Mortgages

Many people who, you know, that are extremely successful from a standard of how much money they're taking home because of how they file their taxes have a very difficult time getting a mortgage. And that is actually right now a huge chunk of my business. Take the nursing home administrator as an example, self-employed. But now that he's self-employed, he's all excited. He's taking advantage of expensing his gifts, expensing [music] his car, expensing his next thing you know, there's not that much money there on paper, but he's making a good living. How does he buy the home? That that is where I've been very busy lately. >> So, what do you do? >> So, all right. So, [laughter] welcome to the middle class podcast. Today we have a special guest, Gabe Tenberg, mortgage Gabe of FM Home Loans. And Gabe Tenenberg deals a lot with the middle class, helping them with mortgages, providing the valued service from step one all the way to the end, A to Z, getting the mortgage. And we want to go into the weeds today to understand how the middle class gets mortgages. So let's start a little bit with an introduction, Gabe, about yourself, what you do on a daily basis, and we'll take it from there. >> Okay. So as you said, my name is Gabe Tennerberg. I haven't legally changed it to mortgage gabe yet, although that is how most people refer to me. Um, I've been doing mortgages for almost a decade, which uh reminds me of a story. When I was in high school, we had a janitor. We asked him how long he's been here and he said 19 years. Almost a decade. [laughter] So, so I've had a lot of experience and, you know, dealing with the middle class is is probably my bread and butter. You know, we obviously help people with investments and we help people who are not necessarily in those classes. Rarely below those classes because it just doesn't work, right? Um, so that's the struggle that I'm dealing with. You know, it's it's it's time consuming and it takes a lot of energy and people need to be able to understand what it takes to get it done and that's what we've been grinding through. So I hear a couple of major emphasis emphasises if that's a word emphasises that um that you said. So there's the struggle like you said automatically it's a struggle usually when you know we look online or in the non-Jewish world um home buying is this paradise let's get a home our first home for us it's a struggle it requires investment of time and resources and like you said get people through the grind what makes it a struggle and a grind for the middle class well we're going to focus on how it's a struggle but let's not forget that it is very exciting. It's I always appreciate the excitement when I get to help someone buy a home, they move in, and anyone who's listening who has dealt with me may have heard this expression where I tell them, "You're not here to buy a home so you can sit on the couch and pull out whatever hair you have left." That's obviously not the goal. Um, but it is a struggle mainly because, as you know, I'm sure you've discussed this with thousands of people. Expenses are very high in in in our culture and it doesn't leave over that much room for whatever that monthly payment is going to be on a mortgage in the communities that you want to buy. So, this isn't a go buy out of town type of podcast right now. We're just trying to deal with, you know, try to deal with how people navigate and get this done. In most cases, it's a struggle. And you know, I always say seven times a week I get asked the question of how does everyone do it? And it comes usually after we get to that point of what it's going to cost. There's a little pause. How does everyone else do it? >> Mhm. And that's a important thing. So a lot of people ask me as the financial planner, should I move out of town? Should I not move out of town? So, let's talk about in town and what are what is the typical price of a movein property or house in town that you're dealing with? >> So, in town is also a broad you know term cuz I will say I do mortgages in you know Houston Texas and Bakinwood Pennsylvania and Boon Beach Florida and you name it. However, in town, you know, let's call it the tri-state area, you have the the Muny, Nanowit, New City, Havstaw crew. You have the, you know, the Jackson, Tom's River, Howell, Brick, and whatever city just popped up as we're speaking. And then you have the five towns, let's say. You know, you have the Northwood mere, the Faracaway, the Wood. There's a there's a big range. But >> it's [snorts] it's crazy how it's very normal for purchase prices to be north of a million for a regular middle class couple in today's day and age. >> Mhm. >> North of a million. north of a million. >> So, just everyone should digest that if they haven't yet. Every house or a lot of the houses in these in town areas are more than a million dollars. A million dollar homes. So, I read the Wall Street Journal. I look at these celebrities who are selling their houses for like $2.3 million in uh Palm Beach Springs or something like that. By us, it's in town. million dollars is a normal number that you're seeing >> close to the shel near the friends already established not on a far out block that doesn't have >> you know the peers that you're looking to be together with unfortunately it's it's it's a lot it's a lot >> now just a quick question fact check over here um what is the mansion tax that >> so mansion tax is it's a onetime fee whenever you buy a house that's a million or more and yes you'll see many homes selling for $999999 but if It's a million dollars or more, there's a 1% tax and it changes in tiers if it gets way more than that. In Jersey, they switch the rules who has to pay that. But the bottom line is there's a onetime fee that adds to your closing cost. And again, >> yeah, >> we'll get to that at some point. But savings and how much money people have for their down payment. They often times forget closing costs. Closing costs are a fortune. Differs from state, differs by county. >> And when you're buying a home for 1.1, there's an $11,000 fee added onto your closing cost. Now, $11,000 for most people. It's not