How to Buy a Home

E191: What To Do When It All Goes Wrong - HORROR story!

When buying your first home, there’s a lot that can go wrong. Sometimes, crap hits the fan and you’re stuck between a rock and a hard place. Well, David received an email from a How to Buy a Home listener who really went through the ringer during the home buying process because they didn’t have the right team and weren’t properly prepared for the process. David takes this opportunity to illuminate what to do and what NOT to do when buying a home as well as how to handle the situation if it all goes wrong.
Here are some topics from today’s conversation:
What to specifically do when buying a home
What NOT to do when buying a home
How to handle it when the process goes awry
Why having the right team and education is vital
Episode Highlights:
[01:10] Here’s the Deal
David got an email from a How to Buy a Home listener that had a very bad home-buying experience. She was very close to buying her first home, but then the home inspection revealed some very serious issues with the foundation, causing her to back out of the deal and costing her her earnest money deposit. Also, her lease deadline was coming up quickly and meant she either needed a place to stay or rent for another year. The biggest problem here? Her team didn’t properly guide her through the process. Then, her lender let her down by wrongly advising her that her employment status would not negatively affect her credit score. This whole experience meant she lost another $2,500 after losing her deposit. Overall, this situation SUCKED. 
[03:37] What To Do (and NOT Do)
There are a few mistakes in this situation that David can hash out: first, instead of allowing a lease deadline to restrict your ability to find a home, see if there is a month-to-month option that will allow you some more flexibility. If you have a lease, the preparation that you and your team do before even thinking about looking at homes is WAY more important than anything else. Also, never assume that a 30-day close date is actually going to be a 30-day close - always give yourself some wiggle room. 
Here are some things to NOT do: don’t just partner with any realtor and rush to get a home because of your lease. Take the time to make sure you’re getting into the right deal. Also, make sure you are getting a quality lender, not just an online lender that sees you as just a number. When you work with a unicorn lender, they are prioritizing you, not just the amount of leads they get. 
[10:16] A Happy Ending
The coolest thing about this listener is that they are willing to do whatever it takes to buy their first home. While she knows it might be tough, especially considering her past experience, she knows that owning a home is better than paying rent for the rest of her life. This is the best attitude to have when buying a home. You have to WANT it and be willing to learn whatever you can and do whatever you need to make sure that you’re on the right track. 

E190: INTERVIEW - Winning the Hunger Games of Achieving a Middle Class Life

After renting for many years, the rental market took a turn for the worse and they knew it was time to get out of Dodge (figuratively). With the rise in investors and house flippers, the competition got intense for homes for the middle class, making it difficult for How to Buy a Homie Derek and his wife to find the right home for their budget. This is their story of overcoming the challenges and finally becoming homeowners!
Here are some topics from today’s conversation:
Buying a home as business owners
The importance of accounting when self-employed
The catch of waiving a home inspection
Doing your research on your realtor
Episode Highlights:
[02:14] Owning a Business and Owning a Home
Derek and his wife were living in Denver when they were notified that the rent would increase significantly. They knew that for the price they were paying in rent, they would be able to pay a mortgage, so they decided to start looking for a home. Both of them own an online business which had allowed them to travel from place to place, but it was time for them to settle down. So, they reached out to David to find a home and several months later they were moving into their new place in Wisconsin. While it seemed impossible for them to buy a home because of their self-employment status, their detailed recording of all their earnings and expenses allowed them to show lenders that they had a reliable enough income to afford a mortgage.
[13:28] A Brutal Market for the Middle Class
Derek’s biggest challenge was the home inspection. His unicorn realtor told him that he would be in a better position to purchase a home because so many folks were waiving inspections. Unfortunately, Derek found that some people were waiving inspections because they were too desperate to get homes, often landing them in homes with big problems. From foundation problems to roof replacements, house issues can be too costly to overlook, especially in the areas where they were looking. Thankfully, his unicorn realtor was kind of a de facto home inspector. His extensive knowledge about homes allowed him to help Derek avoid homes that would provide serious issues later on. 
[29:00] Finding the Right Unicorn
They had a great experience with their realtor, Kevin, but when they decided to start looking in Wisconsin, they needed to find another realtor that knew the area. So, they asked a local person for a recommendation, but the realtor they recommended was not at the experience level they needed. This showed Derek and his wife the importance of educating yourself to know what questions to ask realtors to make sure you’re getting someone you can rely on. Although there are millions of realtors in the U.S., a huge number of them are not very experienced, especially for first-time home buyers. Make sure you DO YOUR RESEARCH on your realtor.

