S2E27 – Do NOT Buy A House In 2023

The Housing Market is out of control with rising interest rates while housing affordability sits at al time lows. In addition, you have the economy sitting on the edge of a major recession. Should you buy now or wait for a housing crash? In this episode, we discuss why you should not buy a house as we help you become The Educated HomeBuyer.

✅ – Want to get connected with us or to a local expert in your market, please reach out at http://www.theeducatedhomebuyer.com/expert

Connect with me 👇 Jeb Smith (huntington beach Realtor/orange county real estate) DRE 01407449 Coldwell Banker Realty ➡I N S T A G R A M ➳ https://www.instagram.com/jebsmith ➡Y O U T U B E ➳https://www.youtube.com/c/JebSmith

Connect with me 👇 Josh Lewis (Huntington Beach Certified Mortgage Expert) DRE 01209148 Buywise Mortgage M:714-916-5727 E: josh@buywisemortgage.com ➡I N S T A G R A M ➳ https://www.instagram.com/borrowsmartjosh ➡Y O U T U B E ➳https://www.youtube.com/c/buywiseborrowsmart

📩 – info@theeducatedhomebuyer.com

For Show Notes, See Below 👇

[00:00:00] Jeb Smith, Huntington Beach Realtor: Do not buy a house in 2023. You’re going to hear a lot of people saying that right now because of housing affordability due to rising house prices, rising interest rates. There’s a lot of people out there that believe home ownership is dead and that you shouldn’t own a home. 

And while Josh and I both believe that home ownership is super, super important and all of the things that it creates, which we’ve talked about in several other podcasts and videos. Today we’re actually gonna talk about the premise of not buying a home. We’re going to essentially support that quote unquote decision to some extent in not buying a house. Josh, with that said, when you hear me say, do not buy a house, what comes to mind? 

[00:00:57] Josh Lewis, Expert Mortgage Broker: It brings to mind the flip side of that coin that everyone has heard, the hack realtor mortgage guy, that it’s always a good time to buy a home.

Is it always a good time to buy a home? No. We’ve talked a million times on the show, homeowners enjoy 40 times greater net worth. More than 60% of that is in home equity. Financially, it is the right decision over the long haul and voting with their actual checkbooks. Most American households, 65% plus or minus at any given point in time, choose to become homeowners.

So it is the right decision for most people at most times, but is not the right decision for all people at all times. So the discussion today is to go through some of the silly reasons or silly ideas for not owning that are out there, and then some of the really good, valid ones. They’re sometimes overlooked.

Jeb, you talk to buyers. I talk to borrowers looking to buy their first home, and they’re like my credit I’ve worked hard. I’ve got it up to a 602, so I think I’m ready to jump in and buy. There are signs that now may not be the right entry point for you and going back, Jeb, for those that are wondering of specifically market cycle, where we are in home prices, we’ve covered that.

So definitely go back to prior episodes, look through that, see what our beliefs are and where we’re at. And we’re gonna have another look at that here in the coming weeks in the future episode. But for today, we really just want to talk about actual evergreen reasons that are valid of why you should either not buy a home or at least put off buying a home until you can answer these questions more affirmatively. 

[00:02:30] Jeb Smith, Huntington Beach Realtor: No, and I think that’s really important. You said something there at the start, 65% of Americans choose to own a home at some point in their life. So maybe you’re one of the 35% at the moment that isn’t ready, or you have a belief that home ownership isn’t right for you, or maybe it’s just not right for you right now.

And things can change. Circumstances can change. A lot of things can change that can put you in a better position where home ownership makes sense. So understand when we’re going through some of these things, [00:03:00] if that’s where you are at the moment, it doesn’t mean you’re stuck there, right?

You’re not a tree. You can move, you can change your circumstances. We’re gonna talk about debt, we’re gonna talk about income, we’re gonna talk about credit. All of these things can change. And I know there’s people out there that believe they’re stuck because of where they are in life, their financial position, whatever.

