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FRUGAL LIVING WITH JIM MARKUS

investing loans personal credit podcasts Sep 08, 2022

Jim Markus joins Tiffany this week to break down all things mortgage related, what's happening with the housing market right now and what you need to know as a buyer/seller. 

About Our Guest

Jim Markus hosts Frugal Living, a podcast for smart shoppers and savers. He works as an editor at Brad's Deals, where he evaluates and negotiates deals for bargain hunters. He worked as a mortgage banker during the financial crisis in 2007 and in recruitment during the ensuing economic recovery.

Connect with Jim

Spotify: Frugal Living
Apple Podcast: Frugal Living

Connect with Tiffany on Social Media

Facebook: Money Talk With Tiff
Twitter: @moneytalkwitht
Instagram: @moneytalkwitht
LinkedIn: Tiffany Grant

 

Transcription

Episode 131

[00:00:00] Intro/Outro: You know what it is. That's right. It's time to talk money with your money nerd and financial coach. Now tighten those purse strings and open those ears. It's the Money Talk with Tiff podcast.

[00:00:15] Tiffany Grant: Hey everyone. And welcome to another episode of the Money Talk with Tiff podcast. Today, I have Jim Marcus on the line. Now Jim host a frugal living podcast, a podcast for smart shoppers and savers, which we all are. He works as an editor at Brad Steals where he evaluates and negotiates deals for bargain hunters.

[00:00:32] He worked as a mortgage banker during the financial crisis in 2007. And, in recruitment during the ensuing economic recovery. We are about to get into this current mortgage stuff that's going on, but thank you so much, Jim, for joining me on the show today.

[00:00:51] Jim Markus: Thank you so much for having me.

[00:00:53] Tiffany Grant: Absolutely. So let's just hop right in. Okay. Because I recently was just talking to my [00:01:00] audience about how the housing market, so they say has gone into a recession and we all know how, Inflated, the prices have been here lately, the craziness that was going on with the bidding and everything.

[00:01:14] So let's just start at the basics. So when it comes to mortgages, okay, what type of mortgages are available for people to have?

[00:01:25] Jim Markus: There are a slew of different types of mortgages. So if you're looking to buy a house, I think a lot of people have this. Antiquated mindset of I need to have 20% of the purchase price to be able to put down.

[00:01:38] And that's not a bad thing to start with. Like a conventional loan with 20% down is totally something that still happens. And if you can afford it, that's great. But a lot of people, I talk to that, especially a lot of younger people think 20% down, abso where am I gonna get this kind of money?

[00:01:57] You don't need that. That's not always necessary. You [00:02:00] can put down less in, on a conventional mortgage. That means you'll pay more like you'll pay PMI, private mortgage insurance, but there's also like FHA loans where you can put down as little as three to 5%. So significantly lower, on a hundred thousand dollars house, you could pay 20%, $20,000 upfront, or you could pay three to 5,000.

[00:02:23] So, there are lots of different ways to get a mortgage. And there's lots of different mortgages available.

[00:02:29] Tiffany Grant: Yes. Thank you so much for mentioning that. Cuz I actually got my house on FHA and I did not. Cause when I bought it, it was what one 10. And of course I did not have 20,000 plus dollars to put down because it was just me as a single mom of two boys.

[00:02:47] and I didn't have family help. So I was like, okay what other routes are there? And FHA came up and I was able to put that down payment down and also the credit scores too. Cuz a lot of [00:03:00] people come to me and they're like, oh, I don't think my credit score is good enough. And this, that and the other.

[00:03:06] Like what's the minimum credit score or approximately I know it depends that people can have to actually qualify for a mortgage.

[00:03:13] Jim Markus: That's a good question. And I, hate to divert like the answer. I'd wish I could give you like one number. Like you need to have a 600, but you don't. There's a scale and it's never gonna be healthy to focus on what your credit score is.

