WEBVTT 1 00:00:00.520 --> 00:00:03.960 You're listening to KFI AM six forty on demand. 2 00:00:04.440 --> 00:00:08.039 Justin Warsham here talking southern California real estate. Last break, 3 00:00:08.039 --> 00:00:11.759 I was talking about it is California a good state 4 00:00:11.839 --> 00:00:14.519 to invest in, and I kind of ended because I 5 00:00:14.560 --> 00:00:17.199 want to talk about flipping. I stumbled upon this because 6 00:00:17.440 --> 00:00:20.239 and I'm shocked I didn't think too in preparing this segment, 7 00:00:20.320 --> 00:00:24.800 because this happens so often. I get so many clients 8 00:00:25.000 --> 00:00:28.679 or friends. Everybody wants to flip houses, and in my experience, 9 00:00:28.879 --> 00:00:30.600 most of it has to do with the TV shows 10 00:00:30.640 --> 00:00:33.399 because even with the drama that they have in those shows, 11 00:00:33.439 --> 00:00:36.479 they make it look so easy. The most egregious thing 12 00:00:36.479 --> 00:00:39.119 about these TV shows is the budget they talk about 13 00:00:39.159 --> 00:00:41.759 flipping houses with, like thirty forty thousand dollars. 14 00:00:41.880 --> 00:00:43.119 I have listen. 15 00:00:43.159 --> 00:00:45.119 If there's somebody who could pull that off out there 16 00:00:45.159 --> 00:00:47.560 and you're listening, hit that talkback feature let me know, 17 00:00:47.640 --> 00:00:49.479 because I don't know who you're getting to do these 18 00:00:49.880 --> 00:00:53.280 jobs for you. When I flipped houses, and when I 19 00:00:53.280 --> 00:00:55.759 say when I have a flipping business, I have a partner. 20 00:00:55.799 --> 00:00:58.479 She's great, she does like the design she makes, she's 21 00:00:58.479 --> 00:01:01.479 so spatially awhere, but sorry, I'm heaping praise on her 22 00:01:01.479 --> 00:01:04.480 because she's the best. But anyway, the point I'm saying 23 00:01:04.640 --> 00:01:06.760 is that we kind of had to hit pause on 24 00:01:06.879 --> 00:01:10.400 looking because the market there's so much demand for housing 25 00:01:10.400 --> 00:01:12.480 that what people are paying for what we would consider 26 00:01:12.480 --> 00:01:14.799 a distressed house, right, that's a house that needs some work, 27 00:01:14.879 --> 00:01:17.439 needs some updates to it, need some love put in it, 28 00:01:17.519 --> 00:01:20.280 money put into it that people were still willing to 29 00:01:20.280 --> 00:01:22.159 pay so much for that by the time we put 30 00:01:22.159 --> 00:01:24.959 in the rehab, we weren't really making and our bare 31 00:01:25.000 --> 00:01:28.359 minimum to buy a house was ten thousand dollars each, 32 00:01:28.439 --> 00:01:32.079 So we're looking for a twenty thousand dollars profit to 33 00:01:32.200 --> 00:01:34.439 buy a house and fix it up and have it 34 00:01:34.480 --> 00:01:37.959 for about four to six months tops, So you're working 35 00:01:38.000 --> 00:01:40.680 four to six months to maybe make twenty thousand. Now, 36 00:01:41.040 --> 00:01:43.000 during the early part of the pandemic, because of the 37 00:01:43.040 --> 00:01:45.719 appreciation and some time it took us to get permits, 38 00:01:45.760 --> 00:01:49.239 we it went great. So then it becomes about a volume, right, 39 00:01:49.280 --> 00:01:51.079 because you've got to be cranking through at least ten 40 00:01:51.159 --> 00:01:54.439 houses a year, and that's just really really hard to do, 41 00:01:54.560 --> 00:01:57.920 especially with the low inventory. So I've yet to see 42 00:01:58.000 --> 00:02:00.480 our rehab costs were about I always tell people that 43 00:02:00.519 --> 00:02:02.680 you want to look at about two hundred dollars a 44 00:02:02.719 --> 00:02:05.599 square foot if you're doing what's salt called inside the box, 45 00:02:05.640 --> 00:02:07.840 so you're not adding square footage at all, you're just 46 00:02:08.159 --> 00:02:10.719 updating things inside the walls. Two hundred dollars of square 47 00:02:10.719 --> 00:02:14.400 foot is a fair budgeting estimate. Four hundred dollars of 48 00:02:14.439 --> 00:02:17.280 square foot for the new construction part, right, So anything 49 00:02:17.280 --> 00:02:19.319 you add on is going to be four