You’re never stuck. There are things you can do to change that outlook, that in turn will maybe change your ability to potentially become a homeowner at some point in your life. But Josh, you mentioned one to start and I think it’s a good place to start. Credit, right? A lot of people believe there are loan programs out there that will allow you to buy a home with as low as a 500 credit score, right?

We both know that the terms, the rates around a 500 credit score are awful. It’s going to translate into a really high mortgage payment if you can actually qualify for it. So that said, you hear somebody with really low credit. Is that a person that should be buying a home, or is that a person that should be working on their credit and then buying a home?

[00:04:06] Josh Lewis, Expert Mortgage Broker: I can tell you this sub 580 credit scores, even though VA doesn’t have a credit score requirement, USDA in theory doesn’t have a credit score requirement. FHA will let you go down to 500 with a 10% down payment. People sub 580, there’s never a blanket statement where you can say they should not buy a home.

I’m sure there is a situation where a spouse is going through medical treatment and they run up a bunch of medical bills and they do have the ability for a large down payment and can handle the payment, and there was an isolated issue over a period of time that led to a lower credit score. But what I can tell you is the vast majority of people that reach out to me with a credit score under and not just under 580. In that 580 to 620 range, there are some obvious signs in there that in the recent history, they have not properly managed their credit score. 

So we’ve talked about this in previous episodes. Credit scores required by loan program, really for an FHA VA. I love to see my borrowers with a 640 or above. That will allow us to get them very good terms. Same thing with the USDA. Conventional loan, with the recent changes to the LLPAs, despite the rumors that it improved for people with bad credit and better risk unless you’ve got 40 or 50% to put down on a conventional loan, you really need a 700 plus credit score closer to 740-760-780.

So is that impossible? No, but it is gonna require a minimum of 12 to probably a 24 month commitment to paying your bills on time, getting some accounts paid off, getting your proportion of balances to high credit in line, and showing that you are serious about owning a home successfully and that you have committed to managing your credit to being that person who can successfully be a homeowner.

It’s not about becoming a homeowner. A lot of people in 2003, 2004, 2005, [00:06:00] 2006, when the guidelines were super easy and all you had to do is fog up a mirror became homeowners, and those became tragic stories for them, for the housing market as a whole and the US economy because they weren’t the type of people who could successfully be homeowners.

We want to promote homeownership to as many people as possible who can successfully be homeowners and credit score is one of the best indicators that you have become that person or that you are that person. 

[00:06:25] Jeb Smith, Huntington Beach Realtor: Now on that same token, I think it’s important to talk about debt, right? Credit score, obviously really important piece of the puzzle, but debt, right?

A lot of these loan programs that you’re talking about also allow higher debt to income ratios, which means that you can essentially put more of your gross monthly income towards your mortgage payment than say Dave Ramsey, for example, might actually support. We talk about Dave Ramsey on the show quite a bit and how some of his foundational beliefs around home ownership are a bit crazy, especially if you live in a high cost area like California. Cuz most people aren’t able to do what he says and actually become homeowners because the guidelines are so strict. But at the same time, if people follow those guidelines, they usually end up in a much better financial position, long term.

But let’s talk about debt. Josh. Someone that has say, FHA allows as high as a 57% debt to income ratio. We’ve qualified, actually had a mutual client VA, that had a debt to income ratio, 65, 70%. I forget what it was, a crazy number. 

[00:07:30] Josh Lewis, Expert Mortgage Broker: It was just shy of 70, just shy of 70. 

[00:07:33] Jeb Smith, Huntington Beach Realtor: Are those people? People that should be buying homes.

Again, this isn’t a blanket statement, we’re talking a little bit outta context here, just to give you an idea of the people that should probably hesitate more when it comes to buying a home versus just jumping all in. 