pocket change and that takes a big toll. >> And that and that number is not just on a structure. Let's say you're buying a property without a house. There's also a mansion tax of >> technically there would be. I believe so. I don't do those. I don't I don't do mortgages on lands really. So, I wouldn't know. It's not something that I I have to check my >> No, I mean like someone's buying like this again facts. People are buying houses that are not moving ready. >> Doesn't make a difference, right? If you're buying a house that you say, I know over the next 5 years I'm going to have to put >> I'm making up a number, $200,000 to repair this home. Not to make it a luxury home, to repair this home so it fits my family's needs. >> You're still paying that. Even though, you know, I find it funny. It's called a mansion tax. It shouldn't be called a mansion tax anymore, >> right? That's [laughter] that's the irony. It's not a mansion. It could be a knockdown and you still pay the same. So, let's talk about this because a lot of people that I work with >> um in financial planning don't know the basics of a mortgage. And the first time they go through the journey, [snorts] it really is a journey. And I would love to just educate people on basics. So let's say a couple's coming to you. We use uh um Mosha and Khani. >> Perfect. >> Gross. >> Perfect. >> Come to Gabe Tenberg Mortgage Gabe. They want to they're looking for a house. Well, do you help them find Do people come to you just to say, "Well, where can we buy?" Is that >> So you usually So I always say the best time to get pre-approved to buy a home is really yesterday. >> Often times I've had people I can I remember the people who called me up >> from the car outside of an open house that they happened to drive by on the way to a friend's barbecue and said, "Wow, look at that house." They go in and they love it, right? It's the Lexus dealership. They go in, they feel the car. This is nice. They come back to the car and they say, "Can we buy this?" And they call me up and now it's a scramble. Let's see if you can a get approved for a mortgage. B, once you understand what it's going to cost, can you figure it out knowing that this seller is going to have 12 people put offers in over the course of the next week and you got to make up your mind. So, it's always smart to, you know, get these things done well in advance. Well, in advance. >> Um, but usually people need to figure out like what's my budget? >> And it's a two it's a two-part question because I can tell someone what they can get approved for. >> I can't dictate what they can afford. >> Everybody has different habits. M >> one person can afford, you know, you can have two people both making the same $250,000 salary. One person can afford this, the other person can't. >> This person's more conscious of their spending. >> They're able to adjust. The other person is more frivolous, is not able to, maybe took on more debt throughout their life. And that is something that I'll help them talk through, but I'm not a financial planner. I know of a couple good financial planners. >> Um >> Yeah. Yeah. Very good. Very good. Thanks for the uh >> for the ad. >> No, but that that's the reality. We got to go through it with them so they can understand. And then often times I'll tell them now it's your turn to go home on mate Shabas, sit down, look over the back six the past 6 months, see what you've been spending on your rent, see if there's any extra money, see where you could potentially cut corners, and try to see, okay, where can we push ourselves to? Where can we make this, we'll call it, a luxury of buying a home >> doable or not. >> Mhm. [clears throat] So, let's talk about the um pre-approval process. And I'm telling you because I have people reach out to me who say, "I want to buy a home. I don't even know what I'm supposed to do." >> Right? Like, "I want to buy a home. I don't know what I'm supposed to do." >> Just to cut you off, I would say eight out of 10 people, maybe eight and a half out of 10 people call me up and say, "Gabe, I'm just letting you know right now. We've never done this before, so we're going to ask questions that sound stupid." And I say, "Well, guess what? So does everyone else. Nobody buys a home for their first time and has any clue about what's going on. Maybe now with AI, you can quickly get a quick summary, but in general, that's the way it is. People don't really plan for this so far in advance and they have no clue what's going on. >> People should hear that because I like when people understand what's out there that you're not alone in not knowing or having any idea what to do, >> which is that question that we which is that comment that that we discussed is how is everyone else doing it? It's, you know, everybody needs to know >> right >> what that everyone else is going through the same. We'll call it struggles even though I don't want to focus too much on that and there's ways to go through it and figure it out. >> Okay. So, let's uh get very factual in the weeds. So, what is the pre-approval process? So, you have someone again who's coming to you Mosh and Khani Gross come to Gabe. We want to get a mortgage. There's a pre-approval process. What is that? >> So, I'm going to make up jobs for these two people. Now, the process for me needs to understand what are they doing for an income? Are they learning? Are they in school? Are they working? Are they starting? You know, do they run a business? Let's just assume for argument sake that is a is an accountant and she has a set salary. She gets a bonus periodically. And Mosha is let's call him a nursing home administrator. He's been in the business for four years. He's got his eyes on the gold, but he's been in the business for four years. He's got a set salary. He's got performance bonuses that he can get if he meets certain criteria. They come to me and they want to figure out if they can buy a certain home. So there's a few I actually break it down. It's called the CIA. >> CIA. What's CIA? [snorts] >> Credit, income, and assets. >> Those are the three pillars for what it really takes to get a, you know, to see