Welcome to Mortgage Talk with Mark Harston, the program that not only talks about
mortgages, taxes, and interest rates, but Mark and his guest talk real
estate trends and your home. He also answers your mortgage questions to help you
make the right financing or refinancing decisions. Now here's Mark Hairston. All right,
everybody, welcome back, Welcome back to Mortgage Talk with Mark Harston.
And or every week we come to you with some ideas to you know,
educate you on options and strategies and ideas to help you in your real estate
investing and other ways to take care property, et cetera, et cetera.
And I'm really excited to introduce my guest today, who I just met literally
like two weeks ago. I was in a CE class for my mortgage license
and every year we have to take some hours to continue our education for our
licensing. And this guy spoke and I said, man, I want to
hear more about what John's got to say, because the way it works.
And a few months ago on this show, I was talking about the different
different not strategies so much, but the different legs of business mortgage bankers,
banks and brokers. As a broker, I work with different whostsale companies.
And wholesale companies means they have a product line to offer brokers like me to
sell and offer to the marketplace. And that's what John does. He represents
a company. I'll let him speak here to just second. But when he
was talking at the C class, I'm thinking, Wow, this guy really
knows his stuff. Number one. Number two, I need to get aligne
with him. So I thought, how about the radio show, so here
he is. I wanted to introduce my friend, new friend, John Hudson
say Hi, Well hello everybody, and Mark, thank you for having me.
I've been anticipating this and been looking forward to sharing some hot sports opinions
on mortgage listen, home buying and creating real estate wealth with you for for
since we talked. Absolutely and you don't. I've been to business thirty seven
years and you're an old timer like me as far as age. But you've
been doing this for a while. You since it's ninety eight or something like
that. Yeah, you know. So it's so it's funny. I like
to tell people with mortgages, you know, it's not the years, it's
the mileage. So yes, so I got into the business in nineteen ninety
eight. Well, I was actually still in college. Yeah you yes,
go frogs. I know we're here in Austin, and that could be you
know, I'm not wearing purple today though, so there's that good thing.
But I kind of like that. But but no. So I was looking
for an internship while I was in school and I just happened to see on
the board, you know, North American Mortgage Company. I mean I barely
knew there was a tea in mortgage and so I was like, Okay,
well this sounds neat. Let's go check it out. And I did in
my first day. You know, I really still didn't understand what what mortgages
were. I came into be an intern basically be an assistant for a loan
officer there, and the first thing that they started with was explaining what mortgages
are. It's like, oh, okay, so when you buy a house,
this is how you buy a house, You get a big loan.
Okay, all right, this is neat. Well what else do you need
to do? And then they walked me through had a learning about credit,
like saying, okay, see that drawer over there with all those credit reports
and needed to call those those people and see if they fixed their credit.
Okay, I mean I still barely knew what I was doing. And you
know, then I learned about okay, income and then you know, assets
and kind of some of the basic functions of buying a house. But it
wasn't until the loan officer I was working for took me to attend my first
closing. And I'll never I can't remember the lady's name, but I'll never
forget her face. And she had blonde, curly hair. She was wearing
blue nursing scrubs that we were the closing at. That was at a title
company in Crowley, Texas, which is, you know, a small town
back then, small town south of Fort Worth. And this woman started crying
at while she was signing the papers. And I'm thinking to myself, Okay,
well, what's what's happening here? This is supposed to be a happy
moment, right, Why is this woman crying and and and And it turns
out she was crying. These were tears of joy. And this this woman
was crying because she had she was a single mom, and she had finally
done something by herself and giving her kids a backyard to play in right now.
To me, I mean, like I get chills just thinking about that.
Uh, maybe it was divine intervention. My mom happened to have been
a nurse. My folks were divorced when I was a kid, and so
here I just saw this, this joy and I was like, Wow,
this is powerful, and instantly I was hooked. I left there, went
and bought you know, home buying for dummies, you know, at the
college bookstore, how the bond market works. And since then I became became
a student of the business. But just seeing the joy and the power that
home ownership can have absolutely people. I mean I remember my first house I
bought nineteen ninety, and that was already in the mortgage business, but I
hadn't didn't own a home. I was still renting, yea, And we
bought a home in nineteen ninety, my first property here in Austin, and
I can't remember crying about it, but I sure always felt good about it.
