Ep. 205: STEP FOUR & FIVE – Managing Debt & Creating Savings 

 October 26, 2023

David combines steps FOUR and FIVE in his series that shows you how to buy a home. Balance and budget are the key words when it comes to these steps. Why? Because they can be done at the same time. Get ready as David dives into these important steps and also shares some real-life stories of first-time home buyers who experienced this firsthand. Also, listen to get the insider scoop on debt management from David’s unicorn lending team and get tips you can’t find on Google.

Here are some power takeaways from today’s conversation:

  • Why credit score goes before debt
  • How to balance debt and saving at the same time
  • Gross debt vs. monthly debt
  • How to start with savings

Episode Highlights:

[04:59] DEBT

There are some important things to consider when it comes to tackling your debt. David breaks it down into six points:

Credit scores take longer to dispute, which is why this step comes BEFORE handling your debt.

You need to develop a rent replacement strategy. Your grandparents’ way of doing things is way out of date in today’s economy, so you need to strategize in order to accomplish your home ownership goals.

Get a handle on your debt. This does NOT mean that it all needs to be paid off, but you need to be on the right track.

Understand how different types of debt can impact your credit score (i.e. installment debt vs. revolving debt).

Total debt means NOTHING. Your gross debt and monthly debt have very different implications on your ability to purchase a home.

NEVER consolidate your debt before buying a home.

Ultimately, your debt can be broken down into three categories: good debt, bad debt, and workable debt. Knowing which is which can make all the difference in tackling it. Don’t just take David’s word for it. There are countless stories of How to Buy a Homies in unique situations who learned this knowledge and successfully bought their first home.

[01:15:57] SAVINGS

Okay, now we’re on to savings. Doing this at the same time as managing your debt means one thing: you need some professional guidance here to make sure you’re on the right track. The bank has very specific criteria and having everything paid off is NOT a part of it. Here’s what you need to consider when saving according to David:

Start saving! Yes, it’s just that simple.

The rest? Well, that totally depends on you and your situation. No one can tell you much salary you need to make, how much you need for a down payment, or anything of the like. But, having a professional can definitely help you along this process.

If you’re terrible at waiting for answers, David does give you a VERY GENERIC low standard to shoot for when saving for a home: 8%. That means 5% for the down payment and 3% for closing costs. However, there are 1000 other factors to consider which is why having a professional guide is key.

David shares some saving success stories from real How to Buy a Homies so you can get a real-life perspective on these all play together.

Episode Transcription

 All right, welcome back to steps four and five in the step by step how to for buying a home Now both of these steps are governed by the b word Actually, it’s uh, it’s actually two b words and no it’s not badass bitch Though I like where your head is at you go girl Oh my god, I just totally dated myself there.

But if you’re buying a home, then you’re probably old enough to remember the 90s. You know, when people actually used to say that. God, I’m old. Drink. No, the B words, the two of them, they’re balance and budget. And I know some of you guys really hate the budget word as much as maybe you hate that. Other word that I said that got beeped the second B word after budget Balance, that’s the one that’s going to help you get much much more comfortable with the budgeting balance daniel son Damn, did it again.

Nah, that quote’s from the 80s. Now I’ve seriously dated myself. Play the music!

What is up? Up my homies, I’m David Sedoni. Hi homies, you are smack dab in the middle of the step by step summary of how to buy a home, especially your very first home. Everything you need to know is right here in these 10 steps, episode 201 to 210 of season two of the how to buy a home podcast. Now, I do have a concession for those of you, if you’re listening.

Right when this episode drops in the fall of 2023, I know there are a few thousand of you out there that are wondering where the hell I’ve been all summer. Um, that’s a story for another day, but do know that all the while in this time off, I’ve been assisting and guiding tens of thousands of people who actually went to WWW.

How to buy a home. com. And, uh, they asked for their own personal plan. So I apologize for delays, but sorry, gang, the people who reach out and ask for help, they get me first, you know, before all you voyeurs out there that are getting analysis paralysis, soaking up all this free information, but not wanting to take any action.

Well, that’s going to be the theme of what we do today. And besides, uh, in the future, there’s going to be, you know, millions of people that are downloading these episodes in order and they’ll never know anything about the gap in time. They’re going to finish this episode and then they’re going to hit episode 206, you know, five minutes later.

Yeah. I gave them like five minutes between episodes so they could pee. I’m humane. Okay. Today, we are going to tackle step four, which is managing your debt. And then we’re going to go to step five, which is working on your savings for a down payment and closing costs. These are big, important steps. I’m going to address all the baby steps for the beginners.

And of course, we’re going to be dropping in some advanced steps so that you beginners, you can have something to shoot for. And for those of you who are more advanced, you can take home some things that are really important to you too. Here are the topics that we’re going to go over today. Lots to cover.

We’re going to talk about credit before debt because your credit score Disputes they actually take a lot longer So you need most of the time in your entire planning session to be spent on your credit score So we start with that we’re going to talk about a big one balancing your debt so that you can up your credit score and and balancing your debt while attempting to increase your savings at the same time.

I know, sounds like an oxymoron, a paradox, something that’s difficult to do. You’re right! That’s why you’re here. Then we’re going to talk about this important fact. Debt is not a hindrance and it should not stop you from reaching out to a pro and starting your plan. In fact, if you’ve got debt, you should be more encouraged to talk to somebody because you need some extra guidance.

And then we’re going to talk about revolving debt and installment debt. Big difference between those two. Speaking of big differences, our next topic is gross debt versus monthly debt. We’re going to talk about never consolidating your debts into a consolidation loan if you want to buy a home. We’ll get into it.

We’re going to talk about DTI, student loan debt, and a secret bonus that I did way back when in episode 56, which is something that is a little better than that debt consolidation. Uh, then the topics for savings. How do you start? What are the tools you use? How much salary do you need to make? How much do you need for down payment?

And what are the closing costs? And how much total money do you need to buy a home? So let’s start with topic number one in debt. Credit score before debt because credit score disputes take longer. Okay. Uh, as you know, I’ve been honing this 10 step list since 2019. It’s actually something I’ve been working on since all the way back in 2006, but in podcast form, uh, since 2019, this list is very specific and planned out in a very specific order on purpose.

Gang, this is designed. For you the whole reason I created it this way in that order is for your benefit So step one is decide step two is get your guides step three Is credit score now that’s on purpose. I put credit score before debt. That’s why it’s three and debts four You can do them simultaneously But not until you’ve done the work on the credit score because the credit score disputes take longer So you want to start them first?

Even if it’s only by like 10 minutes topic number two balancing your debt and saving at the same time Okay, you’re going to hear me talk about today’s economy a lot in this podcast It’s different than your parents or grandparents and if you try the old dinosaur ways to save for a home you are toast Like burnt toast.

I mean, no butter, no jam, just black, dry, disgusting toast. Hard, burnt, flat piece of rock bread. Enjoy your breakfast! Things are different today, and without a rent replacement strategy. Say it with me, gang! Rent replacement strategy. Thank you. JT without that you’re dead Uh, and when the boomers try to give you shade for trying to buy a home at your age I got plenty you can tell them but here’s a good one for them.

Just go. Oh, you know, I I hear you Grandma grandpa uncle or karen that just decided to talk to me in line at the grocery store. I get it Yeah, that totally made sense in your day, but see in the 80s rents went up 12 percent and the 90s rents went up 25 percent And then they went up 45 percent in the 2000s and from 2010 to today Rents have gone up 48 percent and that’s that’s just the conservative numbers from the website I have listeners the rent went up 48 percent last week And then if you want to get really snarky and that doesn’t do it for them.

Try this one on them. Hey boomer Thanks for everything, but if I want to buy a home in today’s economy, I’m going to use a rent replacement strategy that helps me manage my debt while trying to save at the same time. Otherwise, I’m going to be renting until I’m, pfft, your age. Okay, that’s a little harsh, but, you know, if you want to say that in your head, it’s good therapy.

I get it. Seriously, gang, I know that there are people out there that are telling you to play it safe, but in this new economy, Uh, if you follow the safe rules and you just go all in on reducing your debt, because that means your credit score will go up eventually, sure, it’ll go up in like five years and you know, you might have an 800 credit score, no debt and six months of reserves, but not only Did you never take a vacation during that time and probably lived a very miserable life?

Well, more importantly you didn’t use that single payment every single month your rent money for you You lost far more than you gained. It’s a balancing act when you’re doing steps four and five and savings. You don’t just Put all your eggs in one basket. You have to figure out a way to balance them You never started building wealth by paying yourself as a homeowner If you ended up putting everything in just the debt basket instead While you’re getting debt free, let’s just take an example.

You’re paying, you know, a little over 2, 000 a month. Now you’re paying a minimum of 25, 000 a year for five years. Now that’s 125, 000 that you could have reallocated to yourself. Paying everything off and following that program in search of the elusive, perfect scenario for how to buy a home? It’s not perfect, because it takes too much time and you end up being a slave to these new, out of control rent requirements that we all know…

are real and out there. Okay. Topic number three is getting a handle on your debt. So we are obviously just talked about the fact that you don’t have to pay off all your debt. And in many cases, uh, you know, that is definitely not your right move. I know those boomers going, what are you talking about paying off debt?

How can that be a bad thing? You’re a dangerous influence, sir. Fine. I don’t care. Boomer. I know paying off debt. It feels like you’re moving forward, but sometimes when it comes to buying a home, it could actually be taking you backwards because you will have to have some sort of savings. So don’t pay off huge chunks of debt, even though you think that’s the right move.