E189: INTERVIEW - VA Loans: Bad for Buyers or a Christmas Miracle?

Stephanie and her husband were ready to buy a home, but was told she would need 30% DOWN as a VA buyer and no one was interested in VA loans. Well, she knew her family needed a home, so she did some research, got in touch with a unicorn team, and now she and her family are enjoying a home in North Carolina they bought just before the holidays with 0% DOWN. 
Here are some topics from today’s conversation:
Don’t spend too much time researching
Get a good grasp of your credit and debt
The ups and downs of a VA loan
In-person research
Episode Highlights:
[01:37] Home By Christmas
Stephanie’s situation felt daunting at the beginning, but once she got into the process, she was surprised by how doable it actually was. Stephanie is a big researcher and spent nearly two years trying to do things on her own, but found out quickly after connecting with her unicorn realtor that it was not the best use of her time. After conversations with her realtor, she and her husband got to work cleaning up their credit score and then were able to put down ZERO on their house. After their first choice sold the same day they saw it, Colleen took them to see their other choices. At the end of the day, they knew that it was the one and they were able to get in there in time for Christmas.
[15:59] Hindsight is 20-20
Looking back on the two years they spent researching, Stephanie wished she had a better understanding of credit and debt. She and her husband spent a lot of time trying to pay off debt, but realized that they were missing the important thing: they could pay off the bigger debts, save, and work on their credit score all at the same time. The conversations they had with Colleen and the lender showed them that they didn’t need to wait another two years before they could buy a house - they just needed to know how to navigate it effectively. The unicorn team helped them negotiate successfully with their VA loan to make sure the situation was best for the family and looked attractive to the seller.
[25:15] Don’t Be Afraid to Drive By
They thought they wanted a new build house, but the yards were so small that they didn’t feel like they could have enough space for their lifestyle. So, they settled on a resale home that was about 10 years old that had more yard that gave them the space they needed to feel comfortable. She and her husband also did a lot of drive-bys to check out all the neighborhoods and the homes in person to make sure they were really getting what they wanted.

E188: House Hacking May Be Your Tool to Affordability

With prices going up, house hacking is becoming more popular to keep prices manageable. Today there are tons of options such as rentals, AirBnBs/Vrbos, getting roommates, ways to hack your own house, and lately, some new opportunities are coming up for single moms. HOWEVER, each of these options have their own pros and cons and David is going to separate the good hacks from the bad hacks.
Here are some topics from today’s conversation:
Pros and cons of rental properties
Pros and cons of Airbnbs
House hacking with your own house
House hacking for single moms
Episode Highlights:
[01:28] Buying Rentals
Here’s the deal with investing in rental properties. It CAN work. The ROI on rentals is insane when everything works out. Many many people reach out to David and say, “Well, I can’t afford a mortgage in my area because it’s too expensive, but I can buy a cheap home in a cheap area and make $500 a month!” Okay, great. If you can work out the financials for buying a cheap home in a cheap neighborhood, you can most likely work out the financials to buy your OWN home first. Here’s the deal: you are almost always better off buying your own home than buying a bunch of rentals first. Then, rent out the house you bought and then buy another one. 
[08:50] The Ups and Downs of Airbnbs
Short-term rentals sound like an amazing idea UNTIL you consider the vacancy rates. And you need to consider the vacancy rates. Oftentimes, Airbnbs will be vacant for the equivalent of one or two weeks out of the month. Also, there’s a ton of problems with these short-term rentals with local municipalities who are pressured by the hotels to impose regulations and taxes that could make them less cost-effective overall. 
[16:41] Some Great House Hacks to Consider
David recalls his college days for this house hack. Think about frat houses: it’s a bunch of folks living in one house who could all pay rent. Here’s the situation: you get some money together for a down payment, you buy a house, then you get together with some friends or siblings or whoever and they pay you rent to help you with the mortgage. So, you’re the homeowner with paying roommates. They have a place to live and you own your house. Win-win.