[00:07:47] Josh Lewis, Expert Mortgage Broker: If you don’t know for your yourself, whether that feels right or feels comfortable, let me give you the insight of dealing with thousands of clients over the years. The folks like George who have close to a 70% debt to income ratio and they are comfortable with it. The folks on an FHA that are a 56.8% debt to income ratio that are comfortable with it, I have a client right now that we literally just had to rejigger the file to get them under a 57.

The reason for that is he has two other jobs that we can’t document properly. George had a girlfriend who was splitting the bills. Doesn’t show up, couldn’t document it. Can’t use a non-spouse, co borrower on a VA loan. Most of the people that are ultra high debt to income ratios, there’s something going on in their life that represents additional income that makes that a more manageable debt load. 

We had a client here that came from the live show, Jeb, and she put it off. We were talking back at the beginning of the year, January, February, and I could have got her qualified with about a 45% debt to income ratio with all of her debt. She was up around 56, 56 and a half percent and looked at it. She goes, I can’t afford that. 

So you need to know for yourself. And what can happen is I [00:09:00] do fairly regularly talk to people who have plenty enough gross income to qualify for the home that they want with a debt to income ratio in terms of the house to income ratio is perfectly acceptable. And you look and these people spend like crazy.

10 credit cards with two, three, $400 payments, and you look at one individual card, you’re like, Hey, no big deal. You add ’em up, you’re like, $2,000 are going to credit cards. We have two auto leases for another $2,000. We have $4,000 of debt here. And when you take that into account, you’re either pinned at a super max debt to income ratio.

Or you have to acknowledge to yourself, I’m not ready for that. What I will say is there are a lot of people, especially for us here in Southern California, Jeb, that like to rent a place, have a very nice car because people at work, people at the bar see them leaving in the expensive car. 

[00:09:49] Jeb Smith, Huntington Beach Realtor: Should you be leaving the bar in your car? 

[00:09:51] Josh Lewis, Expert Mortgage Broker: It depends. You could have been having no soda water with your friends. 

[00:09:53] Jeb Smith, Huntington Beach Realtor: Okay. Just wondering. 

[00:09:55] Josh Lewis, Expert Mortgage Broker: It’s a good point though. What I’m saying is I regularly see 13, 14, 15, $1,600 auto leases. Typically not loans but typically leases, and they are from people who make good money, but carrying a debt load like that will preclude them from successfully becoming a homeowner or at least at the type of home that you would want to pull your Porsche into the driveway.

[00:10:17] Jeb Smith, Huntington Beach Realtor: It’s one of those things, Josh, that comes up quite often is, the idea that, hey, I need to be a homeowner. I need to become a homeowner as quickly as possible because, you and Jeb are often talking about the 40 times greater net worth it creating long-term generational wealth.

So the sooner that I get into it, even if all of these things are maxed out and it stresses me out. The quicker I can essentially get to that long-term goal. And I get the idea behind that to some extent, because you don’t want to miss out. It’s almost like the fomo of not having the house and the cars and all of the things that we talked about.

But like you said, you need to know where you are financially and if it’s the right decision for you. And sometimes it takes the basics, the foundation, the simple things of writing down every single thing you spend on a monthly basis over a couple of months to really figure it out.

A lot of people are looking at it and saying, Hey, I’ve got car payment here. I’ve got a student loan here. I’ve got these things, but they’re not taking into account, childcare, groceries, gas, all of these other things that are expenses every single month. They just don’t factor ’em in because they’re not set expenses.

They change here and there. They’re putting on credit cards. They’re not really counting for ’em. You need to do that. And yes, we both believe that home ownership is for everyone at some point in your life. It might not be the right thing for you right now. So if you are stressing with the idea of buying a home, knowing that you have all of these other things going on, Then maybe that is the sign for you to just take a step [00:12:00] back before jumping in.