Not yet, anyway. Just chill out for a little bit. I got you. And here’s a big one. Do not let those student loans freak you out. I know there are a ton of people out there, and I say they’re BS monsters who tell you that your student loans are horrible and gonna hold you back. Lies. Absolute lies. Told to you from the man trying to hold you down.

And I tell you, don’t listen to the man. Turn to him and just say, You sit on a throne full of lies. Sorry, it’s only 72 days before Christmas as I record this, but uh, more on student loan debt and the lies that people tell you about that later. Topic number four, understanding revolving debt versus installment debt.

Let me repeat that again. Revolving debt versus installment debt. Here’s how it works. Revolving debt, it’s your typical credit card. It’s got a limit. You know, you’ve got a 10, 000 line and then you have a minimum monthly payment now this Revolving debt it counts more against your credit score because it can grow Forever if you just pay the minimum payment or even if they double the minimum payment, it still just might keep growing It has no end date.

And as you pay it down, you also have the ability to redraw on it again. So it has no determined end date, and it relies on you to be responsible with it, to keep it at zero. And the credit bureaus, they take years for you to earn their trust. Now, the other type of debt, installment debt, those are like personal loans or car loans or Student loans.

They’re fixed with an end date like your car loan. You got a five year loan, you know whatever the amount of months are 72 month loan, but it has an end date with a Payment that’s set up and you just pay that continually this counts a little bit less against your credit score now We’re going to talk later on about more options on how to utilize this.

Okay topic number five Gross debt versus monthly debt. Now, if you’re in here 15 minutes into this podcast and you’re thinking, Ah, this debt thing, I got to figure out. This is a big one. If you don’t understand the difference between gross debt and monthly debt, everything you think could get shattered right now.

This is one that creates the biggest unnecessary fears out there. Hear this now and let this soak into your fragile psyche. Your total debt, like when you go, Oh, I have too much debt. I’ve got this huge credit card debt and this huge student loan. Your total debt doesn’t mean Jack cheese, nothing. Your total debt is of no concern to me or the mortgage broker.

And most importantly, or the bank or the lending institution. that is going to approve you for a home loan. Hear me in your ears. Total debt means squadoosh. Here’s an example. If you’ve got a 200, 000 in a student debt and you’ve got 20, 000 in credit card debt and you still owe 25, 000 on your car, when you apply for a home mortgage, ain’t nobody looking at those total numbers.

No one’s going 200, 220, 225. Oh my gosh, 245, 000, this person can’t afford a house? No, ain’t nobody doing that. Monthly is all that matters. I hope this makes you feel less tense and afraid. The monthly number are all that matters. Forget about the gross. So here’s an example for that person with 200, 20, and 25.

If that person made 8, 000 a month, the 200, 000 Student loan, that, you know, those vary like crazy, like it could be 150 a month payment or like 1, 000 a month payment. So what we’ll do is we’ll just, I’ll pick a high one and say 750, okay? The 20, 000 in credit card debt, that payment’s 500 a month. 25, 000 on your car, that’s 350 a month.

The bank is going to look at your monthly expenses out. That’s it. So all they’re looking at is 750 for student loans, 500 for credit cards, and 350. 750, 500. 350 total monthly debt of 1600 1600 is 20 percent of 8, 000 a month. So what does that mean for you for a mortgage? Well, with some loans, you can go up to 48 percent in your total monthly debt.

And if you’re Three big things that you thought were giant and gross, but monthly they only equal 20%. That means you’ve got another 28 percent to go. 28 percent of 8, 000 means that even with your gigantic gross debt, you actually qualify for a mortgage of 2, 240. So you don’t have to bury your head in shame.

You don’t have to think that your gross numbers are gross. And you don’t have to forever feel like you’re trapped in a tractor beam sucking you into the gaping black hole of life as an also ran. No, my friend, you’re not an also ran. Understanding how the banks see your debt to income ratio as monthly numbers, that’s how you mentally realize you’re not an also ran.

No, you have the potential to be a, uh, A NYX walk. See what I did was I googled the opposite of also and then the opposite of ran and the antonyms for also were no, never, nay, and NYX and I really like NYX. Um, so I went with NYX walk as the opposite of also ran. Get it? Oh, I got the, the, the sympathy clap from JT.

I like NYX because I had the most interesting Consonant structure, JT. So, you know, I just took it and I ran with it. I’m like the next basketball team because I know I do well. You missed my joke. I said I ran with it. But I tried to talk sports. Let’s do it again. Gang, that reminds me, uh, Bantering with JT reminds me, If you are hating your rent and your horrible landlord, Go outside and then find like 10 ants and put them in a starbucks cut and then you’re a landlord because you’re housing 10 ants Dad jokes 2023.

I already did the slow clap. I can’t do it again. Okay on a scale of one to 10 ants What’s the score? I like that but not as much as I like the ants that did the pink panther song You ever heard about those? No. Dead end. Dead end. Oh my god, we’re in fifth grade. Dead end. Okay, we’re going to get more into gross and monthly stuff later on.

Let’s move to topic number six, uh, and end this terrible dad joke section. Never consolidate your debts if you want to buy a home. Now I hate when people say never on podcasts or webinars or seminars or whatever. But I, I, I haven’t found a way where it’s really good because consolidating your debt is something that you can figure out how to do on your own.

If you have the right guidance, uh, and you don’t have to do the consolidation here, let me explain how it works. If you listen to episode, uh, four, where we talked about credit and then you Googled the credit score pie chart, you know, the old wheel low credit, this is going to be real simple to explain to you consolidations.

What they do is they’re there for people that are at the last. Hope. Okay, because what they do is they help you manage unmanageable debt by closing all your accounts. Are you with me, pie chart people? Do you see where I’m going with this? They close all your accounts and they give you one low payment.

That’s great. So you’re not dealing with high interest, your interest rate goes down. But what happens when you close all your accounts? You lose all your credit history from that slice of Uh, the pie. So it’s better since you’re already here listening to me in your ear holes, gross, then it’s better for you to work a plan.

And there’s going to be several different options that you could do with some professional guidance. That episode 56 I was talking about, that’s a personal loan. That’s an installment loan and then

you can snowball your debts. There are seriously tons of different options that you could do. So I recommend you work with a pro that can guide you. Now, for those of you. Just starting to get your free first time homebuyer education here at the How to Buy a Home podcast. What’s up? Welcome, homie. You’re a homie now.

This is, what, the fifth time you’ve had me in your ear holes? Hmm. Get used to that. I say it a lot. Um, and you might be looking at the running time of today’s podcast and thinking, Damn, dude, I thought you said this was baby steps and you’re asking me to run like a 10k or a marathon. This is ridiculous. I hear you.

I totally understand. Here’s the deal. I’ve been having these conversations with first time buyers about these two topics debt and savings since 2006 and i’ve been doing it here on the podcast since 2019 and you may be wondering You know, this is great. And I I know you’ve got a lot of people that you’ve helped but you know I’m still kind of wondering why am I listening to you?

You know, what’s the catch bro? Well, there’s there’s no catch And to show you that this stuff is for real, for real, I’m actually going to do something different. I’ve never done the podcast before. I’m going to insert some real listeners into this podcast so you can get tips from other people. These are people who were just like you at one time.

Uh, some of them had no clue. Some of them have doubts and fears. Some of them, you know, came to me and went, dude, I got no idea when, where, or how to start this process. So how about some real people? With real stories sharing their real solutions that worked for them that could potentially work for you We’re going to start with a snippet that helps kind of bridge step three credit score to step four debt This is from a really good episode.

One of my favorite ones 167 this is christina and sean now if you’re a beginner And maybe you’re out there thinking there’s no way you can buy a home. You gotta listen up to Christina and Sean. Nobody in their family had ever bought a home before. They tried it on their own for a couple years and ended up making some huge mistakes.

See, they ended up getting advice and they worked on their debt the wrong way for several years. And… By the time they reached out to me, they discovered that homes had actually gone up in price by like 25 or 35 percent. When they first started, you know, they would have had a huge discount. They actually pulled this off way earlier.

They got advice that sent them in the wrong direction with debt. Sucks. Now, would I be telling you this if this was a mistake that they couldn’t come back from? No, it’s got a very happy ending. When they closed on their home, which was just a matter of months after they reached out to us, they doubled their square footage from their apartment for only 400 more a month.

In their monthly payment, and it only cost them 18, 000 total to buy their home. Now, what you can learn from this snippet is the way that they attacked their debt, but they ended up ignoring their credit and how that kind of hurt them. Let’s listen in. I know that you guys reached out to me in July. Yes.

Okay. You reached out to me in July of 2022. Tell everybody when you closed on a home. September 29th, 2022. So you reached out to me on July 7th. On July 6th. You, as you said, didn’t make the call yet. Didn’t know for sure. And August, September, like seriously guys, that’s 10 weeks. Yes, absolutely. Okay. So tell us, so tell us what was your story?

You were, were, are you, you guys obviously have. Like good jobs and when we’re prepared to have a lot of money and perfect credit. Far from it. Um, no. Uh, okay. All right. You want to start from the beginning? Like when I started thinking about buying a house. Yeah, give me, give me the details. All right. So, um, Our credit was in the toilet in the beginning of 2022.

And actually the story kind of starts in late 2019. I picked up a book called bad with money from Gabby Dunn, which I heard your episode with her the other day. That was the first financial book I picked up because it didn’t look like it was crunching numbers. It looked fun. It looked relatable. So I read that and I was like, okay, I’m really bad with money.