hundred dollars 50 00:02:19.319 --> 00:02:19.919 a square foot. 51 00:02:20.199 --> 00:02:21.560 So there's just there's no room. 52 00:02:21.680 --> 00:02:24.360 There's no room in there to really make money in 53 00:02:24.400 --> 00:02:27.360 flipping in southern California. I trust me, there are people 54 00:02:27.400 --> 00:02:30.759 out there doing it, and in my opinion, they're either 55 00:02:30.800 --> 00:02:33.080 they've got some kind of an inside track into getting 56 00:02:33.120 --> 00:02:35.319 the properties on what we call the up leg when 57 00:02:35.360 --> 00:02:38.560 they buy the property, or they've just gotten the prices 58 00:02:38.639 --> 00:02:41.560 down so much because they can keep these crews busy 59 00:02:41.639 --> 00:02:43.759 so they can afford to pay them less because they 60 00:02:43.800 --> 00:02:45.960 know that they're going to be doing year round work 61 00:02:46.000 --> 00:02:47.719 for these people. That's the only way that I could 62 00:02:47.719 --> 00:02:50.120 see that It's it's profitable, but it's it's really hard. 63 00:02:50.879 --> 00:02:52.680 But we got some great talkbacks, so I want to 64 00:02:52.719 --> 00:02:54.960 get to some awesome questions Robin hit me with that 65 00:02:55.000 --> 00:02:55.560 first question. 66 00:02:55.639 --> 00:03:00.039 Please, do you think there's any value in converting some 67 00:03:00.080 --> 00:03:04.680 of this vacant commercial property into residential units, you know, 68 00:03:04.759 --> 00:03:08.080 like the shopping malls or some of the larger shopping centers. 69 00:03:08.199 --> 00:03:10.520 It's just a lot of open space. Is it practical 70 00:03:10.560 --> 00:03:11.000 to do this? 71 00:03:11.199 --> 00:03:12.319 Could this be a good source? 72 00:03:12.919 --> 00:03:15.199 This is like, I feel like you were planted, my friend, 73 00:03:15.240 --> 00:03:19.560 because that's a that's great, that's a great question. During 74 00:03:19.599 --> 00:03:23.400 the pandemic, what they found was employers found that people 75 00:03:23.479 --> 00:03:27.080 were actually more productive working from home, and really by 76 00:03:27.120 --> 00:03:28.919 more productive, because I think anybody who. 77 00:03:28.840 --> 00:03:30.000 Works remotely is like am I? 78 00:03:29.919 --> 00:03:32.479 I don't think so, it's that they could get more 79 00:03:32.520 --> 00:03:35.120 hours out of you because it became less about punching 80 00:03:35.159 --> 00:03:37.960 in nine to five and more about people just getting 81 00:03:38.039 --> 00:03:40.479 the job done. And so people would like they would 82 00:03:40.479 --> 00:03:42.199 pick their shots. So maybe they'd dip out for the 83 00:03:42.240 --> 00:03:44.759 afternoon and catch a matine movie and then they'd come 84 00:03:44.800 --> 00:03:46.680 back and work until ten or eleven o'clock to get 85 00:03:46.680 --> 00:03:48.960 caught up. Now I'm not saying that's obviously across the board, 86 00:03:48.960 --> 00:03:50.719 but anyway, what they found was that there was a 87 00:03:51.159 --> 00:03:55.400 significant drop in the need for commercial office space and 88 00:03:56.439 --> 00:03:59.159 just two years into the lockdown from the pandemic, there 89 00:03:59.199 --> 00:04:02.840 was already data coming out from to realtors saying that 90 00:04:03.039 --> 00:04:06.680 there was about one hundred and fifty thousand commercial units 91 00:04:07.159 --> 00:04:10.000 in the state of California that they projected would be 92 00:04:10.080 --> 00:04:14.960 rezoned for housing. And they use that very example like 93 00:04:15.199 --> 00:04:18.800 a mall right, because everybody retail brick and mortar. It's 94 00:04:18.839 --> 00:04:22.279 really tough when you're competing against places like Amazon, so 95 00:04:22.560 --> 00:04:25.560 they're like, how do we repurpose this? And that's definitely 96 00:04:25.600 --> 00:04:27.560 an option where you would see I've seen it. There's 97 00:04:27.600 --> 00:04:30.279 a Oh, I'm blanking on the city. I think it's 98 00:04:30.279 --> 00:04:32.600 Lincoln Heights. I sold a loft and it was an 99 00:04:32.600 --> 00:04:36.759 old factory that they'd converted into lofts. And then there 100 