[00:12:01] Josh Lewis, Expert Mortgage Broker: Think, think of this thought, Jeb, especially for the type of folks that we’re talking about here. Generally, these are higher income, good annual incomes and that’s what is making them comfortable committing to these larger debts, but the thought is you can have anything you want. You can’t have everything you want. 

So unless you’re Elon Musk, you’re Jeff Bezos, and you come on to the next big thing and you have billions of dollars or hundreds of million dollars, you can be a professional athlete. For the most part, those people don’t have to make the decisions that we have to, but at a certain point, you have to prioritize.

Am I okay with a really nice Honda? Instead of the top of the line Mercedes. That’s the reality for most people. We have to make concessions to lifestyle to get where we want to go over the long haul. And if you’re not ready to do that, it’s not a problem. It means you’re probably not ready to successfully become a homeowner if those things are causing your debt load to be too high.

[00:12:52] Jeb Smith, Huntington Beach Realtor: Absolutely. So we’ve talked a little bit about credit. We’ve talked about debt. Let’s talk a little bit about savings and down payment, cuz I think those two go together. We often have borrowers, clients borrowing money for the down payment. Sometimes it’s a son or daughter getting the money from their parents.

Sometime it’s a parent getting the money from their son or daughter in order to help them buy a house. And often what you’ll have, we recently did a video, what this past week where we talked about a 1% down loan program where essentially the borrower’s only having to put 1% down and the bank is more or less gifting you the other 2%.

And there’s a lot of comments on that video. Basically saying if you only have 1% to put down, you should not be buying a house. What are your thoughts on that? 

[00:13:40] Josh Lewis, Expert Mortgage Broker: I don’t necessarily disagree, but I think the people that are really benefiting from that program are the folks that have 3% and they’re saying, cool, I have 3%. Why do I wanna spend 3% if I don’t have to? 

So there’s some validity to that. If you can only scrape up 1% and a seller concession to cover your closing costs and you have no post-closing reserves, we need to think about whether you can become a successful homeowner. So let’s just continue with that thought.

This isn’t just about becoming a homeowner. It’s about successfully becoming a homeowner. So I shudder. I will say this happens more often than I would care to think. But I also know that a lot of people, when they’re comfortable making the decisions, they’re not foolish. They know things that I don’t know.

There are things that we can’t see or don’t see in our file. But we’re gonna say is we will use every last nickel to close escrow. And you’re like, whoa. Cuz when you buy a home, whether it’s a new vacuum cleaner that you didn’t have to have at your last place, whether it’s drapes, whether you need to put in some landscaping in the backyard of your brand new home, there will be expenses.

So we just qualified you off of the debt to income ratio that shows on your credit now. You can move in and run up any amount of credit cards you want. You can furnish the whole place $50,000 on an Ethan Allen credit card. No one can stop you from doing that, but it’s going to make things difficult.

And then above and beyond that, [00:15:00] we want to see reserves. We are coming off a period of protracted prosperity. Other than that Covid recession, which was what about 60 days Jeb? We’re going on 15 years of expansion in the US economy, we’ve seen unemployment decrease steadily through those 15 years.

Everyone who’s wanted a job and is willing and able to work has one. We haven’t seen bad times. It would be foolish to think that bad times have been eradicated, that there’s nothing coming down the pike. So I’m fine with using your liquid cash if you’ve got 40, 50, $60,000 in a 401k that you could tap in an emergency.

But in a perfect world, we want to see a borrower holistically healthy from all of these perspectives. They have a 680+ credit score. They can make their own down payment. When they do that, they have some money in reserves, even if it’s in a retirement account, that could only be tapped in terms of an emergency. 

That we have a debt to income ratio that’s manageable, or it’s not obvious on the surface level that it’s manageable, that there’s some something going on behind the scenes. There’s additional income that makes them comfortable with that. So big picture wise, that’s what I like to look at when a advising people, because again, it’s not about putting people into homes.

It’s about successfully putting people into homes that will be clients for life as they build up equity, trade up to a bigger home as their family grows, downsize when that becomes appropriate. That’s really what success in this industry is not just getting people into homes when they can’t really afford it.