My husband’s bad with money. Let’s just Google some other financial stuff that led me to Dave Ramsey, which I’ve heard you talk about. So I would say beginning right, right before the pandemic. Um, We started the budgeting, Dave Ramsey principles, getting out of debt. And we had no consumer debt. We had no car loans.

We had no credit cards. It was a bunch of medical debt and, uh, using his principles, we ended up starting in March of 2022. We saved up a bunch of money and we paid off all our debt, but then realized when we looked at our credit. Our credit was still in the toilet. So all the delinquencies came off, but we had no lines of credit.

So then I, our goal was always to buy a house and, uh, we were running at the time and the rent was pretty steep for a little house. And, um, so anyway, so I got on the internet and I just Googled how to buy a home and thank God your podcast is how to buy a home podcast because I love podcasts. So listening to you and you know, some episodes were about the market and I didn’t feel like I was there yet, but then I just started scrolling because you had so many episodes.

Yeah. Yeah. Yeah. Okay. Yeah, I saw credit and I realized your podcast, you didn’t have to watch it in order or listen to it in order. So then I just happened to pick one about credit and you had a lady on there. I don’t remember her name, but you had a lady talking about credit. Jeannie, the credit Jeannie, Jeannie, the credit Jeannie.

Yes, yes. And I realized like we had such bad credit just because we didn’t. credit and the credit we did establish when we were 18, we didn’t know how to use. So, um, you guys talked a little bit about secured credit cards to start off with. So we, we went out and, uh, we did talk to his brother in law, which is phenomenal.

His credit score is amazing. And he did agree with everybody like you need to do this. So we got three credit cards. Uh, secured credit cards, uh, one for me, one for him, and one that we were both on. And this was in March of 22. By June of 22, we both went from 550 credit scores to 700, just by putting 25 on each card a month for gas, paying it off.

So about 18 months, we worked Dave Ramsey, saved up enough money. And when we had the total amount in March of 2022, in one day, I called everybody negotiated, paid everything off. And then in March, was it, when did you go up from. 500s to 700. Was that in March? We found you. So by April we applied for the, uh, secured cards and got them in April.

And we did, uh, one payment on each in May and one payment on each in June. And we went from five fifties to seven hundreds. Okay. So that’s why I wanted to interrupt you. I have it now. Dave Ramsey, 2019. Yes. Yes. You saved money. Yes. You reduce your debt. Your credit score stayed in the toilet the whole time.

I don’t want to rag on Dave. I do want to uplift that you had such possibilities. Yes. And that was missing with Dave Ramsey. When we finally broke even, it was going to be years before we saved the down payment. Like we had. Enough for a decent down payment. But then with the whole COVID thing, you needed all kinds of gaps and, and all this, like, take it or leave it kind of stuff that we knew it would take forever to get 20 percent of that market.

So that led us to you. And, and then it was 10 weeks. So, but you hadn’t saved. Because if you found us in March, and then, you know, in a few months, your credit scores were up, and then July, we hooked you up. So how much did you have to save in that time? I’m guessing it wasn’t 20%. No, no, we put, we put down, uh, 5%.

Um, and then, uh, we were lucky enough. I’m in a nursing school for my RN degree. So we had saved up before I started because we knew I was going to stop working at my job and Sean would be the only one working. So. That was supposed to be our little nest egg, uh, to get through until I started working as a nurse, but our rent was going to go up.

She wanted to sell the property, our landlord. So we were going to be putting out so much more money that we just said, you know what? Let me just reach out to this guy, Dave Zidoni. And I’m like, my email is going to go in a black hole and it’s never going to, you know, get anywhere. And you were so quick.

To respond to me and I ran out to my husband’s office and I’m like, he responded, he responded to me. This is real. We’re open to talking about it. Our medical debt was around 12, 000. We actually ended up saving around 25, 000, I think. So we did have a good nest egg after we paid off the debt from that 18 months of working Dave Ramsey’s plan.

But when I went into it for the house. Um, they didn’t even want to hear about me being in school or, or potential jobs or anything. They’re like, John’s income is good. And whatever you make, this was the best part. They’re like, when you start working and you have a dual income, because the rates were higher, they’re like, My mortgage broker was like, give it two years.

They’re going to come down and then you’re going to refinance with a dual income. You’re going to have a lower rate and it’s actually going to work in your benefit. So that’s why they based it solely on his so that yes, the payment was a little higher, but we, we. It was in our budget. It was in our budget that we didn’t even realize until I listened to your podcast about how much can you really flex your budget.

Love those peeps. That interview has tons of great information and tips for all of you out there, especially those of you who think that you’re not even close to buying a home. I highly recommend you listen to that whole thing. And, you know, it sucks because if they got the right guidance two years earlier, we’ll then.

You know explaining to them that that debt isn’t the devil And showed them the tips and the trick to how to work with your debt how to embrace it And create a rent replacement strategy Well, then, you know, they could have bought that home for 25 35 discount, but hey, no sense crying over spilt milk, you know Why do I start the podcast?

On savings and debt with this real life testimonial story. Well, because number one, it’s a little bit of a, you know, a warning sign. I don’t want you to wait to get your possibilities. I don’t want you to be thinking, Oh, I reached out to How to Buy a Home and found out I could have bought a home two years ago.

Don’t worry about it. Don’t worry about reaching out too early. That’s the point. We want to help you. Years ahead of time, you’re not going to get a one size fits all step by step. Each of you has a different path, a different story. Many of you could cut your time by years with just a quick email, a phone call, and then you’re going to get yourselves with a unicorn.

You’re going to find free action steps created by a pro who knows all the ins and outs. And we’ll give you a clear, a clear guided plan. The great thing about that story is these listeners could have actually bought a home with that 12, 000 in medical debt and no credit on just one income. Now it would have taken a couple months to get it all together, but we could have gone a completely different direction.

And if that had happened, they would have gotten the price discount and stopped running sooner. And they’d be sitting on piles and piles of equity today, but no worries, we still had a happy ending. Uh, if you listen to the episode, you’ll hear how happy I think that one actually had some tears. Uh, we were so stoked.

Uh, and that’s another lesson for you. Everyone who discovers what’s up after a little research, they think that they missed it. When you start researching buying a home I can tell you everyone they think it’s too late for them They think the best time to do it was yesterday. And and here’s what I have to say to that Yes, you’re right.

You are totally correct. You’re right. For most people, you’re probably right. Technically, it’s not too late, but technically the best time that you could have got the best deal was behind you. The best deal of your lifetime for many of you was a while ago because That’s why I started the podcast. No one’s out there explaining to you what you can do and how you can do it.

You know, you could have been approved and technically were maybe able to buy a home last month, last year, but you didn’t know, just like these guys. You didn’t know to get a professional analysis of your situation because there are misconceptions out there, or maybe you had fear about student debt, medical debt, your income, your job, your credit score.

You don’t know what you don’t know. Ignorance is not a negative word. I say it all the time. It just means you don’t know. And I embrace it if I don’t know something. That just means I get something else to learn. And when it comes to debt, do not let your current ignorance about how debt works stop you from becoming an enlightened homebuyer instead of being afraid.

And Baynor Renter. Throughout this episode, I’m going to toss in more real people with their tips that they discovered once they found the podcast. And what I like to call the Unicorn Nation. Okay, now that you got some tips from me and also from my real life couple that actually bought a home, let’s talk about debt.

For too long, too many people have gotten in trouble with their debt. So, there are lots of gurus out there teaching and preaching kind of a all in, complete, full commitment strategy. And frankly, I get it. Uh, Americans suck at saving. We’re terrible. We have horrible statistics. We glamorize excess and we undermine saving.

So, what do you do when you got a situation like that? Sometimes you gotta preach. Tough love you got to just create these crazy new habits But the cool thing is things have changed a lot recently a lot more people are spending a lot more time focusing on themselves And that’s great when you do that, but we live in a capitalistic society, but a lot of us don’t understand Capital capital is the tool that you can use to overcome your debt So try not to feel like you’re drowning or running on the hamster wheel.

We’re going to try to get you. Uh A balance I guarantee you that 95 percent of this, uh, the people out there listening to this episode Guarantee you 95 percent of the people out there have some debt Good news is, uh, it’s not going to stop you from buying a home when it’s approached the right way. Now more than ever in this new economy because you’re paying high rents, it’s crucial you understand the difference between good debt, bad debt, and workable debt.

Good debt, bad debt, workable debt. These three types of debt, this is the modern way that you do the biggest financial transaction of your life, which is buying a home. That’s going to help you avoid the negative myths that stop people from capitalizing on that first type of debt, good debt. Your rent payment is a negative on your balance sheet.

It disappears. JT, take a guess. Good debt, bad debt, workable debt? Rent is horrible, atrocious. Yes. Okay. That’s wasn’t one of the options, but I, I like your enthusiasm. Uh, it’s bad debt, your house payment. And your home loan because there can be positive because you’re paying into yourself into an appreciating Asset for an expense that you already would be paying which would have been a bad debt payment your rent See rent replacement strategy.

Well that payment that would be Good debt, because you’re replacing the bad debt. You’re revolving an installment debt, like the credit cards and all that stuff, that’s your workable debt. I’m absolutely positive that for most of you, the math is going to show you that with professional guidance, with that rent replacement strategy, when you fully comprehend how to manage these three types of debt, that’s pretty much the only way that most of us can buy a home.

In this 21st century high inflation wage gap government manipulated high rent economy. And here’s the thing, it’s not going to feel super sexy. When you do it at first, uh, that’s what she said um, but it’s absolutely the best way for you to gain your financial independence if you Coast and you rent it’s wonderful You could be living your best life But you’re gonna have zero options in five years If you take the leap and own and realize it’s not as big a stretch as you think it is in five years You’re gonna have tons of options and options are the key to living a less Stressed life options.