00:04:36.839 --> 00:04:39.480 was a jail that was across the San Fernando Road 101 00:04:39.519 --> 00:04:41.920 over there that they were also looking to convert into 102 00:04:41.959 --> 00:04:44.439 mixed use. Mix use means they put businesses down at 103 00:04:44.439 --> 00:04:47.439 the bottom and then they put condos on top of it, 104 00:04:47.519 --> 00:04:49.519 and those could be rentals, those could be for sale. 105 00:04:49.639 --> 00:04:51.839 But yeah, I do think there's a chance. The problem 106 00:04:51.959 --> 00:04:54.839 is that now we've these high interest rates. Commercial loans 107 00:04:54.879 --> 00:04:58.319 are crazy expensive. If you're really in the high end 108 00:04:58.319 --> 00:05:00.680 of investing. You're hearing that you know these loans are 109 00:05:00.759 --> 00:05:04.000 due to commercial loans. Actually, they don't have thirty year 110 00:05:04.079 --> 00:05:06.040 terms like you do for residential. It's usually three to 111 00:05:06.120 --> 00:05:09.000 five years. So all of these new apartment buildings across 112 00:05:09.000 --> 00:05:11.399 the US that we're being built are probably going to 113 00:05:11.600 --> 00:05:13.759 go under and be sold for pennies on the dollar 114 00:05:13.959 --> 00:05:15.720 because they're not going to profit. They're not going to 115 00:05:15.720 --> 00:05:17.199 pencil out, and these people have to get out or 116 00:05:17.199 --> 00:05:19.079 they're going to go bankrupt when they get hit with 117 00:05:19.120 --> 00:05:21.439 these new interest rates on their commercial loans. I think 118 00:05:21.480 --> 00:05:22.600 we had another question, Robin. 119 00:05:22.639 --> 00:05:25.160 Please hi there. I have a quick question. 120 00:05:25.240 --> 00:05:27.439 My wife and I were looking to buy a home, 121 00:05:28.160 --> 00:05:31.399 but the problem is that the monthly mortgage and interest 122 00:05:31.439 --> 00:05:34.319 rates are so expensive, so we've been looking at manufactured homes. 123 00:05:34.560 --> 00:05:37.160 What are your thoughts on buying manufactured homes and mobile 124 00:05:37.160 --> 00:05:39.959 home parks. We're looking for somebody that has a low 125 00:05:40.040 --> 00:05:43.240 lease payment around the two hundred thousand dollars two hundred 126 00:05:43.240 --> 00:05:45.399 thousand dollars mark. Is it worth the investment? What do 127 00:05:45.439 --> 00:05:47.519 you guys think we want to start building equity and 128 00:05:47.560 --> 00:05:47.959 not rent. 129 00:05:48.040 --> 00:05:48.399 Thank you? 130 00:05:49.639 --> 00:05:52.040 Yeah, so, my and I think you had a second 131 00:05:52.079 --> 00:05:54.000 part to that question too is do you have that too, Robin, 132 00:05:54.000 --> 00:05:54.839 I want to answer both. 133 00:05:55.120 --> 00:05:57.959 Also, second question in regards to manufactured homes, if you 134 00:05:57.959 --> 00:06:01.040 don't mind me asked, if a manufactured home monthly mortgage 135 00:06:01.079 --> 00:06:04.399 payment and lease payment are equal to what my wife 136 00:06:04.399 --> 00:06:07.120 and I spend in rent in our apartment, would it 137 00:06:07.160 --> 00:06:09.759 make sense to go down the mobile home route or 138 00:06:10.079 --> 00:06:12.600 should we just save our money and just buy property? 139 00:06:12.680 --> 00:06:13.519 Layers on the line. 140 00:06:13.560 --> 00:06:14.519 Thanks love the show. 141 00:06:15.079 --> 00:06:15.759 Thank you so. 142 00:06:15.959 --> 00:06:19.000 Without getting into the weeds and understanding your situation, like 143 00:06:19.040 --> 00:06:20.720 I would love to talk a little bit more, just 144 00:06:20.759 --> 00:06:22.519 I'm going to give you a surface level answer. I 145 00:06:22.560 --> 00:06:25.040 don't think a manufactured home or a mobile home is 146 00:06:25.079 --> 00:06:28.560 the solution to home ownership because they don't appreciate in value. 