the month to the end of that month. And that will show up there in that prepaid section of interest being paid at closing to account for those days that go by. And then with your mortgage payment, it's paid in the rear. So it's going to pay the the interest for that month that just went by. So when your first payment is March 1st, your interest on that monthly payment is paying for all of February. Okay, because your closing paid for the half of January that—

right, that you've already paid. You've already paid the month that you're not paying, sort of.

Sounds good to me.

Okay, so, so, so that— I mean, we, we've, we've been talking a long time, like you said, Craig, about About the, the finance side of it. But all of that goes into the reason that if I were to call you today and say, hey, uh, what is, what is a rate going to be if I were to buy a home right now? And you're probably going to tell me what?

Uh, I need to know, I need no more information.

Yeah, because all of that that we just talked about goes into rates and Another big thing that I think that is just— I don't understand how it works, I just know it's a really big thing— is your credit score plays a big part into that, doesn't it?

Big part. It's a large chunk.

If I don't have a very good credit score, the likelihood of me getting a loan, first of all, is going to be hard to begin with. But on top of that, they may say, okay, well, the average rate right now for someone with really good standing and good credit score, all these sorts of things is, let's just throw it out there, 4%. Let's say it's 4%. But if you've got a horrible credit score, you may be looking at 8% or 9% or 10%, right? I mean, that's going to affect your rate as well, correct?

It does affect your rate. I would not go to that kind of range if I were to give an estimate for anybody. Generally speaking, the lower tiers of credit Because, you know, most places they will break it off to every 20 points is a different tier for qualifying. So if you're on the lower spectrum from a lender trying to qualify you, you would probably— you could see anywhere from, you know, 1% or 2% higher in potential rate qualifying with. So it's going to cost more if your credit scores are lower.

But 2% 2% is a big deal.

It's kind of a big deal.

That's a massive jump whenever you're talking about potentially hundreds of thousands of dollars. 2%.

Which people who bought houses in the '80s are like, cry me a river.

Oh yeah. Because they were 15% on these houses.

Yeah.

Right.

Yeah. Like it was just, that was just commonplace. And it's like, we're crying over 4% and 5%. Yeah, exactly.

Come on, folks.

Yeah.

So Kyle, What would you recommend best credits for? So first-time homebuyers coming in, I mean, they may not have the best credit score. What would you recommend they get their credit score to?

The name of the game is typically, and again, this could vary from one company to the next, one lender to the other, one broker to the other, but typically you're going to see anything from 740 Credit score up, it's kind of grouped together. Okay, best credit scenario. When you get from 740 downward, it's usually that 20-point tier breakoff.

Okay, each time.

Oh, every 20, every 20 points down from there, right?

Okay, and it could be, it could be 0.2, it could be 0.4, it could be point— I mean, the— that what you're saying is they— it goes, the rate goes up probably, but it, it may not jump 1 or 2 if you're just 20 points here or there, right?

Right.

Okay, correct. And you can always refinance a loan, right? You know, if you get to the point where— and you hear about this happening a lot— if, you know, you wind up needing some of the equity out of your house, or if you just had a rate that you're going, man, I can get a better rate now, you can refinance, but you're gonna incur closing costs again.

Yes. Now, in the lending side of things, depending on where the market is, what's going on, depending on where you stand as a borrower, it's a brand new loan. So that's going to have typically the same type of costs associated— title costs again, lender costs again. You may not have a survey cost because you could typically reuse the one you already had done maybe a few years prior if you kept it. If you lost it, you, you may have to pay for a new one.

Hmm.

But things like that, you're gonna typically— you're gonna do a brand new loan, so therefore those same costs come into play. Depending on where your current loan sits and the lender you're speaking with, broker, lender, banker, whatever it is, they have a sliding scale to work with on rates that offer— some rates will offer a credit back to the borrower, and that is utilized to maybe pay or cover some of those costs so that you're not coming out of pocket with fees anymore, but your rate you're getting offered can still be lower than what you got originally on the first loan.

Sure.

So that's one way to combat that, uh, that aspect of, you know, okay, I'm going to be paying costs again doing another loan. It's still advantageous to do a refinance if you can get your costs covered with the rate that you're getting, and that rate is still lower than what you have right now. That's savings, right? You know, and, you know, yeah, there were costs involved, but they got covered with, with a lender— what's called a lender credit at that point— due to the rate that that you qualified for and, you know, you're still getting a better rate than what you have right now.

Sure. So, okay.

Yeah.

Well, I feel like we need to kind of move over to the home buying side of things, but something that I want to kind of put back in the back of our minds, and then I think we'll get there in a minute, is, is there a possibility that as a buyer I don't have to pay closing costs? I think the answer only lies in whether or not you can get the seller to pay for them.

Correct.

I want to come back to that. I don't want to get into it right now because I think we have some other things we need to talk about before we get there. But I want to get into the actual fun part of this, which is buying the house.

Right! What, mortgages aren't fun?

Numbers aren't fun?

Nope!

Slam on Kyle out of nowhere!

But you're the one—

I think you're a fun guy, Kyle.

Yeah, don't—

you're the one that people are nervous about, right?

He's, he's step one.

That's right.

Yeah. So before you get to me, you have to pass through Kyle.