They give you the opportunity to stay the course and know that you have security or If there are changes in your life or things that you want to do or things that you need to do, well now you’ve got options. Who do you think has the better chance of quitting their job and taking three months off to travel the world?

The person who’s been renting for five years and at the end of their lease they get a 2, 000 security deposit back. Or the person’s owned a home for five years and now has equity in a property that they can draw from the equity. Or they can even just sell the whole home and move to Istanbul. Ownership early early as you can in your adulting renting life That means that you’re gonna have options later Even if you’re still living paycheck to paycheck in 10 years as a homeowner You’re going to have hundreds of thousands of equity in 10, 20, 30 years.

As a renter, you live paycheck to paycheck and you’re still dealing with debt. So let me say it one more time, homeownership is a rent replacement strategy or a bad debt replacement strategy. Excellent. You’re listening. You have to. You’re wearing the headphones. So those of us living in the real world today must learn to embrace our debt and we need to find.

Our own personal effective rent replacement strategy again, this is not sexy It doesn’t sell workshops programs or webinars. So that’s why i’m the only fool locking jt in this room And talking to him about it it doesn’t sell but damn if it doesn’t make for a better life For you in 10 years, I told my kids in 10 years, uh, you guys, you, you get to do the podcast and you’re going to go and you’re going to reach out to everybody that we helped at the beginning of the podcast.

Uh, and it’s going to be like a telethon. You’re going to reach out to them and you’re going to go, Hey, remember us? How to buy a podcast. We’re David’s kids. Uh, how are things going? And in 10 years, they’re going to be so stoked and have so much money that we can do a telethon and they’re going to send us money.

And I told them they have to do that because college is so expensive and I don’t want to pay for those stupid. College loans, because if you have big student loans, you can’t buy a house. But seriously, kids, I still really don’t want to pay for them. So please have that telethon in 10 years. The goal of this particular episode in our 10 steps home buying series that I’ve created is to help you navigate the nuances of debt and all the math that comes with it.

So you can understand your personal financial situation well enough to feel comfortable making the largest. Financial purchase of your life, managing debt, it’s a trifecta of awareness, reduction, and step five, savings. Jumping into all of them on your own can be overwhelming, and like I mentioned in the episode, like trying to repair your credit on your own, it’s the right thing to do, but it can actually hurt you more than it will help you if you do it the wrong way.

Even if you think you’re getting advice from really smart people, uh, lots of people have ideas about finances, but… I ask you know, in fact, I actually kind of beg you, um, listen to lots of different people in their, in their opinions, listen to lots of different opinions and check them out, check out their track history, check out their record.

When was the last time anyone took their advice? Was it 10 years ago? Was it 20 years ago? Um, you know, how many first time buyers have they not just? Give it advice to but actually help to get to the finish line to get to the goal in say the last three years As they’ve come to understand how to work a market post pandemic or the last three months hell even the last three days The key is debts shouldn’t stop you, but it is sometimes what could be a complex algorithm um, you have to Have somebody tell you, okay, your debt number needs to be here and your savings number needs to be here.

But the key is, don’t let having that conversation stop you. Debts do not need to stop you. We heard from Christina and Sean. If you try to wipe them out all on your own, Before you end up talking to a professional guidance team that is into helping people plan for a year or two to buy a home, not just plan to get out of debt, you might be missing big options for you and big opportunities to time the market for the better for you.

By the end of this episode, you should be able to understand how you can buy with some debt, utilizing good debt and bad debt, and you should be able to understand how to reduce your overall debt and simultaneously save 5 percent for a down payment and 3 percent for closing costs. Those amounts might differ from person to person, but for those of you looking to jump to step…

Five already savings. I did that for you because I know you’re sitting there going, dude, this is a long episode. When’s he going to talk about savings? Fine. You impatient person, 8 percent of the purchase price, but stop making me jump ahead. Back to debt. Looking. I understand. Sounds like a lot to digest in one podcast, you know, it’s.

Totally fine, I understand. A lot of my listeners tell me that they listen to me, uh, when they get ready to go to bed, to help them get to sleep, so it gets in their subconscious. No, my kids like to say that it helps people fall asleep because my voice is droning, but that’s not the deal! Alright, it feels like a lot.

But soon it won’t this stuff works Probably the biggest thing about debt for me is what’s the worst thing that can happen if you’re trying to figure out your debt I mean the truth is you already feel like let’s say you’re one of those people They already feel like you know, you your debt’s too high and you can’t buy a house Well, what’s the worst thing that can happen if you reach out?

And you talk to a professional. They tell you, yep, you’re right, your debts are too high. What’s the big deal? You already think that. And if you have that conversation with somebody and you go, well, I was right. They’re going to have better advice for you to help you cut down that two or three years that it’s going to take for you to get there.

As opposed to you just going, well, I know I shouldn’t even talk to anybody. So I’m going to try this on my own. If you try it on your own, I guarantee you, it’s going to take you two or three years, but if you talk to somebody, maybe you can get some advice that can help you speed up your timeline. So you can get real action steps for your personal rent replacement strategy.

And. I, the other thing about it is, what’s the worst thing going to happen? I am positive about this next thing I’m going to say, and I know it because I do this every single day and I see the numbers. I talk to people all over the country all the time. I cannot tell you how many people reach out to me and are shocked, shocked at how incorrect their fear is.

And then they understand that they can buy a house and they’re a lot closer than they ever thought. In fact, here’s a story from Kendall. Sorry, Dr. Kendall. Uh, Kendall’s awesome. She’s got a PhD. She’s like a real doc in psychology. She’s super smart. This is what she learned trying to handle her debt and savings.

Yeah, yeah. So I think the biggest thing that really hit me was that I was trying to do somebody else’s job. I was trying to figure out all of this information by myself, using all of those online calculators, googling article after article, listening to podcasts. And at the end of the day, one of the simplest moments was just reaching out to a lender, giving hypotheticals and actually getting some answers.

Uh, so I felt pretty silly at the end realizing how much time I had spent when I could have just Asked somebody for some help You see gang even a phd in psychology who understands the human mind and how we can trick ourselves Even she couldn’t resist to over dive into the matrix of the internet and to try to figure out the best way to do this On her own.

I mean That just kills me Oh, and for those of you thinking that AI is, you know, gonna be a great answer too. Well, number one, most AI only has information up to 2021 and, uh, it’s 2023 as I record this. Um, and until AI is currently up to date. The other thing too, is the main thing about AI is you gotta know what questions to ask ai if you ask it, how do I buy a home?

You’re going to get all the drivel and general crap that’s all over the internet. And it’s not going to be specific for you. Things have changed. The buyers need more expertise than ever actually in our current housing market and our current economic market. When it comes to living in debt and trying to save money over the last You know, 10 to 20 years society and the economic systems have changed drastically.

It’s beat some of us down, you know So we now have a new legitimate emphasis on living your best life. I don’t make fun of the people, you know Living your best life. Sometimes I think their hats are a little too large, but that’s just me. I get it I’m with you. I want to make sure that we’re not letting an unfair and unequal system hold back regular people from life, liberty, and the pursuit of happiness.

The problem is that I know that mixed in with that, there’s a lot of things that are creating fear about buying a home. The cost of living, the wage gap, inflation, spiking rent prices. And of course, let’s not forget the post pandemic massive spike in home prices that is scared. A ton of people away from buying a home.

FOMO is real. So, in the middle of all this chaos, folks like Dave Ramsey and other crusty old dudes, they’re spewing garbage to you. And what really drives me crazy is they’re charging you for their service. They’re, they’re out there going to the people that, that need the money the most and charging them so they can tell you how to do something that doesn’t work in today’s system.

And condescending to them throughout the whole process. Uh, the opinions of JT do not represent the opinions of me. Yeah, they do. Look, you need a new insider plan to beat this rigged system. You need to learn to work with your debt, not try to reduce it all in one chunk. For many of you, the only way you can save is To put some of it towards your debt and some of it towards savings because if you put it all towards your debt There’s going to be nothing left.

How can you save when all your extra money is going towards that big? It’s a balance game. You need to know the rules. Otherwise, you’re going to end up paying that skyrocketing rent for years. Okay So let’s get back to it. Uh, let’s figure out how to work on understanding your debt And balancing saving at the same time the two b words budget and balancing All right, the first b word the nasty b word that’s budget Um, I actually heard somebody talk about this and I may have said it on a podcast earlier But I love this whole analogy that budget it’s like diet and diet What it implies is depriving you, you know, meaning things you can’t have taking things away from you So I think of it this way If you say you’re on a diet You’re thinking nothing about except depriving yourself stopping yourself from doing something if you’re making a lifestyle choice it means that You get to do more things Because of this new lifestyle choice and that lifestyle choice does include the food that you take in and work it out and all that But it’s the same thing with budgeting.

So instead of calling it budgeting, uh, how about let’s make up a hipster word a financial style choice Instead of lifestyle, it’s a financial style choice sucked being dollar positive.

Uh, If you’ve got clear numbers clear action steps and clear goals, you can use

Uh, budgeting or dollar positive techniques, um, with the balance to help you make a conscious decision of living guilt free. And what that does is instead of doing that dollar positive spreadsheet, because You’re depriving yourself of something you actually give yourself guilt free permission to spend the money that you’ve saved I’m seriously tell people I’m like cool.

