The Lending Coach

Coaching and teaching - many through the mortgage process and others on the field

Dave Ramsey | Spot-On Regarding Housing

Many know Dave Ramsey from his radio show and his website where he offers some of the best financial advice around.

Recently, he took a bit of a ‘victory lap’ regarding his real estate market predictions.

Relatively steady home prices, despite higher interest rates, seem to have vindicated Ramsey’s bet.  “You were wrong!” he said of his critics, adding, “I freaking know what I’m talking about.”

No Housing “Bubble” – Appreciation to Continue

When the Federal Reserve started raising interest rates in 2022, many were concerned that higher borrowing costs would reduce home sales and prices.

clear and blue bubble near green leaves

However, Ramsey claims he was skeptical of these concerns and was instead expecting home prices to remain steady or rise modestly. His thesis was based on simple supply-demand dynamics.

“When there is a shortage of an item … prices go up,” he said. “That’s basic economics.”

This theory seems to be vindicated by a report from the National Association of Realtors. Home prices climbed 5.7% over the past year as of February, with the median American home being worth $384,500.

Dave’s Latest Prediction

“Prices will go up,” Ramsey predicts. “This is what’s happening with real estate. I promise you, you can look up this [episode] five years from now and you’re going to go ‘god, that old fart was right again.’”

As for interest rates, Ramsey doesn’t make a firm prediction but advises buyers to focus on prices instead and refinance when borrowing rates go down.

“Marry the house, date the rate,” he said.

Who Is Dave Ramsey

Ramsey also makes efforts to educate people on the ways of using monetary resources judiciously, through his ‘Financial Peace University,’ speaking in churches and community centers.

Ramsey advises everyone to follow his prime mantra, “Avoid debt at all costs.”

Dave’s 7 “Baby Steps”

One of Dave Ramsey’s financial literacy campaigns features seven “baby steps” that individuals and households should pursue in order to gain financial freedom. Each step should proceed when the previous one has been completed or is near completion. These include:

  • Establish an emergency savings fund of at least $1,000
  • Pay off all non-housing debts ASAP starting with those with the smallest outstanding balances (known as the debt snowball method)
  • Increase your emergency fund to 3-6 months’ income
  • Invest 15% or more of your gross monthly income into a retirement account like a 401(k) or IRA
  • Start college funds (if you have children) in qualified accounts like 592 plans and ESAs
  • Pay off your mortgage as early as possible
  • Build wealth

In Conclusion

If buyers are waiting to purchase thinking that home prices are going to move lower, that is most likely a bad idea.  Instead, Marry the House but Date the Rate – purchase today and gain appreciation and refinance later if rates go down.  Reach out to me for more, as it would be my pleasure to put a home-purchase plan in place!

Owning vs. Renting | The Hard Facts

Imagine turning your monthly expenses into a growing investment, something that could multiply your net worth exponentially.

Not a lot of people know this, but the average homeowner’s net worth is 40 times that of a renter.

Owning a home offers numerous advantages over renting, making it a seriously smarter long-term financial decision for many.

Building Equity

Firstly, homeownership builds equity, whereas renting does not. Each mortgage payment contributes to ownership of the property, gradually increasing the homeowner’s stake in the home.

Over time, this equity can be leveraged for various purposes, such as home improvements, education expenses, or retirement funding.

In contrast, renting provides no return on investment, with monthly payments essentially going towards the landlord’s profit.

Stability and Security

Secondly, owning a home provides homeowners with fantastic stability and security.

Renters, on the other hand, are subject to the whims of landlords and rental market fluctuations, with the risk of rent increases, lease terminations, or changes in rental terms.

Homeownership offers predictability and control over housing costs, particularly with a fixed-rate mortgage where monthly payments remain constant over the loan term.

Furthermore, homeownership helps people to establish roots within a community and create a space that reflects their personal preferences and lifestyle.

Tax Benefits

Another serious advantage of owning a home is the potential for tax benefits.

Homeowners can deduct mortgage interest, property taxes, and certain home-related expenses from their taxable income, reducing their overall tax burden.

Renters do not enjoy these tax advantages, missing out on opportunities to reduce their tax liabilities through housing-related deductions.

Building Long-Term Wealth

Finally, homeownership provides a unique pathway to long-term wealth accumulation and financial security.  As mentioned earlier, the average homeowner’s net worth is 40 times that of a renter!

Real estate historically appreciates in value over time, building equity and wealth for homeowners. More on that here

For example, Case-Shiller recently reported that home prices rose 5.5% last year, with national home values 46% higher since 2019! And prices are forecasted to rise this year due to ongoing high demand and tight supply.

In contrast, renting does not offer the opportunity to build wealth through property appreciation, leaving renters without a tangible asset to show for their housing expenses.

In Conclusion

Switching from renter to homeowner is simpler than you might think. It’s a strategic move towards securing your financial future, as owning a home offers numerous advantages over renting!

Do reach out to me for more, as it would be my pleasure to help you put together a plan to become a homeowner as well as long-term wealth-building strategy.

Should You Buy Down Your Mortgage Interest Rate? | Pros and Cons

When interest rates are high, some borrowers may choose to buy down their interest rate to lower monthly payments and make their mortgage more affordable.

Buying down the interest rate means paying an extra upfront fee to get a lower rate and monthly payment. This is referred to as buying “mortgage points” or “discount points.”

When interest rates are low, on the other hand, few borrowers pay higher closing costs to get a discount.

But as mortgage rates rise, borrowers are more likely to weigh the pros and cons of buying points to reduce their rate. I’m linking to an article by Michele Lerner at The Mortgage Reports that explains this in depth…and I invite you to check it out.