That's right. So, you know, as a non-first-time home buyer, a lot of times you might go back to the same realtor you've used before because you have a relationship with, especially if you, you know, if you, uh, if you enjoyed how, how that experience went. But as a first-time homebuyer, there are thousands of realtors out there. I'll tell you how I found my first one. The first one that I ever used is, I was driving by a neighborhood, saw a house, and thought, hmm, I'd like to look at that house. So, we called the number on the sign. The person that answered the phone was the person that sold us our first house. It was not the one we looked at the first time. How do

How do I go about finding a realtor better than that?

So pretty much everybody knows a realtor, right? My thoughts are that just because you know a realtor doesn't necessarily mean that they're the right realtor for you. I, you know, I think that it's a personal decision. It needs to be somebody that, that you sort of click with. Right. But again, I think, you know, definitely there is no shortage of real estate agents out there, for sure.

And some of them are a lot better than others though.

They are. That is the truth.

And that's the truth. I don't think that you even need to shy away from that because I think that many, I mean, you know, I mean, years of experience doesn't even make you better No, it does not.

No, it does not. You know what I found is, well, I probably shouldn't even say that, but— Say it.

Say it.

You know, some of the more seasoned agents can sort of get stuck in a rut. You know, again, I think that it's about a relationship. You want to work with somebody that you know and somebody that you Right.

Do you give references?

Do I refer, like, do I refer to other agents?

Like, if I call you and I'm like, hey, I'm interested in buying a house, and you say, sure, I can help you with that, can I say, can you give me some references of people that you've sold to that I can call and find out what their experience was?

Oh, absolutely.

Okay.

Absolutely. And then, you know, we were talking about the reviews. Reviews are huge. So— You talking about like online reviews and things like that? Online reviews. Again, also, we kind of have the same issue in that it tends to be a little bit more difficult to get people to put those reviews in. Sure. But definitely, check out reviews. I would ask for a referral. Is that something that you find that, I mean, particularly, I mean, maybe not just with first-time homebuyers, but do people actually ask you for that usually? I haven't personally had anybody ask me for a referral.

Yeah, that's what I would expect.

I mean, because like we tell people that, all the time. Like, you need to interview the people that you're hiring and that you're gonna work with.

But like, you are hiring this realtor, you will be paying them.

Yeah. And so, but like, well, unless— not on the, not on the buying side.

But yeah, exactly. But somewhere along the line, you're gonna get paid.

And so, so I'm free to the buyer.

Yeah, right.

I'm free to the buyer. You, you don't pay me anything.

But, but somewhere you're getting paid. And, you know, so I do think that there's buy-in for you somewhere. But again, you know, you're gonna be You're gonna be loyal to your seller more than you are your buyer on some level, unless you're good. And then you're— if you're good, then you're loyal to your buyer and your seller. And so all of these things kind of come into play. But, but I think my point about all of this is, you know, what Craig mentioned is, you know, you, you are essentially hiring this person, even though you're free for me to use, to have my best interest in mind.

Well, Well, so I'm actually legally bound to have your best interest in mind. And so that's something really important to remember, especially if you're going to go out and build a new home. So you walk into the beautiful model and there's the salesperson there and they're super friendly and they're ready to sign you right then and there. The salesperson at the model home is not bound by the law to have your best interest at heart.

They're a salesman.

They're a salesman. Okay. So a real estate agent is licensed through the state of Texas. So, you know, they are legally bound to have your best interests above and beyond their own. Yeah. Anybody else's for that matter. So back to the buyer-seller, I wouldn't represent both the buyer and the seller. I would represent either the buyer or the seller. If I've got the seller and somebody calls me and says, hey, you know, I saw your sign, I saw this house, I love it, I want you to represent me, I would at that point refer them to someone else in my office who would take care of them. because I'm representing the seller. So I've got, you know, you can't see the best interest.

It's conflict of interest.

Conflict of interest.

Yeah. And all of this, you know, this, I know because I've been there as a first-time homebuyer. It's very daunting. And I want to make sure that I have someone that's not just going to show me their listings.

You know, absolutely.

I want someone who's going to you know, find what I'm looking for.

You want someone who's gonna listen to you, you know. Um, they're not gonna— they're not trying to line their own pockets.

Um, and that, that, that's going to be one of your biggest red flags. If you feel uncomfortable with your realtor, right, find another one, right? Yeah, there's another one just down the road.

That's right.

And there may be another one in the same company, you never know. But wait, find another one.

If we can, let's, let's, let's try and paint with a broad paintbrush here. What is the typical first-time homebuyer like? I mean, what are their expectations coming into this process when they get involved with you? They're probably telling you like, I want a red door, or, you know, what is— you know, because I think the first-time homebuyer now, at least from what I understand the statistics, is getting older. Mm-hmm. You know, people aren't buying homes as young as they used to. They're kind of waiting around a little bit longer to, you know, make that decision. So what, what is the, the typical first-time homebuyer even look like right now? Well, I think it, I think it's kind of changed. It definitely has changed a lot with internet. So typically people at this point

start the whole home buying process, they're online, you know, so they're on Zillow, they're on You know, red door turnkey, they're looking online for their houses. So typically by the time I see them, they already have a list of exactly what they want.

Yeah.

What you see online isn't always— What's available. It's not always what's available. Also, you can make a picture look really good. You can make a house look really good in a picture online. And you walk in and it's like, oh my gosh, this room is half the size of what it looked like in the picture.

Smells like cats. This room smells like cats.

That's right.

Is this even the same house?