Do you do your budget do your spreadsheet and Right in there put in little rewards for yourself, you know ice cream dinner out Whatever if you do it that way, it’s a permission slip for living not depriving you and taking away the life that you want That’s how you budget. That’s one opinion There’s a ton of other stuff you can do, but if you work it like that, reward yourself a little bit, you can figure out a way where you can psychologically deal with it.

Of course, this all comes after you talk to a professional and someone’s giving you the equation. And the number give yourself permission to use that savings to reduce the debt at the same time that you’re also Trying to save and then you want to put some of your savings And understand that you can’t put it all into savings, but you can’t put it all into debt You just figure out how to pay off the manageable debt In whatever equation gets set up for you for buying a home It’s personal for each of you needs to be worked out on your own personal spreadsheet All right.

I said the word spreadsheet and I know that for some of you that’s nappy time talk So if this is your predetermined 35 to 45 minutes of allotted podcast time that you give when you put on the how to buy a home podcast Well, then Let’s do this. Uh, just pause. I’m gonna keep going, but if you want to, pause right now.

This is a great time for break time. We’re gonna get more into debt and savings and get into the gory details, but if you want to pause and start again later, fine. I know that some of you, I only have a specific amount of your time, you know, of your workout, your commute, your dog walk, your dishes, whatever.

So this is your time to pause me. Can I, can I go? Yeah, you can go too. Woo! All right, everybody, you back? Boy, I bet my wife wishes she could pause me like that. Oh, really? I brought you back with the hackiest stand up joke ever. What am I, a Catskills comedian who just time traveled into the podcast era?

What am I, my wife? Ridiculous. Okay. Where was I? Um, great. Welcome back. Um, we’re going to be talking about dinosaur Debt and saving techniques and how to overcome them christina and sean said pretty much Everything I need to say about uncle dave and jt uh and his Lame ass wipe out all your debt strategy before you even think about buying a home.

Okay, Boomer, maybe in your time. And, and by the way, uh, Boomer, Mr. Man, how much you gonna make me pay you so that I miss out on tons of equity and wealth building with a rent replacement strategy for people living in the 21st century? And for people who question how this way works better. For the buyer of today and then they ask me well, how does it work?

I usually look at them and I go oh because math Sorry gang things are different And uh, you know My advice is free and i’m not trying to build an empire on the backs of the very people who need to save money but oh Whoo, let’s focus on how to be a badass Beach, I didn’t say it You don’t have to beep that one.

We’re going to talk about, uh, using budget and balance back to the doctor, the PhD, what do you got to say, Kendall? Your very first communication with me, you talked to me about something. This is a little, a little deeper level for if you guys are brand new starting. I think this is really important for you to hear.

You have to do three things when you’re getting ready. You have to work on your credit score. Um, regardless, I mean, I’m not saying you can’t buy if you have a low credit score, but you get better stuff, better rates, better loan programs, and then you have to work on your savings and your debt. That’s the balancing act.

You asked me about it. Tell us about your journey of trying to save for something while trying to. Reduce a debt at the same time. Yeah, so I tried to figure out, you know, are there certain numbers, you know I think you hear something like 30 percent debt to income or you know, 30 seems to to stick out to me Um, and so I think I had this idea that I needed to be at that realm, but also have a home Um, down payment.

I mean, I know one of the things that we tried to do was you say this all the time, and this is probably a point I’ll emphasize again later, but, uh, know your area. And so we had done a lot of research and where do we want to be? And what is typical of those homes? What do they typically cost for an entry level that would work for our needs?

My husband and I both work from home. We have a son, uh, so we kind of had to try to figure out. within the area, what’s a reasonable starting point. And from there, work our way backwards and think, okay, well, if you need the 3 percent down, if you need the one to 2 percent closing costs, what does that equate to if you need a 500, 000 home?

Um, so that kind of gave us that savings goal that we were trying to then work our way backwards. Okay. If we want to do this in this many months, how many, how much money do we need to be saving a month to kind of get us there? I felt a little silly later with some of the debts I think one when talking with some of my unicorn team, I’m not saying this is great, but one of the things that was told to me is homes are just really expensive now.

And so they recognize that not everybody can stay in some of that preferred debt to income ratio. And so they were saying that they’ll go a lot higher than I think was traditionally accepted. Um, so now knowing what I know, I think I maybe should have emphasized a little bit more of that down payment savings goal first.

Just because they do kind of let you get away with a little bit more than that 30 percent for debt to income. Um, and you can correct me if I’m wrong, that was just some of the information I had been given. Absolutely perfect information. This is real deep. For those of you who are really into it, what she’s talking about is typically you’re gonna hear a whole lot of generalizations, and you’re right, Kendall, it’s 30%, the DTI.

You have a front end and a back end. All these real estate terms, basically with an FHA, and this is the math I’ve been trying to explain to people with an FHA, and sometimes even with a conventional, you can get up to 40 to 48%. DTI. Now, the articles all say people paying half their money to pay their rent and how bad that is and how that’s ruining our economy.

Understood. But if we can’t beat the man, then you figure out, well, if I’m going to be spending 40 percent for my rent anyway, what do I need to save? 3 percent down, 5 percent down, plus one to 3 percent for closing costs. Then you go and do that at a high, what we call DTI, debt to income ratio, 40%, you still can get a loan, but now you’re paying yourself instead of your landlord.

So, what did you run into with your debts? Were you looking at manageable monthly payments, but large gross? I say that because that’s usually student loans. Yeah, so we had student loans. There was also things like, um, some car loans. There was some credit cards that, you know, when you’re in a grad program that pays you pennies, if something breaks on your car, it’s going on a credit card.

You know, that’s just survival in that time period. Um, so there was some credits, you know, that were credit lines utilization that was higher than, you know, would be ideal. Um, so we were working with like a few different types of debt and we were kind of trying to do a little bit of that snowball method where you’re trying to pay extra towards one and then roll it into another.

Um, one of the things that had hung me up a little was how it was impacting my credit scores. So that idea of if you look at your credit score and it breaks down all the different factors that are negatively or positively impacting it. For mine, the thing that was kind of a ding against it was that credit utilization was a little too high.

Um, I think they want 30 percent as well, if I remember correctly, um, in order to kind of have it in that green and correct me if I’m wrong there, but no, you’re right. One of the hardest things about the snowball effect, because I believe in the snowball effect, but is the immediate credit scores don’t jump right away.

Because if you have three cards that are all at 70 percent usage and you’re just knocking one down. As opposed to knocking them all down, you could, you can go from 70 percent to 60%. And then if you get them all below 50%, your credit score will go up when in reality, there’s a better way to, you know, and that’s where you have to understand your time.

There’s a better way to pay them off longterm. If you snowball one down. Your utilization still kind of stinks because you got two at 70%. But then you’re going to be able to roll into a higher payment and get them down quicker. Yeah, so I will say I, I, I want to say it was on one of your episodes. So if I am misquoting you, cut me off, stop me.

Um, as we were getting a little bit closer, I was thinking, gosh, I don’t, I don’t know how else to do this. I can’t throw any extra money at the debt. I’m still trying to get up to the down payment that I need. And there was an episode that I think talked about ask for a credit line increase. Am I getting that right?

Okay. Yeah. Shockingly simple. I mean, of course it is, right? They want you to owe them more money. So I just logged into my credit cards and I said, Hey, can I have a credit line increase? And they said, confirmed right away. Here you go. And all of a sudden my credit score boosted right away because I didn’t pay down more, but it looked like I wasn’t using as much of my credit anymore, which yeah, your credit usage jumps up.

Well, and one thing that really hit us when we were renting was as you watch people on their homes and you realize every year that you don’t own their stuffs locked in and yours isn’t. And I don’t mean to say that yours never changes, right? When you own a home, your taxes can increase. You might have these random years.

We have very expensive repairs that are needed. But what we saw was we have family members who have been locked in their mortgages who now have 1, 400 mortgages. I think a family member with an 800 mortgage. Our friends got locked in a mortgage where then our rent every year going up 300, 400. And so what we watched is, is they had sort of the stability and expectation of their budget.

And so when you think about that, even just in a year or two, what a difference that makes, that was for us realizing, you know, gosh, the sooner you get in, the better you can lock in some of that. I get so excited going back and listening to these success stories. The reason I want you all to know that you can do this, it really comes down to the fact that a podcast.

Living paycheck to paycheck with very little saved and feeling totally unprepared. And they think there’s no way this is ever going to work for them. Guess what? Listen to the story of Jacob. Back in, uh, oh, December of 2022. You sent me this note. You said, I don’t think I have access to all the tools I need to be successful with a first time home buying purchase.

Would you be willing to help us obtain the right information to be successful? So, give us the scoop. Did we do that for you? A hundred percent. Excellent. It was, it was not only quick, it was easy, and all the tools were in front of me in what felt like 24 hours. Like it was, it was unbelievable. Wow! Oh, holy crap.

Hey everybody, I didn’t pay him to say that. Uh, we talked for about eight seconds before I started recording. So, that’s awesome. Well, um, 2022. And, uh, he closed on a home. Um, get ready to celebrate everybody. He closed on 420. You heard that right. Um, and, uh, of 2023. So it took him four months. Now, when Jacob came to us, uh, he was currently renting at 1500 bucks a month, had about a thousand bucks a month in debt that you were paying at that time.

Or payments or, or like monthly bills, I should say. Something of the sort. Yeah. Okay. Uh, now is this right? When, when in December and you closed in April, in December, you, you at that point had 2, 100 saved. Yes. Actually, in August, I, I had a talk with my wife and I said, what are we doing? We, we were living paycheck to paycheck for no reason.

