Latest / The Jon Sanchez Show / Stop Shopping For A House-Start Shopping For A Payment
Transcript
- Jon G. Sanchez: Good Thursday afternoon to you. Welcome to the John Sanchez show on News Talk seven eighty KOH. Pleasure to be with you. And a pleasure to be with my co-host. Well, we had two co-hosts. One just had a tech issue. He's restarting. He'll come back in. But the one we do have, Mr. Eric Clark of Adriality. How you doing, big A? Good. Can you believe it's already Aaron Clark, Edge Realty: I'm doing good. Yeah. Doing real good. Jon G. Sanchez: been a week since we saw you? I every time I every week I say that, it's like Aaron Clark, Edge Realty: I know. Jon G. Sanchez: time just keeps going by faster and faster and faster. Aaron Clark, Edge Realty: Every week when we finish on Thursday, I'm like, Okay, I'll be back on in a week from now. It feels like an eternity away and then days later it feels like it's Thursday again. Jon G. Sanchez: Yeah, exactly. I know. I know. Crazy. Dwight Millard: Is this better? Is this better? Okay. Jon G. Sanchez: This is better. Yes, we are live, Dwight. This is Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: better. Yeah, you can tell the audience, you know. Aaron Clark, Edge Realty: Mm-hmm. Jon G. Sanchez: Rookie mistake. Rookie mistake. How are you, buddy? Good. You're wonderful. Thank you. Wonderful. Dwight Millard: Doing fine, John. How are you? Good. Jon G. Sanchez: All right. Well, as Aaron was teasing, as we're off the air, today today's show is absolutely all about Dwight. We're gonna do something a little bit different after the stock market recap. We've titled today's show, How Smart Buyers Excuse me. That wasn't the right title. Stop shopping for a house. Start shopping for a payment. Let me repeat that. Stop shopping for a house. Start shopping for a payment. So here we are, guys. And Dwight's gonna tell us I'm not gonna take the you know, the the thunder out of his his announcement, but here we are, north of seven and a half percent, again, still holding there on 30 year mortgages. But that doesn't necessarily mean that all of you out there that are anxious to be buyers should stop buying. What it does mean is that you should stop shopping the old way. So today, Aaron and Dwight are going to show us and tell us how to build a home purchase backwards from the monthly payment and then uncover some opportunities most buyers completely miss. So Dwight, Does anybody do this in real life? First of all, that's what I've been trying to ask you all day long. Dwight Millard: John, that's the way we used to do it in the eighties, right? I mean, that Jon G. Sanchez: Really? Dwight Millard: I mean, yeah, this is how we used to do it. You know, it was kind of not what you qualify, what are you comfortable with the payment? And we worked backwards into a sales price. So we Jon G. Sanchez: Right. Right. Dwight Millard: kind of got away from that because, you know, you got competitive, you got Jon G. Sanchez: Interesting. Dwight Millard: housing shortages and, you know, inventory. So it it yeah, people were just going for it, not really worrying about the payment. But now, absolutely that's the way to do it. You know? I mean, right? I mean, what can Jon G. Sanchez: Yeah. Dwight Millard: you afford? What I get you qualified for and what you can afford are two different things. Right, 'cause I can get you qualified Jon G. Sanchez: Right, absolutely. Dwight Millard: for for probably a lot more than you're comfortable spending. Jon G. Sanchez: Right, right, exactly. Aaron, chime in on this. Aaron Clark, Edge Realty: So for me, I mean, you know, we talk about this a lot when it comes to affordability of homes that people don't really care what the price is. They really care about the payment. It's always been that way in my world. and usually even when I get them handed down, not from Dwight, because he kind of goes over everything aspect of everything from being in the industry for so long, but a lot of people will call me and they'll go, I just talked to the lender and they approved me for $900,000. And I'm like, Okay, so what's the payment in on that? And then they they're like, I I don't know, they just approved but I can afford nine hundred thousand dollars. And I go, Jon G. Sanchez: no kidding, no kidding. Aaron Clark, Edge Realty: Okay, well let's let's do let's take an example. That house you sent me yesterday, let's run that scenario. So we run the scenario, I show the taxes, insurance, everything else, and I go, That payment is X dollars a month. I can't afford that. That's way more than I can I I'm like two thousand dollars less a month and you know, so so then I end up Jon G. Sanchez: How funny. Yeah, right, right, exactly. That's a gotta fit in my Dwight Millard: Yeah. Yeah. Aaron Clark, Edge Realty: working it back. But yeah, that's usually how I mean it's always been that way on our end. Yeah. Jon G. Sanchez: Yep. Yep. Exactly. Well, I I think it's a the reason I I I was thrilled about this topic is I think a lot of people that have not been in the housing market for quite some time, and maybe, you know, this coming spring or whatever, who knows where rates will be, of course, but they haven't had to look at it this way, right? exactly. You know, they're like, I wanna, you know, I know I can afford a six, seven, eight hundred thousand dollar house, no problem. And then come to find out, like you said, once you throw everything else in, maybe I can't afford that. And so You really need to start with, you know, like everything in life, it's all about the cash flow. It's the same principle, guys. You know what's funny about it? It's the same principle that I tell clients, and that is when when we're talking about, you know, planning for their retirement, right? I don't care how much money somebody has. I really don't. I don't care if it's a hundred thousand or a hundred million. You have to work it backwards and start with what income do you need? Or in this case, Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: what portfolio income do you need? And then you add in other sources of income. To live the retirement that you want to, right? And if a person can say, you know what, I'm really thrilled making a thousand dollars