Yeah, exactly. Can't see that in a picture, can you? So, you know, definitely be careful, you know, when you're looking online, have that thought process that it might look a lot better in that picture than it does in person. You definitely want to go and see them. Do you think that a lot of folks now are so internet reliant that they're, they're sort of taken in by some of that sometimes. Yeah. 90% of the people will go online first and, and, and search out their home there.

Well, and, and I get it, it's convenient. I mean, yeah, and it's easy to put in the parameters that, that I'm looking for because, I mean, as a realtor, you need to know that I want a 3-bedroom, 2-bathroom house.

Correct.

And, and that's super easy to put those parameters into an online search. and boom, here's all the ones in my area.

Yeah. So one of the benefits of having the real estate agent is that the real estate agent has access to MLS. So MLS is going to give you much more accurate information than anything that you're going to find online.

What's MLS?

So your— sorry, your Multiple Listing System. So That's where all the agents are going to go and list the houses that they have for sale. And I can find information on there that quite frankly, when I'm looking at it, I feel a little bit like a stalker.

Okay? Yeah.

I know how much you paid for your house. I know how much you owe on your house. Yeah. So there's— and you, and you have a level of access that, like, you know, because we can— I mean, like, I think, what is it, HAR around here that you can, you can look at MLS listings on there. But, like, you have a different level of access to information beyond what we can see looking at an HAR.

Part of that's very private, right?

I mean, it is very private.

Yeah. And you have a legal obligation not to tell me some of that information, right?

Correct. To a degree. So where that information comes in handy is really knowing what the value of the home is, right? Yeah. And also coming up with information that helps me better negotiate a deal for you. Yeah. You know, so I, as the real estate agent, want to be— I want to become sort of a private investigator. To see as much as I possibly can to be able to get you the best deal on that house.

Okay, before we get off of the listing side of things, I know this to be true.

These—

so you mentioned MLS. MLS is the most complete database that I, as a regular person, don't have full access to the MLS. That being said, these other websites that you mentioned, like Zillow and, you know, whatever the other ones are, we mentioned HAR and some others that are around here. Those are pulling from the MLS there. Those are pulling information from the MLS to list that on their website. Is that accurate?

Yes, correct.

Okay, so one of the things that I'm— that I want to mention with that is that there are some websites that do that more accurately than others. And so I would ask your realtor which, which websites they recommend. For example, HAR around here is going to be one of the most, uh, accurate ones, whereas Zillow, for example, it may have a ton of houses in their database, but if they update their system on a Friday and you're looking at it on, you know, uh, Saturday, the next Saturday, A lot can change in that week. And you may be looking at a house that's already sold. You may be looking at a house that, um, there's new pictures of that you never knew, or, or, and you're looking at that house, I don't even wanna look at

that one. And then 3 days later, there's new pictures up that you just skipped. Right?

Right.

And part of that is because certain websites are better at pulling from the MLS and more, they do it more often and they, they're, they just have better parameters that they pull from. So my point in saying that is I think we owe it to our first-time homebuyers to know, be careful of the website that you're out there looking at because it may not have the most accurate information.

So HAR, I believe, updates every 5 minutes.

Uh-huh.

Yeah, that's a big emphasis. You know, and if you're working through a real estate agent, so if I'm working with a first-time homebuyer and we're in a hot market where those houses, you know, are getting multiple offers on them, we want to know when something comes available right away, right? Yeah. So I can set them up to where every time something that meets their criteria comes up on the market, it's going to send them an email immediately. So as soon as it hits MLS, they get an email. I get an email saying that they got an email. This house just went on the market. Let's get over there. Let's go look at it. So we're the first ones in the door. Yeah. Well, and

I'll just throw this in there. I mean, HARMLS is great, but that's not the end-all be-all of real estate either. I mean, the property we're sitting on right now, I bought without it ever being on the market. And you can do that. You can ask, everything's for sale, people. That's right. Knock on a door.

That's right. I mean, I had someone just a couple years after I bought my pickup, they said, hey, is your pickup for sale? And I said, absolutely.

Absolutely.

How much do you want to pay for it?

Right.

And I didn't want to sell my truck, but hey, for the right price, I'll sell just about anything, right?

That's true. Yeah, that's true. And in a hot market also, I mean, I, I'm not beyond going and knocking on a door, right? Yeah.

One of the other powers of utilizing a realtor is their network. They know, one, the community that you're looking into, 2, they have connections, and they can utilize those connections like you mentioned, but of, you know, what is maybe coming on the market soon, right?

Right.

Uh, you know, they, they could ask around to their colleagues in the industry and say, hey, does anybody have such, such, you know, coming on the market sometime soon? Oh, I talked to somebody, right, the other day that may fit what you're looking for, your buyer's looking for. So they have access to other means And beyond just MLS, which is a huge benefit to a homebuyer, especially a first-time homebuyer, the Zillows of the world, the, you know, Redfin, you know, all those internet sites, Trulia, that they're outdated information, quite frankly.

Right.

And they don't do, from my perspective as a mortgage lender, they don't do our side of the world any justice when they estimate a value or throw out their opinion on something because they don't— Texas is a non-disclosure state. Yeah, you know, they, they're not an appraiser. They don't have access to that data point, you know, those data pieces that are necessary to come up with value.

Right. Well, and I'll give you a perfect example of this. So we moved here from Arkansas 2 and a half years ago, sold my house, and Back in June and July, somewhere around in there, that house that I sold in Arkansas went back on the market. I started getting emails from Zillow saying, hey, here's your most updated information that you have just put into our system about the square footage of your house has now been updated. The new pictures have been updated. I'm going, I haven't owned that house in 2.5 years.

