Welcome to Mortgage Talk with Mark Hairston, 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. Hey,
welcome everybody on Mortgage Talk. It's my weekly little show on mortgage financing.
Then I'm excited to be back with everybody. I was out of town last
week up in Detroit, actually Pontiac, Michigan. I've never been to Michigan
before. It's kind of fun. I thought they're on business. So I
want to give a shout out to my marketing director, Leanna Borsellino and my
good friend Kate Balderis who held down the fort last week. And I hope,
I hope it was worth everybody's while to watch that show or listen to
that show because her quarterly bonus is gonna be dependent on that. Just kid.
So today I'm going to do sort of a Q and A. I've
I've reached a lot of prospects and some realtors and say, hey, what
are you hearing? From your from your potential buyers in this market, what
kind of questions are you getting from them? And I wrote down a whole
bunch of them. I kind of wanted to talk about these questions a little
more in detail to hopefully, you know, get people to better position mentally
or psychologically or even financially to buy a property. So the first one is
obviously very important. It says, how do rising interest rates affect my ability
to get a mortgage? And obviously that's a very important question. It's a
very good question. It's probably on the top of everybody's mind who's on the
sideline, whether you're a renter and you're thinking about buying your first home,
or you're relocating to Austin area, or you're thinking about moving up or moving
down and you have a property to sell. You know, what are interest
rates? How do they affected my ability to get a loan? And obviously
it doesn't help. That's a challenge in this market for sure, because we've
gone from around two and a half percent about a year and a half ago
to upwards to seven percent now. So the math the four formula will is
along the lines. This is an average, but on average, every percent
higher of interest rate decreases one's ability to buy buy about ten percent of the
market. So in other words, let's say that you qualify for five hundred
thousand dollars on a mortgage at six percent. If it goes to seven percent
one percent higher, your buying power goes down to around four fifty, about
ten percent less to keep the payment the same That's a rule of thumb and
vice versa. If you buy a property today or thinking about property today at
seven percent and it rates where to fall a six percent, your buying power
would go up ten percent to keep the same payment. So that's a very
good rule of thumb you may want to use. And of course that's an
aside from many taxes or insurance it will be charged on a mortgage. I'm
just talking about the mortgage itself, about ten percent per per insurance, per
rate of gain by the loan rates. The next question is should I be
concerned about the impact of inflation if I'm thinking about buying a house. You
know, obviously inflation has ticked up a lot. The problem was and this
is confusing, but inflation is a product or a result of the Federal Reserve
pumping lots of money into the economy, which happened during COVID. There was
some number like around five trillion dollars at the Federal Reserve put into the banking
system, so money was easy to get to and rates had fallen quite a
bit. That's changed the last year and a half. The Fed has raised
race considerably though since the last oh year and a half maybe two years now
they're a little late to the game. So we saw a very sudden increase
in inflation in the Federal Reserve raising race trying to catch up with that.
So inflation as a as a hedge. A lot of times real estate is
considered a hedge against inflation because because the cost of materials go up, so
billion of house will go up based on the cost of lumber and labor and
all sorts of factors. So a lot of times buying a property or owning
property is a hedge against inflation, just like maybe gold or silver made hard
assets or usually considered a good hedge against inflation. So I don't think it's
a problem buying this market personally around that question. Now, the time will
tell what's going to happen there. But inflation starts to lower and come down,
which is starting to show signs of that, then interest rate should also
fallow too, which is also going to increase the value your property because more
people can be in that market to buy it. So again, I think
we've bottomed out right now in this at least in the local Austin, Texas,
Central Texas market, and I think it's still a good time to be
buying. So what steps here's the third question, what steps can I take
to secure a competitive interest rate? Or how do I in other words,
how do I get the best deal? You know, that's the bottom line.
When rates were I've been doing this since eighty five when rates were at
thirteen and a half percent, So I've seen rates fluctuway from thirt teen and
a half percent down to two and a half percent over the last thirty seven
years, up and down. And when rates were at the bottom a couple
of years ago, probably twenty twenty one and two years ago, you know,
people weren't complaining between a two and a half percent rate and a three
percent rate. There wasn't a whole lot of negotiation, if you will,
between the banks and the brokers and the clients, because they would they thought
it's all good now have rates have moved higher, people are much more interested
in getting the best deal, which I want to share with you another idea
for you. If you're really interested in learning how to shop for a mortgage,
reach out to me. My phone number is five one two seven eight
nine six nine sixty seven, either but via text or call or email marketmark
hairston dot com and I'll be happy to share with you a consumer guide I
wrote years ago, not in the last year or two, but I mean
five or six years ago, on how to shop for the best deal.