if you can get approved for a mortgage. The credit is crucial >> for everyone who's applying for credit cards constantly with all the signup bonuses. Take a deep breath for a minute. >> What your score is makes a massive impact. It makes such a massive impact on what type of rate you're going to get, >> what type of [clears throat] product you could even get into. >> Really, >> some of the loans that are called jumbo loans have minimum requirements and if your score is a 719 and you're trying to buy a home putting down X amount, you can't even get a loan with them >> really. >> So, the score massive impact. >> Well, let me cut you off. What is the factor there? You were saying the credit score to get more credit cards helps or it doesn't help? >> No, it could hurt. Meaning, there's people who will constantly sign up and they're going to try to spend a lot on their credit cards, whether they're part of buying groups, whatever it may be. I've had people >> who come to me and will run their credit and their scores are really bad. They have, you know, seven credit cards. They're maxed out. Now, they're paying those bills on time. >> Uhhuh. >> But when that information gets sent over to the credit bureaus, all of a sudden there's a very high utilization and they don't have good scores. >> Oh, really? So, a lot of people ask me about that. I don't have an answer now. I know. Getting more credit cards doesn't help necessarily help your credit, but you do. Having [clears throat] a credit card >> is Oh, that's crucial. That's crucial. Crucial. Not only that, >> let's say someone and this is a very common occurrence. I have someone who let's say >> was a Canadian citizen, >> got married to an American, moved to America, and they never had credit, and they slowly they slowly they they tap on, they become an authorized user on this card, they finally get their first credit card, you know, 7 months, they want to buy a home. Many lenders, specific types, depending again, depending on what they need, have a minimum length of history that needs to be for that credit to be even looked at. So, you can have an 812 credit score, but if you have one Chase Sapphire card that was opened up 7 months ago, you're now limited to what type of loans you can get. And how would that translate? I don't know if we should get too into this. You tell me where to stop, but like how does it give me an example of how having a good credit can get you this and if you don't, where are you? So, I'll tell you where I see it the biggest or the most, >> we're not doing grammar, right? [snorts] Um, the mo the place where I see it the most is with what's called private mortgage insurance. Now, we're we're jumping all around in the mortgage process. I'll leave the editing up to you to piece it back together, but most people >> are not putting 20% down when they buy their homes. >> Most people, when I say most, I would say over 70% of the clients that I deal with, first-time home buyers, are not putting 20% down. Stereotypically, everyone thinks that's like the standard. >> And the banks appreciate that. That's where they feel the most comfortable. When you've invested and have what, you know, skin in the game, so to speak, >> they feel okay giving you 80% of this $1 million purchase, which is $800,000. [clears throat] >> Mhm. >> That PMI, so say someone puts 10% down and it's a little riskier from the bank's perspective, they're okay with it as long as you have what's called private mortgage insurance. Okay. >> You get it through the bank, they set it up, and it's essentially an extra monthly fee. Mhm. >> That is typically on there till the loan reaches a certain level of paying down the principal. >> And that's basically it's a it's a taking away the risk, taking off the edge from the bank. So what are they looking at on that PMI? The quote, how much is that? It's sensitive to each person. >> Mhm. >> What's their credit like? >> Mhm. >> How easily are they getting approved or how difficult are they getting approved? >> So there's criteria they look at and also is this person putting 5% down or putting 15% down? are they close to the to to our threshold or are they very far away? >> So that's where I see it the most. I'll have people that will come to me, they they've only saved up, they have enough for, you know, 5% but all of a sudden the credits a 693 and that really >> really can hurt them. >> Okay. So let's say for example, we hear that the Fed lowers interest rates and I know we're jumping around, but I'm still in the pre-approval, let's say, process. So the Fed lowers interest rates at they're at 6.2%. You're saying that someone's credit might be that they won't get that 6.2%. >> So, first we got to we got to hit the brakes. >> Okay. All right. >> No, no, no. You're not going too fast. It's just you mentioned a trigger a trigger word, which is the Feds, which is the Feds cutting rates. And that's when, you know, my phone, which you know, I don't know when this is going to be released based on when there's a Fed meeting, but it always blows up when they either raise or lower the interest rate. >> That's not mortgage rates. That's the Fed fund rate. >> That usually will translate into interest rates moving. But oftentimes you'll see the Feds cutting the rates a little bit >> and then all of a sudden you'll see mortgage rates going up. >> Like what happened? >> Yeah, >> it's a different rate. That's for the overnight rate, not mortgage rates which are more longerterm debt, >> right? >> And there's a different outlook. But again, we'll just assume the premise of 6.2 and go back to your question, which your question was, how could that differ? You can have two people buying a home, right? One person has a 690 credit. One person has a 792 credit. >> Mhm. >> And their interest rate could be a difference of.375, >> which on a $800,000 loan is we're already north of 100 bucks per month. >> So there you go. Just like that. By being frivolous and not being on top of your credit, you made a massive difference in your mortgage. >> Wow. All right. Everyone should hear that credit. >> That's the C. That's the credit. >> That's the C. All