Wow!

But Zillow still thinks I own that house. They still somehow I'll have my address, my email address in there as being the person that owns that house. So you— 2 and a half years, these websites, they don't, they don't know everything. So your realtor is going to be one of the best points of access of knowing the actual information.

Absolutely. Correct information.

The correct information. Yeah.

Yeah, that's a big, big deal. So I guess the next thing I want to know is, What, what do you— how do you guide a first-time home buyer? I mean, this is a big, big process. We've talked about the money side of this, but how do you guide them? Because honestly, like, I really would love a 3,000-square-foot house, and, and it's just me and my wife, but big houses are beautiful, and I think I would want that. So how do I— if I come to you now, like, I want a 3,000-square-foot house and a lake view, um, and, and, and by the way, I'm, I'm 24.

Years old.

So help me out, please.

First thing we need to do is cut your man bun off.

Right.

Ouch.

You know, that's a slippery slope because, again, as an agent, I'm there to listen to you and listen to your wants. And my first thing is, Sit down, make a list. What are your wants? What are your needs? What are your deal breakers? Um, we've already spoken to Kyle, so he's already told you what you can afford.

So—

That's right.

That's helpful. That's huge, right?

Right.

We already know that up front because a good realtor is going to point you to a good lender that's going to get you pre-approved.

Right. So we're not looking at the house that you can't afford.

Right.

Hopefully. Let's already set those parameters. Right. Let's set those parameters up front. Um, because we don't want to waste anybody's time, really.

Right.

Yeah.

Um, or, or get you extremely disappointed, right?

Or get you in over your head.

Absolutely. Get you in over your head.

Yeah. And, and I'll tell you that, that's, that is easy to do. Um, and the first house that I bought was in '09, so it was, um, right after the crash happened and everything. And They approved me for a house that was probably— well, I'll just put it this way. They approved me for a house that I couldn't pay for.

Mm-hmm.

There was no way I could pay for it. I was looking for a house in the $150,000 range. They approved me for $280,000. There is no way I could have paid for that mortgage. We're better than that today than we were in 2009. But you can still easily get in over your head.

Yes, very easily. I think, um, I mean, I don't know, you would probably know better than I would, but I think there's still lenders out there that'll play loose and fast. Yeah, but approve you for quite a bit more than what—

There's programs out there that, you know, are taking it back to the time before the crash. So, you know, it's out there. Are you willing to pay for it?

And you just need to be really realistic. Budgeting is huge.

Yes.

And this is not something to play around with because the bank will come after you.

That's right.

And they will take your home and good luck.

Well, and the last thing that you wanna do is be house poor. I mean, and you know, it's just, it's not fun for anybody. Yeah. So— Why live in a house when you can't put a couch in it?

That's right.

That's right. So what do they say? Like 1/3? Yeah, I mean, 1/3 of your monthly paycheck towards mortgage.

That's a rule of thumb right there.

Yeah, rule of thumb.

Okay, that's good.

I think most people live way beyond that.

I would agree with you.

Yeah, probably.

Try not to, people.

Yeah, please don't.

It will— it will—

budget.

Yeah, it'll pay dividends literally for you if you do not get in over your head. I mean, now, now I'll tell you this. So, so as a first-time home buyer, Uh, back in '09, we had a lot of people giving us advice, and one of the pieces of advice was buy a starter home. Can you give me your definition of what a starter home would be?

Not what it was back in '09.

No, it's different. So what I, I'll just tell you what they meant by it.

Okay.

What they meant by it was buy a house that's cheap and that, you know, in 3 to 5 years you can turn around and sell for a profit so that you can then go buy the house you actually want to live in.

Right.

And so for me, at that point, um, we were getting ready to start a family. We were not 23 years old anymore, and we didn't want a starter home. And so we didn't go looking for a starter home, but what it meant was we bought an older And it was a little bit bigger. It was in an older neighborhood, but it was a really good choice for us. And so I think that sometimes you have to manage your own expectations. You may not get a house that was built in 2016. You might get a house that was built— for us, this house was built in '64, but it was wonderful for us. And we turned around

and sold it for a profit after we moved.

You can't beat those older homes. I'm not gonna lie. You can't beat them. were built different. I think everybody has different expectations, right? One of the key things that I tell my first-time homebuyers is don't get sucked into the inside and the beautiful inside because there's so much that you can do DIY. You can repaint a room, you can And that's the, to me, that's the fun part of owning the home. Yeah. You know, is— Sure. Are the projects. Go beyond, go outside. You can fix inside. You can't pick that home up and move it. Right. So if everything around you isn't as fabulous as maybe it should be, Maybe you need to look in a different area because

starter home, in my opinion, is in 5 years. Remember, you may want to sell that home. So get something that—

Smaller, more affordable.

Right. That hopefully you're going to be able to sell later and make a profit off of.

Yeah.

You know, I mean, I can't guarantee that in any home, but, you know, take a look at your surroundings. Where are you? Are you close to a major road? Are you, you know? Yeah, I would imagine part of that is, you know, getting the home inspected, right? Absolutely. Huge. I mean, I would imagine you encourage them to like really go through those reports. Definitely. Get a good home inspector. And I think when you get that inspection, it's important to be able to look at it and determine which things are things that you really need to be concerned about.

