Speaker 1: You're listening to KFI AM six forty on demand.
Speaker 2: Justin Warsham here talking southern California real estate. Last break,
Speaker 2: I was talking about it is California a good state
Speaker 2: to invest in, and I kind of ended because I
Speaker 2: want to talk about flipping. I stumbled upon this because
Speaker 2: and I'm shocked I didn't think too in preparing this segment,
Speaker 2: because this happens so often. I get so many clients
Speaker 2: or friends. Everybody wants to flip houses, and in my experience,
Speaker 2: most of it has to do with the TV shows
Speaker 2: because even with the drama that they have in those shows,
Speaker 2: they make it look so easy. The most egregious thing
Speaker 2: about these TV shows is the budget they talk about
Speaker 2: flipping houses with, like thirty forty thousand dollars.
Speaker 3: I have listen.
Speaker 2: If there's somebody who could pull that off out there
Speaker 2: and you're listening, hit that talkback feature let me know,
Speaker 2: because I don't know who you're getting to do these
Speaker 2: jobs for you. When I flipped houses, and when I
Speaker 2: say when I have a flipping business, I have a partner.
Speaker 2: She's great, she does like the design she makes, she's
Speaker 2: so spatially awhere, but sorry, I'm heaping praise on her
Speaker 2: because she's the best. But anyway, the point I'm saying
Speaker 2: is that we kind of had to hit pause on
Speaker 2: looking because the market there's so much demand for housing
Speaker 2: that what people are paying for what we would consider
Speaker 2: a distressed house, right, that's a house that needs some work,
Speaker 2: needs some updates to it, need some love put in it,
Speaker 2: money put into it that people were still willing to
Speaker 2: pay so much for that by the time we put
Speaker 2: in the rehab, we weren't really making and our bare
Speaker 2: minimum to buy a house was ten thousand dollars each,
Speaker 2: So we're looking for a twenty thousand dollars profit to
Speaker 2: buy a house and fix it up and have it
Speaker 2: for about four to six months tops, So you're working
Speaker 2: four to six months to maybe make twenty thousand. Now,
Speaker 2: during the early part of the pandemic, because of the
Speaker 2: appreciation and some time it took us to get permits,
Speaker 2: we it went great. So then it becomes about a volume, right,
Speaker 2: because you've got to be cranking through at least ten
Speaker 2: houses a year, and that's just really really hard to do,
Speaker 2: especially with the low inventory. So I've yet to see
Speaker 2: our rehab costs were about I always tell people that
Speaker 2: you want to look at about two hundred dollars a
Speaker 2: square foot if you're doing what's salt called inside the box,
Speaker 2: so you're not adding square footage at all, you're just
Speaker 2: updating things inside the walls. Two hundred dollars of square
Speaker 2: foot is a fair budgeting estimate. Four hundred dollars of
Speaker 2: square foot for the new construction part, right, So anything
Speaker 2: you add on is going to be four hundred dollars
Speaker 2: a square foot.
Speaker 3: So there's just there's no room.
Speaker 2: There's no room in there to really make money in
Speaker 2: flipping in southern California. I trust me, there are people
Speaker 2: out there doing it, and in my opinion, they're either
Speaker 2: they've got some kind of an inside track into getting
Speaker 2: the properties on what we call the up leg when
Speaker 2: they buy the property, or they've just gotten the prices
Speaker 2: down so much because they can keep these crews busy
Speaker 2: so they can afford to pay them less because they
Speaker 2: know that they're going to be doing year round work
Speaker 2: for these people. That's the only way that I could
Speaker 2: see that It's it's profitable, but it's it's really hard.
Speaker 2: But we got some great talkbacks, so I want to
Speaker 2: get to some awesome questions Robin hit me with that
Speaker 2: first question.
Speaker 4: Please, do you think there's any value in converting some
Speaker 4: of this vacant commercial property into residential units, you know,
Speaker 4: like the shopping malls or some of the larger shopping centers.
Speaker 1: It's just a lot of open space. Is it practical
Speaker 1: to do this?
Speaker 5: Could this be a good source?
Speaker 2: This is like, I feel like you were planted, my friend,
Speaker 2: because that's a that's great, that's a great question. During
Speaker 2: the pandemic, what they found was employers found that people
Speaker 2: were actually more productive working from home, and really by
Speaker 2: more productive, because I think anybody who.
Speaker 3: Works remotely is like am I?
Speaker 2: I don't think so, it's that they could get more
Speaker 2: hours out of you because it became less about punching
Speaker 2: in nine to five and more about people just getting
Speaker 2: the job done. And so people would like they would
Speaker 2: pick their shots. So maybe they'd dip out for the
Speaker 2: afternoon and catch a matine movie and then they'd come
Speaker 2: back and work until ten or eleven o'clock to get
Speaker 2: caught up. Now I'm not saying that's obviously across the board,
Speaker 2: but anyway, what they found was that there was a
Speaker 2: significant drop in the need for commercial office space and
Speaker 2: just two years into the lockdown from the pandemic, there
Speaker 2: was already data coming out from to realtors saying that
Speaker 2: there was about one hundred and fifty thousand commercial units
Speaker 2: in the state of California that they projected would be
Speaker 2: rezoned for housing. And they use that very example like
Speaker 2: a mall right, because everybody retail brick and mortar. It's
Speaker 2: really tough when you're competing against places like Amazon, so
Speaker 2: they're like, how do we repurpose this? And that's definitely
Speaker 2: an option where you would see I've seen it. There's
Speaker 2: a Oh, I'm blanking on the city. I think it's
Speaker 2: Lincoln Heights. I sold a loft and it was an
Speaker 2: old factory that they'd converted into lofts. And then there
Speaker 2: was a jail that was across the San Fernando Road
Speaker 2: over there that they were also looking to convert into
Speaker 2: mixed use. Mix use means they put businesses down at
Speaker 2: the bottom and then they put condos on top of it,
Speaker 2: and those could be rentals, those could be for sale.