147 00:06:28.680 --> 00:06:30.959 I would, as much as I railed against condos and 148 00:06:30.959 --> 00:06:33.240 townhomes earlier in the show, I would much rather see 149 00:06:33.279 --> 00:06:35.560 you in a condor a town home than a manufactured home. 150 00:06:35.639 --> 00:06:38.759 I think that's the lowest level of purchase because you're 151 00:06:38.800 --> 00:06:41.879 already buying. So why do those exist, right? I think 152 00:06:41.920 --> 00:06:44.800 they exist because it's a primary way for real estate 153 00:06:44.839 --> 00:06:48.240 investors to make money because they basically get rental property 154 00:06:48.240 --> 00:06:52.839 with zero responsibility for upkeep on the actual individual units. 155 00:06:52.879 --> 00:06:55.399 They only have to upkeep the infrastructure of the lot, 156 00:06:55.439 --> 00:06:58.560 the mobile home lot. It's also difficult to get loans 157 00:06:58.560 --> 00:07:01.279 for manufactured home. My mom she owns a manufactured home 158 00:07:01.279 --> 00:07:03.680 in northern California, and I help her rent it, and 159 00:07:03.920 --> 00:07:05.399 it was hard for her to get a loan. My 160 00:07:05.439 --> 00:07:06.959 wife helped her, and she had to make all these 161 00:07:07.000 --> 00:07:09.319 like jump through all these hoops to get it. So 162 00:07:09.399 --> 00:07:12.160 there's a manufactured home that comes as like a prefab 163 00:07:12.199 --> 00:07:14.120 single family home, and then there's like what we all 164 00:07:14.120 --> 00:07:16.519 think of as like a mobile home. Mobile homes might 165 00:07:16.560 --> 00:07:19.279 as well be like a mo an RV that just 166 00:07:19.360 --> 00:07:22.399 parks there forever it loses value like a car over time, 167 00:07:23.079 --> 00:07:25.800 it doesn't appreciate in value, and you're still paying rent, 168 00:07:26.040 --> 00:07:28.839 So you're making payments like you're making a car payment, 169 00:07:29.199 --> 00:07:31.079 and you still have rent that can go up on 170 00:07:31.120 --> 00:07:34.040 the individual spaces. And I think maybe it makes sense 171 00:07:34.120 --> 00:07:36.600 for retirement. I mean, I know my mother in law 172 00:07:36.639 --> 00:07:38.360 was trying to get into one, but the problem was 173 00:07:38.439 --> 00:07:41.279 she couldn't even qualify for the income for the rental 174 00:07:41.319 --> 00:07:43.920 space at the mobile home park where she lives. And 175 00:07:43.959 --> 00:07:46.439 even if I co signed for her they didn't allow 176 00:07:46.720 --> 00:07:49.519 non occupant co signers for that exact reason. They didn't 177 00:07:49.519 --> 00:07:51.240 want it to get flooded with people who could barely 178 00:07:51.279 --> 00:07:53.720 afford to live there. So all in all, I think 179 00:07:53.800 --> 00:07:56.199 this is probably the first time I've said this out loud. 180 00:07:56.759 --> 00:07:59.319 I think if your only option is a mobile home 181 00:07:59.680 --> 00:08:02.519 or a man manufactured home, I think you're better off 182 00:08:02.560 --> 00:08:05.000 renting and trying to figure out some way to save up. 183 00:08:05.079 --> 00:08:07.319 I would take my tip last week is look at 184 00:08:07.319 --> 00:08:09.079 what it would cost for you to get a mortgage 185 00:08:09.079 --> 00:08:11.160 on maybe a condo or a town home, and then 186 00:08:11.319 --> 00:08:13.519 take the difference between what you're paying in rent and 187 00:08:13.560 --> 00:08:15.560 pay yourself that different. So let's say you're paying one 188 00:08:15.560 --> 00:08:18.079 thousand dollars a month in rent and it's twenty five 189 00:08:18.120 --> 00:08:20.160 hundred dollars a month. I know these are low numbers, 190 00:08:20.199 --> 00:08:22.240 but just for the sake of the example, twenty five 191 00:08:22.319 --> 00:08:25.319 hundred dollars a month for your projected mortgage payment, you 192 00:08:25.360 --> 00:08:27.480 start acting like you're paying it but saving up. That'll 193 00:08:27.480 --> 00:08:29.439 help you save for a down payment and see how 194 00:08:29.560 --> 00:08:32.919 much it impacts your financial lifestyle. Okay, thank you guys 195 00:08:32.960 --> 00:08:35.159 for the questions. When we come back, we're going to 196 00:08:35.200 --> 00:08:38.039 be talking to a mortgage broker, my friend Christine Hatch 197 00:08:38.320 --> 00:08:41.240 from the Mortgage Group and going over loan tips. 198 00:08:41.759 --> 00:08:46.480 You're listening to KFI AM six forty on demand and. 199 00:08:46.399 --> 00:08:49.480 I'm excited to have my friend Christine Hatch here with 200 00:08:49.519 --> 00:08:52.639 me today. Christine is a mortgage broker. Feel free to 201 00:08:52.720 --> 00:08:55.080 jump in and correct me anywhere I'm wrong, but I 202 00:08:56.039 --> 00:08:59.000 try to help everybody understand the different roles. So, like, 203 00:08:59.120 --> 00:09:01.559 you could go talk to a loan officer at your 204 00:09:01.600 --> 00:09:05.759 bank right and they would give you, like wherever you bank, 205 00:09:05.799 --> 00:09:08.080 they would give you whatever lending or loans that they're 206 00:09:08.120 --> 00:09:10.240 offering there. You could do the same thing for your 207 00:09:10.279 --> 00:09:13.240 credit union. But what Christine does is she works with 208 00:09:13.360 --> 00:09:15.960 multiple lenders at the same time, so she kind of 209 00:09:15.960 --> 00:09:19.039 looks around and figures out based on your scenario, she'll 210 00:09:19.080 --> 00:09:21.720 place you with a lender that is the best fit 211 00:09:21.840 --> 00:09:25.639 for you. Do you also represent like private investors as well, Christine? Yeah, 212 00:09:25.440 --> 00:09:28.960 no private investor. So some brokers will also have private investors. 213 00:09:29.000 --> 00:09:31.960 And what that means is like I'm a billionaire and 214 00:09:32.039 --> 00:09:34.200 I just got a ton of coins sitting around, which, 215 00:09:34.200 --> 00:09:35.519 by the way, I don't know if you would agree 216 00:09:35.559 --> 00:09:38.159 with this, Christine, but if I did have a million dollars, 217 00:09:38.200 --> 00:09:40.120 just chilling that. I was like, what am I going 218 00:09:40.200 --> 00:09:42.080 to do with that million dollars? What I would do 219 00:09:42.159 --> 00:09:45.000 is I would buy mortgages because there is a secondary 220 00:09:45.000 --> 00:09:47.279 market out there where you could buy mortgages eighty cents 221 00:09:47.320 --> 00:09:49.519 on the dollars. So if it's a nine hundred thousand 222 00:09:49.559 --> 00:09:52.720 dollars loan, you could get it for probably eight hundred 223 00:09:53.159 --> 00:09:55.480 eight around eight hundred thousand dollars. You buy that nine 224 00:09:55.559 --> 00:09:57.559 hundred thousand dollar loan and then they make the payments 225 00:09:57.559 --> 00:09:57.759 to you. 226 00:09:57.919 --> 00:09:59.759 Yeah, yeah, Or you could be a hard money lender, 227 00:09:59.799 --> 00:10:01.000 your hard money. 228 00:10:01.039 --> 00:10:02.639 Yeah, that's a good point too. See, this is why 229 00:10:02.639 --> 00:10:03.600 I love you, Christine. 230 00:10:03.679 --> 00:10:06.279 Hard money, if you don't know, is like when I 231 00:10:06.360 --> 00:10:08.960 do a flip, it's a hard money loan. So usually 232 00:10:09.000 --> 00:10:11.759 that has about a one year term, right, and you're 233 00:10:11.759 --> 00:10:13.440 going to pay a higher interest rate. You're going to 234 00:10:13.480 --> 00:10:16.840 pay higher points when you originate the loan, but it's 235 00:10:16.879 --> 00:10:19.039 intended just to be a quick, short term loan. There's 236 00:10:19.080 --> 00:10:20.679 less hoops to jump through than if I'm going out 237 00:10:20.720 --> 00:10:23.879 and just buying a house. Yeah right, Okay, here's the 238 00:10:23.960 --> 00:10:26.200 thing I wanted to talk to you about though, Christine, 239 00:10:26.639 --> 00:10:30.559 specifically is I think that the first thing whenever people 240 00:10:30.600 --> 00:10:33.639 come to me looking for a home as a realtor, unfortunately, 241 00:10:33.679 --> 00:10:35.799 what always ends up happening is I have to sling 242 00:10:35.840 --> 00:10:39.200 them back over to you. So Christine is one of 243 00:10:39.200 --> 00:10:41.799 probably the most popular lender that I refer clients to, 244 00:10:42.519 --> 00:10:44.000 and so they'll come to me like I want to 245 00:10:44.000 --> 00:10:45.360 buy a house, but I don't know. And the first 246 00:10:45.399 --> 00:10:47.080 thing is the realtor I need to know is what 247 00:10:47.120 --> 00:10:49.879 they can afford, what they qualify for. And there's also 248 00:10:49.919 --> 00:10:52.200 a difference between what