In this episode of Another Day in Real Estate, Middy and Clayton dive into the world of loans and their impact on home buying. They discuss the current housing market, the challenges buyers are facing, and the impact of rising interest rates. Clayton expertly breaks down the most common loan types, their criteria, and how they affect a buyer's eligibility and financial position. They emphasize the importance of exploring different loan options and the unique considerations of each. Middy shares insights on the Barton Hills area, offering a glimpse into the vibrant real estate market. Stay tuned as Middy and Clayton provide valuable tips and knowledge that will help you navigate the dynamic world of real estate.
The Arbor Move Team has a proven track record of success in the Ann Arbor area housing market. With years of experience and a commitment to excellence, we are the go to team for buying or selling a home. Our team is dedicated to making your home buying or selling experience as seamless and stress-free as possible.
The one constant is change, trust me, we know. Marketing is a precise and fluid art that must be consistently monitored to effectively reach more people. This is how we sell houses for more. We work hard , know the market, stay up to date with new technology and marketing trends so we can get the highest sale price for your house.
Our loyal clientele and repeat business are a testament to our dedication to our clients and our success in the industry. The friendships that have formed along the way are the sweetest gift on this journey and an unforeseen reward that we are so grateful for.
Our YouTube Channel is here:
https://www.youtube.com/channel/UCpXvM1679lelrOv-OdSd7iA
To access all of our written materials, which you can read online or download, click this link:
https://issuu.com/arbormove
If you have questions or content ideas, please contact me.
Middy Matthews
Licensed Realtor, Arbor Move Team
The More Group
734-239-3796 | ...
In this episode of Another Day in Real Estate, Middy and Clayton dive into the world of loans and their impact on home buying. They discuss the current housing market, the challenges buyers are facing, and the impact of rising interest rates. Clayton expertly breaks down the most common loan types, their criteria, and how they affect a buyer's eligibility and financial position. They emphasize the importance of exploring different loan options and the unique considerations of each. Middy shares insights on the Barton Hills area, offering a glimpse into the vibrant real estate market. Stay tuned as Middy and Clayton provide valuable tips and knowledge that will help you navigate the dynamic world of real estate.
The Arbor Move Team has a proven track record of success in the Ann Arbor area housing market. With years of experience and a commitment to excellence, we are the go to team for buying or selling a home. Our team is dedicated to making your home buying or selling experience as seamless and stress-free as possible.
The one constant is change, trust me, we know. Marketing is a precise and fluid art that must be consistently monitored to effectively reach more people. This is how we sell houses for more. We work hard , know the market, stay up to date with new technology and marketing trends so we can get the highest sale price for your house.
Our loyal clientele and repeat business are a testament to our dedication to our clients and our success in the industry. The friendships that have formed along the way are the sweetest gift on this journey and an unforeseen reward that we are so grateful for.
Our YouTube Channel is here:
https://www.youtube.com/channel/UCpXvM1679lelrOv-OdSd7iA
To access all of our written materials, which you can read online or download, click this link:
https://issuu.com/arbormove
If you have questions or content ideas, please contact me.
Middy Matthews
Licensed Realtor, Arbor Move Team
The More Group
734-239-3796 | ...