a month off my, you know, $200,000 portfolio, great, that's a success. But I've had, Dwight Millard: Anything. Jon G. Sanchez: just like you guys, I've had the other extreme where people have had multi-millions, and I tell them, here's what we're comfortable with you taking out on a monthly basis based upon the asset allocation plan and so on and so forth. And like, I need more than that. I I can't live off of that. Well, sorry, you know, then you better continue to work, you better continue to save, you better continue to do something because that's really all safely that your portfolio can generate for you. So, you know, we're we're a payment society, your point, Aaron. We're a payment society when it comes to something like a mortgage, but we're also a a payment society when it comes to retirement savings and what our income is going to be and and so on and so forth. I just had this discussion today, matter of fact, with a client who just sold a house, did very, very well up in up at the lake. And you know, very large sum of money he's he's gonna end up with. And you know, we did exactly that. I said that was the first words out of my mouth. I said, okay, so what do you need this money to do? What do you need it to generate? And he said, he knew it right off the top of his head. I said, beautiful. It's only a you know 4.6% withdrawal rate, no problem. He was thrilled, absolutely thrilled. So now he's in a new house. Now he's got you know a nice chunk of money, and now he can live the retirement life that he wants to live. So it's what it boils down to. You know, the guy could have had four Dwight Millard: Mm-hmm. Jon G. Sanchez: million, and if I would have said, Hey, you what? That's not enough. You know, based upon my calculations, not going to be enough income. He would have been as upset as you would imagine. But you know, the the amount that he had after the, like I said, the proceeds of the house, he's like thrill. This is like perfect life now. Gonna be a perfect life for him. So yeah, we're payment. We're payment driven. There's no doubt about it. Payment Dwight Millard: It's been Jon G. Sanchez: and income driven. All right, guys. Well, let me get the stock market side out of the way, because it is not gonna take me long today. unlike, unlike you know, all the other days, it's amazing what happens when the calendar flips and Dwight Millard: Yeah. Jon G. Sanchez: Brand new month, brand new quarter. And it was like, where's everybody at today? Where's all the concerns about all the normal things? It just wasn't there today. It was a really, really boring day, just to be very blunt with you. We finished up, if you can believe this, 21 points on the Dow. Finished up 21 points. closing levels 50,926. NASDAQ up 11 points, obviously a fraction of a percent gain there. And the SP, a 15 point rise, also a fraction of a of a percentage gain there. Let's go ahead and jump right to oil. And this was amazing. We did have strength in oil today. Market didn't seem to care. $2.48 gain, $93.02 a barrel. gold was a modest increase there. $26.40 Dwight Millard: Yeah. Jon G. Sanchez: rise, $4,2120. And Mr. Millard, you gotta be. No, Dwight Millard: Mm-hmm. Jon G. Sanchez: I shouldn't say you gotta be. You are smiling today. No wonder. Ten year treasury yield down six basis points to yield a $5.24. However, how are you looking overall on the mortgage side? Dwight Millard: Well, to your point, John, we're still north of the seven and a half. So we we we matched at the Treasury. We we were down six basis points on the thirty year fixed rate. seven point five four. So still, like you said, uncomfortably high, you know. And so hence the at least for the last few months, the topics that you generate are exactly covering these higher rates. So yeah, Jon G. Sanchez: Yes, yes. Dwight Millard: it w i I mean, I don't know. I don't it it it feels like there's some hope, you know, out there somewhere in this whole you know, conflict or whatever maybe. I I you know, I I know you're not optimistic of but I'm I I I mean, I Jon G. Sanchez: Yeah, yeah. Don't don't don't don't don't get excited. Aaron Clark, Edge Realty: Ha ha Dwight Millard: I think that's the only thing that can start moving the needle th the right way. So, but Jon G. Sanchez: Yeah, yeah. Dwight Millard: but to your point, there's still activity going on, probably not as much. People kinda maybe went to the sideline again, but Jon G. Sanchez: Yeah, I saw some national numbers today that yeah that did not look good. my goodness. Well the the mortgage Dwight Millard: No, no, no, no. I just I Jon G. Sanchez: actually pardon me, it was it was yesterday the mortgage mortgage data and yeah, numbers way down, no surprise there, of course. Dwight Millard: It's yeah, yeah. And and and and I had a long conversation with a dear friend i in the industry and same thing. I mean, there's gonna be cutbacks. There's I mean, if this continues on for end Jon G. Sanchez: yeah. Dwight Millard: of the year, first there it's gonna be it's gonna be painful for mortgage companies. It's gonna be very painful. And the Jon G. Sanchez: Yes. Yeah. Dwight Millard: problem, John, with that is you know, and again, this is not every but when you think about it, if you need that client and and you you know, I mean rates help you with, you know, staying afloat, you know, but if you gotta start cutting Jon G. Sanchez: Sure, sure. Dwight Millard: rates, start Cutting costs and this I mean, w the one thing that can go from there are people. You know, you're gonna start laying people off and it's just yeah, it's just gonna Jon G. Sanchez: Right, right. yeah, it's always the first one to go in any business. Dwight Millard: it's gonna just it's a tough market and i I didn't expect this for this long for this year, you know. I I I I expected a little better. Jon G. Sanchez: Yeah. Well well, you know what we you know what's amazing? I I was thinking of you, Aaron, this morning. You know, we had the construction spending data released up nine tenths of a percent month over month, weekly initial claims down a thousand filings to only a hundred and ninety-seven thousand people. Continuing claims down eleven thousand, only one one million seven and some change million people. Yesterday