you qualify for and what you're 249 00:10:52.240 --> 00:10:55.240 comfortable with, right, So so I. 250 00:10:55.240 --> 00:10:56.240 Kick them over to you. 251 00:10:57.320 --> 00:10:59.480 Tell us a little bit about what are some common 252 00:10:59.559 --> 00:11:02.039 like questions that you get from people, like right out 253 00:11:02.080 --> 00:11:03.480 of the gates when they come see you. 254 00:11:03.600 --> 00:11:06.399 I think the most common question lately has been to 255 00:11:06.399 --> 00:11:08.440 have too much student loan debt, so I don't think 256 00:11:08.440 --> 00:11:11.360 I'm going to qualify, yes, And they are fearful of 257 00:11:11.399 --> 00:11:13.840 taking the next steps towards home ownership because they're like, 258 00:11:14.080 --> 00:11:16.120 I'm drowning in student loan debt. 259 00:11:16.200 --> 00:11:18.399 And this is a great point too. Again, correct me 260 00:11:18.399 --> 00:11:20.360 anytime I'm wrong here, Christine. Is that a lot of 261 00:11:20.399 --> 00:11:23.120 times people will make the mistake of not talking to 262 00:11:23.360 --> 00:11:27.159 a Christine or even a me a realtor because they're like, well, 263 00:11:27.200 --> 00:11:29.000 I got so much debt, so I'm going to pay 264 00:11:29.000 --> 00:11:32.279 off my student loans and then I'm gonna because that's 265 00:11:32.360 --> 00:11:34.360 that's what's really messing me up when an actually and 266 00:11:34.440 --> 00:11:38.080 so that example is like, what am I right? If 267 00:11:38.120 --> 00:11:40.799 you have make you have great income, right, but you 268 00:11:40.840 --> 00:11:42.799 don't have a ton of money in a savings account 269 00:11:42.840 --> 00:11:45.360 that you could use for a down payment, Chances are 270 00:11:45.440 --> 00:11:47.840 you probably shouldn't be paying your down paying down your 271 00:11:47.840 --> 00:11:49.960 student loans. You should be saving extra money to build 272 00:11:50.000 --> 00:11:50.399 up the money. 273 00:11:50.480 --> 00:11:50.919 Is that right? 274 00:11:51.600 --> 00:11:52.360 In most cases? 275 00:11:52.440 --> 00:11:55.360 Yes, because the beauty about student loans, which people don't realize, 276 00:11:55.399 --> 00:11:57.879 is that we don't care how much your total balance is. 277 00:11:57.919 --> 00:12:00.519 We only look at the minimum payments. Say you owe 278 00:12:00.559 --> 00:12:03.320 fifty thousand dollars in student loan debt, but your minimum 279 00:12:03.360 --> 00:12:05.320 payment is one hundred and fifty dollars. That's what we're 280 00:12:05.360 --> 00:12:08.240 taking for a loan qualification. So some people think I 281 00:12:08.240 --> 00:12:10.440 have to pay this fifty thousand dollars debt, but one 282 00:12:10.480 --> 00:12:13.159 hundred and fifty dollars in monthly debt doesn't really move 283 00:12:13.159 --> 00:12:15.639 the needle that much, So why pay off the fifty 284 00:12:15.679 --> 00:12:18.679 thousand when you could maybe use that fifty thousand towards 285 00:12:18.679 --> 00:12:21.519 the down payment and purchase. Your purchasing power is higher 286 00:12:21.559 --> 00:12:22.279 at that point. 287 00:12:22.200 --> 00:12:23.960 Right, Because it all boils down to what they call 288 00:12:24.039 --> 00:12:26.799 the DTI, the debt to income ratio. So that's the 289 00:12:26.879 --> 00:12:30.080 percentage of all of your debt, including the housing payment, right. 290 00:12:30.120 --> 00:12:33.279 Correct, housing payment, your principal interest, taxes, and insurance in 291 00:12:33.320 --> 00:12:36.639 any hoas, and then combine that with your other debt 292 00:12:36.639 --> 00:12:37.559 obligations that you have. 293 00:12:37.840 --> 00:12:40.480 So if I have credit cards, right, maybe I have 294 00:12:41.000 --> 00:12:42.919 five thousand dollars on a credit card. You're not looking 295 00:12:42.919 --> 00:12:44.919 at the five thousand dollars payoff of the credit card. 296 00:12:44.960 --> 00:12:47.000 You just want to know that I have a minimum 297 00:12:47.039 --> 00:12:49.559 payment of eighty dollars. That's correct, and so the same thing. 