[00:03:28] When I worked in mortgages, one of the most baffling things would be people calling in trying to get qualified for a mortgage and then telling me what they thought their credit score was. But the thing is there's three credit bureaus. You have three different scores. Your score is an amalgamation of those three it's usually the middle one is what we choose to go with.

[00:03:47] Instead of focusing on what specific score you have. It's better to understand that the better credit you have, the lower your rate on your mortgage, and the more likely you'll be to be approved for a loan. [00:04:00] So if you have damaged credit or bruised credit, fixing, that is usually the biggest way to save in the long term on your mortgage.

[00:04:09] Tiffany Grant: Yes. Yes. I completely agree. Luckily, when I was getting my house, I, my credit was pretty much. Great. Like I didn't have any credit card debt. I think I only had one house. I mean, not one house. Ooh. I wish . I had one car. So it was really good. And I was able to get a great rate, which I'm now locked in for, because it was a fixed rate mortgage.

[00:04:32] Highly recommend what Jim is saying. Work on your credit report, make sure that everything is a one before you go try to get a mortgage, because it will help you big time in the long term. , Now that we've, talked about just the basics of mortgages, let's talk about what's going on now.

[00:04:50] Because as I prefaced earlier in the episode, it's been a wild ride here for the housing industry. So what are some things that [00:05:00] you've seen or would like to let the audience know about what's going on?

[00:05:03] Jim Markus: Sure. Right now, the thing that everyone's talking about is interest rates. So the, the FED which controls, the federal funds rate has the ability to raise and lower that rate and that rate.

[00:05:16] Ties into everything you pay. It'll tie into your credit card payment. It'll tie into what mortgage rates are available to you in any given time. Not so much to you and me, if we've locked in our mortgage rates and we're not planning to refinance changes in rates, don't really apply to us. But if you've got an adjustable rate mortgage in arm, that is something to really consider

[00:05:38] A lot of people get arms because you can get a lower initial rate, but that rate will adjust every three, five or seven years. And if you see what we're seeing now, where interest rates are rising, your house payment can go up significantly. That's what we saw for a lot of people back in the housing crisis.

[00:05:57] Back in 2008, 2009, [00:06:00] people saw incredible jumps like balloon payments on their mortgage rates. They couldn't pay their mortgages and that led to a lot of foreclosures. Where we are now is a really interesting spot. Obviously the housing market has been on fire recently. Just incredible like I've never seen the past two years, like you mentioned, one of my neighbors was looking for a house.

[00:06:24] They were moving out of a rental into their first home and they put in offers on 30 different properties. And they were outbid on everything. People were paying tens of thousand dollars above asking price, which is mind boggling, but that's part of what led to the inflation that we're seeing this year.

[00:06:47] The inflation is again, almost unprecedented and the way that the fed fights inflation is by raising that rate. So the federal funds rate goes up, mortgage rates, go up, hopefully house prices, stop going. [00:07:00] Hopefully people stop bidding tens and twenties of thousands of dollars over asking price. Because when your interest rate goes up on a mortgage, even by a point like 1%, your monthly payment can go up astronomically.

[00:07:17] It's a huge, huge thing to consider. , The interest rate in your mortgage is something that I think a lot of people undervalue. This is something that affects your daily life.

[00:07:29] Tiffany Grant: Absolutely. Absolutely. And, I just wanna hit on a couple of points there because luckily I did refinance last year, right before they started going up.

[00:07:40] So I was able to lock in even lower rate than what I had back in 2017 when I first. Applied. But then also this year I was thinking, I was like dang, maybe I should sell, because I was looking at the house values and things like that. And like my neighbor, a couple doors down who has the exact same houses I do.

[00:07:59] She was [00:08:00] able to get two, I think it was like two 10 cash for hers. And I was like I only owe like a hundred. I'm like, that's a big gain. Then I was like where am I gonna go? Because if I sell it, then I probably won't be able to get into something else. And rental prices are high, especially in my area.