Yeah, it felt like you're going home, you know, like you
have a place that you could call your home. That's a huge state.
I mean, you go back to even you know, just the anthropology of
humans, right every man wants his castle and every woman wants her nest.
There are some basic human aspects to owning a home. Amen. And the
thing that I think that everybody needs to think about is everybody in this country
puts their head down on a piece of real estate every single night when they
go to asleep, and I think the difference is do you own it or
are you renting? Right? And that is where I couldn't agree more.
I couldn't agree. I've owned properties here in Austin. I have Cevil now,
but you know for over thirty years, and I don't think quite like
that on a deep level daily. But now that you mentioned it, that's
the way I feel when I go to bed. Yeah, this is my
place, you know whatever. But let's fast forward a little bit because we're
a limited on time, because I really want to get to the media of
the conversation, because you know, I heard a stat the other day and
I thought it may have heard from you, but somebody in the industry of
knowledge, if you will, that that over fifty percent of the business in
the second quarter purchase money in the second quarter of this year is for first
time buyers. Now, that's that's a high high number, record record number.
That's the highest percentage of first time home buyers ever recorded. Yeah,
in in normal mark I think you said around twenty percent. It's about twenty
twenty five percent first time home buyers. During COVID, it was probably five
percent. There just weren't that many out there, right, And then today
here it is over fifty And why is that? Well, who's buying homes
today? You know, people that already own homes. You know, they
probably refinanced into a very low fixed rate, you know, during COVID.
And so you know, if you're at a three percent interest rate today,
you know you're probably not looking to buy in the near future. So that
leaves us back in the marketplace, which is everybody else, everybody that's been
renting, everybody that you know. And this is where or relocation right right.
But so this is where I kind of come back to some basic tenants
of home ownership and wealth creation and and and yes, for the record,
I am kind of a geek when it comes to mortgages. Ever since attending
that first closing, I've become a student of the business. Uh. And
so yes, I am filled with with some crazy statistics. Uh. And
and here's one that is is actually pretty disturbing in reality, and that is
the wealth gap by demographics in this country. So this is based off of
photographics of race, demographics of race, and this is from the Federal Reserve
Boards Survey of Consumer Finances. This is from a report. This is now,
this is twenty nineteen data. But this report just came out a few
months ago, and it showed that in twenty nineteen, the average household median
net wealth was one hundred eighty eight thousand dollars in this family for white families
in this country. For Hispanics, it was roughly thirty six thousand, and
for black families it was twenty eight thousand. Huge, huge gap. And
you know, and not to get into politics, we'll save that for another
talk show. But you think about all a lot of the problems that we
have in our society and it boils down to one thing, the difference the
gap between the haves versus the have nots. And when you drill down and
you look at the data from this twenty nineteen study, the key driver that
gap is home ownership. It's it's it's the wealth that was created via home
ownership, because then it goes back to are you renting or are you're either
paying your mortgage or your landlords? And that's a you know, a very
very simple way of looking at it, but but I think it's a reality.
And so that leads us into so what what how do first time buyers
buy a house? Right? It's it's expensive, uh, to to to
save, it's expensive to live, it's expensive to save money, it's expensive
to buy a home. Everything is more expensive today. Right. So that's
where there's some really great programs that are available for consumers from mortgage brokers in
today's environment. So and not you know that come all the way around,
and not to digress too far, but but again, I'm John Hudson and
I run the wholesale division for Mortgage Financial Services HOST. I mean, you
don't do loans yourself. I do not do the loans myself. We are
the underwriters. We're the ones that are behind the scenes, I guess if
you will, that are approving loans and doing the under originatings. We're not
originating, you know, you're the one that's talking to the consumers. We're
on the background. We're we're the bean counters in the back of the room
going through through a bunch of pieces of paper. So that's a very simple
way way of looking at it. But so some of these programs that we've
now rolled out to the mortgage broker community really do help. I think a
lot of first time home buyers get back into the driver's seat because again,
you know, rents have been going up, you know, forever as far
as as far as I'm concerned. It's one thing. Every time I drive
through Austin, you know, I just I hear talking to people that,
uh, you know, yeah, rents continue to go up, so it's
harder and harder for people to save money for a down payment. Yeah,
And and then and probably the number one thing right now that's keeping people from
buying a house is they think people believe that they have to have twenty percent
to put down. Not true at all. It's a total myth. And
you know, I blame the talking head media because every time they're out there,
Hey, the average mortgage rate on a twenty percent down mortgage is X.