298 00:12:49.600 --> 00:12:51.679 And then this is the other thing. So you got 299 00:12:51.679 --> 00:12:53.799 your car payment, you got your credit cards, All of 300 00:12:53.799 --> 00:12:56.440 that stuff goes into qualifying for the loan based on 301 00:12:56.480 --> 00:13:00.120 your income. What in your experience, Because I know that 302 00:13:00.200 --> 00:13:02.960 a financial advisor would recommend and most of the other 303 00:13:03.000 --> 00:13:05.440 states in the nation can do this, recommend that your 304 00:13:05.440 --> 00:13:08.200 housing payment is about thirty percent of your monthly income. 305 00:13:08.320 --> 00:13:12.480 Yeah, yes, Now, thirty percent is super low, especially for 306 00:13:12.600 --> 00:13:14.080 southern California, right our market. 307 00:13:14.159 --> 00:13:17.440 Yeah, yeah, your clients' what's the average are most common? 308 00:13:17.559 --> 00:13:21.039 I mean, most people will push it up to fifty percent. 309 00:13:21.200 --> 00:13:23.360 Lending guidelines can go up to fifty and a lot 310 00:13:23.360 --> 00:13:26.279 of people will push it to fifty. But I think 311 00:13:26.279 --> 00:13:27.840 a safe space is around. 312 00:13:27.519 --> 00:13:31.519 Forty forty percent is a good comfort zone. So what 313 00:13:31.799 --> 00:13:34.399 would be a circumstance though, where somebody should be comfortable 314 00:13:34.399 --> 00:13:36.440 going up to fifty percent If. 315 00:13:36.320 --> 00:13:37.960 They know that they're going to get a raise soon, 316 00:13:38.320 --> 00:13:40.759 if they get bonuses, if let's say they have a 317 00:13:40.799 --> 00:13:44.039 spouse that's not currently working but will possibly be working 318 00:13:44.039 --> 00:13:48.360 in six to twelve months, right, so certain financial situations 319 00:13:48.399 --> 00:13:50.000 that are going to put them in a better financial 320 00:13:50.039 --> 00:13:52.200 picture down the line. Then I would say, okay, well 321 00:13:52.240 --> 00:13:54.399 maybe we can go higher, just as long as they 322 00:13:54.440 --> 00:13:57.440 know they're kind of already at that threshold of your max. 323 00:13:57.559 --> 00:13:59.279 And this is why Christina and I are such big 324 00:13:59.279 --> 00:14:01.000 fans of that to I've given out I think now 325 00:14:01.000 --> 00:14:03.919 three times where you figure out whatever your projected mortgage 326 00:14:03.919 --> 00:14:05.960 payment is and what you're paying in rent, and you 327 00:14:06.000 --> 00:14:09.000 pay yourself the difference, so you could see what's that good? 328 00:14:09.360 --> 00:14:11.200 How is that going to impact my lifestyle? Because a 329 00:14:11.240 --> 00:14:12.639 lot of people tell me they don't want to be 330 00:14:12.679 --> 00:14:15.440 house poor, right. They like to go to concerts, they 331 00:14:15.440 --> 00:14:16.000 want to travel. 332 00:14:16.039 --> 00:14:17.639 And that's exactly what I tell people too. 333 00:14:17.639 --> 00:14:20.600 When I qualify them, I'll qualify them for the maximum 334 00:14:20.639 --> 00:14:22.919 that they lending guidelines would allow for us to lend. 335 00:14:22.919 --> 00:14:25.639 But then I also tell them, based on your comfort zone, 336 00:14:25.679 --> 00:14:28.159 you should be looking at X purchase price, right, because 337 00:14:28.159 --> 00:14:29.799 I don't think they should be house poor either. 338 00:14:30.960 --> 00:14:33.519 But I too strategy session. 339 00:14:33.600 --> 00:14:36.480 I too will tell them if you're let's say, paying 340 00:14:36.519 --> 00:14:38.720 three thousand dollars in rent, but your house payment's going 341 00:14:38.759 --> 00:14:40.799 to be five thousand, start paying yourself the difference and 342 00:14:40.799 --> 00:14:43.559 see if you're comfortable with that, right, Because if you are, 343 00:14:43.639 --> 00:14:45.600 then great. If you're not, then maybe we have to 344 00:14:45.840 --> 00:14:47.720 take your comfort zone down a little bit so that 345 00:14:47.799 --> 00:14:50.600 you are comfortable purchasing at that budget. 346 00:14:50.879 --> 00:14:52.559 So student loans is a big issue. 347 00:14:52.600 --> 00:14:55.159 Anything else that comes up when you're talking to clients frequently. 348 00:14:55.240 --> 00:14:57.320 Credit credit score, credit score. 