right. Moving along to >> the I. That's where it's the nitty-gritty. The income's the nitty-gritty. Everybody's different here. You know, I don't want to exclus, you know, make it exclusive to our community, but often times the salary jobs don't don't cut it. And you have people doing a lot of different things and, you know, people will call me up kind of bashful saying, you know, my tax returns don't show much income. I promise I'm earning my and and that's common. Um, but assuming the scenario we played where she's an accountant, he's a nursing home administrator and they're making their salary. So, the first thing I do is I take that I divide that number by 12. The bank looks at the gross when you're salaried. So the gross number >> I forgot the numbers I gave you but let's just say it was a total of 360 divided by 12 360 middle class 30k per month great 30k per month this is going to shock most people the banks will approve someone for a mortgage in most cases where that monthly payment on a mortgage now what is a monthly payment on a mortgage typically consist of on a regular home your mortgage payment which is known as the principal and interest property taxes which differs you know out in Muny it could who knows where. Wood, Woodsburg, New York is who knows what. >> Inwood much less. New York City could be less. It differs based on where you are. >> And then your insurance and insurance also insurance has home insurance has unfortunately over the years has gone up with inflation, with cost of everything, insurance keeps going up, flood insurance, depending on where you're buying. Those are the four main things. Your principal and interest, which is your mortgage, your tax insurance. As long as that number along with whatever else came up as your recurring liabilities on your credit, not your life insurance payments, not your school tuition payments, not your subscription to who knows what payments 24/6. Bottom line is as long as that monthly payment with the recurring liabilities that we see on your credit does not exceed in some cases 50% of that number, which again 30,000 >> it's 14,999. >> Mhm. >> You would be good to go. Now, any financial planner, and I can speak for all financial planners, any financial planner who hears that someone is, let's say, putting themselves into a position >> where their monthly recurring credit card debts and stuff they have on their credit report, car lease, you know, student loans along with their mortgage is just at 50% of their gross income. >> Yeah. >> That doesn't work. >> No. I mean, let's think their net income. >> Exactly. [laughter] Well, exactly. And the net income differs where you are. You know, you're in you're in Bon Beach, Florida. your net income is going to be different if you're living in farway New York where you're going to be hammered. >> So >> it does differ but in even in even in those cases that 50% number is a very tight number but still that is the the the standard guideline for most mortgages that are >> interesting. So it's not really hard if I can say it like this hard it's not hard to get approved if you're making a middle class income. >> If you're making a >> with a pretty good credit >> if you're making what we classify as a middle class income. Yes, >> under the terms that we discussed which which you know salaries not you know >> making it the the more complicated ways where the tax returns don't necessarily show that you're making that money but assuming you're making the money the way the middle class is making the money >> it is not so hard to get approved now affording to get pre-afford as we call it >> pre-affording interesting >> is a whole different story >> so okay so let's talk about that because I know with my clients as well of course everything is kosher vioer but the tax return doesn't necessarily reflect all the cash flow. Correct. So, what do you cuz that's a very common. What are we doing? >> So, there's a few things that you know the banks understand are paper losses. So, like all the guys in real estate that have the the depreciation, the accelerated depreciation, >> that's a paper loss. Now, it differs from program to program, how lenient they are with adding that back, so to speak. >> Um, but that's one thing that they kind of recognize. Um, and then you have like something I hear constantly from business owners is I'm just letting you know that, you know, at the end of the year we we pay a lot of our vendors and and try to offload as much as possible. And I and I got I let them say it and then I say I've heard that a million times. >> Many of them have a very hard time getting a mortgage. Many of them really many people who you know that are extremely successful >> from a standard of how much money they're taking home because of how they file their taxes have a very difficult time getting a mortgage. And that is actually right now a huge chunk of my business is dealing with people >> that are self-employed. Some of them more recently opened up businesses. You know, we'll take the nursing home administrator as an example. He was working as an admin for six years. branched out on his own, became an operator with some people, and now he's self-employed. But now that he's self-employed, he's all excited. He's taking advantage of expensing his gifts, expensing his car, expensing his that that next thing you know, there's not that much money there on paper, but he's making a good living. How does he buy the home? That that is where I've been very busy lately. >> So, what do you do? >> So, all right. So, [laughter] >> sorry. So you can tell me that this is censored at [laughter] the >> No. So for that there's a there's a very popular program right now. It's called a business bank statement loan. Slow down. >> Okay. >> The banks understand that not necessarily what lists your income on your tax return is what you're actually making. There's an understanding, but they need to get an idea of how they can evaluate your income. So what they'll do is is they'll take a we'll call it a T12, but they'll take 12 months of your business bank statements. Mhm. >> Some cases you could do personal if people