Mm-hmm.

And what are things that, okay, well, I can probably fix that myself. Don't get too wrapped up in the details. I think we had that conversation with our last clients that we had.

Yeah, I mean, when it comes to the inspection, it's critical from the lending side. We don't really want to see that. Our appraisal is the inspection that we get on the lending side. The home inspection is for the homeowner to understand what they're coming up against, right? You know, and so the structure, the bones, the electrical, the plumbing, those things really matter. The AC, the big units, the big parts of the home.

The roof.

Those are the big components that need to be understood. Are they in good quality right now? Will they supposedly still run 2 years from now? Those are the things to find out about. The paint chipping on one corner of a room may not be a big deal.

Right.

The dirty carpet. carpet may not be a big deal, you know, you can change that.

Leaking faucet, you can fix that pretty easily, right?

Yeah, the fixtures can be changed, things like that. But the— and it's hard for a home inspector to get— they're not going to go behind walls, so they can't see everything. But they, they can— they're a private investigator. They're going to look and find— they know what they're looking for. They're going to see the signs of red flags, and that their job is to let you know as a first-time home buyer of, you know, What you potentially are up against.

Yeah. Here's some areas of concern.

Very critical to get.

Do you find first-time homebuyers, I'm just guessing here, are they sometimes not paying as close attention to those reports? Maybe because they've got the feels about a house? I mean, everyone's different. Everyone's different. But I would imagine you've come across someone where you're like, look, this is a very very serious issue that— and then they're just like, yeah, it's fine, moving on, you know. But I mean, I would imagine you would encourage them to go like, look, what's that going to cost you? Yeah, well, that's where we step in and say, we got to negotiate this. Yeah, this isn't going to work out, you know. We're going to need to negotiate a new roof, or we're going to

need to— um, so that's where your agent comes in. And that's where a good agent comes in and uses that as leverage to, you know, either get you a better deal on the house if they're not willing to have it fixed or get it fixed before you move in. Right.

Yeah. And I think that's one of the things that you have to also understand as a home buyer is that terms are negotiable.

Yep.

Everything's negotiable.

I mean, yeah. I mean, if you, And that comes back to my, you know, full circle to what I started off with here. So, you know, if you, if you feel like it needs a new roof and they want to sell that house bad enough, you can tell them, listen, I'll buy that house. You fix that roof and you replace it, and then I'll buy it.

Right.

Um, or, or you can, you can tell them, you know, these— that's one of the things that, you know, the inspection is really, really helpful for, is it gives you leverage to say, look, Look, these— this professional person told me these things are wrong with your house and I'm not buying it. And probably no one else will until you fix these things. Or, you know, I want numbers 1 through 5 taken care of and I'll, I'll work on the other ones myself.

Right.

But you can even say, look, I'll buy this house, but I don't, I don't have the money right now in my pocket to pay the closing costs. So if you want to sell your house badly enough, And this is one of the things we did with the first house that we bought is we said, listen, I've seen the inspection report, there's some stuff on there that needs to be taken care of. I'm going to ask for none of those, but I want you to pay for all the closing costs.

Right.

And so again, it's kind of what, what you want to put the terms in. And if they agree to them, then you're in a legally binding document at that point with the agreement and Here we go.

That's right. So you can definitely negotiate the, the closing costs. We just did that.

It's always nice when you're a first-time homebuyer gets a refund of the earnest money check at closing.

Nice. Yeah, and so the, the loan that we did in 2009, and this was something that with the Obama administration that they were incentivizing first-time homebuyers, is they had a loan system that they said, hey, well, you can for $0 down, you can buy a new home. The only stipulation was, and it was a big stipulation, You have to live in that house for 3 years. If you don't live in that house for 3 years, then you have to pay a certain amount of money prorated based on how long you lived there. So what was really great for us as a homebuyer in that market at that time was we didn't pay anything down on the house. We didn't pay any closing costs. And

so when we went in to sign the 4,000 pages of papers that we had to sign—

Right, a book.

Let's go ahead and put that out there, first-time homebuyer, you're gonna sign a bunch of papers.

Bring a pen. Yeah.

Um, well, good lender will give you a pen, right?

Maybe do some thumb and index finger stretches.

Right. Um, that's after we ask for blood.

Exactly. But, um, we walked out without paying a single penny, and it was, it was beautiful for us at the time. Um, but, you know, don't expect that.

Don't expect that.

It is a very unusual situation for us. Unless you're a veteran. And VA loans are different, right?

Right. Yeah.

Yeah. And in fact, the, the house that we, that we sold, we sold, uh, as a VA loan, and that was a very different experience as a seller trying to, to get a VA loan to go through as well. It's very, very different as well.

We just closed one of those. Describe them as thorough.

That is right. That, that is the truth. Thorough is— yeah, they— it takes a long— they have a lot of of restrictions.

Yeah, we even get brought in on VA loans, which, I mean, we, we rarely get brought in on real estate transactions anymore. You have to have a termite inspection. You have to. That's the only one that requires it anymore. No, there's not a bank out there anymore that requires it, so, other than VA lenders that I, that I'm, that I know of. I haven't run across one in years.

Now, in all fairness, the VA loan is a great—

It's a great product. Yeah.

That they, our veterans, have earned the right.

Absolutely.

To use And it actually, in fact, in today's day and age, is not much different than an FHA loan.