we had which I kind of looked at it with one eyebrow up and one eyebrow down, you know, the Fed's favorite measure of inflation, the PCE numbers, a personal consumption expenditure. Up three tenths of a percent month over month. That was below expectation. the year over year number, still below expectation. So, you know what's amazing, Dwight, is you look at the underlying data, labor front looks phenomenal. I mean, there is nothing you can say bad. Dwight Millard: Mm-hmm. Mm-hmm. Mm-hmm. Mm-hmm. Mm-hmm. Jon G. Sanchez: Tomorrow, of course, we're gonna get non-farm payroll numbers. Labor front is great. The inflationary data, okay. Fed member yesterday saying, you know, based upon the data, yeah, I I'm kind of Basically, I'm paraphrasing basically I'm I'm not going to vote for an interest rate increase in October. Then we had another Fed member today come out and say, again, just the opposite. So again, the Fed's playing this game. One person says rate increase, Dwight Millard: Mm-hmm. Jon G. Sanchez: another person doesn't. So, you know, I think we find a find ourselves in this colundrum at this point where everyone's going, what data do I really look at? Right? What what really is is you know, are we looking at? I'll tell you my perspective on the oil side and how it relates to inflation and most importantly to the bond yields and therefore the mortgage side. is I think we're becoming very, very immune to market volatility when it comes to oil. I like I said, two dollar and forty eight cent gain today. Historically that'd be a a a a market mover on the downside. Like I said, market didn't even budge on the news today. So I think we're kind of becoming immune to that side of it, which is a good thing, right? That's a very good thing. So Dwight Millard: Mm-hmm. Jon G. Sanchez: I think, you know, if we can I think if we can go for a while, obviously we're gonna have earnings season start here in a couple of weeks, but I think if we can go for a while without any major inflationary type of data that really spooks the market. I think you could s I think you're you're pretty close to a peak right now, Dwight, on that on the thirty year mortgage, you know, based upon what the mar bond market's Dwight Millard: I Jon G. Sanchez: telegraphing at this point. Dwight Millard: with everything you described, John, I I that that's my hope and prayers that w you know, but I I just see this being very labor intensive getting these rates down. It's not gonna come easy, it's not gonna come fast, Jon G. Sanchez: Sure, sure. No, not at all. Dwight Millard: it'll be slow and methodical. It and so I mean, if anybody's expecting a five and a half anytime soon, it's gonna be, you know, it's gonna be a ways. It's a ways out, Jon G. Sanchez: Yeah. That one's gonna be tough. Yep. Dwight Millard: yeah. Jon G. Sanchez: Yep. Absolutely. All right, you're up to date. So we're gonna get an early start when we come back and we'll hit our topic. Stop shopping for the house, start shopping for the payment with Aaron and Mr. Millard. Welcome back to the John Sanchez show on News Talk 780KOH with Dwight Millard of On Q Home Loans and Mr. Aaron Clark of Adrility. Like I said, a lackluster day today. Just a 21 point rise on the Dow, Nasdaq gained eleven and the SP higher by 15. Once again, also oil up $2.48, $26.40 rise in gold, down six basis points on the 10-year at a yield of 5.24%. And once again, that 30-year mortgage, as Dwight alluded to, 7.54%. All right. Now we've got high mortgage rates. They've been here for a while. We're solidly obviously above 7%. So we said, you know what? Let's reverse engineer it for our audience today. Let's start shopping for a house. Or excuse me, stop shopping for the house like we normally do and start shopping for a payment. So that's what we're going to be covering with you this afternoon is kind of like I said, reversing the the psychology, right? Normally you go out, you go to house shopping, then you go to the lender and you go, okay, what can I afford? And hopefully it's the same amount of the house that you bought and on and on and on. But it doesn't work that way anymore. So do I let let's start with building the purchase backwards. Start with that. So let o' go. All right, go ahead. No, go right ahead. Go ahead. Dwight Millard: Yeah. Yeah. Yeah. Yeah. So go ahead. That's it, John. I I do this in every case, unless I actually know what the borrower's looking for. Is I always start, what are you comfortable with? Forget about what I can qualify you for, forget. I think they well, Jon G. Sanchez: Do people know that answer? Do people know let me interrupt you, do people know that answer? Dwight Millard: yeah, because they know what their current housing, the ones that are are a little tougher, the ones that maybe are living at home right now, or you know, some different scenarios, but I yeah, they have a pretty good idea what they feel comfortable with Jon G. Sanchez: Okay. It's good. Dwight Millard: because they've been having that spending habit for maybe the last year, year and a half. So I Jon G. Sanchez: Right. Dwight Millard: think where the shock comes in, Aaron can tell you this is that they look at the rent and they go, Well, I'm paying, you know, $2,300 in rent. So I want to keep it there. I I I that's almost impossible, right? So, but they have a good idea. So what I do is I take that and then from that point, that is their total payment. So then you have to back out because my calculator. Calculator only calculates principal and interest, John. So I got to back out taxes estimated, insurance estimated, mortgage insurance if there is any estimated. And then you know, you guess kind of maybe leave an HOA possibility there. So that gives you that bottom number. And then you just plug it in the calculator in terms of that's it over 30 years. Today's rate at seven. Let's just even be gracious and go 7.375 today, right? Let's just Jon G. Sanchez: Uh-huh. Dwight Millard: go a little bit low. Then that'll tell me what they. that that'll give me the base loan amount. That'll give me the loan amount. So then then it becomes how much you want to put down. Then I backwards, there's my sales price, right? I'm going to put Jon G. Sanchez: Okay. Dwight Millard: 