E187: Interview - Balancing Saving and Paying off debt to find IMMEDIATE PEACE

It might seem daunting, but, yes, you can purchase a home while you’re in graduate school. Even though you’re stressed about money and depending on your credit card, there are ways you can organize your finances to prepare for this additional big achievement. Today, David is talking with Kendall who achieved her doctorate in psychology AND managed to purchase her first home amidst it all! 
Here are some topics from today’s conversation:
Yes, it’s possible to over-research
Paying off debt while saving for a house
How a credit line increase can help your score
Knowing your area to win your home
Episode Highlights:
[02:22] Let Your Realtor Work Their Magic
As an academic, it was natural for Kendall to sit down and research as much as she could about buying a home. From podcasts to news articles, she surfed the web for any information that could help her. But, she found out that, in reality, all she needed to do was get in touch with a real lender and look at real numbers to realize it was possible. After trying to take care of everything by herself, she realized that she was trying to do someone else’s job. Instead of over-researching and trying to figure everything out on her own, she needed to reach out for help to really get things moving.
[08:30] The Balance of Saving and Paying Off Debt
There’s no doubt that saving money while also paying off debt is a tough balance. Lenders are typically looking for a certain debt-to-income ratio, but, as Kendall found out, houses are more expensive these days so the traditional ratio isn’t always the end-all-be-all. She and her husband tried to execute the snowball effect, but found that it didn’t impact their credit score the way they wanted it to. So, how did they hack it? They asked for a credit line increase and it significantly helped boost their credit score!
[17:50] Know What You Want
Kendall and her husband knew that they wanted to be ready for the spring/summer buying season, so they planned their finances so they could hit the ground running. They made an offer on their first house, but it fell through and it was pretty emotional for them. But, it ended up being for the best because a house they loved cropped up in a neighborhood that they knew they loved, and put an offer in immediately. They knew that this was the right house and it allowed them to go all in and really be committed to winning their dream home.  

E186: INTERVIEW: Buying a Home with 300K of Student Debt?

John and Richard had around $300,000 in student debt which made them think that buying a home would be impossible. BUT, they were able to navigate the financial waters with an amazing lender who showed them that yes, buying a home IS possible, even with student debt. Also, learn about physician’s loans and how they can help your own purchase process. 
Here are some topics from today’s conversation:
Having an experienced lender makes all the difference
FHA compared to other loan opportunities
“House hacking” options for home buyers
Tackling student debt to make room for a mortgage
Episode Highlights:
[01:53] John and Robert’s Biggest Buying Tips
After reaching out to their unicorn realtor, they were introduced to their unicorn lender, Kathy. Their amazing lender helped them realize that they could buy a home even with $300K in med student loans. They felt that this massive debt was insurmountable and would prevent them from being able to buy a home, but finding the right lender was imperative. They talked with Kathy and felt comfortable sharing the numbers and their concerns to make sure it could work. They handed over all their bank statements and monthly income numbers and discovered that a physician’s loan would be the best option for their situation. 
[09:45] Are There Other Options Besides FHA?
To answer this section’s title, yes. There are vocation-based loans that allow folks who are doctors, first responders, teachers, etc. all have a shot at buying a home. While the idea is a great one, it’s not always the best option. These programs are often government-instituted which means they can be unreliable and are very dependent on the current market situation. As a doctor, John entertained the idea of applying for a physician’s loan for the house, but after looking at all the numbers, Kathy advised them to stick with an FHA loan because it has better benefits. 
[17:15] House Hacking Tips
John and Richard wanted to “house hack” their home situation to get the best bang for their buck. Unfortunately, the lack of inventory screwed them over because there weren’t enough affordable four-plexes. After looking at newly built homes where everything was turnkey, they ended up with a resale home that they fell in love with. While new build homes were great, the HOAs and plot sizes weren’t what they were looking for, ultimately leading them to their resale home that they plan on fixing up and eventually renting out while they find another house later on.