So people just assume, oh, I need to have twenty percent to
put down. Well that's not true. So not at all with the products
that we now have at your disposal via either the Texas State Affordable Housing Corporation
or the Texas Department of Housing and Community Affairs. These are both nonprofit state
agencies that provide the funding mechanism for down payment assistance programs that you can now
originate. And so with these down payment assistance programs, the assistance ranges anywhere
from two percent to five percent, in particular with TCHE And so now you
think, right, okay, for a borrower that's buying a house, Uh,
if they're doing an FHA loan, they need to have a minimum of
three point five percent down, not twenty three point five. So if they're
getting five percent in assistance, then that covers their down payment and a little
bit of their closing cost. It could be a lot of closing costs,
really, it could it, really, it could be a lot of closing
cost you know. There's also there's conventional loan programs offered also with Fanny May
and Freddie Mac. As you know. Well, so if you're getting five
percent down payment assistance with that Fanny Ma Freddie Mac may only require three percent
down, well, now you have down payment and a lot more closing costs.
And technically these programs are even available for veterans for using VA loans and
people that are not buying outside the city limits that are getting USDA loans.
Okay, so VA loans and USDA, as you know, are both one
hundred percent financing. Sure, So why would somebody need downpayment assistance for one
hundred percent financing? Well for the closing costs and prepaid items for expenses of
taxes and insurance exactly, because yeah, there's still going to be closing costs,
right, it could be the tunes of six, seven, eight thousand
dollars, depending on where you're at and what time of year, right,
how much are we needing to collect for future scrows? So absolutely, it
could be a significant number. So I won't put a little bit of perspective
because when I got in the Warriors business in nineteen eighty five, our average
loan was around seventy thousand dollars. Now it's more like four hundred thousand dollars.
Yes, you know, so that adds up when you're talking about percentages
of loans that can go toward those fees. It could be thousands of dollars,
absolutely, you know. Well, so so yeah, so let's just
let's let's we don't have to go back that far. No, no,
no, no, no no. But let's but let's take a home price
early side roll. Yeah, so let's let's take a let's take a home
price and we'll just we'll just break it down into very very simple math.
Let's take a home price of two hundred thousand, which was viable just you
know, sure maybe five years ago here in the Austin area there were two
hundred thosand our homes. So if they were doing a three percent down product,
that's six thousand dollars that the bar needed for down payment assistance. Right.
Well today, now let's take that four hundred thousand and a sales price
and three percent down, Well, that's twelve thousand dollars. Right, that's
a big it's a lot harder of a bridge to gap for somebody that's saving
up for down payment. Did you know currently the forty percent, so two
out of five of Generation Z or millennials that are wanting to buy a home
are working a side hustle to get save up for their down payment. Wow,
I didn't know that that is, so that that number came out and
that was that was pretty wild when I read that, because I mean,
you think about it. I mean, we all know ten millennials or gen
z ars out there, and so that means that out of that four of
them are working a second job wow, to save up for down payment.
And that goes that comes back to these products. Right, they don't need
to right, We've got the ability to get them into a house today.
Okay, I love that instead of having to wait. You know, one
of the little holmanies just suggest. You know, back in eight nine ten,
the most reasons because of the recession and the housing crisis. In those
days, most of the reasons we couldn't get people at home was because of
credit. Nowadays, credit seems to be pretty stable, The scores are pretty
good. It's the down payment that is keeping people. That is That is
absolutely correct. So I was really excited to talk, you know, to
hear more about that and and the course of the tax credit programs and things
like that. Yeah, no, no, and that's and that's a that's
a great segue right there too is one of the other beauties. Well,
first of all, with the down payment assistance, let me just finish this
up real quick. Sure you do not have to be a first time home
buyer to get down payment assistants. So I don't even know that. And
that's a that's a real uh important myth that I think that needs to be
dispelled out there. A lot of people just assume that down payment assistance is
for first time buyers, and that's not the case, not not with particularly
not with the t Shack product, the Texas State a housing corporation. And
so you know, you go back to, well, are there move up
buyers out there? And yes, there still are. We did a transaction
a year ago actually here in Austin. The borrowers owned a home, lived
in a home, converted it to a rental property, used down payment assistance
to buy another house. Wow, you do that? So you know,
when you think, you know, go back to owning real estate is a
is a vehicle for wealth creation and long term investment. There's a perfect example
of it of a way that you could do it. So so yeah,
so that's one of the myths that that we want to get out there.