[00:08:18] Around that time, when I was evaluating, I called the apartment complex that I used to live at right before I moved into my house. And they were already double what I used to pay. I said, oh, no, I'm staying, but so I just wanted to share that with the audience too, really, there's no way to tell how the market's gonna go.

[00:08:38] You just have to. Guess like last year, I, would've never known that this year, that interest rates were gonna go up, it's just, you gotta jump in on deals when you can. But then also I wanted to hit on the point that. Because knowing your background and how you worked on mortgages during the last financial crisis how are you feeling about this [00:09:00] one?

[00:09:00] Do you feel like it's similar, or a little different, or what are your thoughts around that?

[00:09:07] Jim Markus: Great question. I mean, good news, bad news, bad news. We can't predict the future. There was a pandemic, a global pandemic that affected the whole economy that no one could predict.

[00:09:15] That just happened in 2007, 2008, we saw. An unprecedented situation in the housing crisis that again, affected the whole world's economy.

[00:09:26] Tiffany Grant: Hey, it's Tiffany, are you interested in starting a podcast? We can get up to two months of free podcasting service from Libsyn with the code MONEYTALK get your show on apple podcast.

[00:09:37] And Spotify anywhere you want get critical stats to help you grow. Find all the tools and support you need to sound your very best and you can even do video, really bring your podcast to life with Libsyn you can use code again, MONEYTALK to get two months of free podcasting service. This is what I use to get my podcast to your listening ears.

[00:09:58] Enjoy.[00:10:00]

[00:10:05] Jim Markus: The good news is a lot of regulations have gone in place since 2007. That should prevent a lot of those things we saw happen from happening. Again, like I worked in mortgages back then my wife works in mortgages now, and one of our favorite conversations when it comes to work is. She talks about the kind of loans that we used to be able to sell back.

[00:10:29] When I worked in mortgages that are fairy tales now stated income stated asset was a thing we used to be able to sell where , if your credit rating was good enough, you had near perfect credit. You could say, Hey, I'm an investor for a living or I'm a gambler or whatever. Here's how much I make.

[00:10:47] And we'd say, great, your credit score speaks for itself. We don't need documentation to show how much you're making. And we'd be able to process that loan no longer like underwriters are like, no, that's insanity. Wouldn't that [00:11:00] doesn't make any sense at all. Prove it. I, if what you're saying is true, that's great.

[00:11:04] We can give you a good rate. We can give you a solid mortgage, but we need to have proof that you can pay it back. So those types of regulations. Became just industry standard. And one thing, people, especially, people like you and me were interested in buying a house where we can live, where we can raise our family, where we can maybe build some equity, maybe sell that in the future as an investment.

[00:11:26] But banks, the people who write these mortgages, they look at investments. They look at mortgages as investments. They look at mortgages as I wanna sell you this mortgage. I will give you whatever rate is available. And then I'm going to immediately sell that mortgage to someone else. That investment goes elsewhere.

[00:11:42] And if you've ever bought a house, this shouldn't sound too strange. You'll notice that where you're sending your mortgage checks sometimes changes. That means your mortgage has been sold to another processor. And it's very normal. It's very normal in the industry, but the cool thing that's happening now is that people [00:12:00] buying those mortgages from, maybe you got your mortgage through chase or Quicken loans or wherever, whoever buys your mortgage, they aren't going to buy it unless there's documentation that you can pay it back.

[00:12:10] So if you're initial mortgage underwriter, didn't ask for your proof of income or your proof of assets, they're not gonna be able to sell that loan. So now all of them ask for that because they need it. If they wanna be able to sell it, that's how they make their money. That's how they protect themselves from downsides.

[00:12:26] So the whole industry's changed pretty significantly. And if you're mortgager like me, like that's really exciting, but it's also important to understand as just an everyday home buyer. We should be a lot more protected from the downsides we saw back then, but that doesn't mean there's not other, terrifying things coming on the horizon.