E185: INTERVIEW: From Renter to New Build Homeowner in 5 WEEKS

Bryant from North Carolina reached out to David and the unicorn team in January 2023 with the intention of moving in July. Five weeks later, he was closing on a home of his very own! Listen to his fascinating story and get some insight into buying a newly built home.
Here are some topics from today’s conversation:
Asking all the right questions
Easements and other surprises
Buying new construction homes
Inspections vs. “blue tape”
Episode Highlights:
[01:28] Ask All the Right Questions
Five weeks after connecting with a realtor, Bryant was sitting in a newly built home of his very own. The key to the process? You got it - asking all the right questions. His unicorn realtor knew what to ask the developers when they were touring homes and helped him narrow down his selection that way. Buying new builds and working with developers can be a super challenging process, but with his realtor asking questions about HOAs, insulation, easements, and so many other things that first-time home buyers may not know about, as well as working with a knowledgeable lender, Bryant was able to confidently close on his new build with a strategic 2-1 buy-down.
[11:45] New Home vs. Resale
Living in North Carolina, there are a lot of older homes to choose from, but you can’t tell what will go wrong and when. For Bryant, he didn’t want to deal with the “ifs” that come with an old home, so he wanted to go with a new build. Location was also a vital part of his decision, so being close to the city without being in the city was the perfect in-between for him. And having the option of being able to rent his home if he decides to move on, he knew he could get a decent price for rent in the area where he now lives. 
[17:58] Buying During the Build Process
When Bryant looked at his newly built home before closing, it was about 65% percent done and came with all the bells and whistles. So, he got to have a say in some of the details that went into it and was able to move right in because the appliances and other odds and ends were included. Buying a new build also looks a little different than buying a resale home. Instead of going through an inspection, Bryant got the “blue tape” process where he did a walkthrough, marked the things he wanted fixed, then worked out a one-year deal with the contractors to fix those elements. 
Sound Byte - (Please Choose One)
Option 1: 
[01:37]- [02:09]
The biggest lesson I’ve learned is definitely ask all the questions that you wouldn’t even think of, like especially for HOA and things like that. For my house, I didn’t know that they built partway into an easement until closing, so that was definitely a big thing that I was not expecting, so that affect, you know, building a fence in the backyard, so really do your due diligence, and research, and all the different things you could ask.

E184: Interview: How a 20-year-old Found the Right Realtor and Bought His 1st Home

This young man from Idaho had a goal: buy a home. After getting tired of paying rent, Quade decided he was going to do something about it. After educating himself about the home buying process, he got in touch with a unicorn team who showed him that he was qualified for way more than he thought, eventually leading him to his very first home at 20 years old!
Here are some takeaways from today’s conversation:
Paying forwards vs. paying backwards
Tools to help you budget wisely
Possibilities with home equity loans
Don’t get caught up in the increased monthly payment
Episode Highlights:
[01:25] How It All Started
Quade had always been interested in finances and loved to listen to financial podcasts at work. After getting sick of paying rent and watching the money go down the proverbial “drain,” he decided it was time to see if he could buy a home. After getting in touch with a unicorn team, he was approved and purchased his first home within a few weeks, even though he was still paying rent. Quade knew it was worth it to “double pay” because having a mortgage meant more value than paying on a lease, so he followed a well-planned budget to save up for the 3% down payment and closing costs. Also, it made sense because paying rent, you pay ahead for your month, but with a mortgage you pay backwards for the previous month. This can give renters-turned-owners some breathing room.
[20:30] Homeowner at 20
The average age of first-time home owners in the US is 36 years old, so Quade is ahead of the game! He purchased an older home that he can renovate and resell, hopefully giving him a boost into the real estate industry that he’d like to get into. He didn’t need to spend too much time finding the right neighborhood because he knew exactly where he wanted to be, so his unicorn team helped him prepare financially to be able to get into it. 
[32:12] Don’t Get Caught Up in the Expenses
Instead of being afraid about the expenses associated with buying a house, listen to David. If you are paying for rent and also looking to save, it might be helpful to change your perspective on how this really works. You aren’t taking on a new payment, necessarily. You’re replacing a monthly payment for a different type. By paying for a mortgage, even an increased one, you’re really combining your old rent payment and old savings payment. 