are paid differently. Um and they'll essentially determine your income just based off the deposits that are coming in. Now there's rules to it. It works very favorably for some industries, a little tougher for others, but they're very focused on deposits. So you have people, you know, one of my biggest clients are Amazon sellers because there's a lot of deposits. There's a lot of deposits coming in. And even though the tax return may show a h 100,000, when they do the approval through the bank statements, all of a sudden there's, you know, 1.6 million of income. >> So there's a lot more. So that is >> that's a big chunk of my business right now is the business bank statement loans. A lot of people out there are not even entertaining buying homes because they think there's just no way they can do it. Like example, a guy opened a business 17 months ago >> and he knows that his first year he went crazy with expenses. crazy, >> right? >> And he's gearing up for another year of it. He's gearing up. He's already, you know, tax planning. He's doing he's got to do. Um, but he's making money. >> Mhm. I would say, if I could, you know, take a step back for a second that I feel what I'm taking from this conversation is that this is why it's very important to have a good broker. >> 100%. >> Right. Because >> it's not it's not only about having a good broker. It's about realizing you need to make the call before you think you need to make the call. That's also sometimes it's just about like >> people assuming certain things, right? You know what they always say about assume? People assume certain things and they just don't make the call. You make the call, you get that >> that light and all of a sudden you realize, wait a minute, I could have done this. And and I've had many people who realize too late in the game and as they waited, the home prices kept going up, the communities they wanted to move to, where their friends were, the homes started selling out. And the next thing you know, now that they make their decision, in hindsight, they should have pulled the trigger a few years ago. And so you're saying I know it's very important people like we said with the interest rates and how that works. I do hear that from what you're saying that it's still if you're in the situation where you want to and can let's say buy a house you should just do it so to speak. >> Yeah. Again I hate to push people off a cliff but >> very few people that I've worked with that push the envelope so to speak within reason. Within reason. It can't be reckless, but push the envelope, >> right? >> Did not regret the home they bought, realizing now that the neighbors, they don't know how the neighbors who are moving in 2 years later are affording the home that they bought 2 years ago. And remember, when you buy a house with a mortgage, >> you're hedged. Your cost is what your cost was then. Your loan is typically fixed. >> As the prices go up, >> you're hedged. [clears throat] You're protected. Maybe you'll catch a win where you can refinance and make your payment even lower. they don't adjust what your sale price is then even though the neighboring homes are selling for you know 150 times that price you're good you're locked in so most people most people are able to make the move and that's something I I do try to like >> passive aggressively push on people like I just had a conversation with someone yeah >> on Friday I'm not going to give the date because I don't know when this is getting released but on Friday where I spoke to a guy and I said he was trying to manage he had bought a home 3 four years ago great move the area he bought in the homes went up now He's figuring out, can he move and buy somewhere else? He'll sell his house for a nice amount, but he's going to have to pay a nice amount for the next home. >> His payments will go up. So, he's trying to figure out what's appropriate. >> And when I went through the numbers with him, he's like, "That's a big jump." And I said, "Do me a favor. How about over the next 6 months, you manually take, let's call it, $700 a month out of your account and pretend like that is your new housing expense. >> Just pretend. And see if you can survive after 6 months. while you're at it, put it in a good investment, let it grow a little bit, >> and then see because oftent times what I find, >> people [snorts] kind of adapt and conform to their housing budget. >> So when they have a rent of 2,700, they'll go out to eat. >> They'll buy the new sneakers. They'll do what they need to do. But if their mortgage now is 4,300, >> they're going to take a they're not going to run in and grab that roll of sushi. They're not going to go buy the new pair of shoes. They're going to squeeze into that sweater that doesn't fit so much. They're going to make it work. So, put yourself in that situation and see if you can push it and see if you can do it. >> Mhm. So, I also want to emphasize cuz that's a concept in planning also that when you hear, let's say, I don't know, a $5,000 a month mortgage, understand that you're not adding $5,000 difference between the housing budget, like you said, >> and the rental payments. So, it's a gap of let's say $2 to $3,000 a month, which is much more doable. >> Correct. Correct. That's a very Yeah, I always like to focus for and before that there's always a sticker shock like we said the million-dollar home. People get sticker shocked by that. Well, let's break it down first. >> How much you putting down? What's that monthly payment? What's your rent? And also, where do you see yourself in the next two years? You think your rent's going to stay the same? Are you going to fit in this three-bedroom home the next two, three years, or is there going to be a, you know, inflated rent that you're going to have to deal with there as well? So, let's try to, again, I can't foresee everything, but let's try to see if we can somewhat bring that number to something that you can actually achieve. >> Exactly. So, a million-doll house sounds like, you know, crazy with a mansion tax and celebrities, but the truth is you break it down. [snorts] Um, also keeping in mind that our