[00:16:31] Jeb Smith, Huntington Beach Realtor: And I agree. I, often when I’m talking about the idea of owning a home, I say, you shouldn’t buy a home if you’re not comfortable with the payment, completely comfortable with that payment. And what do I mean by that? Hey, listen, if I lose my job tomorrow, are you comfortable with that payment?

The all reality, the answer is no. I’m not gonna be comfortable with a payment if I don’t have a job. But the idea here is, hey, if I got another job, would I still be comfortable with that payment? Or am I only comfortable because of the position I’m in right this second? So you need to have that.

You need to have some money in the bank. Josh said, you need money outside of your down payment for things like repairs, I haven’t had to do a lot of major repairs on my property. I’ve been really fortunate. But if something were to go wrong there, there is, money there to do that.

And I feel comfortable that, it’s like buying tires for your car. It’s not money you wanna spend, but it, Hey, if you gotta do it, It’s good to have that money versus having to borrow it. And really the most important thing, Josh, that we haven’t really touched yet, that I always talk about is the time horizon.

Having a longer term time horizon. I often hear people say, Hey look, I just, I’m gonna buy this house. And I’m just gonna own it for a couple of years, and they might be owning it for a couple of years for a number of reasons. Maybe they’re planning on moving out of the area. Maybe they’re using it as like a jumpstart to buy the next home.

They think that they’re going to sell that and get some equity and move to the next property, those sorts of things. So if you have a shorter term time horizon, this is probably, honestly out of all of the things we’ve said, really the most important because,[00:18:00] if you can withstand time, home ownership is going to create the things that we’ve talked about.

Long-term generational wealth. It will make up the large majority of your retirement for most people out there. Time. But if you don’t have that time, personally I’ve been there, Josh, I’ve owned a couple of investment properties that if I still owned today, would be bringing in monstrous cash flow based off what the mortgage was.

But I didn’t. I was young. Coming through the housing bubble, if you will. And me being a commissioned employee in real estate and mortgage at the time, I wasn’t making a lot of money and I was looking at those properties going, they’re just breaking even.

This, kinda made my ass pucker a little bit if we’re being honest. And so I wanted to get rid of that debt, that potential debacle if things were to go south, renters were to move out, I would have to pay that. I’m like, no, I don’t want that. Got rid of that real estate.

And now here I am 15 years later going, man, that was a really bad decision. If I still held that real estate, my financial position would be completely different. So what are your thoughts when it comes to time? 

[00:19:09] Josh Lewis, Expert Mortgage Broker: Here’s how I like to look at it. You and I both say five to seven year time horizon. Let’s take a shorter term. Five year horizon. Let’s go back to the scenario you just talked about. A 3% down payment. So if someone puts 3% down in their home, they owe 97% of the value. If you have to sell a month after buying it, you are upside down. What would you say are the closing costs for a typical seller around the country?

[00:19:30] Jeb Smith, Huntington Beach Realtor: Six to 7%. 

[00:19:32] Josh Lewis, Expert Mortgage Broker: Okay, so you only have 3% equity. And you’ve, maybe you’ve made a couple payments. You have a little bit more than 3%. So what does time do for you? It does a couple of things. Historically, we are not guaranteed this, but historically 4% plus annual appreciation. So if we wait five years, we have greater than 20% appreciation in addition to your initial 3%.

You can safely and easily sell without having to write a check to do it. Now, is that a guarantee? Absolutely not. So if we look back just in the last 15, 20 years, if you bought in 2007, in 2009, that home was likely worth 20 to 40% less than what you paid for it. That is your absolute worst case scenario.

Let’s say you bought in 2010. 2010 to 2015. I’d have to go back and look up the numbers, Jeb, but it was more like two or 3% appreciation annually through those years. It was ticking up, but very slowly. But still at that point, five years of 2% appreciation. You have 11, 12% growth. You have your 3% in the property, and remember, you’ve been paying a portion of your principal down every year, probably 1% a year. So you’re in a position where you can safely sell. 