E183: Home buyers getting punished for good credit scores? Shownotes:

If you haven’t heard, the government is giving people with good credit scores higher interest rates when it comes to getting a home loan. WHAT? Why are they punishing good credit? 
Well, as usual, David Sidoni is here to give you the REAL story behind those clickbait headlines, and it’s not quite as bad as it sounds. But, keep listening so you know what’s up and how it affects you. 
Here are some takeaways from today’s conversation:
An overview of GSEs and how they work
Who will be affected by loan level price adjustments
A look at the numbers and data (of course)
Why this isn’t exactly the subsidy it sounds like
Episode Highlights:
[02:26] What’s Going On?
So, these headlines tell you that the government is the one behind all this. Well, not exactly. It’s a government-sponsored enterprise (GSE), which, in this case, is supervised by the Federal Housing Finance Agency and is run like a for-profit business. Weird, right? They’re called Fannie Mae and Freddie Mac and they are the ones that give out the loans. BUT it gets wilder. These loans, although the organizations are advised by a government-appointed director, aren’t backed or insured by government money. And it’s these ones that are facing the good credit score punishment, not ones that ARE backed by government money, so FHA, USDA, and VA loans are safe. 
[11:11] So, What Should You know?
So, those with higher down payments and higher credit scores usually pay less, but with this new policy, you’ll still pay less than people with low down payments and low credit scores, but the difference isn’t that big. So, it’s not as good for lower score people and not as bad for higher score people. Now, upfront fees for loans from Freddie and Fannie will face some changes called “loan level price adjustments.” These will tweak interest rates for many home buyers (remember, not those backed by government funds). 
[21:31] Is This a Subsidy?
To get to the point, it’s not exactly a subsidy. It’s not really a Robin Hood situation where you’re taking from the rich and giving to the poor. It’s really just minimizing the cost difference in the spectrum. But, as a business, this really just doesn’t make any sense because it doesn’t even the playing field the way it should. But don’t be too concerned about this, because if you’re getting ready to buy a home, this could change by the time you are ready. 
Resources:
How the US Is Subsidizing High Risk Home Buyers at the Cost of Those With Good Credit - New York Post
Setting the Record Straight on Mortgage Pricing - FHFA

E182: Interview: From ZERO Credit Score to Homeowner

David Sidoni sits down with How-to-Buy-a-Homie Weston from Nashville, TN, to talk about his home-buying experience. Now, Weston was in a unique position - he’s newly married, 30 years old, and had absolutely NO credit score! What?! Listen to his incredible home-buying journey.
Here are some takeaways from today’s conversation:
Building a good credit score
What happens when your credit score tanks
Being willing to go with plan “B”
Finding the right lender
Episode Highlights:
[01:31] Research, Confidence, and a Good Plan
Despite having no credit score, Weston was determined to buy a home. As a man who thrives on knowledge, he started diving into research to learn the best way to buy a home, eventually coming across David’s podcasts. He put David on 2x speed and devoured as many episodes as he could! The biggest challenge he faced was building a good credit score because he had NO credit. So, a month before he and his wife got married, he opened up a credit card to try and build good credit. But, he left his fear behind and jumped into the process. After connecting with his unicorn team, he was stunned by how attainable buying a home was, despite his unique situation. 
[13:08] Buying a Home During “Doomsday”
Everyone thought the world was going to end at the beginning of 2023 because interest rates were so high. But, that’s the exact time that Weston and his wife bought their house! They were lucky enough to be in an ideal scenario when the previous owners were more willing to negotiate. They were also prepared for full renovation projects - which many other people were looking at, too, in their area - but found that many of the prices were rising in their area because of that high demand. So, they needed to switch their gears and look for something a little more move-in ready.
[24:04] The Importance of Finding the Right Lender
When looking for a lender, it was tough for Weston to find one that would communicate well with him. But, getting in touch with a unicorn realtor led him to a lender that communicated like a dream. When it comes to making the biggest decision of your life, making sure your lender is engaged, wants the best for you, and knows their stuff is VITAL to ensure your process goes smoothly.