10% down. I divide, you know, so then and that's probably the smartest way to do it, John, because the problem then is that they get a typically when that happens, I go, Well, you can't find much for that. You know, and you're going, okay, Jon G. Sanchez: Ha ha ha. Dwight Millard: so, so now let's let's, you know, let's move into a more realistic, but I want to keep you comfortable, right? Let's Let's go and so you just kind of gradually move around and get to a point. and again, I never use a buy down, John, a as my tool for that b yeah, Jon G. Sanchez: Yep. That was my question. Yep. Dwight Millard: because that just you know, that can just run into problems. So I just use a just a straight today's market, what they get you know, I mean, so if we can get the seller to pay for a buy down, they get a couple of years, you know, cheaper, that's great. But I want them to be comfortable. Jon G. Sanchez: Right. Okay, so so we we we haven't at this point we haven't talked, we haven't talked purchase price of the home yet. So now you you have ran the calculation. Now they Dwight Millard: Mm-hmm. Jon G. Sanchez: have confirmed to you I am comfortable. Let's just use the example, thirty-five hundred dollars a month, all in. Now Dwight Millard: Mm-hmm. Yeah. Right. Jon G. Sanchez: that's when you reverse the numbers and you come back and go, okay, at thirty-five, you know, hundred dollars a month, Dwight Millard: Right. Jon G. Sanchez: you how much do you want to keep in emergency savings, etc. That's when you will say, Okay, based upon this. You're pre qualified for X amount of dollars. Okay. Dwight Millard: Right, right. But that and typically, John, ninety-nine percent of the time I usually can qualify buyers higher than what they're comfortable with. To Aaron's Jon G. Sanchez: Right, right. Dwight Millard: earlier point, you know, they they don't under they get qualified for nine hundred. I don't want that payment. So typically on a good on a good client, I can usually give them more than what they feel comfortable. And there's not Jon G. Sanchez: Okay. Dwight Millard: a lot of mortgage professionals out there. They'll try to run you. And there and as Aaron knows there's yep, there's there's Jon G. Sanchez: yeah, right up to the top. Yeah. Dwight Millard: realtors out there. There's there's people out there that'll just push you to the max, you know. So but that's the that's the smartest way to do it. And then you can, you know, then you talk to them, you counsel, well, maybe we can pay off this debt instead of putting extra down. Pay off that debt that, you know, I mean, if you have a ten thousand dollar bounce on a car and it's five hundred dollars, let's put let's pay that off and put less Jon G. Sanchez: Mm-hmm. Right, right. Dwight Millard: down by 10 and I'm gonna get you your net Jon G. Sanchez: Absolutely. Dwight Millard: savings will be much greater on a monthly basis doing it that way. So those are just different ways and they they get a little more comfortable. But it's it's it's a it's time well spent right there, John, because at the end of the day they Jon G. Sanchez: Yeah. yeah, absolutely. Dwight Millard: gotta they gotta do the they gotta make this payment. So Jon G. Sanchez: So, Aaron, before we go to break, so once Dwight establishes the the mortgage, you know, amount that they're approved for, the so on and so forth, they bring that letter to you. Now, what kind of counseling do you give them to again, we're in this reverse mortgage side of things, or reverse engineering, excuse Aaron Clark, Edge Realty: Well, I g Jon G. Sanchez: me. Aaron Clark, Edge Realty: yeah, I've I gotta feel out, you know, are they looking for have you ever heard champagne budget on a or champagne taste on a beer Budweiser budget? You know, I Jon G. Sanchez: Beer budget, yep, yep, yep, absolutely. A good point. Aaron Clark, Edge Realty: gotta figure out who I'm dealing with, right? So assuming I don't quite know yet, if I've got somebody who's got some flexibility and they you know, they're not l stuck to one neighborhood, but they're stuck to Jon G. Sanchez: Mm-hmm. Aaron Clark, Edge Realty: maybe anywhere in Reno or something Jon G. Sanchez: Sure. Aaron Clark, Edge Realty: like that, then we'll probably start at a place where we're gonna look at listings that are a little bit stale, so maybe like 90 days on the market plus, because on those specific listings, we know that those sellers are getting a little bit frustrated and they're running out of time type thing in their mindset. So Jon G. Sanchez: Right. Right. Aaron Clark, Edge Realty: we can take advantage of some of the stuff that Dwight mentioned earlier, which is we can get the seller to buy the rate down, we can get closing cost credit, we can do all kinds of things to soften the money even more to give that buyer even less of a monthly payment. By buying the rate down or points, closing costs, et cetera, saving more money for their pocket. So that's that's Jon G. Sanchez: Right. Aaron Clark, Edge Realty: the first place to start. Jon G. Sanchez: Absolutely. Dwight, once they meet with Aaron, will they come back to you and say, Yeah, Dwight, I know you approved me for eight hundred thousand, but through Aaron's great negotiation skills, we got some buy downs, we got this, you know, benefit to us, this benefit to us, that benefit to us, etc. Dwight Millard: Yeah. Jon G. Sanchez: I don't need eight, I need seven fifty, right? Do you see that very often? Okay. Yeah, that's gotta please you. Dwight Millard: Yeah, yeah. I do. I do. And and that's a smart way to go. And I know Aaron Aaron recomm you know, I'll run the numbers many times. So what when I'm doing a blind scenario, you know, I'm just estimating taxes and insurance. When Aaron Jon G. Sanchez: Sure. Dwight Millard: finds them a property now, I can get real live, you know, numbers going, Hey, here's your taxes. This is pretty much your insurance. We can get that locked up. I mean, we get everything. So that's always a good way to go down because if it it it wins for everybody, right? Everybody wins in that. Jon G. Sanchez: Right, right. Dwight Millard: payments better, yeah. So they qualify easier. Jon G. Sanchez: Yep, exactly. All right. So notice what we just did here. Again, we