I like people to know that and be aware of it and think in terms of, it’s not as simple as just throwing a sign in the yard. Probably the biggest cliche that we’ve seen, Jeb, is the person that has a for sale by owner sign in their yard and you go and say, Hey, why’d you decide to sell this yourself?

They don’t have enough equity. I can’t afford a realtor. And they’re asking too much for the home. It sits, never sells. You don’t want to be in that position. And if we talk about in terms of a rental property, if we’re not just talking about [00:21:00] your home that you’re going to buy, we had a guest on a couple months ago, Michael Zuber and his word for it is never buy alligators.

Never buy a property you have to feed every month. So if it’s a rental property, you also want to have a longer term time horizon. You want to make sure that you have a cushion there, that it’s bringing in additional money every month. An example I have my property in Orange.

It’s about $500 positive on a monthly basis. You go, cool that’s $6,000 of annual income. The lease is up next year. Those tenants have told me they’re going to move. They’re likely to be getting married. They wanna buy a place of their own. If I have one monthly vacancy that’s 3,800 bucks, so now I’ve got $2,200.

So it’s not as simple as saying, Hey, I rent it for $1 more than what my monthly payment is. It’s thinking over the long haul maintenance vacancy, all the expenses that could come up. For me, that property is essentially a breakeven property over the long haul until rents increase. 

[00:21:51] Jeb Smith, Huntington Beach Realtor: And I think if you’re buying a home, primary, investment, second home whatever, these are the things that you need to factor in. You need to write all of this down, right? People buy emotionally, they justify logically. It doesn’t matter whether it’s a house, a car, anything. 

It happens in every scenario, and people often have buyer’s remorse to some extent, even when buying a home, even when it’s the right time in your life, you might have some buyer’s remorse just because it’s such a large purchase and you’re putting such a big percentage down for most people.

You’re going to have a little bit of angst. That cold feet feeling. So that’s normal. If you don’t have a little bit of that, you’re probably not human, right? You’re going to have some of that, but you are the person that knows more so than anyone else. You, your spouse, your partner, whoever, know whether or not it’s the right decision. 

And sometimes it takes writing down, pros, cons, where we are, where we want to be, and making that plan. Now, Josh, we often hear people talking about maintenance. It’s better to rent than it is to own because, you gotta maintain that property, you gotta put a roof on it, you gotta put AC on it.

You gotta change the flooring, you gotta paint it, you gotta do the landscaping. You got all of these things. That’s people’s biggest thing is that maintenance, right? You gotta put all this money into a property. What are your thoughts on that aspect of it are, should you not be buying a house afraid that the house might need some work?

[00:23:17] Josh Lewis, Expert Mortgage Broker: It is going to need some work. You need to be aware on the way in. Your home inspection, your appraisal, your agent’s visual inspection, your visual inspection, you should be looking very closely at that house. If you’re not a handy person that you don’t know what to be looking for, bring a friend or family member that is hopefully not the cranky old dad that’s gonna, tell you every property’s awful one that you shouldn’t buy and talk you out of buying, but someone to walk you through that, like the example we’ve used, our individual examples. Yeah, but I’m going on, this will be my 20th year in my house. We’ve had two large expenses. One was a water heater. And I think ends up 1200, 1400 bucks.

Somewhere along those lines. We had a slab leak and to repair that slab [00:24:00] leak and then fix the drywall and paint where they had to cut into the wall to, to reroute everything about $1,800. So are there expenses that could exceed that? Yes. Probably your big one that you’re always gonna be looking at is the roof. Roofs generally have a 30 year life.