Speaker 2: But yeah, I do think there's a chance. The problem
Speaker 2: is that now we've these high interest rates. Commercial loans
Speaker 2: are crazy expensive. If you're really in the high end
Speaker 2: of investing. You're hearing that you know these loans are
Speaker 2: due to commercial loans. Actually, they don't have thirty year
Speaker 2: terms like you do for residential. It's usually three to
Speaker 2: five years. So all of these new apartment buildings across
Speaker 2: the US that we're being built are probably going to
Speaker 2: go under and be sold for pennies on the dollar
Speaker 2: because they're not going to profit. They're not going to
Speaker 2: pencil out, and these people have to get out or
Speaker 2: they're going to go bankrupt when they get hit with
Speaker 2: these new interest rates on their commercial loans. I think
Speaker 2: we had another question, Robin.
Speaker 3: Please hi there. I have a quick question.
Speaker 6: My wife and I were looking to buy a home,
Speaker 6: but the problem is that the monthly mortgage and interest
Speaker 6: rates are so expensive, so we've been looking at manufactured homes.
Speaker 6: What are your thoughts on buying manufactured homes and mobile
Speaker 6: home parks. We're looking for somebody that has a low
Speaker 6: lease payment around the two hundred thousand dollars two hundred
Speaker 6: thousand dollars mark. Is it worth the investment? What do
Speaker 6: you guys think we want to start building equity and
Speaker 6: not rent.
Speaker 7: Thank you?
Speaker 2: Yeah, so, my and I think you had a second
Speaker 2: part to that question too is do you have that too, Robin,
Speaker 2: I want to answer both.
Speaker 7: Also, second question in regards to manufactured homes, if you
Speaker 7: don't mind me asked, if a manufactured home monthly mortgage
Speaker 7: payment and lease payment are equal to what my wife
Speaker 7: and I spend in rent in our apartment, would it
Speaker 7: make sense to go down the mobile home route or
Speaker 7: should we just save our money and just buy property?
Speaker 5: Layers on the line.
Speaker 1: Thanks love the show.
Speaker 3: Thank you so.
Speaker 2: Without getting into the weeds and understanding your situation, like
Speaker 2: I would love to talk a little bit more, just
Speaker 2: I'm going to give you a surface level answer. I
Speaker 2: don't think a manufactured home or a mobile home is
Speaker 2: the solution to home ownership because they don't appreciate in value.
Speaker 2: I would, as much as I railed against condos and
Speaker 2: townhomes earlier in the show, I would much rather see
Speaker 2: you in a condor a town home than a manufactured home.
Speaker 2: I think that's the lowest level of purchase because you're
Speaker 2: already buying. So why do those exist, right? I think
Speaker 2: they exist because it's a primary way for real estate
Speaker 2: investors to make money because they basically get rental property
Speaker 2: with zero responsibility for upkeep on the actual individual units.
Speaker 2: They only have to upkeep the infrastructure of the lot,
Speaker 2: the mobile home lot. It's also difficult to get loans
Speaker 2: for manufactured home. My mom she owns a manufactured home
Speaker 2: in northern California, and I help her rent it, and
Speaker 2: it was hard for her to get a loan. My
Speaker 2: wife helped her, and she had to make all these
Speaker 2: like jump through all these hoops to get it. So
Speaker 2: there's a manufactured home that comes as like a prefab
Speaker 2: single family home, and then there's like what we all
Speaker 2: think of as like a mobile home. Mobile homes might
Speaker 2: as well be like a mo an RV that just
Speaker 2: parks there forever it loses value like a car over time,
Speaker 2: it doesn't appreciate in value, and you're still paying rent,
Speaker 2: So you're making payments like you're making a car payment,
Speaker 2: and you still have rent that can go up on
Speaker 2: the individual spaces. And I think maybe it makes sense
Speaker 2: for retirement. I mean, I know my mother in law
Speaker 2: was trying to get into one, but the problem was
Speaker 2: she couldn't even qualify for the income for the rental
Speaker 2: space at the mobile home park where she lives. And
Speaker 2: even if I co signed for her they didn't allow
Speaker 2: non occupant co signers for that exact reason. They didn't
Speaker 2: want it to get flooded with people who could barely
Speaker 2: afford to live there. So all in all, I think
Speaker 2: this is probably the first time I've said this out loud.
Speaker 2: I think if your only option is a mobile home
Speaker 2: or a man manufactured home, I think you're better off
Speaker 2: renting and trying to figure out some way to save up.
Speaker 2: I would take my tip last week is look at
Speaker 2: what it would cost for you to get a mortgage
Speaker 2: on maybe a condo or a town home, and then
Speaker 2: take the difference between what you're paying in rent and
Speaker 2: pay yourself that different. So let's say you're paying one
Speaker 2: thousand dollars a month in rent and it's twenty five
Speaker 2: hundred dollars a month. I know these are low numbers,
Speaker 2: but just for the sake of the example, twenty five
Speaker 2: hundred dollars a month for your projected mortgage payment, you
Speaker 2: start acting like you're paying it but saving up. That'll
Speaker 2: help you save for a down payment and see how
Speaker 2: much it impacts your financial lifestyle. Okay, thank you guys
Speaker 2: for the questions. When we come back, we're going to
Speaker 2: be talking to a mortgage broker, my friend Christine Hatch
Speaker 2: from the Mortgage Group and going over loan tips.
Speaker 1: You're listening to KFI AM six forty on demand and.
Speaker 2: I'm excited to have my friend Christine Hatch here with
Speaker 2: me today. Christine is a mortgage broker. Feel free to
Speaker 2: jump in and correct me anywhere I'm wrong, but I
Speaker 2: try to help everybody understand the different roles. So, like,
Speaker 2: you could go talk to a loan officer at your
Speaker 2: bank right and they would give you, like wherever you bank,
Speaker 2: they would give you whatever lending or loans that they're
Speaker 2: offering there. You could do the same thing for your
Speaker 2: credit union. But what Christine does is she works with
Speaker 2: multiple lenders at the same time, so she kind of
Speaker 2: looks around and figures out based on your scenario, she'll
Speaker 2: place you with a lender that is the best fit
Speaker 2: for you. Do you also represent like private investors as well, Christine? Yeah,
Speaker 2: no private investor. So some brokers will also have private investors.