Hey, it's another day in real estate with Middy Matthews from the Arbor move team. And as always, our very own Clayton Kendrick from academy mortgage. We're more than realtors. We're more than mortgage pros. We are your guides, your teachers, Ann, your cheerleaders on this journey of home buying. Welcome to the podcast, where we will help you fall in love with the process of buying or selling a home, always bringing you helpful information along with some fun and tragic stories from the real estate trenches. Remember to subscribe to our channel for the weekly bite of real estate. Good morning, Clayton. Good morning, Middy. How are you doing today? Doing just fine. Yourself? I'm good. I'm glad to be back in podcast land. Absolutely. Let's start out with our news roundup. A little market watch. Housing climate. We had an all time low, Brighton. Now, I can't tell you there's nothing on the market to purchase. Or if you do find something you like, you and 17 other people will put in your offer. So it's pretty exciting out there right now. And I'm kind of expecting, like we saw last year, that we'll have the buyers, we'll see the buyers, put the brakes on and say, you know what? You all can settle down for a minute. And I think we're coming into a quick lull here. But who knows? You never know. There's some things that will happen or. Good time to be a seller, though. Good time to be a seller. Inventory is low. Low. We're at 18% of norm. And of course, you have some interest rate news for us. It's going to double down on that. That's right, we do. So rates are headed upwards, that's for sure. We've seen some kind of, in the past week and a half or so, some major jumps. For instance, today we opened up the market about 60 basis points down, which essentially means rates are going up today. They've been following that trend. So instead of a little up, little down, we've been kind of getting our butts kicked. If you want to refinance, obviously get it done. Right now, we don't know what's going to happen, but, yeah, it's going to be interesting to see what happens here with the new president, with Yellen here. It's going to be interesting. Yeah. So that means a little less buying power, doesn't it? That's right. It certainly does. I mean, it's not going to be a huge swing or something. It's not like, let's say you were pre approved a month ago. And you're at two, seven, five on a 30 year or something of that nature, and all of a sudden you're at five. But could it mean you're at three and a quarter? Three and a half, absolutely. That's a major market movement. That is, that's huge. So today we have a podcast that's different types of loans and how this matters. It matters hugely right now as we are going into this multiple offer situation. So why don't you give us a lowdown, Clayton, and tell us what kind of loan types that you run into, at least the most common ones, and we'll dig deeper and see why they matter. Sure. Absolutely. So I would tell you that there's four major loan types that you're going to see. You can certainly kind of fade into the gray part of the mortgage world, the brokered kind of old subprime sort of thing. But generally speaking, you've got conventional, and then the rest of them are your government deals, your FHA, USDA and Va. Generally speaking, if you don't have a cash offer, what you're going to want to see is a conventional, you can put as little as 3% down, but generally speaking, conventional is going to have your stronger buyers. Right. You've got a little bit higher of a credit score. You need at least a 640. But generally speaking, I'm going to go conventional. When I've got a buyer who's maybe 680 or 700 and up, they've got a good amount of money to put down, hopefully 5%. But the biggest differences in these programs are essentially the strength of buyer. So if I've got a client who's, let's say, sub 680, what I'm going to do is I'm almost right out of the gate looking for an FHA loan for them just to kind of push back a little bit. For the folks that don't know too much about our world, when you're getting approved for a mortgage, there's a couple different factors. First and foremost, there's your credit score. Right. So obviously, we want you to be as high as you can, but different programs are going to have different kind of minimum scores that you need to hit, but it doesn't mean that you're going to get approved. So, for instance, a conventional loan is right now going to start at about a 640. Right. But that doesn't mean that if you've got a 641 credit score, you're approved for a conventional mortgage. There's a couple of different factors that are going to go into it. Obviously. Again, credit score is what kind of gets the door open. Then there's debt to income ratio and there's down payment. And so if you've got three factors, those are the three factors that we're really looking at that are weak. A conventional loan is probably not for you. You're not going to get approved. We're putting all this information into essentially an algorithm, and it's going to give us a thumbs up or a thumbs down. Generally speaking, I would tell you that FHA loans are the easiest to get approved. You can have a lower credit score, you can have a higher debt to income ratio, and you can also have a little bit less down at the table. You can also get plenty of concessions from sellers. Obviously not in this market. That's not going to be happening. But it's allowed. Right. So it allows for clients that are certainly qualified to purchase a home, but might not be quite as qualified as somebody who might be looking at a conventional 20% down, 800 credit score sort of person. Got you. So FHA and conventional, those are probably the two most widely used mortgage vehicles. Then USda and Va are also other ones. So obviously a VA loan is a veterans loan. So you have to have served. Right. So they do some pretty cool