reverse engineered this. We didn't talk about the purchase price first or any anything like that. What are you comfortable with on that payment? That's where it all starts. So now when we come back, we're going to talk about something that's very important. I think there's a lot of confusion on guys, and that is all right, price cut or rate buy down, Mr. Clark. When you go for that negotiations, which one is really going to have the most impactful benefit for the client. Again, price cut, rate buy down, combination, whatever it is, enlighten us on that when we return. Welcome back to the John Sanchez show on Newstock 780KOH with Aaron Clark of Edge really do Melard of OnCube Home Loans. Once again, we finished a late gain of 21 on the Dow. NASDAQ up 11 and the SP higher by 15. You can only listen to what we talk about during the break. It's fascinating. Absolutely fascinating. All right, let's get back to our topic. Stop shopping for the house and start shopping for the payment, right? Okay, so you guys have said a lot over the, well, probably the last year plus, if I remember correctly. Obviously, we're in a new situation where the buyers Have some advantage right now. So they get these things called concessions and buy downs and on and on and on. So the challenge I've placed to Dwight and to Aaron is the following Seller says this can either give you a $20,000 price reduction or a $20,000 credit towards the closing costs and also an interest rate buy down. So 2020. Mr. Clark, let's start with you. Which one is most impactful? Aaron Clark, Edge Realty: This is like the easiest answer in the world. Take the take the credit. Yeah, take the credit yeah, me too. I was like, please call on me first. you always wanna take Dwight Millard: I was going to press my button. Yeah, Jon G. Sanchez: Love it. Screen one, screen two. You and you in the front. Aaron Clark, Edge Realty: the interest rate buy down and the credit towards closing costs Dwight Millard: Yeah, yeah. Aaron Clark, Edge Realty: because you know, let's say you're doing a eight hundred thousand dollar purchase price, you're Jon G. Sanchez: Yes. Aaron Clark, Edge Realty: putting five, ten percent down, whatever, and your payment is gonna be let's say around almost just under five thousand dollars a month, let's say on average. If you reduce that $20,000 on the price point, the the numbers are gonna change by such a small amount, it's not even worth it. I mean, it's not even gonna be $100 a month, probably after it's Jon G. Sanchez: White's biting his lip. Yeah. Yeah. Right. Dwight Millard: Yeah. Yeah. Aaron Clark, Edge Realty: all said and done. Plus, you're still putting all the cash that you're into the game Dwight Millard: Yeah. Aaron Clark, Edge Realty: that you were gonna put. If you do a buy down and you take that same $20,000 and you buy the rate down or you put it towards your closing costs, let's say your closing costs were $10,000. Well, guess what? $10,000 goes right back into your pocket. Let's say you buy the rate down for another the with the other ten thousand and now it drops your payment by two hundred and fifty dollars a month. That's a realization as if they dropped the price by like forty thousand dollars just Jon G. Sanchez: Right. Aaron Clark, Edge Realty: from the rate buy down, not counting the ten thousand that you're gonna save in your pocket. So all day long you're Jon G. Sanchez: Love it. All day. Aaron Clark, Edge Realty: gonna get more bang for your buck. But you have to remember if you're gonna refi like next week, that doesn't necessarily make sense. You you gotta be there for a little while in that in that rate environment since you're taking advantage Dwight Millard: Yeah. Right. Yeah. Yep. Aaron Clark, Edge Realty: of it that way. Jon G. Sanchez: Dwight, you're chomping at the bit. Go for it. Dwight Millard: Hey, sp spoken like a true loan officer, Aaron. I mean a hundred percent, John. A hundred percent. You know, Jon G. Sanchez: That's right. That's right. You've taught him well. Okay. Aaron Clark, Edge Realty: Ha ha Dwight Millard: take it towards a transaction. Aaron's right, you're probably flirting with about a hundred dollars on that twenty grand if you put it took it off the break. And now you become your own worst comp, right? You just knocked twenty grand off your now you're on your worst. And and John, you Jon G. Sanchez: Yeah. That's good point. Dwight Millard: it it just it makes more sense. But to Aaron's point, you gotta make sure that you're doing it right. At least I always say go after the closing cost and then after that, then Jon G. Sanchez: I was gonna say, okay, so when we throw in the world, let's just Dwight Millard: Didn't bite you. Mm-hmm. Jon G. Sanchez: call it concessions, whether it's a rate buy down or closing cost Dwight Millard: Yeah, anything. Jon G. Sanchez: assistance, whatever, is there one let's start with you, Dwight, is there one that has the biggest impact on the monthly payment? Dwight Millard: the rate by down. The rate by down. Jon G. Sanchez: The right by down. Okay. Dwight Millard: But but yeah, but your wallet would be the closing cost, right? So the wallet has the biggest Jon G. Sanchez: Right. Dwight Millard: so yeah. Aaron Clark, Edge Realty: Yeah, 'cause if you have fifteen thousand dollars in closing costs and you used fifteen thousand how and and you're gonna save two hundred dollars a month, how many months can you go with the fifteen thousand dollars that you saved before Jon G. Sanchez: Mm-hmm. Aaron Clark, Edge Realty: you hit break even? So then by then you're probably gonna refi anyways. So that's Dwight Millard: Yeah, yeah. Jon G. Sanchez: Right. Aaron Clark, Edge Realty: where wh why Dwight is saying that. It's always better for the cash immediately out of pocket. Jon G. Sanchez: How do we how do we negotiate a rate buy down? Aaron, start with you. So let's say, Aaron Clark, Edge Realty: How do you do it? Jon G. Sanchez: well, let's say it's this 20,000. Okay. And and Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: and the and the buyer says, okay, Aaron, I want you to negotiate. I okay, you got me my 20 grand. Now, Aaron, where do I put this money? And you go, best bang for the dollar is gonna be on the rate buy