We weren’t saving any money at all. We literally like couldn’t go somewhere our friends invited us to because we could not afford it. And I, so from August to, well, I guess probably September to December. September to December, we were able to save 2, 100. Seriously. I don’t record and do podcasts with everybody that we help.

Uh, but. This is not even a surprise to me. 2, 100 saved in December, living paycheck to paycheck, with no chance of the family giving him money, no 401k to pull from, uh, and they managed to build a savings plan with the guidance of some experienced pros, and with just 2, 100 paycheck to paycheck in December, they closed in April.

That’s crazy. Four and a half months. Yeah, they closed on 4 20. 4 20, what do you think about that, JT? Sorry, he’s, he’s, he’s kind of spacing out. Look, gang, you don’t know what you don’t know. And this is such an incredible story. Can this be your story? I don’t know. But maybe when you’re teamed up with the unicorns, boom, maybe for some of you, it’s four months and you’re in a home.

You don’t know what you don’t know. Okay. What about those of you out there are organized and you’d love to prepare and you’d love to get all your ducks. Well, you like to get your ducks in military formation because frankly, rows are too disorganized and chaotic for you. You are Captain Anal Von Organized.

Okay. Well. Here’s some great information from John and Richard. They’re from episode 186, one of my favorite couples. Listen to what they had to say. Debt is a team sport. Okay, so, so we, now I was joking, obviously, student loans. I mean, the headline for this podcast is John came to me. And said, I have 300, 000 in student loans.

What can I do? So we talked with Kathy, who is our lender. She was amazing. She kind of just went through, pulled our credit. That was kind of one of the first things too, is it was like, Oh gosh, should I let her pull my credit? And what’s that going to do? And then I heard one of your podcasts, like soon after that, it was like, just do it.

Let them pull your credit. You want to do it as early as possible that way it it doesn’t affect your Your stuff later on and you want to know everything on there as early as possible Um, so yeah, we we said let’s let’s go ahead. Let’s pull the credit Let’s see what we got and she kind of asked us what our you know Monthly minimums were on the stuff that was on my credit report and we Handed over all the documents and bank statements 401k stuff, uh, just everything savings and stuff so that we could get it all going and I’ve done my own research, quote unquote, and so I thought I had a handle or knew going in like, okay, like this is what I can expect.

And it just turned out to be not nearly enough compared to what she brought to the table. And, you know, it’s very hypocritical because me as a primary care doctor. hate when patients come in with their WebMD Google search stuff. And so it’s like I was doing the exact same thing. Um, but she was wonderful, answered all my questions, corrected a lot of my misconceptions.

And I thought, Oh, a physician loan would be best for us because of my student loans. Um, so I brought that up to her and she showed us and ran the numbers. And the it really kind of depended on what kind of house we wanted to get And really the interest rates were still better with an FHA loan Or even the regular conventional as opposed to a physician mortgage for for our situation Um, which was crazy to me, but she showed us the numbers.

She showed us everything very transparent. So She was like look here you go. This is what? You know, it’s going to look like for you. And I was like, wow, okay. Um, that just difference in rate made all the difference even with or without PMI. And I was like, okay, that, that was, we were so scared of, oh, I don’t want to pay PMI.

So let’s do a physician mortgage, but here we are. Oh, wherever you’re listening to podcasts, you really need to exercise your rewind ability right now. Rewind gang. Did you hear that stuff? Overprepared. Waiting to get a credit pull and most importantly the WebMD thing. Did you hear the WebMD thing coming from a doctor?

I hate to tell you this, but if you listen to that and you didn’t understand what he was talking about, I guarantee you, you’re the person that needs to hear that. You ever heard that saying? You know, there’s… 12 or more people at a party there. There’s always one a hole And if you don’t see one or you don’t think there’s one in the room, then you’re the a hole See some of you heard that webmd thing and went.

Oh That’s so me. It’s good stuff gang. You gotta listen to that episode To understand that the biggest part of their saving in debt was planning with a professional instead of trying to do it themselves, even though they’re smart people. That’s the theme of the episode. That’s just one snippet. I could have dropped the entire episode in there, but then we would have turned into a four hour Joe Rogan podcast.

It’s already long enough. How to Buy a Home, Episode 186. Make it the next one on your playlist. Okay, then, uh, we move to over prepared again, but in a different style. This is Corey. Corey’s a funny dude. I love him. Uh, he prepared, prepared, and over prepared. And when he got ready to go, well, listen to this.

Let me put it this way. I had my initial consult with a mortgage company on a Tuesday and on Friday I was conditionally approved. They called me and told me it was unheard of for them to approve somebody that fast. So I figured they really wanted to give me their money. Told you he’s a funny dude. What I hear when I hear that is, you know, what we talked about, it was like, dude, you could have bought like a year earlier, easy, if not two or three.

You know, you could have done that all with a pro team that would have worked with you for free until you closed And then you know, who knows maybe you reached out three years ago. I bet he could have stopped renting in six months It’s another good one to listen to so if you’re out there right now and you’re thinking about your debt And your savings and you’re trying to just do those all on your own if you’re one of those research guru You know a reddit king or queen Uh, and you’ve been working on your own dti trying to figure out how to manage your debt to savings and your debt to income ratio because You’re afraid.

I totally understand that. I get it. So instead of reaching out to someone because they’re so gross online you end up doing hive mind research, going to YouTube videos, deep dives, and I gotta tell you, I’m totally with you. Weren’t expecting that, were you? I am totally with you. You are right. Most of the realtors and lenders out there suck and they should quit.

And a lot of them are skeezy and just trying to get attention as opposed to actually learn how to do their job. Good news is things got hard in 2023 and a whole bunch of ’em did quit. So what I really wanna say in a a real way is. I understand your doubt, and I appreciate it, and I empathize with you trying to figure things out on your own.

What I’m telling you is there’s three million real estate agents out there right now. Not all three million of them suck. And if you know what to look for, and you know what to ask for, and you know what to get, then, instead of being afraid of them, you just have to find the needle in the haystack. And, you know, that’s what we’re trying to do here with Unicorn Nation, and it seems to be working.

As a matter of fact, uh, let’s find out what the doctor found out. After she put in all the hard work. Let’s see what the PhD Ms. Kendall discovered when she actually went through the process. Tell me what it, what it looked like for you where you were trying to balance paying down your debt and build your down payment.

Where were, you had a chunk of chunk of money every month or what were you doing with it? Yeah, so we, we try to stick to a budget, you know, we do the whole Excel sheet where it’s. You know, you’ve got the month broken in two. I knew what bills were coming up. And so every time I was paid, I would just look at how much money do I typically need for this section of the month.

Whatever was left over was sent into the savings account. Um, but then I had pre set up ahead of time, just extra payments going towards the credit card so that I didn’t have to remember to log in and make those extra payments. So I kind of decided ahead of time when I looked at how much debt do I have, you know, I want to buy a home in a year and a half, tried to figure out like, okay, I need to shave off, you know, at least this much amount on the debt and then using credit card calculators trying to figure out.

What’s the best way to do that factoring in interest? So it was a little bit of math up front to try to figure that out But then I kind of just set up those auto payments Um, so they were automatically pulled out and then whatever was left over in the account just got sent straight to savings for the down Payment so okay, so you hit me up on thanksgiving.

Uh, i’ll cut to the ending for everybody you closed on may 1st. You did Um, congratulations What were the differences when you talk to when the unicorn ended up getting you to a lender? Um, was there any, did that change your payment structure and what you were doing with the saving and the debt reduction?

Did you find new options, different things that you want, or did you just go in and say, what can I do? Yeah, I think that’s a little bit of me working harder than I should have needed to ahead of time was I think solving some of that earlier. By the time I was meeting with my team, I had A lot of ducks already kind of in a row.

Um, so they didn’t really have to add any corrections or any adjustments. Um, one of the things that I felt so silly about later on was that I agonized over, um, trying to figure out how much money am I making? How much debt do I have? What kind of down payment do I have? And just the, the agony over. Will I even qualify for enough?

And it felt so silly later. I just reached out to a lender. I had a friend that had a great experience with a lender. So I reached out to him ahead of time and just said, Hey, here’s my hypotheticals. This is what I make. This is what our debts are. What kind of house would we potentially qualify for? And he was able to give us a ballpark range.

And I think that number, that confirmation. Made our timeline speed up so much this fear went away this reality of this is possible. Let’s get this ball rolling Made it real and that’s when I kind of really started hitting the ground running with things Man, awesome stuff there. Let’s get the ball rolling and make it real Okay, wrapping up the debt section, which is to be worked on hand in hand steps three four and five credit score debt and savings as I mentioned before some of the best practices of my listeners was to use All to be working all three of these steps at the same time improving the credit score reducing their debt Um while they were balancing saving enough money to purchase a home as for the debt part Probably one of the big things I want to make sure is don’t think What the hell am I thinking?

You know, am I only dreaming? Is this burning an eternal flame? Oh, how was that? Did everyone get to see my sweaty armpits when I raised my arms and sang? I know what you’re thinking. Stop that. Stop that. I’ll tell you what. I will stop singing the classic 80s bengal song. If you will stop thinking, what the hell am I thinking?

Stop. You don’t know what you don’t know. I know that was a terrible way for me to get into that real. Earnest segue, but I mean it. You don’t know what you don’t know. Stop talking to yourself like that. With debt, gross is gross, your fears may not matter, and in fact, I bet for most of you, your debt might not matter half as much as you think it does.