When you’re buying that, you do need to be aware if the appraisal inspection says, Hey, the roof appears to have a five year useful life on it, that’s gonna be a big expense coming up in the next five years. When I bought my home, the roof was three years old. So I’ve been there 20 years. I know in the next 5, 6, 7 years, I’m gonna have to put a $15,000 roof on my house.

So is it real? Yes, it is. Amortized over the life of home ownership. It is not significant. You talk also about not just the maintenance there, but upkeep. Landscaping is not included as an owner, it could be included in your rent. So if it is included in your rent and now you’re gonna have to come and pay with it. These things are legitimate, but pretty much overblown for the most part.

Again, The numbers have spoken. Over hundreds of years we’ve arrived at this 40 times greater net worth. I can’t underline that enough, and 60% of that being in home equity for homeowners. All of those homeowners had all of the maintenance and upkeep that we’re talking about. Magically, they found a way to pay for it, and they still built up equity in their home. And started to move towards retirement of and getting that home paid off. 

What’s the number, Jeb? More than 40% of homes in the US are owned free and clear. Yeah. Most people. 42%. Yeah, 42%. And that’s where we all want to get. I have one that is paid off. I have one that will be paid off in two and a half years, and I’m probably 12, 14 years away from having my primary residence paid off. 

I don’t want to go into retirement With a house payment. It’s not the worst thing if you’ve planned for it and you’ve built up assets that can comfortably pay that mortgage payment. My goal is to get everything I own paid off by the time I say I’m not going to work anymore, and that’s not possible as a renter.

[00:25:56] Jeb Smith, Huntington Beach Realtor: And here’s one, Josh. I think those are all really good things. We wrote down something here that I think is important to talk about, something we haven’t touched on. I don’t think it really in, in any other videos, and that’s the idea of relationship uncertainty, buying a house. When you’re in a relationship with someone that isn’t stable for whatever reason you’re not sure if it’s gonna work out.

You fight a lot, you’ve been whatever the situation is. We see this all the time. Hell, we’ve had friends that we know the relationship isn’t on a solid foundation and they’re buying homes. And at some point, that relationship, whatever, something happens. Now they have this piece of real estate that they, in theory, had a longer term time horizon.

Now they’re having to sell in two, three years, which puts you back in those, the scenarios that we talked about earlier. Having a solid foundation, not only in your credit, not only in your finances, your down payment, your time horizon, but also. In your relationship, right? Because you don’t want [00:27:00] to buy a house and then six months later realize that, oh, this isn’t gonna work out.

Now we have to sell the property. So Josh, there are some other, quote unquote funny ones that come up. Do we want to talk about those? 

[00:27:13] Josh Lewis, Expert Mortgage Broker: Before we close that last one out. The other one is career uncertainty in a good way. Especially with our younger higher earning borrowers, it may require them moving to another part of the country. I have an example, one of my best clients, and they already owned here in California, so it wasn’t a matter of them putting off buying, but for him, He worked for Costco and to get his own store, which those guys make a lot of money.

It was like a tripling of his income. He had to move to Texas. There was, there are no stores. California is very desirable. He was not going to be eating a store anytime soon in California. He had to go to Texas to do that. That’s not uncommon for young upwardly mobile people. They’re like, Hey Susie. Hey Joey. You are awesome. But here’s the next management position that we have available. You need to move. 

Or you could be a salesperson and it’s Hey, territory just came up. Don retired and we would love for you to go take it over. And it’s this wonderful opportunity. So think in terms of your career and if it needs to be location flexible.

A lot of people just don’t take that into account. And we’ve had that one as well, Jeb, either people coming back to California because of an opportunity, leaving California because of an opportunity. So it’s important to consider.

But the goofy ones, Jeb, that are just silly reasons that we hear thrown out, and I say this one’s goofy, but there is actually a valid personality type that this is a very good reason not to buy it.

But this thought that you’re just not an ownership type person. You’re just happy renting. You want to be able to move to a different place next year. You want to be able to leave at a moment’s notice. You want to call the landlord at 2:00 AM. Like when I hear that, I go, I could not imagine being that frivolous as a person that I would not want to become a homeowner cuz it’s just easier to rent.