down. So Aaron Clark, Edge Realty: Yeah. Jon G. Sanchez: how do you equate 20,000 to if Dwight quoted them seven and a quarter percent, but now you got 20 grand, maybe this is a Dwight question. So either one of you want to answer it. Aaron Clark, Edge Realty: Yeah, well, I mean, on the Jon G. Sanchez: How do you equate that? Aaron Clark, Edge Realty: on the front end, when we write the offer, we'll write the offer and instead of beating them up on price, if that's what our goal is, because we know we're Jon G. Sanchez: Mm-hmm. Aaron Clark, Edge Realty: gonna get more bang for the buck, then we'll put in the offer that seller to contribute to buyer twenty thousand dollars towards, and it will say, closing cost, rate buy down, prepaid not recurring, non recurring, etc. Then that goes to Dwight. Now Dwight Jon G. Sanchez: Got it. Aaron Clark, Edge Realty: takes that money and he's the one that sits down and he says, Here's the best allocation. We put a little money here, a Dwight Millard: Yeah. Aaron Clark, Edge Realty: little money. Money there, a little money here, and then boom we have the perfect five star Michelin meal. Jon G. Sanchez: Okay. Okay. So it's a so it's a team effort between the two of you. Okay. Did not realize that. Dwight, not take it from there. Dwight Millard: Yeah. What well and John Aaron Clark, Edge Realty: a hundred percent. Yeah. Dwight Millard: John, what what Aaron gets better than anybody is first of all, you go out the contract you write is a generic contract. I mean it says that Aaron would write it anyhow before you even get to the concession. So there are certain Jon G. Sanchez: Right, of course. Dwight Millard: closing costs that your seller's automatically gonna pay. But I've seen a lot of contracts Jon G. Sanchez: Right. It's usually half. Dwight Millard: where they don't even do that. And what the seller would have already paid, they incorporated it in their concession, so they lost that money. Do you under you follow what I'm saying? What they Jon G. Sanchez: Not really. Explain that again. Dwight Millard: Well, so typically there are certain what standard costs that the seller would pay. Jon G. Sanchez: Let's use a you split the closing costs as norm, right? Dwight Millard: But the but there have been instances where I've seen contracts with agents that don't understand that write the contract to the favor of the seller and then do the credit. So they give up what they would have already. Aaron, can you explain that but you know what I'm saying? Aaron knows. They would have taken the five thousand five thousand of sellers costs anyhow. Yeah. Yeah. Yeah. Jon G. Sanchez: Okay. Okay. Okay. They would have taken the t s five thousand of the twenty and put it towards closing costs where where normally they've that would they've already got it anyways. Okay. Great point to bring up. Great point. Okay. Aaron Clark, Edge Realty: Yeah. Dwight Millard: And Aaron knows and that's and so you're already kind of getting a little leg up because that's something we're already gonna pay. But the moment I know how much money they have left over after closing costs, then we do a as aggressive buy down, either whether temporary or permanent, just whatever they, you know, whatever come. Mm-hmm. Mm-hmm. Mm-hmm. Mm-hmm. Mm-hmm. Mm-hmm. Yeah. So I Jon G. Sanchez: Okay, so I need you to go further. Okay. So you got twenty grand, right? So let's make it simple. You got this twenty grand buy down that that Aaron negotiated. How what do you how do you do that? What do you Dwight Millard: so typically let's just say the closing costs are eight and I got twelve thousand. I'll take the 12,000 and I'll go by my loan amount and that'll give me exactly how many points I can actually utilize to buy down, right? So if you're you know, depending on what your loan amount is. So in this particular case, it's probably gonna be somewhere around three quarters. Let's just even call it a point. So if you get a point better in the it, not in the rate, but you're getting it in the cost, that's gonna probably knock you down at least a quarter in the rate on a on a Jon G. Sanchez: Okay. Dwight Millard: you know, on a on a permanent buy down. Jon G. Sanchez: So you're you're gonna apply so it basically you're just gonna take in this example twenty thousand because we're we we we've already agreed that the closing costs are are yeah Dwight Millard: Closing costs. Mm-hmm. Jon G. Sanchez: above and beyond the twenty. You're gonna take the twenty thousand and just essentially it's just like the client take giving you twenty thousand, say, I want you to do a rate buy down, and and you know, how many points is that worth to buy it down? Then you gotta go, is it temporary or is it a permanent buy down? Okay, where do we Dwight Millard: Yeah, yeah. Exactly. Exactly. Mm-hmm. Jon G. Sanchez: wanna be in today's market? Do we wanna do a temporary buy down or do we want to do a permanent buy down? Dwight Millard: Well, that's depends on you're the master, John, where the rate's gonna be in a year. Yeah, that's what Aaron Clark, Edge Realty: Ha Jon G. Sanchez: I would say temporary. Yeah, I would say temporary. Dwight Millard: I would say too. I mean, you get more bang for the buck and on the temporary, we've talked about this before. What people need to really understand on a temporary buy down, whatever that money costs to do that temporary, you never lose it. So if it's a t if it's a two year buy if it's a two year buy Jon G. Sanchez: Explain that. Dwight Millard: down and you refinance in one year, the remaining amount of that credit for that buy down goes to principal reduction. Jon G. Sanchez: Thank you. I was hoping you were gonna s bring that up. Yes. Dwight Millard: So I like the t I like the temporary and you could do a one zero buy down, meaning you could just do a one percent buy down. So there are creative ways just to get kind of your cake and eat it too, but Jon G. Sanchez: Or another another option too that just came to mind is you you perked my interest a few weeks ago, Dwight, when you're talking about the three, two, one, right? And and right, come in at a really low rate at this point and maybe take that Dwight Millard: Mm-hmm, yeah. Yeah. Mm-hmm. Yeah. Yeah. Jon G. Sanchez: twenty