Here are a few highlights and thoughts from her article…

Pros of Buying Down the Interest Rate

The biggest reason to buy down your interest rate is to get a lower rate on your mortgage loan, regardless of credit score.

Lower rates can save you money on both your monthly payments and total interest payments over the life of the loan.

In addition:

  • If your income is too low for you to qualify for the house you want, you may be able to afford the purchase price with a reduced interest rate and payment
  • If you can convince a home seller to pay discount points for you, buying down your interest rate may help you qualify for your mortgage loan
  • Since discount points represent prepaid mortgage interest, the cost is often tax-deductible (provided that you itemize your deductions). Ask a tax professional for more information

Cons of Buying Down the Interest Rate

The primary drawback when you buy down your mortgage interest rate is that it increases the upfront cost of buying a home.

Your monthly payments will be lower, but you need to “break even” for those saving to be worth it. That means you should plan to keep the home loan long enough that your total savings outweigh the upfront cost of buying points.

Buying mortgage points also ties up your liquid cash. You may have better uses for that money; for example, paying off high-interest credit card debt, making investments, or saving for future home improvements.

You may also want to use the cash to invest in assets other than real estate for diversification, to boost a college tuition fund, or to pad your retirement account.

Finally, if you’re making a down payment of less than 20% — or have less than 20% in home equity when refinancing — you’ll probably have to pay for private mortgage insurance (PMI) on a conventional loan. Thus, it could be best to use your cash for a larger down payment rather than buying points.

How Does a Mortgage Buydown Work?

Buying down your mortgage interest rate involves purchasing discount points (also known as “mortgage points”).

You’ll pay an upfront fee to the lender at closing in exchange for a lower rate over the life of the loan.

Most types of mortgage loans allow buyers to purchase discount points, including conventional, FHA, VA, and USDA loans.

The rate reduction per point depends on the mortgage lender and the type of loan. However, as a rule of thumb, a mortgage point costs 1% of your loan amount and lowers your rate by about 0.25%.

Let’s look at an example, using a $400,000 mortgage amount:

  • Original quote: $400,000 mortgage at 6.25%
  • One discount point costs $4,000
  • One point lowers the rate by 0.25% (from 6.25% to 6.00%)
  • Over 30 years at 6.25%, you’d pay $486,600 in total interest
  • Over 30 years at 6%, you’d pay only $463,300 in total interest
  • Extra upfront cost of buying points: $4,000
  • Savings from buying points: $23,300

The actual savings and interest rate reduction will vary depending on your loan and lender. Ask your loan officer to show you a few different quotes, with and without points, so you can understand how the potential cost and savings stack up.

Types of Mortgage Rate Buydowns

Mortgage rate buydowns come in a wide variety of options.

Here’s a summary of what you might find when you start shopping around for a mortgage rate reduction:

  • Permanent buydown: This buydown results in the interest rate being lowered by a certain percentage for the entire duration of the mortgage.
  • Temporary buydown: This buydowns typically results in a temporary reduction in the interest rate for a specified period, often the first few years of the mortgage term.
  • 3-2-1 buydown: This option involves a more gradual reduction in the interest rate over the initial three years of the loan, with each year representing a different interest rate tier (e.g., 3% lower in the first year, 2% in the second, and 1% in the third).
  • Seller contributions: In some cases, sellers may offer to contribute to the buyer’s closing costs, which can be used to fund a buydown.

In Conclusion

Mortgage rates have recently fallen from their 2023 peaks. However, they’re still much higher than a few years back so paying discount points can help you save.

To see what you qualify for, give me a call and we can go through multiple scenarios. I can show you rate quotes both with and without mortgage points so you know how much you could save on your rate — and what it would cost you!

If you’d like to find out more and discuss the pros and cons of discount points, don’t hesitate to reach out to me!

The College and Professional Athlete

Playing sports at the college or professional level is a dream for many aspiring athletes, but it is much more challenging than most players and parents realize.

The percentages of high school athletes who make it into the collegiate and professional ranks are relatively low, underlining the competitive nature of these pursuits.

College Participation

First and foremost, making it to the collegiate level is an achievement in itself. According to NCAA (National Collegiate Athletic Association) statistics, only a small fraction of high school athletes move on to compete at the college level.

person holding baseball bat

The percentage varies by sport, with more popular sports having higher competition – but on average only 5% of high school athletes are able to play in college. And that doesn’t even consider scholarship athletes…

This underscores the importance of exceptional skill, dedication, and often a combination of academic and athletic competence to stand out in the recruiting process.

The Professional Ranks

The transition from college athletics to playing professionally is an even more exclusive path. The NCAA reports that only a small percentage of college athletes move on to play at the professional level.

It’s crucial to recognize that the journey to becoming a professional athlete is a challenging one, and success is not guaranteed even for those who excel in college sports. Injuries, changes in performance, and the highly competitive nature of professional sports leagues all contribute to the uncertainty of reaching the highest levels of athletic competition.

man wearing black cap with eyes closed under cloudy sky

The Benefits of Athletics

While the percentages may seem discouraging, it’s essential to recognize the broader benefits of participating in high school sports.

Engaging in athletics promotes physical health, teamwork, discipline, and leadership skills, contributing to personal development regardless of whether a student-athlete advances to the college or professional level.

Most importantly, the lessons learned through sports can shape individuals into well-rounded, resilient, and determined individuals, laying the foundation for success in various aspects of life.  The time management skills, the dealing with setbacks, and preparing to perform translate so well into the business and professional world!

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