middle class is technically upper class. Um, it ends up being very doable. Um, back to Mosha and Connie Gross who are getting a lovely couple at this point. They're excited about their house. So, they're buying a million-doll house in Inwood, New York. Okay, >> let's assume they're putting 20% down. Just let's assume >> take out the PMI factor which is another added element of monthly expense. >> Another complication. So assume they're putting down the money. >> Khan's grandfather. >> I was going to get to that point. Hold the thought. We're going to get to the family help question which is been a theme on this podcast. >> So they're putting down $200,000. He saved from babysitting over many years. >> He also tutored at night. >> He tutored at night. He did side hustles. He sold sourdough. Okay. So they have $200,000. They put it down. $800,000 loan. What kind of numbers are we looking at for the mortgage? So, again, it's going to differ based on rates. So, let's let's ballpark it based on where rates are. Today, I'm going to use a ballpark 6% rate, which is about a $4,800 monthly payment. Again, >> that's just the mortgage, no taxes, no home insurance, >> $4,800 a month. >> Mhm. $4,800. Let's assume their home has, let's say, $12,000 a year taxes just because it's easy. Although that's high for Inwood. >> Tack an extra thousand bucks on top of that. Okay, >> down to 5,800. >> Okay, >> home insurance, it's getting more expensive. We'll use $2,400 cuz again, >> easy math. >> Tack on that [clears throat] $200 a month, $6,000 a month payment. >> Okay. And they're assum we're assuming their rent is 27. They have four kids. >> No, where they're getting 2,700 a month rent. Go ahead. Yeah. >> They live in Far Rockway, I'm assuming. Moving to Inwood. >> Yeah, they're moving. They They don't like Faraca. I would say they're at They're probably Let's say they're 30 30 Let's say $3,100 a month. >> $3,100. >> Yeah. >> So, the gap again now is $2,900. Doesn't sound >> Remember, some of that is paying down the money, the $800,000, which is towards the home that they're going to own. So, you know, I don't want to get into the whole rent for its own, but also remember it's not really apples to apples cuz you are buying an asset that will be yours >> forever. >> It's not money spent, it's money saved or invested. And I can tell you from the back end of working with people in their plans when they have a house, it's an asset. They can borrow against it. >> Now, it may be a pain in the asset, but it's a good asset. >> Yes. Yes. That was the word I was looking for. Um, over time though, you get a lot of equity and when you do put down, you get a certain percentage. Yeah, home is definitely an asset. >> Okay, so we're moving along in the pre-approval process. We get approved for this $800,000 loan. Did we get into what the A is again? >> The A is the assets. That's the assets. >> That's where, again, I don't know if you want to get into this. Where are people getting their assets? But >> oh, >> how much money you have is important. Not because they care about your net worth, so to speak. It's because you need to contribute. Like we said, a person again, the C is the credit, the I is the income, which gets very complicated in our >> uh communities. The A is the asset is you need to contribute something towards this purchase. How much that is is going to determine what type of loan >> and obviously what your monthly payment is. You put less down, you're borrowing more. And then you also have on most loans, the PMI added on top. >> Interesting. >> Um but like I tell people, most of my clients, and it's not like 51%, it's closer to probably 80. >> Yeah. are putting less than 15% down even. >> Wow. And that's the crazy thing because when I was in um economics school and CFP school, financial planning school, PMI was like this demon. >> Oh, and avoid it at all costs. You're saying >> I love it. I love PMI. It's the best thing ever. It's the best thing ever. Most people who took on loans where they I'm telling you, most people who bought homes with PMI are way ahead of the game. Even though they paid $96 a month in PMI, some of them even refinanced their homes and based on the new appreciated value when they refinanced the loan balance versus the new value didn't need PMI anymore. The bank's very happy with that. So PMI is the best tool that is out there today. I love it. I preach it. Not only do I preach it, >> I tell people, and I'm not a financial adviser, but I do preach this. Let's say someone comes to me with 20% down. Let's say let's say with Mishian Khani Mishian Khani they have 20%. Plus the closing cost and the 6,000 payment it's a little bit of a squeeze. They really want to move to that area but it's a little bit of a squeeze. They can probably swing like >> 5200 6,000 is a real squeeze. So they're like 800 short. >> Okay. >> There's there's a magical 800. And they sat crunch the numbers after a mat shabas. They went through everything. They looked at the past six months. They they can't come up with that 800 bucks. What I tell them is I say, "Calm down. Don't put down 20%." Put down >> put down 170. Keep $30,000 in your bank. So now you're borrowing instead of 800, you're borrowing 830. Does your payment get a little bit more expensive? Yes. How's that helping them? Now instead of it being 6,000, don't correct me on the math here cuz I'm just going to throw it out there. All of a sudden it's 6215. Went up by $215 and they added PMI of of $47 a month on there. So now they're their payments, let's just say 6,300 bucks a month. >> Mhm. >> They're further away from that 5,200 number, but they're not cuz they have $30,000 sitting in their bank. And Mai knows he's working really hard. He knows he's got his eyes on the gold. He's pretty confident based on his resume, how good he's been at his career that >> his salary is going to be growing over the course of the next two, three years. So now you're good to go. Protect yourself. Take that 30,000, spread it out over three years. You buy in the community you want. Your kids start getting their friends. they can have their playdates on Shabas instead of feeling