things for you. What's neat about both of these programs is they're 0% down. That doesn't mean you don't have closing cost, but that does mean that instead of conventional or FHA, where you're at three or three and a half percent down, you're at zero. So you could have a client who might only be bringing a couple thousand dollars to the closing table in totality to purchase a home. That's pretty big. So a VA deal, again, you got to be a veteran. Pretty. If you're a veteran, it's a fantastic program. USDA is the same, although the caveat there is that you have to be rural. We call it a rural development loan. Right. Usda rural development. It doesn't mean you've got to be living amongst cows or something like that, but you can't certainly be in the middle of Detroit and expect to be getting a 0% down USDA deal. Right. There's a website where you can actually go and look up whether or not you can purchase a house. That's right. With an RD loan specific to the address. So it's not hard to figure out. But yeah, downtowns are pretty much out. Yes. And the funny thing about it, too, is one side of a street could be RD approved and the other side isn't so they've got their lines pretty set in stone there. And then again, the other, I guess, two types that you're going to be seeing are certainly less common just because of the market. First and foremost, a jumbo loan. Those are for, obviously, your higher net worth clients, people who are purchasing more home. Those are not quite the same as any of these four kind of, let's call them standard programs, jumbo loans, kind of, they do their own thing. They've got their own rules and regulations, but you're generally going to have to put down a little more money. You're going to have to have higher credit scores. You're asking for more money. So you need to be a little more qualified to do so. Makes sense. Yes, makes sense. And then again, there's the brokered, there's no such thing as subprime anymore, but there is basically, let's call it subprime with guardrails. And those are for the clients who maybe have truly low credit scores, like you're in the low 500s or something. You've got a foreclosure in the past couple of years, you just came out of a bankruptcy. Something to that effect. Somebody is going to lend you money, but the terms are not going to be favorable. And those are for clients that maybe that's somebody who. Yes, obviously, if they want to purchase and we can get them qualified, of course we're going to do that. But that's somebody who might, from their own perspective, might take a step back and think, should I be purchasing a home right now? And that's up to them. Right. Quick question on that, jumbo. What's your minimum on a jumbo loan? Oh, jeez. This just changed. But it's somewhere around 550K now, something like that, yeah. So that's a pretty low. Yeah. Obviously for Michigan, we're not going to see, there's not a ton of homes out there that are in the seven figures. Right. Most of your buyers are going to be in the mid six figures. But if you're in a know, maybe New York, California, Hawaii, something, something like that, where a ton of these properties are going to be north of seven figures, then I'm sure that they use those products significantly more often than we do. Question about that. Still, if we're talking about the jumbo loan, let's say I'm looking for a house, $700,000, just as a prime example. I mean, obviously I could go with a conventional loan or I could go with a jumbo. Is there a reason that a jumbo loan might benefit me. Well, so if you're buying a$700,000 house, first and foremost, to get to a conventional loan, you're going to have to put down a pretty significant chunk of change to get to that conventional loan limit. Right. But you're kind of right on the borderline there. The 700K is right on the borderline. If we bump it up a little bit, let's say you're buying a $900,000 home, right? Essentially, yeah. The big part about that is you don't have to put down, let's say half a million bucks or so to get yourself to a conventional loan. You can put down maybe 10%, something like that. And again, different lenders and different brokers are going to have different guidelines on what they want to do. Pretty few and far in between that you're going to see something like a 5% down. Jumbo written a couple of those in my time. I haven't seen one in years. But, yeah, you're still going to be able to do the 10% down, something like that. And a lot of those programs, even sub 20% down, you're not getting hit with mortgage insurance. So that's a big piece of it, too. That is a big piece of it. Okay. Yeah. It's hard to figure out as a buyer where that line is that jumps you to the next. Sure. Absolutely. So, yeah, I would say that that's about right. Once you're north of about a 700K or so now, and you don't have money, a ton of dough to put down, then that's when we're starting to look at a jumbo product. That makes sense. That makes a lot of sense. Hey, how about a doctor loan? Sure. So doctor loans are pretty cool. I'll put it this way. So there's a ton of ways to use a more conventional product. Who qualifies for a doctor loan? Well, doctors. Doctors qualify for doctor. Nurses. Nurses can qualify. I don't know if a vet would something like that. The whole thing behind a doctor's loan is essentially the potential to make more money. Right. You just got out of school, something to that effect. You've got a ton of student debt. That's the big thing is on a conventional loan or FHA, one of these other programs, even if you're not paying your student debt down, you've got a deferred student debt. We're going to hit you with anywhere from a half percent to 1% of that debt on a monthly basis. If you're conventional, if it's FHA or any of these other program, the government programs, it's 1%. So the cool thing about a doctor's program is they might not be looking