It's Too Expensive in My Market!

Jim Eyre • October 21, 2024
a man and a woman are sitting at a table with a calculator

People said that in 1980, too! But consider what's happened since then! This is #4 of the great mortgage myths. Let me begin by saying I recognize houses are far more expensive than they used to be. I bought my first home in 1977, and I paid $11,000 for it. It was 50 years old, 2 bedrooms and 1 bath, 1,000 Sq.Ft., located in central Washington State. Today that same home is tax-assessed for $337,650. $11,000 might seem like a very low price, but believe me, back then it seemed like an awful lot. Today I live in an area where first time homebuyers have difficulty finding a home for less than $600,000, and if they're purchasing with small down payments, their payments run somewhere in the $4,000-$5,000/mo. range. But you know what? People are still buying! They're making adjustments in their monthly budgets, they're adjusting their expectations of what they're actually going to get in their first home, they're a little more accepting of kitchen countertops that haven't yet been upgraded to granite or marble... they're simply finding a way to make it work.


The questions are (1) how?, and (2) why?


The "how" is simply a function of dollars and cents... perhaps paying down some credit card debts, maybe paying off the car, and it could even be changing to a higher paying job. Then it simply becomes a matter of finding out what you can be approved for, and finding something in that price range that meets your needs more than it meets your desires. Sure, maybe it will have the wrong color carpets, and the wrong color exterior paint. But those are things that can be changed with time and effort. If a house is priced right and it has what real estate brokers refer to as "good bones", it's almost always a good investment. 


The "why" is probably far more important to most people, and actually has a great deal of bearing on the "how". I dealt with a young couple about 5 years ago, who had really expensive taste. They could have afforded a home in the $350,000 range, but they couldn't find any homes that met their expectations and desires for less than about $475,000. They drove through neighborhood after neighborhood, weekend after weekend, pointing out homes they were interested in to their real estate broker. On Monday the real estate broker would call me, review the weekend's activity with this couple, and ask if there was any way possible for them to get into a $450,000-$500,000 home. My answer was always the same... not unless they get higher paying jobs, pay off a lot of debt first, or get a large gift from parents and relatives. Guess what - they still don't own a home today. They were either unable or unwilling to adjust their expectations and desires. Consequently they've forfeited 5 years of enormous equity growth and income tax deductions, to say nothing of the personal satisfaction of owning their own home.


Contrast them with another couple that I'm working with today. I first met them 10 years ago, when they attended one of my free homebuyer classes. They just wanted to get into a home that they could make their own, be able to paint a room the color they wanted, to plant their own plants, and to build a deck in the back yard because he liked to barbecue. They had decent jobs, decent income, and the most important thing was that they were realistic. They had a great real estate broker who found them a home that met their needs, and they bought it for $237,000. They worked hard to improve that home, and I refinanced it for them in 2021 when interest rates were lower. Today that home is tax-assessed for $539,000 - more than double what they paid for it! They were already saving for their next home, and because they were able to save some more money with their new lower mortgage payment, they were able to set aside even more for their next home. They called me 3 weeks ago, ready to start looking for their next home. I introduced them to a great real estate broker, and they're now under contract on a home for $680,000. And I'll close their loan for them at the end of this month. And that's my point.


This couple's "why" was more important to them than their "how". Consequently, they were willing to adjust to the market, and they made a smart investment. And today they are far better off financially than the first couple. I see this all too often, and I reply with the same answer that many other lenders and real estate brokers say - "Marry the house, and divorce the rate". It simply means that everyone acknowledges that with today's higher rates and higher prices, it's just a given that most of the time, the monthly payment will be more than you're comfortable with. And while I agree that this must be carefully considered in a "total life" concept, if you don't do it now, when are you ever going to do it? In other words, if you don't want to buy at today's prices, at today's rates, and then refinance later when rates go down again, when are you going to buy?


Will home prices come down when rates begin to decline? Think again - all lower rates will do is cause prices to keep increasing. It's the law of supply and demand. If you wait until later, all you'll do is cost yourself more money, and I can show you that in black and white. If you'd like to go over it, reach out, and let's do a Zoom meeting. I'm happy to show you how it works. 


But please - don't get caught up in the myth that homes are just too expensive in your market. And don't tell me that you can't do it I've seen far too many people make it work, and be better off for it. If you want to do it, if you want to make it work, and if you're reasonable with your expectations and desires, you CAN buy a home. Call me, I'll prove it to you.

a large brick house with a driveway in front of it

Why Your Preapproval is Such a Big Deal?