[00:12:47] I just don't know what those are.

[00:12:48] Tiffany Grant: And, like we've been saying, you can't really predict the future I do know, like with this time though unemployment isn't as drastic as it was back then. People are still hiring. I [00:13:00] have read a few articles and, heard a few podcasts, like NPR, whatever that was saying that some companies are starting to slow down on hiring.

[00:13:08] Some companies are starting to lay off people a little bit. But it's definitely, from what I know now, granted, I was very young during that time. But from what I know it's not as bad as then. So that is a good indicator as well. Cuz at least people are still getting to keep their job or move to better jobs or what have you while this is going on.

[00:13:30] Personally, I feel it's not as bad right now. Like I said, I can't predict the future, but , I think right now, I don't think this is like a 2008, 2009 thing.

[00:13:42] Jim Markus: Oh, no way. Totally.

[00:13:43] Tiffany Grant: Yeah.

[00:13:46] Jim Markus: Yeah, that, that is one thing I think we can, we can sleep easier at night. With exactly what you're saying.

[00:13:51] Like unemployment is still at historic low. Like unemployment is very low across the US right now. And while it probably will tick up in [00:14:00] the coming months, it's still not gonna be anywhere near probably like half, maybe lower than half of what it was in 2009. So you're totally right. Even with layoffs, there are other opportunities out there and that should help protect a lot of our economy.

[00:14:15] Tiffany Grant: Absolutely. Absolutely. So when, okay, so let's just jump back to mortgages real quick. I know we're like veering off, but I think these are good conversations to have especially for my audience who is generally not really tapped into what's going on in the financial world like that. When it comes to the mortgages and stuff, what do you.

[00:14:35] Suggest, and I know it depends. But for people that still haven't bought a house yet they were getting priced out at the beginning of the year. They're still wanting to get a house at some point. What are your thoughts around that? What should people be doing now to prepare or if they're ready, should they go ahead and pull the trigger or.

[00:14:53] Just what are your thoughts?

[00:14:55] Jim Markus: Yeah Great question. I mean, I think it's great news right now for buyers. If you're [00:15:00] trying to sell your house right now and , you look at what happened in the past year, you're probably banging your head against a wall thinking, oh my, why didn't I sell as a buyer?

[00:15:08] That's great. So yeah, higher rates, like the mortgage rates are, are higher than they were a year or two ago, but again, that's those rates. Crazy low. The great news for buyers. If you're looking to buy your first house right now, you have all the bargaining chips like you have. There are so many fewer buyers right now because a lot of people were that were thinking about buying homes were pricing their mortgages at 3% interest rates or two and a half percent interest rates as a buyer, you're holding all of the chips.

[00:15:37] All the bargaining chips are in your corner right now. A lot of the buyers a year ago, or two years ago were pricing their mortgages. They were figuring out how much of a house they could buy based on two and a half or 3% interest rates. But those aren't available now. I don't care how good your credit is.

[00:15:55] Even if you work in the industry, you're now getting a 3% rate right now. If [00:16:00] maybe you can get a 5%, maybe you can get a 6% depending on where your credit is and where the fed has decided to drop their rate right now. You're gonna be paying more this year than you were last year for our mortgage. So a lot of other buyers are falling out because the houses that they loved now seem unaffordable

[00:16:16] they thought they could buy a $500,000 house, but now they can only afford a $300,000 house or a $100,000 house. So you, as a buyer, walk in with that knowledge, understand that there are fewer buyers and those sellers are gonna be a lot more desperate to make concessions. People might lower their.

[00:16:33] Price or if they're really hung up on price, when you're negotiating for a house, ask for concessions on repairs, like, it used to be a year ago, you would tour a house, pay above asking price and then buy it as is, no, no repairs needed. Now you go in and you see a roof that needs to be repaired.