Speaker 2: And what that means is like I'm a billionaire and
Speaker 2: I just got a ton of coins sitting around, which,
Speaker 2: by the way, I don't know if you would agree
Speaker 2: with this, Christine, but if I did have a million dollars,
Speaker 2: just chilling that. I was like, what am I going
Speaker 2: to do with that million dollars? What I would do
Speaker 2: is I would buy mortgages because there is a secondary
Speaker 2: market out there where you could buy mortgages eighty cents
Speaker 2: on the dollars. So if it's a nine hundred thousand
Speaker 2: dollars loan, you could get it for probably eight hundred
Speaker 2: eight around eight hundred thousand dollars. You buy that nine
Speaker 2: hundred thousand dollar loan and then they make the payments
Speaker 2: to you.
Speaker 8: Yeah, yeah, Or you could be a hard money lender,
Speaker 8: your hard money.
Speaker 3: Yeah, that's a good point too. See, this is why
Speaker 3: I love you, Christine.
Speaker 2: Hard money, if you don't know, is like when I
Speaker 2: do a flip, it's a hard money loan. So usually
Speaker 2: that has about a one year term, right, and you're
Speaker 2: going to pay a higher interest rate. You're going to
Speaker 2: pay higher points when you originate the loan, but it's
Speaker 2: intended just to be a quick, short term loan. There's
Speaker 2: less hoops to jump through than if I'm going out
Speaker 2: and just buying a house. Yeah right, Okay, here's the
Speaker 2: thing I wanted to talk to you about though, Christine,
Speaker 2: specifically is I think that the first thing whenever people
Speaker 2: come to me looking for a home as a realtor, unfortunately,
Speaker 2: what always ends up happening is I have to sling
Speaker 2: them back over to you. So Christine is one of
Speaker 2: probably the most popular lender that I refer clients to,
Speaker 2: and so they'll come to me like I want to
Speaker 2: buy a house, but I don't know. And the first
Speaker 2: thing is the realtor I need to know is what
Speaker 2: they can afford, what they qualify for. And there's also
Speaker 2: a difference between what you qualify for and what you're
Speaker 2: comfortable with, right, So so I.
Speaker 3: Kick them over to you.
Speaker 2: Tell us a little bit about what are some common
Speaker 2: like questions that you get from people, like right out
Speaker 2: of the gates when they come see you.
Speaker 8: I think the most common question lately has been to
Speaker 8: have too much student loan debt, so I don't think
Speaker 8: I'm going to qualify, yes, And they are fearful of
Speaker 8: taking the next steps towards home ownership because they're like,
Speaker 8: I'm drowning in student loan debt.
Speaker 2: And this is a great point too. Again, correct me
Speaker 2: anytime I'm wrong here, Christine. Is that a lot of
Speaker 2: times people will make the mistake of not talking to
Speaker 2: a Christine or even a me a realtor because they're like, well,
Speaker 2: I got so much debt, so I'm going to pay
Speaker 2: off my student loans and then I'm gonna because that's
Speaker 2: that's what's really messing me up when an actually and
Speaker 2: so that example is like, what am I right? If
Speaker 2: you have make you have great income, right, but you
Speaker 2: don't have a ton of money in a savings account
Speaker 2: that you could use for a down payment, Chances are
Speaker 2: you probably shouldn't be paying your down paying down your
Speaker 2: student loans. You should be saving extra money to build
Speaker 2: up the money.
Speaker 3: Is that right?
Speaker 9: In most cases?
Speaker 8: Yes, because the beauty about student loans, which people don't realize,
Speaker 8: is that we don't care how much your total balance is.
Speaker 8: We only look at the minimum payments. Say you owe
Speaker 8: fifty thousand dollars in student loan debt, but your minimum
Speaker 8: payment is one hundred and fifty dollars. That's what we're
Speaker 8: taking for a loan qualification. So some people think I
Speaker 8: have to pay this fifty thousand dollars debt, but one
Speaker 8: hundred and fifty dollars in monthly debt doesn't really move
Speaker 8: the needle that much, So why pay off the fifty
Speaker 8: thousand when you could maybe use that fifty thousand towards
Speaker 8: the down payment and purchase. Your purchasing power is higher
Speaker 8: at that point.
Speaker 2: Right, Because it all boils down to what they call
Speaker 2: the DTI, the debt to income ratio. So that's the
Speaker 2: percentage of all of your debt, including the housing payment, right.
Speaker 8: Correct, housing payment, your principal interest, taxes, and insurance in
Speaker 8: any hoas, and then combine that with your other debt
Speaker 8: obligations that you have.
Speaker 2: So if I have credit cards, right, maybe I have
Speaker 2: five thousand dollars on a credit card. You're not looking
Speaker 2: at the five thousand dollars payoff of the credit card.
Speaker 2: You just want to know that I have a minimum
Speaker 2: payment of eighty dollars. That's correct, and so the same thing.
Speaker 2: And then this is the other thing. So you got
Speaker 2: your car payment, you got your credit cards, All of
Speaker 2: that stuff goes into qualifying for the loan based on
Speaker 2: your income. What in your experience, Because I know that
Speaker 2: a financial advisor would recommend and most of the other
Speaker 2: states in the nation can do this, recommend that your
Speaker 2: housing payment is about thirty percent of your monthly income.
Speaker 8: Yeah, yes, Now, thirty percent is super low, especially for
Speaker 8: southern California, right our market.
Speaker 2: Yeah, yeah, your clients' what's the average are most common?
Speaker 8: I mean, most people will push it up to fifty percent.
Speaker 8: Lending guidelines can go up to fifty and a lot
Speaker 8: of people will push it to fifty. But I think
Speaker 8: a safe space is around.
Speaker 2: Forty forty percent is a good comfort zone. So what
Speaker 2: would be a circumstance though, where somebody should be comfortable
Speaker 2: going up to fifty percent If.
Speaker 8: They know that they're going to get a raise soon,
Speaker 8: if they get bonuses, if let's say they have a
Speaker 8: spouse that's not currently working but will possibly be working
Speaker 8: in six to twelve months, right, so certain financial situations
Speaker 8: that are going to put them in a better financial
Speaker 8: picture down the line. Then I would say, okay, well
Speaker 8: maybe we can go higher, just as long as they
Speaker 8: know they're kind of already at that threshold of your max.
Speaker 2: And this is why Christina and I are such big
Speaker 2: fans of that to I've given out I think now
Speaker 2: three times where you figure out whatever your projected mortgage
Speaker 2: payment is and what you're paying in rent, and you
Speaker 2: pay yourself the difference, so you could see what's that good?