Another myth that we want to dispel. Another myth is that there's that these
programs are also only available for low income consumer. Okay, that's also not
the case that it's to be at one time, I think or maybe not,
you know, a long time ago. And then, don't get me
wrong, there are programs that are designed spetifically for for low low income folks.
But you know, with t Shack in particular here in this in the
Austin area, the income limit for a person looking to get down payment assistance
is one hundred and forty six thousand dollars. Wow, And you might is
that from a single person to a family of four or per application, per
application? Yes, So so when you when you think about that, and
some people might think, oh, man, they're making one hundred and forty
thousand dollars a year, and man, they should be able to save money
for a down payment. Well, you know, possibly, but then there're
you know, other's life that happens, there's big rent, maybe they're taking
care of their family. I mean, you never know. One thing I
could say with certainty is that in my you know, twenty five year career,
I've seen tens of thousands of loan applications, no two alike. So
I don't judge anybody of whether or not they have money for down payment or
not. But nonetheless, I mean, you can be making one hundred and
forty six thousand dollars and utilize down payment assistance to buy your home. Wow,
that's amazing, pretty cool. Now now getting to the tax thing,
this is a really really cool product, and I'm glad you mentioned this.
So right now there's a there's a product available that is now technically only available
for first time home buyers, but that's called the Mortgage Credit Certificate to MCC.
I've done these. It's a great product. It's a federal income tax
credit program that's been around for a long, long long time. Would you
say thirty years years? At least thirty years the MCC has been around.
I've been doing this for a long time, but I didn't know the new
changes it's been modified. Yeah. So up until recently, like in the
last couple of years, the maximum tax credit available was up to two thousand
dollars. Which, don't get me wrong. If you can get a two
thousand dollars tax credit, awesome, take it. Explain tax credit versus tax
deduction, that's okay. The excellent question so is when we follow income taxes
every year, right, we're trying to get pays. Well, unless you're
really generous and you want to give money back to the government, because for
some reason the government thinks they could spend our money better than we can.
But that's another conversation I could go down road. But nonetheless, so a
tax deduction lowers your taxable income. So if you know, if I donate
ten thousand dollars to my church every year, then you make and then make
one hundred thousand dollars, then my tax taxable income is ninety thousand, so
versus a tax credit, which says that, okay, my, you know,
I owe ten thousand dollars in taxes to the federal government every year,
and so the mortgage credit certificate is going to subtract from that ten thousand dollars
dollar for dollar of what I what I owe Uncle Sam every year. And
so to put this into some mathematical terms here, like I'm going to bust
out my calculator, all right, so let's just say that, and I'm
just going to pick a number. Let's say that we have three hundred thousand
dollars loan amount, and I'm just going to use eight percent for an interest
rate. Percent That's about right, That's is right. Actually, So that
means that in the first year, the mortgage interest paid on that on that
mortgage is twenty four thousand dollars. Now, the mortgage Credit Certificate as it
stands today is equal to twenty percent of the mortgage interest to barrow or pays.
So in that example, we paid twenty four thousand, right three hundred
thousand our loan eight percent interest rate. So I'm going to take that twenty
four thousand, and I'm going to multiply by zero point two twenty percent.