Remember Christina and Sean. Episode 167. So for you, lord and lady over thinkensteins, you cannot do research and find a one size fits all that’s actually going to be your best plan, no matter how deftly you can dig online and crawl down dozens of rabbit holes on the interwebs. You’re not You know a lot of times people think oh, I know how to do this because you know, I researched the best deal The best deal is just the best price You’re not just looking for one thing You’re just not looking for the best interest rate from the best lender and then I go find the best home No, no, no, you’re researching the best complex and creative long term financial plan, algorithm, long term forecast equations you have to bring into the mix, immediate multiple stream changes in your spending and how to maximize your portfolio to one specific financial entity.

There are huge factors that you have to figure out. And for you, it’s not. An immediate one time purchase. This is a 10, 20, 30 year plan. And if you look at it with just price interest rate and timing the market, you’re going to get so caught up in those immediate first year results That you’re going to end up analyzing for 18 to 24 months and not get off your ass And the whole time you’re going to be paying rent and suddenly you’re going to pop up and go.

Oh here I am the wizard of research, but I paid rent for two years and I still don’t have a home. The long term math, even five to seven years, is going to prove out. Because this new economy with the new jacked up rents, it’s the new not your parents way to buy a home. Best time to buy was yesterday. The best time to start your plan was last year.

So the last piece on debt. There is a bonus tip on episode 56. It’s a slick trick that my unicorn lending team came up with. Check it out. It’ll show you there are creative ideas that you can’t find with a simple Google search And it might be a great way for you to work your debt. Told you we were serious today gang.

Okay, uh Moving on. Okay. We’re an hour in so let’s go ahead and move to step five savings. I’ve said it a million times It’s a balancing act between debt and savings the savings part The big question everyone has for me is, Oh, what do I need to do? Well, it depends. Everybody’s got different things that they might need.

The key is to understand the bank has specific criteria and understanding how to present that to the bank is going to give you your number. And for most of you out there, it is not. Repeat not 20%. If you can do that, awesome. But in today’s economy, most of my first time buyers all across the country, it’s not happening.

Don’t assume how much you need to save. Get with a pro, get that spreadsheet together and figure it out. These are the topics that we’re going to be talking about in step five. How do you start? What are the best tools that you use? How much salary do you need to make? How much for a down payment? And what are the closing costs and the total number you need to bring?

Sorry, I say it that way because that’s the way we say it in real estate. How much money do I need to bring to close? Uh, you normal people would probably say, Hey, how much money to buy a house? You probably don’t say it like that. You don’t sound like someone from Hee Haw. I don’t know why I did it that way.

You don’t even know what Hee Haw is. Old, drink, boom! How do you start? Okay, this is easy. Save money, silly. Seriously. How do I do saving? Save. That’s all. Save. Okay, you want the tips? Automate in past episodes. I’ve talked a lot about Exactly what you should save and how you should save it’s something called the 70 rule Now, how do you do that?

You read the book richest man in babylon It explains real simple 70 of your salary comes in 70 percent goes to your expenses 10 percent to charity 10 percent savings and 10 percent to investing. So in this case if you want to do a 70 28 2 And you do 70 for your life and then you take 28 percent of your monthly or weekly, whatever, and you automate it automatically into your savings account for your down payment.

And then you take 2 percent charity and say, sorry, love you guys, but I need a house first or whatever you want to do. Yes, JT. During the course of this podcast, I sent a form to our HR to put 20 percent of my paycheck into a savings account to automate and do just that. Thanks, boss! I love the fact that he thinks he gets a gold star for that.

Bro, you’ve been with me for four years. Anyway! Okay. I just got an actual job Okay When you understand automate automate automate, uh, it’s going to help your saving a lot. That’s how you do it Make it a habit or better yet, uh automate it so you don’t have to make it a habit. It’s nothing you need to think about Once again, let’s go to other people.

So instead of me and jt yelling in the room. Let’s listen to cory

I think one of the biggest things for me was, you know, having that student loan and car payment that’s, you know, 600 out of my pocket every single month, but I got used to not having that money. So when I didn’t have it anymore, I just saved it instead of spending it. I’m a big fan of the reverse budget.

Where you take what you know are your expenses every month and instead of saying, okay, here’s what I need to save, I say, okay, here’s how much I know that I’ll need for the month, so anything else I can spend. Now, I factor in my savings into that. I’m a big fan of paying yourself first because, you know, that’s money that’s going to go towards your future.

And money, I think one of the biggest things for me is I see money as security more than anything else. So, you know, the more money that I’m sitting on, the less time I have to spend potentially working in my retirement years, the less I have to worry if something goes wrong. So, you know, knowing that I was putting that money away first, that was more valuable to me than anything that I could buy with it.

Love it. He’s got a lot of good ways on, uh, saving money and, you know, unless you’re out there with your rich eccentric uncle who’s ready to give you tens of thousands of dollars, um, we all need to figure out whatever the program is. Um, there’s a ton of great, deep information, uh, including apps and other tools on the internet that you can use that, Will help you in the seven part series.

It starts at episode 19. How to financially prepare to buy your home Uh episodes 3 are really good with some deep details on that But the bottom line is just automate it call your bank right now Just like screaming jt over there did save your money Open a savings account right now Or if you don’t, or if you do have a savings accounts, call your bank and say, Hey, put 25 bucks a week into my savings account.

You can automate it. Click of a button right in your hands. And of course, as always, uh, a legit experience in caring realtor or lender is going to be help you maximize your efficiency in these steps, but don’t let that. Don’t wait until you talk to somebody, do something, do something and then talk to somebody.

Uh, and at the same time, having those guides, one of the big thing I say is it helps you avoid, avoid all of those first time home buyer mistakes. And that’s super important. Topic number two in our savings discussion today on this podcast is the tools. Like I just said, all those tools are there for you in the seven part series.

Starting at episode 19 of the podcast. I’ve been doing this for four years gang. You don’t think I haven’t covered this stuff It’s in there. Um, okay now for the remaining topics these last three topics i’m gonna throw them all together How much salary do I need to make? Uh, how much do I need for down payment and what are the closing costs and how much is the total number I need?

to buy the house These are all covered with one answer. I don’t know. And any BS monster online who tries to tell you that they can give you the answer, give you just a one stop answer, they’re full of crap. The only way you can get this answer is by having a 45 minute caring, empathetic conversation with you about you.

Your family’s goals, your hopes, your dreams, your debts, your salaries, your assets, your potential promotions coming, the vacations that you want to take, the future family plans. Do you need room? Do you need to grow? Do you need to shrink? What about your desire for your pets? What about overtime? What about a hundred other things you need to know in order to answer that question?

And anyone Who tells you they can answer how much salary do I need to make? How much do I need for a down payment and what’s the total number I need if they don’t quantify it by saying well If you want to buy this home and you have zero debt and 800 credit, nothing else in your life matters than here, then they’re lying to you and they’re trying to make money off you.

I say these words and I know you hate it. It depends. It depends. It depends. There, you all hate me right now. Or you think I’m doing some kind of commercial for adult divers, but it does depend. Don’t cringe at that. Cringe at my jokes. That’s fine. But don’t cringe at the words, it depends. I’m telling you that it depends because it depends on you.

That’s the end of the sentence that doesn’t get said enough. It’s you and your representatives and your advocates. They should care about what matters. to you, and they should want to know what you want. Okay, now I understand maybe many of you have thrown your earpods against the wall in anger because I said, it depends, or maybe I said adult diapers and you didn’t like that.

I know, it depends sucks. So you tossed your earpods because all you wanted was clear, simple answers. So maybe that’s a good time for another pause in the podcast. Okay, and then we’ll come back with this thrilling conclusion. It’s the trilogy within one podcast. Pretty cool. So come back for Return of the Jedi.

Okay, I didn’t pause at all. I just came right back, but, you know, you knew how to pause. See, what’s cool is you know how to do something that my own children are incapable of doing when I walk into their room, and that’s pause your device. Okay, it’s a therapy session for me, apparently, today. We’re back for the final portion of steps four and five, and I know a lot of you out there Might be looking for an immediate answer.

So i’m going to give you a basic equation for the topic How much should you save now? It’s real important if you’re, you know Looking at your notes because I know you all take copious notes as you listen to my podcast Notice how I skipped over uh, how much salary do you need to make? The reason I did is because it depends and it really depends on huge factors.

Um, and I know that pisses a lot of you off right now because episode 174 actually cover the whole thing. This is deeper than one question. 174 covers All of that and it gets more clicks than everything the answers are there and it’s far too Complex, especially in this marathon episode, um your individual dti not to mention mortgage interest rates the reason why we can’t answer it is because Mortgage interest rates they can change multiple times in one day.

So how on earth am I supposed to be able to give you a spreadsheet that says, okay, if you make a hundred thousand dollars, you can afford this much house when the one greatest factor of the mortgage rate could change multiple times. Um, anyone who tells you that again, it’s clickbait nonsense. They’re looking to sell you, not educate you.

The answer changes daily and it’s not. An exact science. So the generic answer I can give you an answer to is how much should I save? It’s a basic equation that I mentioned earlier, the 8%. Now this is an approximation to tell you how low the bar could be, uh, but to help you get off your butt and find a supporting team and start planning, remember for some of you, it 5 percent total or 3 percent total or 1 percent total, but I like to keep things conservative, real.

And actually legit. So shoot for eight. Okay. Some of you, you might be able to do it with zero down and just have to pay your closing costs. And some of you, you might be able to do it for zero down and get the seller to pay your closing costs. Whoa, David, tell me who that is. Well, that would take me an hour and a half to go through every single scenario.

But it could be you. Oh, well, tell me about an app. There’s got to be like an app I can just punch in like… You know 10 things and it tells me no, there’s not each of you is different and I wish you could but you can’t google this Thing you need to do in the biggest and and I get it the reason I know i’m sounding condescending and crappy But it’s not your fault.