Speaker 2: How is that going to impact my lifestyle? Because a
Speaker 2: lot of people tell me they don't want to be
Speaker 2: house poor, right. They like to go to concerts, they
Speaker 2: want to travel.
Speaker 9: And that's exactly what I tell people too.
Speaker 8: When I qualify them, I'll qualify them for the maximum
Speaker 8: that they lending guidelines would allow for us to lend.
Speaker 8: But then I also tell them, based on your comfort zone,
Speaker 8: you should be looking at X purchase price, right, because
Speaker 8: I don't think they should be house poor either.
Speaker 9: But I too strategy session.
Speaker 8: I too will tell them if you're let's say, paying
Speaker 8: three thousand dollars in rent, but your house payment's going
Speaker 8: to be five thousand, start paying yourself the difference and
Speaker 8: see if you're comfortable with that, right, Because if you are,
Speaker 8: then great. If you're not, then maybe we have to
Speaker 8: take your comfort zone down a little bit so that
Speaker 8: you are comfortable purchasing at that budget.
Speaker 3: So student loans is a big issue.
Speaker 2: Anything else that comes up when you're talking to clients frequently.
Speaker 9: Credit credit score, credit score.
Speaker 8: A lot of people think that they have terrible credit
Speaker 8: and it's actually not as bad as they think it is,
Speaker 8: and that they wouldn't be able to qualify. We can
Speaker 8: actually go down as low as six twenty, sometimes even
Speaker 8: five eighty depending on the loan program. But six twenty
Speaker 8: and higher you have a wide range of loan programs
Speaker 8: available to you.
Speaker 2: Yeah, because I get people like, well, I don't know
Speaker 2: my credit like what's the cap credit score? Where it's
Speaker 2: like after this, you don't really get what we're talking
Speaker 2: about here. Just to break it down a little bit more,
Speaker 2: is that your credit score really is probably the strongest
Speaker 2: indicator of what your rate is going to be, because
Speaker 2: that's the rate is what the lender uses to cover
Speaker 2: their risk of lending you this large amount of money.
Speaker 3: Fair to say, yeah, okay, so.
Speaker 2: If that's the case, so your lower credit score, the
Speaker 2: five eighty is going to be on the higher end.
Speaker 2: But if I have an eight hundred credit score, I'm
Speaker 2: going to be on the lower end. Is there like
Speaker 2: a capped out max?
Speaker 9: Well, seven eighty and above, So.
Speaker 3: Seven eighty above doesn't get any better.
Speaker 8: Exactly whether seven eighty two or eight ten doesn't matter.
Speaker 2: You're getting the best rate you can get for that
Speaker 2: credit score. What are some common mistakes that people make
Speaker 2: in screwing up their credit score, But they think is
Speaker 2: the smart.
Speaker 8: Thing paying off stuff and closing them out, paying off
Speaker 8: credit cards and actually closing them because imagine you have
Speaker 8: a credit history. Let's say you have a target credit
Speaker 8: card for the last fifteen years, you pay it off
Speaker 8: and you close that account, that fifteen year history of
Speaker 8: making payments is now gone. So if you're going to
Speaker 8: pay down at great pay it down, but do not
Speaker 8: close out the actual credit card accounts because that could
Speaker 8: actually negatively affect you and drop your scores as opposed
Speaker 8: to increasing your scores.
Speaker 2: And what about like balances, Is there are there thresholds
Speaker 2: for what kind of balances I should have on the
Speaker 2: right question.
Speaker 9: Yes, thirty percent.
Speaker 8: So let's say you have a limit of ten thousand
Speaker 8: dollars on your credit card, on your target credit card,
Speaker 8: ten thousand dollars. You don't want to exceed three thousand
Speaker 8: dollars a month on the balance.
Speaker 3: I've heard fifty percent.
Speaker 2: Also, is it like is it a tiered thing, Like
Speaker 2: if you're above fifty percent you get a bigger dean.
Speaker 8: It would be yeah, But anytime thirty percent or more,
Speaker 8: that's when you're going to start to see your FYCAL
Speaker 8: scoring decrease.
Speaker 2: Okay, So ways that I've heard you give this tip before,
Speaker 2: so I'm going to say it, but I'm going to
Speaker 2: give you credit.
Speaker 3: Where it's due. If that ways that.
Speaker 2: Let's say I'm right now, I'm like, I want to
Speaker 2: start looking for a house, but I'm at you know,
Speaker 2: I'm at thirty well above, I'm forty percent of my limit?
Speaker 3: Is an easy way? What's an easy way that I
Speaker 3: could just Is there an easy way I could just.
Speaker 9: Fix that get it down to the thirty percent?
Speaker 7: Well?
Speaker 2: What if I can't pay it down? What if I
Speaker 2: don't have a couple grands sitting around? Like what I'm
Speaker 2: getting at here too? Is I think you could call
Speaker 2: and just ask for a credit line increase. Right, So
Speaker 2: if I have a ten thousand dollars limit but I'm
Speaker 2: already and I have five thousand dollars, if I get
Speaker 2: them to bump it up to fifteen thousand dollars, now
Speaker 2: I'm at that thirty percent threshold.
Speaker 9: You're all right?
Speaker 2: Yeah, all right, let's uh, oh man talk too much
Speaker 2: with Christine. We're going to come back and I think
Speaker 2: what we're going to talk about is buying down rates, right,
Speaker 2: I want to talk about is it worth it to
Speaker 2: pay the extra money to try to get as close
Speaker 2: as you can to those fantastic pandemic rates.
Speaker 1: When we come back, you're listening to KFI AM six
Speaker 1: forty on demand.
Speaker 2: Justin Warsham here talking Southern California with real estate Sorry,
Speaker 2: with my guest Christine Hatch from the Mortgage Group. She's
Speaker 2: a mortgage broker, and last break we were talking about
Speaker 2: common questions that you get and how to what credit
Speaker 2: score has, how that impacts it. But now I want
Speaker 2: to talk about rate, right, because it's the thing. It's
Speaker 2: probably don't let me put words in your mouth, Christine's
Speaker 2: probably the most annoying question that you get as a lender,
Speaker 2: not because you think it's a dumb question, but people
Speaker 2: always want to know what is the rate? But there's
Speaker 2: so many variables, right, that go into the rate. It's
Speaker 2: hard to answer that, is correct.