grand, maybe invest it, maybe go pay off some other debt. I mean, remember, folks, that twenty thousand dollar credit in this example, it does not have to go, you know. you you have a lot of options, like is the point I'm getting and getting to. And that's where your team will really come into play and go, what's the biggest bang? Because Dwight, you I I'm I'm sure, you know, as savvy as you are. You can say, okay, yeah, you know, Mr. Smith, you got twenty thousand. We, you know, it's for an interest rate buy down, but you could talk to Aaron and go, hey, you know what? I just want a twenty thousand dollar credit because dude's got, you know, two ten thousand dollar credit cards at five hundred dollars each. That's a thousand dollar month savings. you do? Okay, explain that. Dwight Millard: Yeah, you gotta be careful on that, John. You gotta yeah, you gotta be yeah, it's yeah, you you you can't it can't be outside the transaction. So typically the the money earmark has to stay inside in yeah, stay inside. So but if you're still saving Aaron Clark, Edge Realty: Yeah, everything stay has to stay in the pot. But your your your Jon G. Sanchez: Okay, see, there we go. Dwight Millard: the money, you could take the money, you know, like you said, go after closing costs that saved you ten, go pay your credit card off later. Yeah, you're absolutely right. Jon G. Sanchez: Okay. Right. Okay. Aaron Clark, Edge Realty: Yeah. You're you're you're robbing Peter to pay Paul type thing, 'cause you're you're taking money from the seller to pay your closing costs that would have come out of your pocket and now it's not, and now that money's free. So you can go buy a broom with it and it's out of the transaction. Yeah. Dwight Millard: Pocket anyhow. Yeah. So in a roundabout way, you're right, John. Yeah. Yeah. Yeah. Yeah. Yes. Yeah. Jon G. Sanchez: Right. Right. Right. Yeah. Yeah. Right. Right. Okay. Okay. All right. Dwight Millard: Yeah. Jon G. Sanchez: So as we conclude, get ready to go to our final break. As we conclude, the interest rate buy down, nine times out of ten, it sounds like. Not every time, but nine times out of ten, correct me if I'm wrong, is gonna be the most efficient use of that money. Dwight Millard: I yes, yes. Yeah. Jon G. Sanchez: Both of you agree to that. All right. Perfect. All right. We got that accomplished. All right. When we come back, buy, wait, or restructure. Welcome back to the John Sanchez show on Newstock seven eighty KOH. All right, boys, let's get some phone numbers going for everybody anxious to talk to you and let you assist them in their real estate endeavors. Mr. Clark, start with you. Aaron Clark, Edge Realty: Six seven three sixty seven hundred. Jon G. Sanchez: Thank you, sir. Mr. Millard. Dwight Millard: two four zero two zero two two. Jon G. Sanchez: Very good. All right. Now let's move on to something very interesting. And Dwight, I'm going to throw this in. I'm going to throw you guys for a loop. We were talking about this during the break. And I think, as the host, this is very important. Dwight, you were saying during the break, and and let's just make this portion short, there's some great programs out there right now, right? For Dwight Millard: Yeah. Jon G. Sanchez: the for the guy or gal that says, you know what, I don't need the the the the the prettiest house on the street. I want the best value on the street. You can do a loan. Where they can come in and go, all right, yeah, I need a new roof, I need new paint, I need a let's call it a hundred thousand dollars. You can get that home improvement qu loan, I'll call it, into the into the original mortgage and and have them pay for all that under one loan. Dwight Millard: Under one loan, every agency offers it VA, F H A, conventional. what you find in Jon G. Sanchez: may why isn't that talked about more? Dwight Millard: well, because it's just it's a t it's a tougher animal. I mean, you you can't move in right away and you know, it involves contractors and different things, but for those that have that bandwidth to do it, th that they're it's about as good as it's ever been on the renovation product out there. Yeah. Mm-hmm. Yeah. Jon G. Sanchez: Wow, that's amazing. I like that idea. Okay, boys, you guys ready for a little little challenge here? You ready? I noticed I lifted up I rolled up my sleeves because we're gonna go fast. Here we go. Yep, roll up your sleeves. There you go. All Aaron Clark, Edge Realty: let me do that too. Jon G. Sanchez: right. Buy weight or restructure. Here we go. I'll go to Aaron and then Dwight. So we're gonna get see if you guys have the same answers or different ones. I've got seven questions and your answers are either well listen, listen. Aaron Clark, Edge Realty: What do you mean restructure? Clarity. Jon G. Sanchez: Your answers either gonna be buy weight or restructure. Okay, so let's do the first question slowly to answer your question. First time buyer currently renting. Do they buy, do they wait, or do they restructure? Meaning, hey, you know what? I wanna I wanna get into the real estate side of things, but I need to I need to kind of get my life restructured and and handled. Okay, Aaron. First time buyer currently burning. Aaron Clark, Edge Realty: Alright, for me it's gonna be bye. Bye. Jon G. Sanchez: Bye. Dwight. Aaron Clark, Edge Realty: Great deals. Dwight Millard: Bye. Bye. Jon G. Sanchez: Love it. Love it. Number two, Aaron, growing family that has outgrown their current home. By weight or restructure. Dwight Millard: Jo I I I I was gonna go restructure when I first saw that. So I mean I it's a buy, but it's you know, maybe figure out the Yeah, yes, yes, yes, yes, yeah, yeah, yeah, yeah, agreed. Agreed. Jon G. Sanchez: Buy with an asterisk. Okay. Okay. All right. Perfect. Air Aaron Clark, Edge Realty: For the right scenario. Th there's a lot of caveats to it, but overall it's gonna be by. Jon G. Sanchez: Erin number three. Retiree considering downsizing. Buy weight or restructure. Aaron Clark, Edge Realty: Wait, wait, yep. I'm gonna say wait. Jon G. Sanchez: Dwight? Dwight Millard: I I would say the same thing. I think it's only gonna get a little better for that that person. Jon G. Sanchez: Okay. Consensus, real quickly. Why do you both answer