It's called The Truth and Lending. It's a fifteen page white paper consumer guy.
How I kind of pulled back the curtains against in the mortgage industry and
tell you how it works so you can make educated conversation, whether we have
a broker like me, or your bank or credit union or mortgage lender,
online lenders, whoever you speak with. It'll give you some detailed information on
how to make sure that you put yourself in the best position if you will,
to win, because there's a big difference between six and a half percent
and seven percent on an interest rate in this market with these prices. Okay,
so is it a good time to buy a home in the uncertain the
economy. That's a question you're going to have to answer you for yourself,
because I can't tell you what to do. I don't want to tell you
what to do. I can barely tell myself what to do. That's done.
But I bought my first home in nineteen ninety in Austin, Texas,
and we are in a bad recession. This is a fourth I hate to
call a recession per se, but it's certainly the fourth correction we've had in
the real estate market since I've been in the business. We had one in
the late eighties, mid to late eighties, for sure, around two thousand,
two thousand and one. The big one was ten to ten, two
ten, And this fourth one is in the last year or so. And
I find this one to be more interesting than the others. But anyway,
my first home I bought nineteen ninety. I bought a property down in Oak
Hill area off a William Cannon in escarpment if you know, the area of
village of Western Oaks, Western Oaks area. And it is a bad economy.
We were coming out, or we were coming out of, a really
bad economy. The point around that is is always and I've said this before
on this show, and I've said that in private conversation. Do you make
your money on the buy and not when you sell. In other words,
if you can buy at the right time, that's where you're going to make
your profit. And I think today, because of price is coming down the
last year fourteen fifteen months, that this is an excellent time to buy him
because I think that interest rates will be coming down next year. I don't
know how much, but I don't see him going much higher than this,
and as reinist rates fall, I think you'll make a good investment if you
could afford the property at these rates. And that's that's the kicker right now.
We're gonna talk about that a little bit more as we go. So
buying in a recession or maybe coming out of recession is a great time.
My last time we're out the last time I bought, but I bought another
property in two thousand and ten, my wife and I did, and we
bought a property in the Lost Creek area. And if you remember, two
ten was some of the worst economy we've ever seen. I mean, the
banking system, the whole economy almost fell. But we weren't worried about that.
We thought it was a great time to buy then, and it was.
It turned out to be a great investment. We still own that property,
we re lease it out for a profit. And so typically speaking,
you want to buy it the low, whether it be stocks or any any
any investment, you want to make sure you buy it the low. And
I think we're very close to the low, if not at the bottom.
So how does it unstart e commy impact the housing market. Well, we've
seen that in the last We've seen that in the last fifteen months that prices
have come down. So that's how an uncertain market is going to affect the
economy. There's a lot more to it than just that. You know,
it's about jobs. You know, in Texas is a very fortunate state in
the sense that a lot of jobs are still moving here. I think I
saw her government, Governor Abbot say that about twenty five large corporations have relocated
in the Dallas Fort Worth Theream, not to mention you know, central Texas
in general. So Texas is still a very favorable business market. And that's
the key. Employment's always the key to a healthy roal estate market because without
that you know, I was, Like I mentioned, I was in Detroit
this past week. Detroit between Detroit and Pontiac, Michigan now Detroit proper.
Detroit downtown is a beautiful city. I went to see the Tigers and Red's
play, had a great time the game. Took an uber down there from
Detroit's I mean, the Michigan's a beautiful state. But just driving in the
uber for about forty minutes or so, you could see along the road lots
of vacant properties just basically just boarded up all along the freeways. And that's
not going into the more of the inner city. So Detroit's lost a lot
of jobs over the years, population over the years, and those some of
that real estate's just sitting there. Maybe a good time to buy in Detroit,
I don't know. But Texas, on the other hand, has been
a migration center for businesses. Tesla's obviously came here in Oracle and Samsung's building
that huge plant. And it's not just those big names. You hear about
the big names, but it's all the selfimental businesses and industries that come to
support those big companies. So again, I feel I've been in Austin for
forty six years now, and I'm not really going anywhere. I still think
it's a great place to live. I'm pro real estate. I'm bullish on
Austin and real estate, so I would not be personally too concerned about buying
property in this market. We're looking for some other property right now. Are
there any government programs? Are incentives available? You know, one of the
things is different. And I was talking to a mortgage friend of mine yesterday
and we were saying, this is in some ways worse in my industry.