By Jim Eyre • October 21, 2024
People ask me why a fully-documented preapproval is such a big deal. Here's why.
a woman is sitting at a table with a laptop and a man is using a cell phone

Let's Get You Into A House - Strategies 3 & 4

By Jim Eyre • October 21, 2024
Budgeting strategies to get yourself into a home. We've been considering the steps that people go through mentally to get ready to buy a home. And they normally ask themselves a bunch of questions, which as it turns out, are the same questions financial planners and mortgage brokers ask, or at least should be asking their potential clients. These questions are (1) Financially speaking, where are you?, (2) Financially speaking, where do you want to be?, and (3) Again financially speaking, how are you going to get where you want to go? And of course, in the context of this blog, "where you want to go" refers to buying a home. Last week we began to look at some specific strategies that are often suggested to help homebuyers reach their goal. The first was to "Always pay yourself first" by saving 10% of what you earn. The second was to budget a little bit for home maintenance every month, because in some ways, houses are like cars. Parts wear out, and either need to be repaired or replaced, and with a house, those parts can be quite expensive, and you don't want to be caught unaware. This week we're going to look at the next two strategies which can be utilized to help you ready yourself to buy a home. Strategy #3 is to start living as if you already have a mortgage, and here's how it works. Let's say you're already paying $2,000/mo. for rent, and you're concerned as to whether or not you can actually afford a mortgage. First, select a neighborhood where you'd like to live, and actually write down on paper what you need in a home. Then contact your real estate broker, and ask what such a home would actually cost. Once you have a price range in mind, contact your mortgage broker, and find out what a mortgage payment would be on such a home. For the purposes of this scenario, let's say that payment comes to $3,400/mo. for principal, interest, taxes, insurance and mortgage insurance. That's a $1,400 increase, and you might be worried whether or not you can sustain that over a long period of time - perfectly understandable, right? The way to determine whether or not you can sustain it is to go ahead and pay your $2,000 monthly rent, AND save $1,400 each month, in a separate savings account, designated for your closing costs when you buy your home. Do this for 3 months, 6 months, maybe even a year. Take however long you need. At the end of this time, you will know whether or not you can actually do it, and you'll make the appropriate decision. Strategy #4 is to minimize credit card debt. Mismanagement, and in some cases non-management of credit card debt kill more mortgage applications than anything else I see. So it's critical to understand how this can affect you when applying for a mortgage. It's actually a subject unto itself, and it's too long to go into real depth here, but I can at least give you some time-tested methods to manage a situation that's tough for many people. First, list out all your credit card accounts, their balances, their limits, and their interest rates. Sort them by balances owed first, and secondly by interest rate. Second, starting with the balances that are easiest to do this with, pay each of the cards' balances down to 50% of their limits, and NEVER exceed 50% again. Most people do not understand that when they exceed 50% of a credit card's limit, it begins to lower their credit scores. Once you've accomplished this, pay them down to 30% of their limits, and NEVER exceed 30% again. If you do this, you'll begin to see rapid increases in your mortgage credit scores. But hold on - you're not done yet. Next, use each card you have periodically. The reason for this is that banks who issue credit cards are in business to make money. If you don't charge something periodically, they won't make any money, and eventually they will close the credit card account for non-use. And this will lower your credit score for a couple reasons which are too detailed for this blog. Just be sure you use each card you have... You don't have to use each one every month, but use each one every few months, even if it's just for a tank of gas in your car. Last - never close a credit card account! There are two exceptions to this. If your identity has been hacked and you fear that someone may have gotten your credit card information, call the bank who issued you the card, and have them issue you a new card. And if for some reason you suspect that the bank who issued you the card is going to close the account for non-use, either charge something on it immediately, or close the account yourself. It always looks better on a credit report if you've closed an account, than if the creditor closes the account on you. Hopefully the questions we've looked at, and the strategies that I've suggested are things you find helpful as you get ready to buy your home. If you have questions about any of it, please feel free to reach out to me at anytime. Remember, I don't work 9-5, I work start-to-finish, and I will always give you straight talk without any sales talk.
a picture of a budgeting # 3 page with a diagram of how to get where you want to go

Budgeting #3 - More Questions Financial Planners Will Ask You as You Prepare to Purchase a Home

By Jim Eyre • October 21, 2024
Now that you know where you are financially, as well as where you want to be financially, the next question becomes "How are you going to get there?