[00:16:53] Get a credit at closing to have that covered, negotiate that way. And if you're not comfortable negotiating. [00:17:00] Ask someone who is , I'd say, ask your realtor. But one thing when you're buying houses, almost everyone you work with is incentivized to sell you a higher priced house than you want. Your realtor gets paid a portion of the purchase price.

[00:17:16] That means they're not incentivized to get you a lower price. They're incentivized to get you a higher price, even if they're your realtor. That is their pay is based on the price of the house. So probably not the best negotiation partner in your realtor, same with your mortgage banker or your mortgage officer.

[00:17:33] Oftentimes they'll get paid based on the price of your loan. So while the difference between an 80,000 and a hundred thousand dollars loan might not be huge to a mortgage banker, a difference between a $400,000 and a $500,000 home is so choose your negotiation partners and coaches. With that in mind if you're paying them, unless you're paying them a flat rate, don't trust them in negotiations.

[00:17:57] But again, you've got the cards you've got, you've got all the [00:18:00] chips right now. It's a buyer's market. It's a great time to buy a house.

[00:18:03] Tiffany Grant: Absolutely. And, I'm glad you made that point now, granted I'm glad that I have the team that I have because they're always looking out like, for instance, the mortgage originator that I work with he's phenomenal, but he's Tiffany, eh, I don't know if you should do that right now or I don't think that's a good move, so it's not all about money.

[00:18:22] And then also with my real estate agent that I use, she is very like, gung-ho like for you, it's not about the money. So if I had to give any advice, try to surround yourself with the team that is actually looking out for you now, as Jim said, you have to be careful because everybody's incentivized, With commission and stuff, but there are some good ones out there.

[00:18:47] And just try to do your best with trying to find those. And that's why, my little team I'm like, all right, I might not need you now, but I'm gonna keep you in my back pocket, in case something else comes up. But thank you so much, Jim, for joining me [00:19:00] on this show today, this was very informative and hopefully it gives our people looking for houses.

[00:19:06] Some, Hope that it's still possible and you could make it happen. Now, if people were interested in finding out more about you or learning more where could they find

[00:19:15] you?

[00:19:15] Jim Markus: You can always listen to me if you like the sound of my voice at frugal living. So we're on apple podcasts, Spotify, Amazon music.

[00:19:22] I host frugal living. We have new episodes every week. And actually Tiffany's been a guest on the show. If you wanna hear about her talking about paying off $50,000 in debt, which was awesome. We did two episodes on it happened earlier this year. Just check out our feed. I work at Brad's deals. And that is a great resource.

[00:19:40] If you're looking for deals on anything. So if you want deals on like groceries, check out Brad's deals, or if you're looking to upgrade your home. If you don't wanna buy a house this year, you just wanna make where you live better. Lots of deals in like patio furniture, living room furniture, rugs, you name it, new deals every day, sourced by real people, just like me.

[00:19:59] That is [00:20:00] also worth checking out.

[00:20:01] Tiffany Grant: Yes for sure. You all know how I do not like spending money so I love Brad steals. It's an awesome site. And like you said, check out frugal living awesome podcasts. If you are interested in spending less, but getting more out of life check it out and we will make sure that we have all of those links in the show notes.

[00:20:20] So check that out as well. Thank you so much, Jim, for coming on the show today. And it's a pleasure speaking with you

[00:20:27] again. Thank you so much for having me. It was a great conversation.

[00:20:30] Awesome. Bye.

[00:20:33] Intro/Outro: Thank you for listening, joining, and being a part of the Money Talk with Tiff podcast this week, you can check, Tiff out every Thursday for a new money talk podcast, but if you just can't wait until next week, you can listen to previous podcast episodes at moneytalkwitht.com or follow Tiff on all social media platforms. Add moneytalkwitht until next time spend wise by spending less than you make. A word to the [00:21:00] money wise is always sufficient.

 

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