I'm not saying in general, but in my industry than it was in two
thousand and eight, two thousand and nine, two ten, because the government
stepped in with a lot of incentives for people to buy, and they were
talking about down payment programs and tax incentives and things like that for first time
buyers. First time buyers drive the market generally speaking, because you know,
if you buy first time buyers buy a property, then that seller can do
something different. They can move up or move out or whatever. So a
lot of times first time buyers are a key, which we're starting to see
a lot of that come back in this market now. About half our business
I would say at least half, maybe more as first time buyers, people
who are living in apartments or coming out of college or have a roommate and
they want to say, Hey, I'm done with this. I don't want
to live in this rental property. I want to go buy my own place.
Because there's an old saying you're gonna pay a mortgage, you might as
well pay your own because you're paying somebody's, that's for sure. But in
this economy, the government really hasn't done much. And I'm not saying they
should. I'm just saying they haven't done much as far as incentives to be
able to buy. Now, we're going to talk a minute in a minute
about a program called MCC, which I think is very very important that a
lot of lenders don't either know or they don't talk about. Let's talk about
now. MCC stands for Mortgage Credit Certificate. It's nothing new. MCC is
a government program national. It's not for Texas, it's not for my company.
It's for anybody that qualifies, and you qualify as a first time buyer.
First time buyer is somebody who's either never owned a property or hasn't owned
a homestead in three years. That would be considered a first time buyer,
and the government says, look, if you're a first time buyer, this
is a great incentive. We'll offer you up to two thousand dollars tax credit
if you buy a home, and every year you live in this home,
we'll give you a two thousand dollars tax credit. A tax credit is different
than a tax deduction. You can deduct your interests and taxes against your taxable
income, but a tax credit is such that it's a dollar for dollar deduction
from what you owe. So at the end of the year, let's say
in April you file your taxes and you owe two thousand dollars. If you
have this program, it can only be done in the loan process. It
can't be done after you close. So make sure your lender is talking to
you about this program if in fact you qualify. But let's say in April
you owe two thousand dollars, Well, if you have this, you don't
owe any money. Or let's say you're going to get back a thousand dollars
and if you have the MCC program in place every year, not just the
first year, but every year. In this case, you'll get three thousand
back if you get a thousand back from the government. So that's that's not
a new program. That's been around since really the mid to early nineties,
as I recall, So it's not new, but that's the way incentive I
can really think about off the top of my head that would would encourage people
to look at buying as a first time buyer. What current what are the
current rates and how do they compare historically? Well, as I meant the
answer the question really historic, the current rates are on a fixed rate or
around seven percent fixed thirty year. Now I'm I've just locked alone in yesterday
for a client who's refinancing into a fifteen year. He bought a property in
May of this year and he barred around seven twenty five. He had a
home that he was going to sell, but he qualified with this current mortgage,
so he didn't need to sell the property first to buy. But he
knew he was going to be selling that property and he did. He's club
a matter of fact, he's closing today and he's going to receive about four
hundred thousand dollars and that what he's going to put that down on a new
on the property we financed and the loan. So he's gonna be barring around
three hundred and twenty five thousand on a fifteen year note and I locked him
at six and a quarter percent, and so he's very happy with that because
it's gonna his payment's gonna be a little bit less than he's paying now.