like they're out, you know, out of town. And over the course of the next 3 years, take that $30,000, make automatic transfers of, let's call it $800 a month. Do a,000 the first year, 750 the second year, and then so and now you've just slowly bridged the gap into being in an affordable home by using our best friend, Mr. PMI. Wow. I was really blown away by that. I would say just to throw it out there to all the hardworking individuals that a lot of times after we do financial plans and maybe you can do this as well in mortgages, it's an incentive to get a raise a lot of times cuz if you see what you need to get a house, it's a house. It's like that's unbelievable to buy a house. All you need to do is add on a little bit more income. It's a good incentive because I see a lot of people out there are underpaid or they can get a raise. So, just wanted to uh >> and I've seen that firsthand. I've had these numbers with people and I've seen people take these numbers and go back to their boss and say, >> "I need to I need to buy a home in this area. It's going to cost me around this. What I'm earning is not going to make it. I need a raise of X." >> And most times it works. >> That's valuable. Wow. >> You hear that? You listen to this podcast, you make money, [laughter] right? That's it. What an investment. It's free. All right. So, let's um complete the mortgage process. So we have Mishi and Khani. >> Mish and Khani have just been pre-approved. Their income is good to go. We had to get all the documentation, their photo IDs, their W TWS, their payubs, their bank statements. They had to give a lot of information about the where they live. They had their credit run. Their scores are good. And now they're pre-approved. Now they don't have a specific house. In most cases, they're looking in a general area. And now they reach out to a realtor and they say, "All right, I've been pre-approved. We've also come to terms that we can afford this. We game planned. They took my advice. They're putting 170 down, not 200. they have that cushion and then they start looking at homes and every home will be different. I get people who I pre-approve who will text me for sometimes years cuz every house is different. Oh, we decided we're going to go to this area of Inwood where the tax are higher, but it comes with flood insurance. This house needs work. You got to put less down. >> And you'll kind of shake it and bake it until you find that right one. But now you know at least that you're good to go. And it works both ways because >> like the the car dealership example is what I always say is do not go into a Lexus car dealership. Do not walk in unless you are comfortable that you can actually afford them. Because the second you feel that leather and the second you smell that, you know, [snorts] you want it, but if you can't have it, you're going to end up getting yourself in trouble. You get pre-approved before you start walking into open houses just for the free sushi or whatever, you know, whatever they're giving and see that beautiful kitchen. If you can't get it, you can't get it. You got to first make sure to run the numbers to make sure you could. And sometimes people get surprised >> like the guy who was self-employed who has a net income of $63,000 on his tax returns but is really making well over triple digits. >> Mhm. >> Now he can go in, he can buy that house. >> Yeah. So to emphasize again, the whole preapproval process can happen like before you even know of a house. >> Correct. >> So anyone everyone who will buy a house get preapproved. I mean isn't that like >> it's basics? >> Like do it. It'll save you a headache and then you can be that first buyer who bids to get the house. Really? Okay. So, you're saying after they get preapproved, they find a house. What is the actual I guess that's the closing process? >> Well, again, yeah, that's the process. They have to go to contract. Meaning, let's say, for example, the person wants to know. >> Again, I'm sorry, but these are people who are really need to know, >> unfamiliar, right? So, they can listen to this without feeling embarrassed that they're asking these questions. So, they've been preapproved. Now, they contacted a realtor in whatever area they want to buy their home in. And they start putting offers on whatever homes they looked at that they like, and there's a negotiating process. It's not going to be the same because every house has a different seller, different realtors, how they negotiate it. You finally come to terms with what that price is. That's when they get their home inspection. They contact their attorney. There's going to be a contract drafted between the two parties. And there's usually a time frame once it's agreed upon where okay now you need to send a certain deposit towards that purchase and then you have x amount of days to get your mortgage and close on that home. And that some people are closing 30 days, some people are not closing for 5 months till the sellers move to Florida, whatever it may be. Um and that's going to [clears throat] be specific to each transaction. Um, and you have some homes, which is common, and this is a term that probably people hear is, you know, the mortgage contingency, which is what I was referencing, that timeline to get approved for your mortgage. >> You have, let's say, a home in Inwood that a bunch of people want. It's it's and we're using Inwood, New York as a reference right now, just cuz we mentioned it before, but >> great block, great families on the block. It's near the shul, and it's in good condition, moving ready, and you go to the open house, you see like a bunch of other people, you know, there, and you want this house. So [snorts] people start putting in their offers, highest and best. Let me hear what you got. And sometimes you'll have multiple people putting the same amount down and it's not necessarily that big of a difference. The one thing that I've dealt with very often is where buyers will wave their mortgage contingency. Extremely common. I deal with it all the time. Puts the pressure on me. But essentially what they do is is they're buying this home without the