at that debt. Okay. Right. So now you've got a client who can qualify for way more a house than you might have seen before. And again, it's kind of based off of the potential for more income. You're a doctor, we know you're going to be at least a decently high earning person. Right. So you're going to be able to get the money and get into the home when you're in a situation where we know you can afford it because you're not paying down those student debts, and eventually enough, you're going to be really a truly high earner, and that's when you're obviously going to have to start paying down your student debts. Low risk, right? Low risk, yeah. So that's the biggest piece of it. And again, a program like that is going to have its caveats. You're going to need to have a higher credit score. And we're not just going to say, hey, here's the dough, go ahead and run with it. There's different kind of nooks and crannies for loans that you can find them. And that's the job, obviously, of the loan officer, is to take a look and make sure that they're putting you a in the best financial position and making sure that you're getting the home that you want to. Most of the clients that I'm going to see, I mean, 95% of clients are going to fit into conventional and FHA, and then the other 4% are going to fit into the USDA and VA. And then the 1% you might see, at least in Michigan, are going to be jumbo broker things of that nature. Okay, cool. Now, as a realtor, and I sell a lot of houses, so as I'm sitting on a pile of offers, it's likely that the first one that I will put on the top of the pile will be conventional. Sure. And there's a lot of reasons for that. Like you went over earlier that the conventional buyer is probably more financially stable. That one was going to get to the closing table for sure. Yeah, that's probably our most qualified client. And again, we covered this in one of the other podcasts, but when we're getting an appraisal done, these government loans, fha, Va, USDA are going to have some more stipulations. They're looking for things a little bit, I guess, with a bit more of a magnifying glass than a conventional loan is conventional. We're just a, we're looking for value and B, making sure that there aren't any health and wellness hazards a human being can go live in that house is essentially what we're looking for. Whereas USda va fha are going to be looking for handrails. There's going to be things that are going to come back on an appraisal where you're not going to see it on a conventional real. So as a seller, you're going to want the conventional offer because it's an easier way to get your home sold. Right? Yeah. And because FHA has, NVA has some, that extra stipulation on the appraisal, the appraiser usually has to come back to make sure that work's been done. So. That's right. Elongates the entire deal process for us. An FHA deal will probably take six weeks to close conventional. We can close it up in four. Yeah. And I mean, generally speaking. And that's something that if I'm doing a government deal, I'm going to call that listing agent as well and say, hey, listen, you've accepted it, right? So are we good with handrails? Are we good with our electric work? Are we going to go in, in there? And my appraiser is going to have to come back and they might miss something every once in a while, but, yeah, that's the piece of it that can trip things up. And obviously, then the buyer's got to pay for that second appraisal. They're going to have to go in and they're going to have to wait for the work to be done. Most of the time, it's easy stuff. Maybe somebody forgot to put a cover on an electrical outlet. Right. Seen it so many times. And that just cost my client $250 for an appraiser to go back out there and make sure that that cover is on the outlet. I think once in a while I've had the appraisers ask me for a photo that it's been finished and we can get by with that. But most of the time that's rare. Yeah, I think they like to put their eyes on it. They want to put their eyes on it because they're also getting paid to go back out there and take a photo. Right. So it's not a terrible gig when you're an appraiser. Right. But you got to remember that it's not a robot. These are human beings. So every appraiser is going to be a little bit different. They're going to come up with a slightly different value. Some appraisers are going to pop you for things where others won't. So there's a little bit of human error that's in trial and error that's involved there. But, yeah, generally speaking, a conventional loan, conventional offer is going to the top of the list, or at least they do directly under cash. Yeah. And so if you're fighting for a house, getting that conventional loan is going to be helpful in your battles. I had a house out in Chelsea, just south of Chelsea on M 52, I think it was M 51, something like that. And it was an old farmhouse. And the buyers came in with an FHA loan because it was, for them, it was going to be better numbers in the end. Right. For whatever reason, they decided on the FHA loan. The FHA, I think, was what they had. And we were having problems getting through the appraisal because there were things like the window wells were rotting out a little bit, and they had every intention of coming in and replacing all the windows before they even moved in. So in reality, for us to do all that work meant no gain other than to get through this loan hoop. Right. And replacing wood and everything else was just going to elongate this process. And it's going to cost your client money. Yeah, it's going to cost you seller money for sure. In this case, it was a divorce situation. Nobody wanted to pony up any money for anything. What ended up happening with a buyer went ahead and he was well qualified anyway. He just jumped ship and went to the conventional loan. Sure. Yeah. Which solved everything. Not