And if to go to a fifteen year no, So the answer, but
fixed rates, Normally people go to a thirty year loan because it keeps your
payment relatively as low as you can. Now. When I got in the
business in eighty five, like I mentioned, rates, we're thirteen and a
half percent, and they've fallen over the years anywhere from thirteen and a half
to two and a half. But on average rates to historically forty year average
has been around six percent. So we're a little higher than the than the
national average historically. But I do believe we'll see that those rates come down
in that market, hopefully in the fives in the next year or so,
depending on you know, a lot of factors. So that would be a
comparison of where we are today versus you know history. Another question is how
can I improve my credit score and how does that help me? Well,
a few months ago, what about a month ago, I guess we had
a three week series on credit scoring, how to increase your scores. It
helps quite a bit. The higher your score, the better deal you're going
to get. Now that's in the conventional market. If you're a veteran,
or if you're in the fa shade market, it's not as significance, not
as big a deal as your credit score is from let's say six fifty to
seven fifty. But on a conventional known it is, and most of our
business right now is conventional financing. But I would suggest that the key,
one of the keys, or there are several keys, but one of them
is to make your payments on time. Number one. Obviously, make always
make your payments on time, even it's just the minimum. So if it's
twenty five dollars minimum payment and you owe a thousand dollars, just make the
twenty five bucks, you know, at least do that. But the other
key is to keep your keep your balances as low as possible. Now,
the problem that we're seeing today when I talk to clients is their credit card
balances are much higher. Matter of fact, we have reached a record in
this country of credit card debt it's over a trillion dollars. Now we've never
seen that before, but what we call unsecured debt, credit card unsecured debt
over a trillion dollars two years ago because of all the because all the free
money that people got, you know, not only were savings rates higher,
but credit card balances were around six hundred billion dollars. And this goes two
or three years ago. So it's not quite doubled, but it's gone up
significantly in the last you know, certainly in the last year, because I
wouldn't say people are living on credit cards, but they're certainly using them more
so than ever. And I'm guilty of it too. I've got some credit
card debt I need to get handled between you and me. So so number
one, Number one is to pay make your payments on time. Number two
is to reduce your credit card balances or your total debt as much as you
possibly can, you know, and I'm working on that myself. So what
is the maximum? And again, the higher your credit scores in the conventional
market, the better your deal. So if you save an eighth or a
quarter on an interest rate, and you're bar and a half million dollars or
six hundred thousand dollars. That over time, that adds up quite a bit,
so it's going to save you ultimately thousands of dollars. What is the
maximum mortgage amount? Now this is a question I get practically every day because
people say, hey, I want to know how much I can borrow.
Okay, and until we get into the weeds with people about income and credit
and down payment whatnot, a good rule of thumb is we're going to take
fifty percent. This is a rule of thumb. It's not an exact science,
but keep it in mind if you want to do some quick calculations.
We take fifty percent of your gross income. So let's say a married couple
makes ten thousand dollars a month gross income before taxes, before four O one
K, before healthcare expenses, anything like that. Whatever you make as a
gross income, we take fifty percent of that. So let's say that's that's
that number will be five thousand dollars, and then we back out any debt
you may have, Let's say student loans, car loans, revolving credit loans,
personal loans, things like that. And let's assume for a minute that's
fifteen hundred dollars. We take that out of the five thousand, we leave
you thirty five hundred dollars. The thirty five hundred dollars is how much we
would allow you for a mortgage payment. So and that would include taxes,
insurance and homewards insurance and all those sort of mortgage insurance whatever. The thirty
five hundred dollars would have to cover all of that. Whatever is left over
after you deduct the expenses in a thirty five hundred dollars payment in today's marketing
with these rates and taxes, is probably around a four and a quarter to
four hundred and fifty thousand dollars loan. Of course, that's after you're down
payments. So let's say you bought a property for five hundred thousand or let
well, let's say five hundred thousand, put down ten percent and your bar
and four fifty. Your payments should be in the thirty five hundred dollars range,
depaying on other factors. So that's just a real thumb. But be
sure you consult with a mortgage consultant. Make sure you consult with somebody who
can give these details. That reminds me of a couple who were coming out
of California, and they got pre approved, but all I could approven for
was two hundred and seventy five thousand dollars. But they wanted to buy a
house for three hundred seventy five thousand dollars. So I said, well,
I may not be the right source for you, you know. And I
did all I could for him, but I couldn't get them that much money.
So I taught at the agent this past week. I said, hey,
did they ever close? They said, yeah, they did, and
he said they actually got denied, but but she went out. The wife
was not working. The husband was being transferred here with home Depot, but
the wife was not working at the time. And he said, you know,
they made her go get a job so they could borrow, you know,
the other one hundred thousand dollars. And I guess maybe I should have
thought about that, but she told me she didn't want to work. So
anyway, makes because the pre approved by this lender, well, they didn't
get pre approved, they got denied until you went to got a job.