it that way? Why do you say wait? Aaron Clark, Edge Realty: There's no urgency. You don't have to downsize today. I think for a retiree who's approaching end of of life that they should prop hey, listen. I get this question all the time. There I don't mean death, Jon G. Sanchez: Hey, easy now. Geez, young buck. It's not the end of it's not the end of life when you retire in your 60s. Jeez. Dwight Millard: Ha ha ha. Aaron Clark, Edge Realty: I mean life of working. Jon G. Sanchez: okay. Nice comeback. Aaron Clark, Edge Realty: that they are in a place where they have freedom and flexibility and there's no need to jump. So why add the pressure and the stress? Yeah. Jon G. Sanchez: Yes. Right. They they got the time. I love that. Dwight Millard: Yeah. Jon G. Sanchez: Okay, perfect. not death. All right. Just want to clarify that. All Aaron Clark, Edge Realty: Not death. End of working. Dwight Millard: Yeah, yeah, yeah. Jon G. Sanchez: right, number four. Homeowner with a Aaron Clark, Edge Realty: Ha. Jon G. Sanchez: three percent mortgage relocating for work. By weight of restructure. Aaron Clark, Edge Realty: I mean, I'm gonna say rent. If you're gonna only do it Jon G. Sanchez: that's interesting. Aaron Clark, Edge Realty: for three years, keep your house, don't sell it, and go rent for three years. Jon G. Sanchez: Okay. Yeah, you got a three percent mortgage. Yeah, Dwight. Aaron Clark, Edge Realty: Yeah. Dwight Millard: Yeah, I I would I would agree wait. Jon G. Sanchez: I agree with you on that one. Number five, buyers planning to move again within three years. Aaron, buy way to restructure. Aaron Clark, Edge Realty: I'm gonna say again it's gonna be a wait. Yeah. Dwight Millard: Yeah. Jon G. Sanchez: Okay. Dwight Millard: Weight as well. Yeah, it's gonna be tough to recapture that, you know, unless you're Jon G. Sanchez: Dwight? You go. Okay. Aaron Clark, Edge Realty: Yep. Dwight Millard: yeah. Jon G. Sanchez: Number six. Aaron Clark, Edge Realty: You'd have to get a smoking deal in the front. Jon G. Sanchez: Yeah, there Dwight Millard: Yeah. Jon G. Sanchez: you go. Number six. Buyer using every dollar of savings for that down payment. Dwight Millard: Mm-hmm. Aaron Clark, Edge Realty: That's always gonna be a restructure for me. You should never go house poor by throwing all your Dwight Millard: Yeah. Yeah. Aaron Clark, Edge Realty: cash in one basket. Jon G. Sanchez: There you go. Do I Dwight Millard: I I agree a hundred percent. Restructure you know, live and fight another day, right? You you'll you'll make it. Disciplined what you need. Yeah. Jon G. Sanchez: Yep, live and find another day. Yep. You know, Divide, I I I love when you say I I love your attitude. And you you know, the 20 plus years we've been together on this show, you have you've always said that. You've always you've always you're one of the well, the only mortgage professional I know that gives people a glimmer of hope, right? When they're you Dwight Millard: Yeah. Jon G. Sanchez: know, you always say, look at maybe the time's not right now. You'll live to fight another day. And I think that's so very important for people to understand, especially young people. So frustrated, trying to get in, trying to get the down payment, trying to qualify, trying to do everything. And your, you know, infinite words of wisdom, I think, are are worth a million dollars. So thank you for always looking out for everybody. I think that's it's it's amazing. Yeah. Dwight Millard: Well John, I always believe where there's a way, there's a hope. Where there's Aaron Clark, Edge Realty: Great. Dwight Millard: a way, there's that you know, where there's a will, there's a way. And if they have a little bit of hope that hey, I can do this with some discipline and you know, all that absolutely. I've seen so many Aaron has too. We've seen so many Jon G. Sanchez: Yeah. Yeah. I know you have. Yeah. Dwight Millard: victories over the years. Jon G. Sanchez: Yeah. But it r it requires a plan. And that's, you know, the right I think you guys both said restructure, right? You gotta look Dwight Millard: Yeah. Mm-hmm. Mm-hmm. Jon G. Sanchez: at everything. All right, boys, we're gonna wrap it up with number seven. The buyer whose payment only works if rates fall next year. Buy way to Well, that's a quick answer. Wait, it's the yeah. Yeah, yeah. Yeah, yeah. No d Aaron Clark, Edge Realty: Wait wait Yeah. Dwight Millard: Yeah. too late though, John. They've all done it. It's it's it's a definitely a wait. Yeah, definitely a wait. Aaron Clark, Edge Realty: Don't do that. Never never do anything where you're predicting Dwight Millard: Yeah. Aaron Clark, Edge Realty: where the market's gonna go for success. Ever. Never. In any of our industries. Yeah. Jon G. Sanchez: man, you could be a you you you could be a stockbroker. I can bring you over into this industry with that, that advice. There Dwight Millard: Yeah, yeah, yeah, yeah. Jon G. Sanchez: you go. There you go. That's perfect. All right. Well, guys, you know, very interesting topic. I think it's a again, a very unique way that people need to be reminded of as far as don't get sucked into what that purchase price is, get sucked into what is my payment, you know, reverse engineer it, figure out what you need. and again, for those that haven't been in the real estate market in quite some time. You're gonna be ready for payment shock, you're gonna be ready for purchase price shock, et cetera. And what's your final words of wisdom to them, Aaron? Aaron Clark, Edge Realty: It no matter what, right now it is it is time to buy. If you can afford the payment, there are insane deals out there. So jump in. Jon G. Sanchez: Love it. Love it. Dwight, final advice? Dwight Millard: Yeah, I'd say it's your journey. Take your time. Get off the internet. Don't listen to other people and do the right thing. Right? Do the right thing. Jon G. Sanchez: But I'm gonna leave there. I I couldn't ask for a better finish than that, boys. Phenomenal job as always. You two are the man. Thank you. We'll do it again next week with you, Mr. Clark, Mr. Millard. I'll see you on Tuesday. God bless everybody. Dwight Millard: Yes, sir. Jon G. Sanchez: We'll do it tomorrow. Non farm payroll numbers. Don't miss the show. Take care.