everybody has that ability, but it really solved all of our problems and we ended up closing that up pretty quickly. But, yeah, the loan piece of the puzzle is very important. Well, sure, absolutely. And that's what we're looking for. First and foremost, we want to make sure we're putting our clients in the best financial position. Right, right. And something like mortgage insurance is a big factor of that. Okay. And that's why I say maybe north of 700 credit scores is when I'm going to be going conventional, because that's risk based. Right. So if you're a 645 credit score client and you want to go conventional, that mortgage insurance factor is going to be huge. It's going to cost you a bunch of money monthly to get into what you want to, whereas an FHA, it's the same. If you're 626, 40 or 800, doesn't matter, you're getting the same mortgage insurance factor all around. So for those lower credit qualified folks, that's why an FHA deal is going to be a first and foremost easier to close because the algorithm is certainly a little kinder. But yeah, the mortgage insurance factor is going to be lesser and on a monthly basis it's going to put your client in a better position. But there's that balancing act between lender and real estate agent of, hey, I'm trying to put my client in the best financial position and on the other end of it. Yeah, but we got to get your client a house. Right. So that's always the fun part. Not all clients can jump ship lake yours was able to do, and I would imagine that on a monthly basis the conventional loan is going to cost them a little bit more. But you want the house or not, right. So there's the fun part. Exactly. So we get through it. That whole deal got extended a little bit, but not too badly. We did get that closed and everything. They're all moved in. All right. So let's just wrap up the loan thing and move on. I think you've got probably said everything you needed to about that stuff. Yeah, I think that's about right. What I would tell anyone out there is that whether you're speaking with hopefully me or any other loan officer, though, is obviously go through your different options. But that's what your loan officer is there to do, is to make sure that they're putting you in the best financial position outside of just getting you qualified for the mortgage, explore the different options, see what's going to put you in the best position, both financially and to get a home. So just make sure you're asking a ton of questions up front. That's something I always appreciate from my clients, is making sure we're answering everything up front, so that by the time we're halfway through the deal or getting to a closing table, I'm now not answering questions. You already know everything. We've already educated you, so get it out of the way up front so that there's nothing at the end that's going to shock you. Absolutely perfect. All right, that wraps up that. Let's go on to the market watch today. I have picked Barton Hills to give you a little overview of what's happening in Barton Hills as far as sales and everything else is concerned. We literally have three houses for sale in Barton Hills and that is pretty low inventory. Barton Hills has escalated in price enormously. What we have now, the range for the houses for sale are from 700,000 to 2.5 million. 2.5 million for Barton. I mean, it's a big house, no doubt. Who knows what it's worth? I haven't actually taken a look at that. And the other one is the middle ground. One is a million plus a few bucks. Barton is a forever up and coming area. It's clearly filled with trees. It's a thickly wooded area. It's gorgeous. You have giant lots. There's nothing not to love. The pond is gorgeous. If you can get a house that overlooks that at all, which is kind of rare, but they're there, and it's its own entity. It's not part of Ann Arbor. It's its own township, and it's also. Got its own taxes. It's got its own taxes. That's a bonus. And it's got its own community. Well, did you know that? I did not know that, no. It's like they're all feeding off of the same giant. Well, yeah, it's bizarre. So everybody's got. I think they've got a septic field there. I'm not sure that. I don't know. I'm trying to remember. It's interesting, the last house I sold over in own. It's its own thing. You've got your Barton Hills country club there. You can kind of live almost entirely in Barton Hills and never leave. Well, I tell you what, we can go look at the two and a half million dollar one, and we'll find. All of our answers. That's right. That one's actually not the key location that I would want to buy in, honestly. Yeah. It's not very far into the wooded Barton Hills, really super private area. It's kind of sitting on the fray, and Barton's just gorgeous. Plus, you can go and have the Barton Sailing club. You can get in one of those little tiny, tiny, tiny boats and get. Yourself on a sailfish race. Your tiny, tiny friend. That sounds great. That's awesome. Okay. I don't think we've got any additional news. We've kind of covered everything we can think of about loans today. The market's tough out there. I can't tell you. Yes, it is. I've had clients that typically, I'd show them six houses, and we've done. And we're in the 20s already. We've written three contracts. They have half a million dollars to spend, and we can't spend it. It's fun. It's fun. I can't lie. All right, Clayton, it was great talking to you today. You as well, Matty. Let's go ahead and say cyanara to our fans. See ya. Thanks for joining us today. Remember to subscribe to learn a little bit more about real estate every week. Thinking of buying or selling real estate in the Ann Arbor area? Reach out to Clayton Kendrick at Academy mortgage or me. Midi Matthews of the Arbor move team over here at the more group for your home search needs. Head for arbormove.com and find your dream home today. Our.