Really? Well, I, you know, I was very thankful that a veteran was purchasing my home. It made a big deal to me.

Yeah.

But there were a lot of different things that I just didn't know about that they required. And they really look out for our veterans.

They do.

It's a beautiful program that I'm very thankful for.

Yeah. And it's not as overly complicated as it used to be maybe, or the persona or the stigma that was out there in the past. So it, it's very similar to FHA rules and guidelines nowadays. Cool.

Yeah.

I'm glad. I'm glad to hear that if it has changed. I mean, cause I mean, it's a lot, you know, I've been, I've been doing what I've been doing for close to 20 years and man, I can remember some guys who were, you know, who were the, you know, the recipients of the VA loans were like, just, this is a, this is a booger to get through.

Yeah, but it's a protection. I mean, the protection that they were getting even then, they were still trying to look out for them, right, as much as possible and give them an opportunity to come in and buy a home.

And yes, a lot of the guidelines and rules for any loan program is to protect the lender, but a majority of it is also protecting the home buyer, right? You know, it's, you know, checks and balances that get done through the loan process that protect the home buyer so that they are not getting in a bad situation, you know.

Yeah, right.

Upside down, you know, whatever the case may be, buying a lemon, all that kind of stuff. I mean, there's a lot of protections in there that, you know, getting the wrong loan, you know, not not being able to afford it, things like that. You know, in today's day and age, there's something called ability to repay.

Mm-hmm.

You know, it came about with the collapse, right? Yeah. You know, okay, lender now has the responsibility to make sure the buyer can repay that loan.

Mm-hmm. Yeah. No, you're, you're absolutely right. And, and there's a lot of different types of loans out there.

Yeah.

And, you know, the, the, the best lender will help you navigate that process as well. So, uh, you know, there's a lot that goes into all of this, and I really appreciate y'all through some of this. Is there anything that we didn't hit on that you think I would be remiss if we didn't mention this?

I'm sure we didn't cover everything.

Not even close.

Yeah, it's impossible.

Um, I was actually curious, Christy, do you have a—

do you kind of have like a checklist that you work through when someone comes to you and says, I'm ready to, to buy a home? I mean, do you have kind of like an initial, like, okay, do you have these boxes checked before we can I do it. I do an interview with them. So if, when somebody comes to me and they're ready to purchase a home, I'll go through and kind of find out, you know, I want to know a little bit about them. I want to know what they're looking for in their home. I want to make sure that they've been pre-approved. But yeah, so yes, in answer to your question, I do. I've got a checklist that I go through with them. And some of that you can flesh

out. In an interview process, right? Right. As they answer questions, that's going to bring up more questions and you're going to be able to flesh out whether or not they're actually ready. Exactly. So are there some red flags that you run across sometimes where you're like, all right, let's slow the roll. Other than pre-approval, are there other things that you've run across where that's like, okay, well maybe we need to back up and do some work here before we can move forward? I think the biggest thing is just kind of narrowing down where you want to move. Because that's kind of a big deal. Like some people, the new homebuyer, they get out there and

a lot of them will find themselves, you know, just kind of all over the map. Yeah. Which is incredibly time-consuming. One of the best things that a new homebuyer can do for themselves is really just spend that, spend some time and narrow down kind of an area. Right. And look at the big picture. If you've got kids, definitely look at the school zone. School zone can play a lot in resale.

Yes.

So much more than somebody who doesn't have kids would even dream of. So honestly, even if you don't have kids, that is something that I would absolutely look at is looking at the school zone.

Yeah. And one of the things that my realtor, Brandy— we've had her on the show— one of the things that she did that I really do appreciate about her is she said, you need to really look at the school zone. Okay. Can you help us understand what the better schools are? And her answer was, this is not my child. This is your child. and I have opinions, but I need you to research that.

That's right.

And, and a good realtor should do that. They, they should, they should not stick their, their nose in some things. And that's one of those things that the right school is different for everybody. And I'll just give you a perfect example. If you've got a child with special needs, not every school is, is right, and you know that. So a realtor may or may not know some of that information. So they might point you in a direction and you think this is the best school and all of a sudden you go, well, I've got special circumstances that I didn't disclose and so here we are. But there are some really good websites out there that will help you navigate what schools are better. They give ratings

to them.

Absolutely.

They'll tell you testing scores. They'll tell you diversity. and all different types of things that are interesting for you to really do your homework. Yeah, do your own homework.

And that's a really, really good point because honestly, as a real estate agent, we can't tell you what the best school system is, what the best school district is. To your point, I mean, honestly, I don't even work in the school system, so I'm not at liberty to really give that advice. Yeah. It does make a difference and it's different for everybody. It might be somebody wants in this particular school district because of the football program or somebody wants in this particular school district because of special needs. So definitely do your homework. Yeah. Know what you're looking for. Know what you're looking for.

Absolutely. And there's a real big hubbub going on right now down in, is it The Woodlands or Spring? where they're building a culvert through a golf course. Have you heard this?

I have not.

I'd have to go online to get the exact, but there's a golf course community that because of the flooding going on, the city is going to take over a golf course to build a culvert through it. And so all of these These homeowners who have bought into a golf course community are now going to have a culvert instead of a green in their backyard. Do your homework, people. Do your homework.

That's super unfortunate. Yeah.

Floodplains are a big deal here.

Yes, they are.

So there are things like that that a good realtor is going to help you know.