And the flip side of it is, we’ve gone through this on the show a few weeks back, the engineer mindset, who can get out a spreadsheet, who can save diligently, who can invest, they can arrive at retirement with more assets than a homeowner. Doesn’t happen very often. That’s why the numbers are 40x in favor of the homeowner, but the person who’s not buying, cuz they’re happier renting, they are not that person.

[00:29:18] Jeb Smith, Huntington Beach Realtor: And then what about the idea of, if you’re not handy, you shouldn’t buy a house? Now I hear that and I laugh because I guess I categorize myself as somewhat of a handy person by nature. So I think if something is broke, you just fix it, or you watch a YouTube video or you, you call somebody, right?

The idea of calling someone to come and fix it. Now, I guess if you’re in the situation where you don’t have the funds, like we talked about earlier. You don’t have those reserves, you don’t have that money in the bank, and you’re not a handy person. You need to think you need some money in the bank for the things that we talked about earlier, but just because you are not handy, I would say that a large majority of people aren’t handy that own homes and have done it very well.

[00:29:59] Josh Lewis, Expert Mortgage Broker: I am the [00:30:00] exact opposite Jeb. I am not handy. I will try basic stuff. When I’m done with a task or a project, I want it to look perfect and clean. Me doing that will generally not result in a perfect and clean looking outcome regardless of whether I successfully pull it off. So my handiness is involved in Googling and cell phoning to the many professionals who can handle this.

Again, you pointed out. Two sides of it. If you don’t have the money to pay someone to do it, you need to be handy enough to do it and have the funds available one way or the other. So it’s just, I don’t think it’s a tremendous reason for not owning a home. It’s something to be aware of and budget for and account for on the way in, but it’s not a reason to not become a homeowner.

[00:30:40] Jeb Smith, Huntington Beach Realtor: Agreed. I realize today’s show is about not buying a home, but yet counter argument, as part of the episode and telling why home ownership is important. And that’s because, Josh and I believe home ownership is important. So while we’re sitting here saying, Hey, if you’re in this position, you should probably consider not buying a home right now.

But what we’d really like to say is, Hey, if you’re in that position where those things don’t apply to you, or they do apply to you right now, change your scenario, change your situation where they no longer apply so that you can put yourself in a position to become a homeowner so that you can reap the long-term rewards of home ownership and the generational wealth that it creates.

So Josh, I’m gonna throw it your way to wrap this up today, instead of saying, do not buy a house, I’m gonna say, buy a house, but buy it when it’s the right time in your life. 

[00:31:32] Josh Lewis, Expert Mortgage Broker: And I would say the same thing, never let anyone tell you it’s always a great time to buy. It is not. There are market cycles that come and go. We talk about that a lot. There are life cycles for you and it needs to be the right time in your life, when you have put yourself into a position to become a successful homeowner, not just beg, borrow steal, scrape by to become a homeowner who is not gonna enjoy the process or is going to fail at home ownership.

So ask yourself these questions. Go through it. Honestly, assess where you’re at. Jeb mentioned budgeting. Get a budget. Know what your relationship looks like. Know what your career track looks like. Know who you are in terms of handyman, yard work, willingness to do that type of stuff. When you’re ready to buy a home, check these things out.

Know when that roof’s gonna be replaced. Know when the major things like water heaters were done. You do your due diligence, you can successfully become a homeowner and start that clock so that you are working towards having your home paid off, building up that home equity, and building up net worth for you and your family.

[00:32:37] Jeb Smith, Huntington Beach Realtor: And I’m gonna leave you with our quote here at the Educated Home Buyer. And that is buy right, borrow Smart, build wealth. Until next time, Adios! 

[00:32:47] Josh Lewis, Expert Mortgage Broker: And Vaya con Dios!.


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