So that means that that equals forty eight hundred dollars. So that means that
my tax liability just lowered four hundred dollars a month. That equals four hundred
dollars a month. Now that's where it gets really cool. Now, first
of all, for that borrower, it's great because I'm just again using the
example for simple math, ten thousand dollars worth their tax liability. Now,
with the MCC the mortgage credit certificate, we'd reduce it by forty eight hundred
dollars. So now their tax credit is only fifty two or their tax taxes
O douncle SAM is now only fifty two hundred dollars. Yeah, really in
that case, and in that example, yeah, it's about half and the
borrower can get that money in one of two ways. They can either wait
until the end of the year and get it in a big refund, or
what they can do is they can actually go to their employer and adjust their
W four withholdings and the take home more and have less taken out of their
paycheck. Because if if we could help a family even take home half of
that, say two hundred dollars a month more in take home pay, I
mean that that makes a big difference to that utilities of food absolutely for a
lot of people. So that's a gigantic benefit there. The other the second
part of that equation now is because I know that you qualified for this tax
credit, as the underwriter, I'm allowed to say that, Okay, well
you're gonna get forty eight hundred dollars a year, so I'm going to take
that number divide by twelve. That gives me four hundred dollars. So I
can use that four hundred dollars a month as qualifying income. Wow, to
help you buy a house. That's awesome. So you make five thousand a
month, you're making fifty four correct in that case and that example, and
you know, for for our realtor friends, that are out there too.
This this really helps bridge the gap between people not being able to buy a
house and buy a house. Yeah, I mean, I mean you and
I both we see scenarios where twenty dollars can be the difference between a person
getting a house or not. So when we're able to go back through and
at and add four hundred dollars to their income, huge huge benefit, it
really is. So now can the MCC be a standalone or does it have
to be in conjunction with the downpay So right now, you can do it
in two ways. You can use it in conjunction with the down payment Assistance
product, which is awesome because if there's if you're using it with if you're
using it with T Shack's Home for Heroes program, Special Financing for cops,
firefighters, teachers, veterans, if you're using conjunction with that, then you
can actually get the MCC for free. Now, it didn't cost a thing,
doesn't cost the thing to them, you know, so it makes it
very very simple. I mean, it's a savings of five hundred dollars for
your bar or there now. Or you can use the mortgage Credit Certificate by
itself with another home so it's an extremely beneficial product. I encourage anybody that
is either a first time home buyer meaning they haven't owned a home primary residents
in the last three years, or a qualified veteran right a non active duty
vets in Texas can qualify as a quote unquote first time home buyer, or
even somebody buying a home in certain targeted areas around Austin certain zip code zip
codes YEP can qualify for for this MCC. So the bottom line is be
aware to ask the question and all that education and and and don't hesitate to,
you know, ask about downpayment assistance either. Uh. You know,
I think one of the downsides of our industry, and I know we're coming
short on time here, one of the downsides of our our industry was in
the last few years during COVID, Uh, you know, mortgage rates were
at historic, all time record lows, and so you know, there was
so much refinanced business out there that I think some of these programs kind of
went to the wayside to a certain they were put on the back burner,
you know, and and and you know it was rates were at two percent.
It was easy to buy a house. Uh, you know, realtors.
No, nobody wanted to mess with down payment assistance. And so now
you know, I'm really trying to go out there and with your help,
right, educate as many people as possible that these programs are out there.
Borrowers need to ask about them. There's no such thing as a dumb question
the one they were afraid to ask, that's right, and and just know
that yeah, there's there's help. Well, I wanted to thank you for
your time today, and you're generous enough to come back to one of my
lunch and learns for relters next week to time talk about the same thing a
little little more and more detail, which is exciting because I haven't done these
programs in a long time. But the market is begging for it. It
is the market needs it, it needs it, and they're saying, hey,
and I think you've got some solutions that people need to know about.
So I'm really really pleased not all you're here today, but are event next
week because because you know, my background is lending. Certainly is a loan
officer, originator, broker or whatever, but I think that our main focus
should be education. It's it's it's educating, it's telling our story. Yeah,
and helping home buyers, whether they're first time buyers or even moving up
buyers, or just anybody in general. Let's help them build, create their
story right, and then also bridge that gap of you know, create long
term generational wealth through homeownership. Am well, John, we are out of
time. That was fantastic. I've learned some stuff just sitting here, so
that was good for me and I hope very good for everybody. Ouse.
Thanks thanks for having me, Mark, You welcome. This has been mortgage
Talk with Mark Hairston. Mark is a mortgage advocate with Texans Mortgage Source LLC,
offering personalized mortgage solutions, fast customized quotes, great rates, and service
with integrity. Contact Mark at Markhirston dot com. Mark Hairston dot com.
You can call our text Mark at five one two seven eight nine sixty nine
sixty seven. That's five one two seven eight nine sixty nine sixty seven and
come back next week for more mortgage talk