Another benefit of MLS. I can pull up the flood— and I do. I mean, And that's something that really your agent should come armed with. So when we go out and look at a home, I'm going to have the flood map and show exactly where the house is on that flood map. If you walk into a house as a new home buyer, and let's say you're looking in the, you know, $160,000, $170,000, and it's 3,000 square feet and everything on the inside is completely brand new and the most beautiful thing that you've ever seen in your life, Chances are it's been in a flood.

Yeah, beware. If it looks too good to be true, it might be.

Exactly.

To go along with that, here in Houston, the recent activity over the last few years with flooding due to hurricanes and such, there were many homes that actually flooded due to the area they're in that were not in the floodplain, 100-year floodplain or whatnot.

Right.

So So although it's a great tool, it, you know, if you are in a low-riding, low-lying area, your realtor can help you figure that information out. You as a first-time homebuyer, you want to look into that information. It's public and on, on the interweb, right? So what we call it.

Sure, why not?

Sure, sounds good to me. No, but do your homework on it. It is something to look into, whatever community you're buying into. to, whatever, whatever region of the country you're buying in, whatnot. Understand what that, that area is up against because it's not always based off of what this map tells you or what this source tells you. You know, people who have lived there may have a better understanding just as well.

Yeah.

I want to touch on or wrap up for you guys on, on the loan side. You mentioned, you know, you'd be remiss if we didn't mention things as a first-time home buyer, there's basically 3 aspects to consider or to, to look into or to know about for yourselves. Your money— how much money do you have saved up? Your income— how much, you know, can you afford? And your credit— how much can you qualify for, right? Or what deal can you qualify for? Those are the 3 basic or main aspects to consider. Um, and we never did touch on, which It's a whole other topic just as well, but there's programs out there that can help you, like down payment assistance program, loan programs that can help you with your,

uh, your closing costs or your down payment.

Okay.

In addition to those other aspects, or getting seller help or whatnot. So there's many ways to buy a house.

Is that someone like you can point those people towards those programs?

Correct.

Okay.

I would have access, or any mortgage lender, mortgage broker, loan officer, Not everybody, not every lender— this is a good key to know— not every lender will utilize those programs or offer those programs. You know, generally speaking, they cost more for the lender to provide, so they don't offer it. You know, cause and effect type of thing.

Sure.

There's usually always a trade-off. If you're getting assistance like that, they usually come with maybe higher interest rates, just Well, but if that's a need you have, that you need funds to buy a house because you don't have enough saved up for it, there's ways to do that, right? So it's not for everybody, but it is for certain people.

There's rent-to-own programs out there as well. So I mean, there, there are definitely options if, if you're a renter. And, um, honestly, even if you thought in your head, there's just no way, I don't see how we could ever possibly get a home in the near future, definitely give me a call. You never know, you could be surprised. Yeah, definitely. If you can afford rent, you can usually, I mean, like, unless you've got extenuating circumstances, you can afford a mortgage. Absolutely. Usually.

Now, whether you can qualify for a mortgage is completely different.

And let's talk about those closing costs again.

Yeah, exactly.

Big tip, a little piece of advice, have that emergency fund. Don't spend all of your money getting into the house and then you've got nothing left once you're in, because once you get in that house, there's going to be things that you need. So definitely have an emergency fund set aside that's not for actually purchasing the home. Yeah, because that's not an emergency. Right.

That's right.

That's right.

That's right. Well, listen, I really appreciate I appreciate y'all coming on and spending time talking with us. And, you know, if, if you're out there listening and you've got a question that we did not cover, please send us an email, info@homeownersshow.com. Post us, uh, something on our Facebook, uh, at, uh, homeownershow.com is where you can find a lot of that information, which is our website. So, uh, you can find us all there. But, uh, before we get to any of that, we, we can't let you off the hook.

Nope.

Without going into the final 4. The final 4. That's right. The last 4 questions that we ask all of our guests. You cannot leave without this. So we're just gonna breeze through this. I know we've been keeping our listeners a while. How, how far are we into this so far?

Hour and a half.

Goodness gracious.

No, that means it's been good.

Wow. No, it's been good. It's been fantastic. So, so we're, we're gonna breeze, breeze through these final 4 But we, we just can't let you off. So, uh, very first question we ask all of our guests, what's the must-have tool you won't leave your house without? Christie, we're gonna start with you. What's the must-have tool you won't leave your house without?

Um, as a real estate agent, that would be my, uh, market analysis, comparative market analysis. Okay. So I'm not gonna go to a listing appointment without it. I'm not gonna go show a home without it because what you absolutely have to know is really what is that house valued at?

Okay.

So is that like, is that a book?

Is that a—

So the market analysis is going to tell us, you know, basically what the market says that that home is worth. Okay. What I'm asking is, how do you, I mean, how do you access that? MLS. MLS. Okay. You do your homework. That's where the private investigator comes out. Gotcha. Okay. All right.

You got a lot of work. See that? You real estate agents, people, they earn their 6% or whatever it is that you're paying. They earn it.

They do. They do.

For sure. And not to mention the fact that, you know, I'm sure you get calls at 10 o'clock at night sometimes.

Yes, I do. 5 o'clock in the morning.

Something just popped up. I want to go see it first thing in the morning.

That's—

yep.

Yeah, it happens. All right. What's a must-have tool you won't leave your house without, Kyle?

Man, my lifeline is my cell phone.

Yeah.