mortgage contingency. What is a mortgage contingency? Mortgage contingency gives the buyer typically 30 days to 60 days to apply for their formal mortgage. This is past the pre-approval. Now they have a house. They have their money together. They're putting it all through underwriting now and having the actual stamp done for this specific house. They have 30 to 60 days to get that approval. And if, let's say, they get denied for whatever reason, something comes up, the appraisal of the home that the bank determines it's not worth what you're buying it for, and that shakes things up or who knows what it may be, it doesn't work anymore. You back out. your attorney reaches out with a denial letter from the bank, you get your deposit back. So for a seller who's moving to North Carolina, they're on the edge of their seat until that 30-day window happen. They're not going to sell their grand baby piano. They're not going to donate their clothing to the poor yet. They want to make sure. So what people will do is they'll say, "Hey, >> I'm waving my mortgage contingency." >> So for the seller, it's like, you know what, your offer is $5,000 less than the other guy, but it comes with that certainty that I know you're not going to back out if you know, spaghetti hits the fan. >> And boom. So, that is a very common occurrence and the and again, it's the decision of the buyer if they want to do that. Obviously, they'll discuss it with their attorney, >> but in most cases when they're doing it, they've been really vetted with their pre-approval and they know that if anything comes up, it's something that was totally unpredictable, but they're willing to take that risk because >> Mhm. mortgage contingency. Wow. >> Okay. So, again, just let's just go through the bullet points. So, we have the pre-approval, then to get the formal mortgage, and then again, just the steps in getting the closing. What is the closing process? >> The closing Well, again, the closing process will back up is you get that contract, your attorney is going to get title insurance on the home. >> Title insurance, >> which is, you know, you see all those companies. I'm not going to make any names now and have other people upset why I didn't mention their name, but title insurance. on the tissue [laughter] box. >> The attorney is going to order title insurance, which is an important component of buying your home and making sure that it's going to be yours and no issues can come up beyond that date. Um, and then you're going to get homeowners insurance on the property locked up once you get broker with the with the homeowner's insurance broker. Um, and then most of it is actually done with your mortgage lender that's going to be going through the process with you. There's odds and ends. they need to document the money that you got from your great aunt Lisa and in and you know North Dakota. um all those different steps to making sure you're good to go. And then there comes to a point through the process where everything has been, you know, they've dotted the eyes, they've crossed the tees, and now you're cleared to close. And then the attorneys coordinate the closing takes, you know, anywhere from 40 minutes to two hours, signing a whole bunch of documents, you know, which is that lovely note of now the new loan that you have, which you're making that lovely monthly payment with all the smiles, uh [snorts] hiding the struggle, um because we don't buy a house to pull our hair out in it. Um, that's right. And then you want a home, >> right? All right, Gabe, it's been amazing. I'm going to wind down the conversation, but I want to get the powerpoints from this conversation. How >> do people do it? Let's use our example, but you know, break it down with my Conani. I think I think the example is >> first of all, like what you touched upon is people need to start getting pre-approved well before they're actually looking to buy the home because they have to get to terms with what that number is going to be. Don't look at the million- dollar home. Look at the monthly payment. Mhm. >> Try to get a feel for how much you have available because like I said, game planning with your money to maybe use some of it as a cushion will go much further than putting it towards your big down payment. And kind of adjusting your budget and almost making it as if you have that new mortgage payment every month to see if you can actually make it work and see how far you can stretch yourself. Because like we discussed, most people who pushed the envelope a little bit more than the other person ended up winning big time on the fact that they bought their home when they bought their home. And that took an element of kind of jumping off the cliff >> with the proper gear, >> but jumping off the cliff. And I think that's a crucial a crucial element of buying a home is having that conversation, understanding that number, seeing where you can stretch yourself to. And hey, if it means you got to move out of town, you got to move out of town. >> Mhm. [clears throat] I hear from this conversation, what I would take out of it really is having a good mortgage broker. This is not an ad. We never discussed this. [laughter] I really mean it. Having a good mortgage broker to take all of this off your brain like title insurance and property insurance and property taxes and PMI. Just know that you have someone who you're trusting. That's again all that's what I'm hearing. It's doable because you're filling in a gap. You owe to rent and you have to fill in a gap for a mortgage. You need to push yourself. There's strategies to do it. But this is all, you know, good mortgage broker will give you the peace of mind to uh to do it properly. So, I want to thank you, Gabe, for coming on the show. >> Thank you for having me on. >> I learned a lot and I'm sure a lot of people will learn and have learned as well. Feedback again is the most important thing. We want feedback. We want to hear from what people have to say. If they have questions, I could definitely give all your flooding emails to Gabe. I'll pass it on to him. Flood his inbox. But thank you all for listening and till next time.