Speaker 8: I get that question all the time and fight go
Speaker 8: score your down payment, the type of property, the loan program,
Speaker 8: the term of the loan.
Speaker 9: Is it a fix it adjustable?
Speaker 8: All that plays a factor, and how the bond market
Speaker 8: is performing plays a factor. So if someone says what's
Speaker 8: my rate, I say, well, it depends, right, it's not
Speaker 8: black and white because of all those variables. So you
Speaker 8: have to be really careful on when you see advertisements
Speaker 8: right at there, let's say online or at your big bank,
Speaker 8: and they say, oh, get a five and a half
Speaker 8: percent rate, Well, what's the catch ye, with what type
Speaker 8: of down payment? With type of FCO score? All of
Speaker 8: that plays a huge factor, and it's.
Speaker 2: Hard to because you can sit down with any lender
Speaker 2: right and you can say these are the rate in
Speaker 2: terms that I'm offering right now. But on average, it
Speaker 2: takes a buyer three to six months to find a house,
Speaker 2: even in this market, and so that all changes by
Speaker 2: the time you get the contract right.
Speaker 9: And they get misled.
Speaker 8: And that's the one thing that buyers have that you know,
Speaker 8: I want to know what my rate is, but it's
Speaker 8: so hard to determine because absolutely, if it takes three months,
Speaker 8: if it takes six months, well the market hopefully is
Speaker 8: better by that time, right, But if it's not, then
Speaker 8: you're stuck with thinking you're going to get this rate
Speaker 8: and then come to find out it's different.
Speaker 2: So people often will ask me about they don't actually
Speaker 2: it's not a lot, but the people who are like
Speaker 2: really geeky, right, that really geek out about this stuff.
Speaker 2: They always want to know about buying down the rate
Speaker 2: because the rates are so much higher. What does that
Speaker 2: look like? And can you give me like a top
Speaker 2: level example of what where a scenario might make sense
Speaker 2: to buy down the rate.
Speaker 8: So a buy down, there's a couple different buydowns. So
Speaker 8: when you're buying down, you're paying points to buy down
Speaker 8: the rate. It's typically you're paying one percent of the
Speaker 8: loan amount to drop your rate, typically a quarter percent.
Speaker 8: So let's say let's use round numbers on a five
Speaker 8: hundred thousand dollars loan. To drop your rate a quarter percent,
Speaker 8: you're going to pay one point, which is five thousand dollars.
Speaker 8: So that might change your payment what eighty bucks a month?
Speaker 8: So does it make.
Speaker 2: Sense You've got to pay twenty grand to get a
Speaker 2: full percentage point? So if you're at a seven and
Speaker 2: a quarter rate, it's twenty grand to get a six.
Speaker 8: And a quarter rate, right, So does it financially make
Speaker 8: sense to pay five thousand dollars just to save eighty
Speaker 8: dollars a month?
Speaker 7: Right?
Speaker 8: So I look at it from a financial strategy because
Speaker 8: at the end of the day, a mortgage is a
Speaker 8: financial strategy, that's really what it is. And do you
Speaker 8: want the peace of mind of the lower payment regardless
Speaker 8: of how much it's going to cost you, or would
Speaker 8: you rather be a little bit smart with your money
Speaker 8: and say, well, I'll save that five thousand dollars or
Speaker 8: that twenty thousand dollars maybe for home improvements or my
Speaker 8: emergency fund.
Speaker 9: Take the slightly higher rate.
Speaker 8: When rates come down, we rewrite the mortgage refinance, take
Speaker 8: advantage of the lower rate, lower payment.
Speaker 2: And I've seen you talk to our clients, mutual clients
Speaker 2: that we've had that you talk about like, well, how
Speaker 2: long do you think because it if you if there's
Speaker 2: a chance that you're not going to be in that
Speaker 2: house for five, ten years or more. Right, you could
Speaker 2: be putting forty sixty thousand dollars to buy down that example,
Speaker 2: which is a very low price, right because we're talking
Speaker 2: about a five hundred thousand dollars loan amount. More likely
Speaker 2: your loan is north of a million dollars in this market, right,
Speaker 2: So double all these numbers really, So you're talking sixty
Speaker 2: to eighty thousand dollars to try to buy down two
Speaker 2: percent on your rate to get probably a five and
Speaker 2: a quarter rate. So you've paid all of that money
Speaker 2: and then something happens, right, you get a job change.
Speaker 2: Now you're moving out of that house. You don't get
Speaker 2: to take that rate with you. So you've paid that
Speaker 2: money to buy down that rate without experience the benefit of.
Speaker 9: It, exactly.
Speaker 8: Or what if rates take down a year from now,
Speaker 8: two years from now, where you can get that five
Speaker 8: and a quarter percent rate.
Speaker 9: You just spent all this money up front, right.
Speaker 2: I've never even thought of that as being an option
Speaker 2: because rates have been so low through most of my career.
Speaker 8: Yeah, that's right, and most homeowners actually refinance within the
Speaker 8: first five years, whether they refinance to a lower rate,
Speaker 8: they go from an adjustable to a fix, whether they
Speaker 8: cash out, shortened the term lengths in the term. So
Speaker 8: you're probably going to be touching your mortgage within those
Speaker 8: first five years. And if you did spend all that
Speaker 8: money up front, well, now you just you.
Speaker 2: Just spend all that money for nothing exactly. The other
Speaker 2: there's a program that came out after the rate hikes
Speaker 2: because I think lenders were like, oh crap, there's nothing
Speaker 2: out there, there's no way we could do it, and
Speaker 2: everybody was like the Fed just raised the rate, like
Speaker 2: it went from three percent all the way up to
Speaker 2: six at that time, and so they put out a
Speaker 2: two to one buy down. Can you talk a little
Speaker 2: bit about that.
Speaker 8: I love this program. Yeah, So in essence, what you're
Speaker 8: doing is you're buying down the rate those first two years.
Speaker 8: So the two stands for a two percent lower the
Speaker 8: first year, the one stands for a one percent lower
Speaker 8: the second year. So let's just say, hypothetically speaking, your
Speaker 8: rate is seven percent today on a thirty year fixed mortgage.
Speaker 8: That first year you would be at five percent, the
Speaker 8: second year you would be at six percent, and then
Speaker 8: you're three through thirty you would be at seven percent.