I have got to have that. I can access communication, email, information. You know, yes, a lot of what we do is sitting behind a computer sometimes and doing work, but we also have to be mobile. We got to meet clients certain places sometimes. We've got a meeting here, do this, you know, network that. So it's— you can't leave home without the thing.

It is its own computer.

True.

I mean, yeah, it's one of the most powerful computers that's out there. So, all right, awesome. Second question, what's a job you've walked away from? Uh, y'all know the caveat, we've— we say it every single— every single week we say the caveat. So I'm just gonna throw it out there. What's a job you've walked away from, Christy?

All right, so it's supposed to be home Related, right?

Yeah.

Honestly, I was trying to think about that. I'm not one that walks away from a job. I really don't. I will sit there and figure it out, piece it together, Google. The more challenging it becomes, the more competitive I get. I have to figure this out. You're walking away from this question. That's what's going on.

Yeah.

I mean, I've done a I've done a lot of home projects. There's not any of them that I— electrical. You know what I walked away from? Termites ate through the electrical cord of my stove. Oh my goodness. Yeah. Good grief. That was beyond me. I tried. You tried? Yeah, I did. That was beyond me. Walked away from that one. Yeah. Good call.

Yeah.

I would've walked away too.

Might have run.

Right.

All right, very cool. Kyle, what's a, what's a job you've walked away from?

All right, so in the scope of, uh, the, the house, there's a lot of things that I've started that I thought I could do, and then I ended up hiring a professional to finish it out. Whether it's floors, you know, I have a funny story with this one.

Well, that's a tricky one.

Funny at the time. Here I am Hammering away and pulling up some old tile. And, you know, apparently I held the thing wrong and I hit the hammer and a piece of tile shot up and got me in the wrist. And, you know, then we have an ambulance ride to the ER. Oh my gosh.

Wow.

Because it's gushing out.

Oh no.

And lo and behold, after I'm in the ambulance and riding to the ER, it stops.

You literally— you slit your wrist.

Yeah, it was a puncture.

You clotted up quick.

In my wrist. But yeah, so, you know, learned not to mess with tile anymore.

There you go.

I will walk away from that job.

Yeah. Plus, going forward, your knees appreciate you for that.

Knees and back.

Yeah, exactly. It's a tough one for sure. All right, 3rd question. How do you wind down at the end of a long day?

Um, yeah, I'd say a glass of wine, um, which I do appreciate, but honestly, I think At the end of the day, that's kind of when I catch up on Facebook. So I just, in my room, scrolling through Facebook, for whatever reason, that somehow just allows me to step away from whatever it is I've been dealing with that particular day.

It's mindless for you. Yeah.

Yeah, it can be. Yes.

Yeah, it's mindless.

Exactly.

Yeah, good. That's good. How about you?

I'd say my wind down is, is getting home and spending time with the family. Um, I, I'm— I like to think I'm pretty good at it. I'm sure my wife would say I'm not very good at it, uh, because, you know, I, I work from start to finish, not a 9-to-5 type of thing in this industry.

Hmm.

But, uh, you know, that is my wind down. I get home, I start going through the routine. I got a 17-month-old right now, and, and bathing and, and all that kind of stuff and reading bedtime stories. That's my getaway. That's That's my unwind.

Yeah, awesome. Very, very cool. All right, last question. You're almost there. What's one of the best pieces of wisdom or advice you've ever received?

Serve others.

That's a good one.

Yep.

I can get behind that all day long, for sure. Kyle?

Never give up. So that Jimmy Valvano?

Yeah.

Never give up.

Yeah.

Never give up. So I mean, I— that's how I approach, you know, my work.

Actually, who is that?

Uh, he was a, uh, basketball coach in the college collegiate level.

Okay.

And, uh, it was ESPN does the V Foundation and all that, right? So hearing him say that, it always stuck with me. Never give up. And, uh, that's kind of how I approach things, is that, you know, in my line of work, it's problem solving. solving. Yeah, 99% of the time. So giving up on a problem, that just doesn't happen.

Yeah.

All right, well, that's good stuff, man. I, I really appreciate y'all, uh, giving your time. It's been good.

Yep. And we have the, we have the 5th secret question. Yeah, yeah. So if, if people want to get a hold of you, they got some questions about some loans, they want to go find a house, how do they, how do they find you?

Go ahead.

Um, onthemovetexas.com.

Mm-hmm.

Is the website, and my phone number is 832-480-2621.

Awesome. Website is mylendingnetwork.com. Email is kyle@mylendingnetwork.com, and you can reach me on my cell phone, 713-304-1308.

There you go, guys. Direct access That's right.

Awesome.

Thank you so much for having us. This has been awesome.

Absolutely. No, it's been really, really good. And, and I know this is a long episode, but there's a lot going on here.

Yeah, right. I don't even think we got to all of it. No, I'm sure we— no, we really didn't.

No, but I know you've got questions out there, so send them in.

Send them.

Send it. I feel like I got questions.

Yeah.

So, but until then, if you haven't yet, hit the subscribe button, leave a review, like, on Facebook, follow on Instagram. You can do stuff on Twitter, but we won't respond. Um, but we're there.

We have a presence.

Tweeting things.

That's right. Yeah, thanks for, thanks for downloading the episode. Uh, we're here every Tuesday, so, uh, keep supporting us. Leave us a review, a rating, that would be fantastic. We would really appreciate that. Until then, we'll see you next time.

See ya.