349 00:14:57.360 --> 00:15:00.000 A lot of people think that they have terrible credit 350 00:15:00.000 --> 00:15:01.919 and it's actually not as bad as they think it is, 351 00:15:02.240 --> 00:15:04.360 and that they wouldn't be able to qualify. We can 352 00:15:04.360 --> 00:15:06.639 actually go down as low as six twenty, sometimes even 353 00:15:06.679 --> 00:15:10.120 five eighty depending on the loan program. But six twenty 354 00:15:10.120 --> 00:15:12.559 and higher you have a wide range of loan programs 355 00:15:12.600 --> 00:15:13.240 available to you. 356 00:15:13.440 --> 00:15:15.399 Yeah, because I get people like, well, I don't know 357 00:15:15.480 --> 00:15:18.399 my credit like what's the cap credit score? Where it's 358 00:15:18.440 --> 00:15:20.879 like after this, you don't really get what we're talking 359 00:15:20.879 --> 00:15:22.639 about here. Just to break it down a little bit more, 360 00:15:22.679 --> 00:15:26.639 is that your credit score really is probably the strongest 361 00:15:26.919 --> 00:15:29.080 indicator of what your rate is going to be, because 362 00:15:29.120 --> 00:15:32.279 that's the rate is what the lender uses to cover 363 00:15:32.360 --> 00:15:34.600 their risk of lending you this large amount of money. 364 00:15:34.639 --> 00:15:36.440 Fair to say, yeah, okay, so. 365 00:15:36.559 --> 00:15:38.759 If that's the case, so your lower credit score, the 366 00:15:38.799 --> 00:15:41.120 five eighty is going to be on the higher end. 367 00:15:41.159 --> 00:15:43.360 But if I have an eight hundred credit score, I'm 368 00:15:43.360 --> 00:15:44.679 going to be on the lower end. Is there like 369 00:15:44.679 --> 00:15:45.799 a capped out max? 370 00:15:46.200 --> 00:15:47.879 Well, seven eighty and above, So. 371 00:15:47.960 --> 00:15:49.600 Seven eighty above doesn't get any better. 372 00:15:49.480 --> 00:15:52.480 Exactly whether seven eighty two or eight ten doesn't matter. 373 00:15:52.559 --> 00:15:54.240 You're getting the best rate you can get for that 374 00:15:54.320 --> 00:15:58.080 credit score. What are some common mistakes that people make 375 00:15:58.240 --> 00:16:00.960 in screwing up their credit score, But they think is 376 00:16:00.960 --> 00:16:01.639 the smart. 377 00:16:01.399 --> 00:16:04.279 Thing paying off stuff and closing them out, paying off 378 00:16:04.320 --> 00:16:06.600 credit cards and actually closing them because imagine you have 379 00:16:06.639 --> 00:16:09.279 a credit history. Let's say you have a target credit 380 00:16:09.279 --> 00:16:12.080 card for the last fifteen years, you pay it off 381 00:16:12.159 --> 00:16:14.840 and you close that account, that fifteen year history of 382 00:16:14.840 --> 00:16:17.559 making payments is now gone. So if you're going to 383 00:16:17.960 --> 00:16:20.639 pay down at great pay it down, but do not 384 00:16:20.799 --> 00:16:23.879 close out the actual credit card accounts because that could 385 00:16:24.039 --> 00:16:26.639 actually negatively affect you and drop your scores as opposed 386 00:16:26.679 --> 00:16:27.759 to increasing your scores. 387 00:16:28.039 --> 00:16:30.480 And what about like balances, Is there are there thresholds 388 00:16:30.480 --> 00:16:31.879 for what kind of balances I should have on the 389 00:16:31.919 --> 00:16:32.440 right question. 390 00:16:32.559 --> 00:16:33.480 Yes, thirty percent. 391 00:16:33.960 --> 00:16:35.679 So let's say you have a limit of ten thousand 392 00:16:35.720 --> 00:16:38.080 dollars on your credit card, on your target credit card, 393 00:16:38.159 --> 00:16:40.120 ten thousand dollars. You don't want to exceed three thousand 394 00:16:40.159 --> 00:16:42.080 dollars a month on the balance. 395 00:16:42.320 --> 00:16:43.320 I've heard fifty percent. 396 00:16:43.360 --> 00:16:45.000 Also, is it like is it a tiered thing, Like 397 00:16:45.039 --> 00:16:47.000 if you're above fifty percent you get a bigger dean. 398 00:16:47.200 --> 00:16:50.240 It would be yeah, But anytime thirty percent or more, 399 00:16:50.240 --> 00:16:51.720 that's when you're going to start to see your FYCAL 400 00:16:51.799 --> 00:16:52.759 scoring decrease. 401 00:16:53.120 --> 00:16:57.159