So always sort many ways of skin of cat. Okay, what are closing
cost? Great question? Great question because there's lots of closing costs. Now,
closing costs are third party fees and people so people think if they put
down a lot of people think if they put down ten percent, maybe they
don't have a other costs per se. But there's there's gonna be several thousand
dollars worth of closing costs. And there're third party fees, like the lender
fees. My fee as a mortgage broker, you don't the lender. The
borrower doesn't pay me. I get paid by the lender whoever I sell that
loan too. But the lenders have charges. There's appraisal fees, there's there's
attorney fees, there's title costs, there's surveys, there's recording fees. There's
all sorts of third party fees and on average, on average, they run
about forty five hundred dollars to five thousand dollars. That it's just the closing
fees. Now, the question was can they be negotiated? And we're seeing
most of the time and I would say three out of four loans these days,
the seller is participating in paying some of those fees. They're negotiable.
So on a conventional loan with five percent down, the seller can pay up
to three percent of the sales price for closing costs. So on a half
billion dollars property, that'll be three percent would be fifteen thousand dollars. Now,
closing costs don't run fifteen thousand dollars, so that's that's if you want
to buy points to buy down the rate possibly on FHA it's going to be
around six it's six percent, So again there's a lot of latitude on FHA
for the seller to pay a lot of the fees. As far as by
down costs, there's there's ways of reducing your costs or your rates temporarily.
It's called two one or three one BYEM three two one BYM and that's probably
for another day we could talk about that, but that's also a tool of
negotiation that we're starting to see a lot with buyers because they can't afford a
seven percent rate, but two one buy down affords in the opportunity to get
a five percent rate in the first year, six percent in the second year,
and seven percent in the third on. So those that costs, there's
fees to lower that rate temporarily that's going to be paid by the seller too.
So again most of the time because of the market in general. We're
not really in a bad market. We're in what I call a balanced market.
On average, properties are selling between three and four months on the market.
You know, two years ago there was three or four days. Literally,
are certainly three or four weeks before a property would sell. Those days
are kind of over. We're sort of back to a normal market where there's
more negotiation between a buyer and seller, and there we're seeing a lot of
people coming to the market that maybe couldn't buy two years ago. So it's
I think it's a healthy thing. It's a healthy thing all around. You
know, this this COVID thing was a weird, weird time, but those
days are at least over for now. They keep talking about mass coming back.
We'll talk about that some all the time. So how long does a
mortgage approval take? Well, that's a great question. On average, we
can usually close alone within three weeks. We say a month, but we
really don't need a month anymore. The technology around mortgage financing is such that,
you know, we could process these loans and close them using between two
and three weeks. You know, when I got in the business in the
eighties, there was no internet. There was no technology. There's no Facebook,
if you will, and they would take sometimes six to seven weeks,
but that was when everything was piled in a package like this a paper.
We don't really do paper anymore. Everything's done pretty much electronically and so on
average week can close pretty quickly, and that's an incentive for people because if
you get pre approved, let's say with me or anybody for that matter,
and you get pre approved, you get all your ducks in a row,
as I say, and you can contract. We can usually close in two
weeks, and that may make the difference between getting that property or not getting
it if you come in prepared. And that's one of the questions they keep
asking, what's the benefit of game pre approved? Well, the benefit is
your negotiations. Your negotiation goes way up in your favor because the seller saying,
hey, this guy has been through the process. And as a lender,
I'll usually call the listening agents say, yeah, this couple or this
client is well qualified. We've got them all prepared as far as their payments.
They're very comfortable with their payment, in their in their interest rates and
all that sort of thing. We write a letter to that effect, and
that's that's something you really want to work with. Because I had a client
called me last week and he wasn't pre approved, but he wanted to buy
a property and he lost on that deal because he didn't have time. He
didn't have his ducks in a row, so so he lost on that property.
Now he's in a position because we've done everything up front the next property,
I'm sure he's going to get okay, So what about tax and centives?
And this is a good question too. We know the government's always and
I mean always had some of the synos for people to buy proper real estate
in general, whether it be a commercial property or our residential property. And
and so there aren't Texas centers available to you. And let me know,
I've got to wrap this thing up, but call me and we'll talk about
your specific situation because I want to make sure you're clear about everything we're talking
about today, and a lot of other questions I didn't have time to cover.
So again, Mark Harrison's Mortgage Talk. I appreciate you guys being with
us. See you next week. Obay. This has been mortgage Talk with
Mark Hairston. Mark is a mortgage advocate with Texas Mortgage source LLC offering personalized
mortgage solutions, vast customized quotes, great rates and service with integrity. Contact
Mark at Mark Hairston 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.
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