Speaker 8: So the benefit of that is you're going to get
Speaker 8: into the house with a more comfortable payment, and hopefully
Speaker 8: within those first three years you refinance out of it, right,
Speaker 8: hopefully rates go down to where you can rewrite the mortgage.
Speaker 8: It's a fantastic way for people that are worried about
Speaker 8: their mortgage payment being high right at that seven percent,
Speaker 8: get into it now, and then we monitor the rates
Speaker 8: over these next two to three years and hope that
Speaker 8: right cross our fingers, hope that we can refinance you
Speaker 8: and get the lower and not even see that seven
Speaker 8: percent rate.
Speaker 2: And as a realtor, what I like is that this
Speaker 2: is a way that you could put your you could
Speaker 2: finance your buydown because what you do, what I do
Speaker 2: with clients who want to do a two to one
Speaker 2: buy down is usually it's about fifteen to twenty thousand.
Speaker 3: Is that a fair guessimate of price to do?
Speaker 8: That depends on your loan size and the purchase price
Speaker 8: how much you're putting down, but gets.
Speaker 2: Somewhere around there for most of the places here in
Speaker 2: southern California. So what I encourage my clients to do
Speaker 2: is they throw on that extra fifteen to twenty thousand
Speaker 2: dollars into their purchase price and then ask for that
Speaker 2: credit because part of the term to get that two
Speaker 2: to one buy down is it does have to come
Speaker 2: from the seller as a credit, right correct.
Speaker 8: So let's say the properties listened for eight hundred thousand,
Speaker 8: you offer eight fifteen with a fifteen thousand dollars sellar credit,
Speaker 8: you accomplish the buydown, the seller still nuts that eight
Speaker 8: hundred thousand that they wanted right as their price there go.
Speaker 2: So you've paid for it, like you financed the credit,
Speaker 2: but a lot of times when people find out about it,
Speaker 2: they want to, like say, make a list price offer
Speaker 2: at eight hundred thousand, and they want that twenty thousand
Speaker 2: dollars credit, which feels like a little bit of a
Speaker 2: slap in the face if you're the seller, going, well, really,
Speaker 2: you're only you're offering seventy eighty. That's what you're offering me.
Speaker 2: And so that's why I always tell it if you can,
Speaker 2: like push it up now. During the break though, before
Speaker 2: we let you go, we were talking about you you
Speaker 2: are a fan of condos and townhomes for first time
Speaker 2: home buyers.
Speaker 8: I actually am, yeah, so I actually bought my first
Speaker 8: property as a condo. I think it's a great stepping
Speaker 8: stone to home ownership because the price point is slightly
Speaker 8: lower than single families. So I would hate for people
Speaker 8: to not get into home ownership because they think they
Speaker 8: can't afford it. Now, with all the stuff that's going
Speaker 8: on with Hway's and California law, I think it does
Speaker 8: make it a little bit trickier for condos to get finance,
Speaker 8: but still a great stepping stone, especially if you can
Speaker 8: build that equity over the next three to five years you,
Speaker 8: let's say fifty one hundred thousand equity, you sell that property,
Speaker 8: you then have a bigger down payment for your next property,
Speaker 8: which hopefully then will be a single family home.
Speaker 2: And admittedly I gave it a Google, and this is
Speaker 2: a very quick google. I would love to dig a
Speaker 2: little bit deeper because this is really just the first run.
Speaker 2: But in Orange County, the median house price for a
Speaker 2: condoor a town home is eight hundred and seventy one
Speaker 2: thousand dollars, whereas a single family home is one point
Speaker 2: four million dollars, which I think feeds right into your example.
Speaker 2: But when we start to account for LA County, I
Speaker 2: don't know how these condo and townhome prices are so
Speaker 2: high or the single family. The single family rate kind
Speaker 2: of seem makes sense, but it says the median condo
Speaker 2: price in LA is eight hundred and sixty four thousand,
Speaker 2: and my only guess is that LA must have a
Speaker 2: lot more amenities or something that's driving those prices up.
Speaker 3: And the median house price is nine hundred and.
Speaker 8: Eighteen Yeah, so now if you're comparing that price point,
Speaker 8: maybe go with a single family that would make more sense.
Speaker 8: But at Orange County, with that big of a difference
Speaker 8: in condo versus single family condo is a great opt.
Speaker 2: But I would bet in La that to get that
Speaker 2: nine hundred and eighteen thousand dollars house, you're probably living
Speaker 2: in a place that you're not going to want to
Speaker 2: be living maybe.
Speaker 8: A one to one right, a bedroom, one bath.
Speaker 2: But I would venture a guest that if you're buying
Speaker 2: an eight hundred and sixty four thousand dollars condo or
Speaker 2: town home anywhere in LA, that's a really nice condo
Speaker 2: or town Yeah.
Speaker 9: You're probably sixteen hundred or sixteen.
Speaker 2: Hundred square feet, three bedroom, two bath and a pool
Speaker 2: and a gym in of you probably. Yeah, Thanks Christine,
Speaker 2: I appreciate How could people find you? You got a website
Speaker 2: and give social media handles? How can they find you?
Speaker 8: Yes, my website is www. The Mortgage GROUPCA dot com
Speaker 8: and my social media you can find me on Instagram
Speaker 8: at CTHELETTERC dot Mortgage sister, and I am on Facebook
Speaker 8: as well under Christine Hatch.
Speaker 2: What I love about Christine is Christine is the kind
Speaker 2: of person. We both have said this to clients. She
Speaker 2: will sit down with a person and educate them and
Speaker 2: talk them through stuff. So what we both are like
Speaker 2: big fans of We don't want you to come to
Speaker 2: us just when you think you're ready, when you're just
Speaker 2: starting to think about it, start talking to a lender
Speaker 2: that you trust just to get the information, and someone
Speaker 2: like a Christine or myself will help you build a
Speaker 2: plan to get that home.
Speaker 3: Yeah.
Speaker 8: I always tell people, if you have the slightest thought,
Speaker 8: even if you don't think you're going to buy for
Speaker 8: two or three years, start that conversation today because you
Speaker 8: can start to put a game plan in place and
Speaker 8: then work towards that over these next two three years,
Speaker 8: rather than waiting and thinking, I'm just going to talk
Speaker 8: to you know, Justin or myself right when I'm ready
Speaker 8: to buy. So it's always better put your ducks in
Speaker 8: a row while in advance and you'll be in good ship.
Speaker 3: Yeah, you're not wasting our time. People think you're wasting
Speaker 3: on them. It all right.
Speaker 2: When we come back, I want to talk about more
Speaker 2: ho waves. We've got a great huaight talkback question, and
Speaker 2: then I also want to talk a little bit about
Speaker 2: listing prices and what they mean.
Speaker 1: You're listening to KFI AM six forty on demand.
Speaker 2: Justin Worsham talk in Southern California real Estate. We got
Speaker 2: a great talkback question that I want to hit first
Speaker 2: before we get into listing prices.
Speaker 3: Can you play that for me? Robin, I justin love
Speaker 3: the show.
Speaker 8: My question is I have a town house and what's
Speaker 8: to deal with.
Speaker 9: They just keep raising the ho way?
Speaker 7: Are they allowed to do that? And is there a.
Speaker 9: Cap at some point? Because now it's half.
Speaker 5: Of my mortgage?
Speaker 7: Can you give me some assistance?
Speaker 3: Thanks, have a great day.
Speaker 2: I'm gonna try and it's I'm so glad you asked
Speaker 2: this question because it reminded me to do some research
Speaker 2: into it, because I was literally talking about this yesterday
Speaker 2: with clients that were considering getting a condo or a
Speaker 2: town home instead of a single family home. And here's
Speaker 2: what I found. You're gonna want to talk to a lawyer.
Speaker 2: I'm just a license broker. I'm not a lawyer, so
Speaker 2: I should not be giving legal advice. But the cap,
Speaker 2: according to what the California Civil Code is that they
Speaker 2: can only raise it up to twenty percent over the
Speaker 2: previous year's assessment. Now, what I don't know and what
Speaker 2: you might want to talk to a lawyer or do
Speaker 2: some more research into is that is that twenty percent
Speaker 2: overall or just the monthly cost or whatever. And then
Speaker 2: the other fun fact I found was that they can
Speaker 2: they can do a special assessment up to five percent
Speaker 2: of the annual budget of the h away without homeowner approval.
Speaker 2: So if you get hit with a special assessment that's
Speaker 2: more than five percent of the annual budget for the
Speaker 2: h away, then they need to get your approval. And
Speaker 2: this is part of what I was saying too that
Speaker 2: I have concerns about the h aways is that they
Speaker 2: can just eight people in a room decide one day
Speaker 2: that they're going to raise your dues and you don't
Speaker 2: really have a lot of say in that. Now, you
Speaker 2: could be the person who's like, I'm going to be
Speaker 2: the president and that's how I'm going to regulate that,
Speaker 2: But I again don't I don't know that how much
Speaker 2: control you're going to have. What I will tell you
Speaker 2: is that more than likely, if your town home is
Speaker 2: here in southern California, the reason that your hays are
Speaker 2: going up is insurance costs. I would, I would it's
Speaker 2: got to be insurance costs, because I think the property
Speaker 2: taxes a yeah, they're all broken up by the individual owners.
Speaker 2: So it's only insurance costs, very rarely unless they're talking
Speaker 2: about doing some kind of a major improvement down the road.
Speaker 2: I think it's because their insurance costs are going up
Speaker 2: and it's crazy for them.
Speaker 3: Thank you.
Speaker 2: And the other thing I want to talk about before
Speaker 2: we get to Chris Merrill, who's coming up here next
Speaker 2: with his show, is listing prices. This was actually a
Speaker 2: question I asked people at open houses before I did
Speaker 2: the show. I asked what they thought, and this is
Speaker 2: something that I don't know if Christine Hatch is still
Speaker 2: here with me with the mortgage group, but the people
Speaker 2: are confused by the listing price. And I think that
Speaker 2: the listing price is it was at some point was
Speaker 2: probably intended to be some kind of a representation of value,
Speaker 2: and I think that's kind of gone away. I think
Speaker 2: now it's more of just a marketing strategy. The best
Speaker 2: example was that I saw a home that was listed.
Speaker 2: Does it mean oh, I saw a home that was
Speaker 2: listed at eight ninety nine and it was way low
Speaker 2: that house should have been. It was going to sell
Speaker 2: for at least a million fifty at least one point one.
Speaker 2: But when you look at the most common listed prices
Speaker 2: in the in the city that it was in, which
Speaker 2: it happened to be Burbank, that those were the most
Speaker 2: common spots, and so it was it was their way
Speaker 2: of getting the most eyes on it. And it was
Speaker 2: during the pandemic where you could do that. You could
Speaker 2: list a house for a dollar and the interest would
Speaker 2: just drive it up. But more recently, because the market
Speaker 2: is slow, I've seen people try to list houses more
Speaker 2: conservatively and if you have a seller who's not patient,
Speaker 2: if they're not if they're anxious, then they and they
Speaker 2: might take an offer early. I was able to Arstine
Speaker 2: actually helped these clients. But we were able to get
Speaker 2: a house for sixty thousand dollars below the appraised value
Speaker 2: on the home, just because the realtors had a strategy
Speaker 2: of they wanted to list it a little low to
Speaker 2: let the interest drive it up. And we just came
Speaker 2: in early, right after the first weekend, and the seller
Speaker 2: was like, well, I think this is going to be
Speaker 2: as good as it's going to get, and it's close enough,
Speaker 2: and so we did it. We didn't offer list. We
Speaker 2: offered like twenty k above lists, just to show them
Speaker 2: that we mean business. You think I missed anything in there, Christine, No,
Speaker 2: I think.
Speaker 9: You're absolutely right.
Speaker 8: List price doesn't necessarily mean that's what the home is worth, right, Yeah, So.
Speaker 2: I always tell people try not listen to your realtor,
Speaker 2: try not to pay too much attention to a list
Speaker 2: price on that one. Chris Merrill is here. He is
Speaker 2: coming up in the next hour. Chris, what are you
Speaker 2: talking about in your show, sir? Well, first of all,
Speaker 2: I guess hey, I'm really enjoying listening to your show.
Speaker 2: Oh thanks, man, that mayes a lot. You're like a professional,
Speaker 2: You're like the real deal. I'm just here being a
Speaker 2: weekend warrior ing.
Speaker 5: I know. No, It's funny because I cracked open Zillow
Speaker 5: while you guys were talking, and I was like, is
Speaker 5: there really.
Speaker 3: That much of a difference between condos and single thing? Oh?
Speaker 3: Yeah there is. Yeah, there's a huge difference. Yeah.
Speaker 2: But those hoa man, they they oftentimes they don't they
Speaker 2: make it now. They're just close enough where it's like
Speaker 2: it has a lot of buyers going, it's just not
Speaker 2: worth it. I feel like I want to push my
Speaker 2: budget up just to get a single family home.
Speaker 5: Yeah, But then I lived in a neighborhood where somebody
Speaker 5: decided to paint their They had kind of one of
Speaker 5: those walls in front of their house, you know, or
Speaker 5: there's a like not a fence, but like a solid wall. Yeah,
Speaker 5: and they decided to put a mural on it. But
Speaker 5: it was not well. They didn't have an HOA and
Speaker 5: it was gauny as all hell. It was like a
Speaker 5: wolf bang at the moon kind of thing. And and
Speaker 5: then they painted their house this like a pastel pink.
Speaker 3: Oh, it's horrible.
Speaker 2: So you wished you had an HOA in that case
Speaker 2: for design and Review as they call.
Speaker 5: The one thing I like about HOA is it gives
Speaker 5: me a chance to tell other people what to do.
Speaker 3: Yeah.
Speaker 5: I'm a big fan of me having control over them. Yeah,
Speaker 5: And I just love that and I hate giving that up.
Speaker 5: So that's that's the one thing I'm doing. Hey, we'll
Speaker 5: talk about the Grand Prix is in town and that
Speaker 5: means that it's time to shoot somebody. So that's happening.
Speaker 5: Tariffs are hitting us, and I appreciate that. You guys,
Speaker 5: we're talking so much about tariffs. In fact, I'm going
Speaker 5: to dive into the tariffs and the home prices of
Speaker 5: what they're doing UH in southern California, and what they
Speaker 5: are doing nationwide, and then what they're doing to industry
Speaker 5: as well. We'll talk about that coming up in the
Speaker 5: five o'clock hour, and we're going to open up our
Speaker 5: talk back as well. We'll ask the question, what is
Speaker 5: the one thing that you won't give up no matter
Speaker 5: how expensive it gets? So I was talking to my son.
Speaker 5: He's he's a jim He's I gotta go to the gym.
Speaker 5: Is a jim rat.
Speaker 7: Yeah.
Speaker 3: He likes to throw some steel, Yeah, a pumps iron
Speaker 3: like that.
Speaker 5: How old is he? He's twenty five? Yeah, I swear
Speaker 5: he's twenty five going on fifteen. Yeah, But he says,
Speaker 5: I'm not I'm not giving up. I'm not giving up
Speaker 5: egg whites. I gotta have my egg whites and my
Speaker 5: protein powders. And I thought that's really convenient because he
Speaker 5: is paying a nominal rent and and I'm thinking, am
Speaker 5: I subsidizing his protein powders and and UH and whites?
Speaker 3: Yes, you are, I think kind of am ernest.
Speaker 2: I mean, I actually have a sixteen year old, so
Speaker 2: I feel like I was just talking about a thirteen
Speaker 2: year old and my younger son is very fast and
Speaker 2: loose with my money. Like today, Billiest example, today he
Speaker 2: decided to have McDonald's delivered to the house instead of
Speaker 2: having his older brother drive him there. And the only
Speaker 2: reason I knew this is because I was sitting at
Speaker 2: home preparing for this very show and he called.
Speaker 3: His mother, Chris.
Speaker 2: He called the mother and said, can you get I
Speaker 2: want McDonald's delivered to me? And then when I found
Speaker 2: I was like why, and he goes, well, if I
Speaker 2: asked you, you would have said no.
Speaker 6: Right.
Speaker 5: He was right, He was totally right. Well, and then
Speaker 5: are the terroriffs? Is the concern people are having? Is
Speaker 5: that leading to more petty theft? Are we're going to
Speaker 5: see resurgons in portpos Because I actually had about one
Speaker 5: hundred and seventy dollars where the stuff stolen from me yesterday.
Speaker 3: I was very unpleased.
Speaker 5: And I haven't told my wife about it because I'm
Speaker 5: kind of ashamed and and I'm afraid that she's going
Speaker 5: to say, how could you have been so stupid?
Speaker 2: You know what I love is that you're saying this
Speaker 2: on the radio where she's you just know, my wife
Speaker 2: is also not listening.
Speaker 5: Are you kidding? My wife is like, did you meet Seacrest?
Speaker 3: I love Seacrest? When can I meet Seacrest? That's what
Speaker 3: I get from my shot. Listen to this thing.
Speaker 2: I don't even know, no, but I like that. That's
Speaker 2: I never would have thought. That's a great idea, Chris.
Speaker 2: Not to not to suck up to you, but that's
Speaker 2: a great idea. I never would have thought that tariffs
Speaker 2: would have an impact on crime, like I never would
Speaker 2: have even crossed my mind.
Speaker 3: I'm looking forward to it, man, Thank you so much. Funny.
Speaker 2: All right, Well, we'll see you guys next week again,
Speaker 2: two to four. Right here more southern California real estate.
Speaker 3: Reach out to me.
Speaker 2: You could find me at home with Justin on Instagram,
Speaker 2: or you could go to Justin Worsham dot com. If
Speaker 2: you want to send me an email, you can find
Speaker 2: my number anywhere out there. Just type it justin w
Speaker 2: O R and then that'll spell the rest of my
Speaker 2: name for you.
Speaker 3: Thanks to shout out to Richie and everybody.
Speaker 2: Robin Brigeta, I'm sorry I messed up your name again,
Speaker 2: but I think I ended strong.
Speaker 3: I felt good about it. You did I did right.
Speaker 2: I rallied, I locked in, and I rallied and ill
Speaker 2: him here.
Speaker 3: Yeah, you know what.
Speaker 2: I found success in betting people pop tarts. Richie scored
Speaker 2: himself a family pack of pop tarts because I guess
Speaker 2: the affordability next in correctly last week, thank you Christine
Speaker 2: as well hit her up.
Speaker 3: Thank you guys very much.
Speaker 1: KFI AM six forty on demand