The real estate industry doesn’t do their job Their job should be talking to you when you’re signing your last lease and going. Okay, you’ve got 12 months Here’s the steps, but they don’t because they’re lazy and greedy and it bums me out So you can’t google it. But if you’re gonna do this on your own, you don’t want to talk to anybody Use 8%.

It’s a good low bar to shoot for. 8 percent is a 5 percent down payment. Now, that’s 5 percent of the purchase price and then another 3 percent to cover the closing costs. Now, most of the time, most places, that’s pretty high, but again, I like to be conservative. So, once you say 8 percent of the purchase price of the home that you want to buy, you should be in decent shape to figure out how to purchase a home.

Now again, Here’s my qualifier, my legal. There are thousands of factors that come into play to see if you can qualify for a home. That’s why we have step two, getting the guides. And don’t call me, don’t sue me, and don’t yell at me if you save 8%, and then you go to get a home loan and you go, I can’t get a home.

And if you want more answers to figure out where you are, um, and, and how much you actually need to save, uh, listen to episode 164, talk to a pro and figure out where you are on the chutes and ladder board. Madison, my main gal from episode 53, she’s a perfect example. Now, I was gonna, uh, put her podcast on here, but instead, I actually said, Oh, you know what?

Maybe I’ll just talk to her in person. So, because I love Madison and I love to rag on my friends, I actually texted her and, uh, this, this is what I said to her. Uh, I believe I said, um, please spare me the agony of my ear canals and my brain function, uh, having to re listen. To your podcast while I drive into work.

And then I asked her to just give me the details of some specific information. Now, remember I did that only because I love her. Uh, she’s the best. I’ve been in touch with her a lot of times. Her episodes, a killer example of how to work step four and five. So. I asked her about her savings. Uh, and, and she actually texted me this.

She said she put 5 percent down. She was originally going to put 3. 5 percent down and that’s what we call an FHA loan. But Dino, uh, my unicorn lender here in SoCal, they discussed that the 5 percent conventional. Would be better for her because she’d be able to get rid of her small PMI. It was only 98 a month once she hit 78 percent loan to value what we call LTV.

Um, and then she went, Oh, by the way, and after closing costs, she only spent 17, 000 and she still had 4, 000 left in her savings. Now this was for a 475, 000 property. And yes, gang in Southern California. That’s a condo a two bedroom one bath, maybe no two bedroom two bath, uh, 475 Um, and she said she still had two thousand in a roth ira 150, 000 in investments in her mutual funds, which she didn’t want to touch and ten thousand dollars in a cd that expired Uh the year after she bought it and four thousand left over in her cash savings account Which was both my home fund and my emergency fund.

So That’s crazy And she’s actually already calling Dino to get her PMI removed. Um, maybe even without having to refinance since her value has gone up so much since she bought the home. If you’re listening to that and none of it makes sense to you, your eyes are glazing over and you’re like, what? Cool.

Remember this thing’s like. Going to be 90 minutes long and i’m giving advice to everybody. So that was for the advanced listener That’s someone who saved up a whole lot and had a whole bunch of different options and still Once I got her down, uh, she was another big dave ramsay person Once I got her down off of that we ended up, you know getting her off the 20 percent wagon And figured out how to remain liquid and then it was just a matter of three and a half fha Which has PMI for life or 5 percent where she can get rid of the PMI.

And because she bought right post pandemic, the market took off bang. And that’s fine. If, if none of that makes sense to you, hang on, that’ll come for you later. In fact, what I love about Madison, that purchase was April, 2021. Uh, and I’m recording this October, 2023. Um, and at the end of that text, she went, Oh, by the way, I got to talk to you.

Uh, because I’m getting ready to buy my next house. Uh, she bought with me, what? She was 23 and 24 during the buying process. So that means she’s only 26 right now and looking to buy her second house. Queen Madison. What episode was that? What’d I say? 53. Yeah, go back and listen to that. Okay, we are super deep in the longest episode that I’ve ever recorded, and I am pretty sure that JT is asleep.

Aww, that doesn’t help me. But I promise you this, I saved some even better real life interviews. I’m talking serious chicken nuggets of knowledge. Nuggets of wisdom Tendies.

Mmm, honey mustard’s the best. You people that dip them in ketchup, I don’t understand you. We’ve got nuggets and they’re coming right now. Real life stories. Uh, this is Jacob from episode 194. What up, Jacob? Talk to us about savings and buying a home. So basically my wife and I looked and it, you know, we had been Basically saving around 1, 000 a month without major changes to our spending budget because we don’t have children.

So that’s a big, you know, plus as far as saving money goes and we wanted, we do want children, but we also don’t want children in a, the 800 square foot apartment that we were living in. So we wanted to move and upgrade to somewhere where we could grow into it. And speaking of saving, this is Stephanie from episode 189.

She had been told by several people that she needed to save 30 percent down. I thought that was really weird. Usually it’s 20, but people were telling her 30%. Well, thank goodness she reached out and got in touch with the Unicorn because, um, she ended up getting a much, much better number. Uh, listen to this.

So two years ago, we did have some debt, right? We had student loan debt. We had some credit cards. We had auto loans. Um, you know, kind of the, the very… I don’t know if we want to call it regular, but a lot of people have this experience where they have those types of debts. Um, it’s regular it’s in America and Canada.

It’s regular, so don’t worry about it. No need to quantify. So, uh, yeah, we had debt. Um, we also had low credit score. And just the uneducated portion of what that really meant for us. You know, they don’t teach it in school. We didn’t really keep up with it. And then when we went to look at it, we were like, whoops.

You know, we really let that go and are not prepared. Another thing that we experienced two years ago is the market was very, very different. People were putting in cash offers, um, you know, way over market price. And we were trying to use our, my VA loan. I spent eight years in the Army and we were very excited to be able to leverage that in our experience.

And then we connected with a realtor, you know, just a guy that, you know, we, you know, we reached out to him. We were like, Hey, you know, I think we’re ready to buy a house, or we wanna start to plan. Can I talk to you? He got on the phone with us and said, Hey, you don’t make enough money. Um, you know, you need to be put at least 30% down.

And also nobody’s taking a va, va. Home loan right now. So don’t even think about using that. Uh, so we were very, very discouraged with all of those things. And, you know, we thought we just had so much work to do to try and save up 30 percent in the bank, you know, um, we didn’t have the income for it. My husband as well.

He was, he’s an entrepreneur. Um, and we had to prove his income in a way that we weren’t prepared to do two years ago. So that was a big, big awakening for us. Okay. I have lots of questions about that, but the first thing I, that the, probably the listeners want to know is, okay, two years ago, you thought it was 30%.

What did you end up putting down for this purchase? We put nothing down. Say that again. We put nothing down. We put nothing down. Two years ago, somebody told you you had to have 30%? And now you did it for nothing. I want to reiterate to everybody. When did you guys close? We closed in December This next one comes to us from episode 163.

It’s joelle boy. I really love talking to her She’s a really sharp woman. Um, it was a real pleasure talking to her Um, I talk all the time about the fear of being house poor and I totally understand and in fact I appreciate those of you out there thinking about being house poor Because it means you’re being conscientious about your life and I know that feeling might be holding a lot of you back, so don’t listen to me anymore.

Uh, listen to a real smart, real smart woman, Joelle, and how she and her mother actually view the house poor issue. Yeah, the stability and knowing that the rent would be the same. So my landlord had been talking about selling the place, which would change all of this math, right? And that wouldn’t be in my control, because so many of them wanted to…

Offloaded so like, you know, you end up being in a spot where you’re like watching your landlord’s life. Like, are they getting a divorce? Will it sell? What’s happening? Like, okay, I need to get out of that and have more control over what’s going on. And then also a big part 2 is. Coming to terms, this is the emotional part again, coming to terms with the fact that I needed that, I was using that gap between like what was coming in and what was going out for rent to save, to save, to save, to save, like most of that went to savings and I was having a conversation with my parents and my mom was like, well, you don’t have to worry about not having that much The same level of buffer anymore, because this is the thing you were saving for.

Like you were putting away for this. So if you have this, you may not need to save to the same level as quickly. Like you can take your time with certain things or make adjustments. And that was like, Oh yeah, like this is the thing. You don’t save to save. You save for a reason. And this was my reason. And I just.

I was hesitant to get out of that mindset. Now, I want to make sure that everybody gets their questions answered today. So if you’re one of those analytical type trying to get the perfect equations in your spreadsheet, and that’s the reason you came here today, you’re like, hey, okay. I love all this philosophy and stuff, but I came here to figure out how much I need to save.

Well, I unfortunately have bad news for you. I wish this was different. In the real estate business, we actually call crazy, intense, analytical people, um, engineers. Um, and I just realized I called you crazy. I don’t mean crazy. I, um, I meant, uh, very focused. Um, and this interview is from an actual engineer.

Um, and I know that when I was talking to Jake, that his brain was going to explode when I told him that nothing is exact in how much you need to save. Nothing. There is no. Spreadsheet everything is an estimate when I said everything is an estimate. I thought he was going to have a heart attack It’s a four letter word for engineers, but you just have to be ready for it.

That’s the way it works in real estate you have to be Flexible another dirty word to engineers. Here’s engineer jake episode 121 And on the financial side, was this something, I know you said you got out of school and you were thinking about this. Have you been prepping this for a while or were you surprised at what you could afford?

Uh, some people think they’ve got to put 20 percent down. Where was your headspace coming in? I guess with that one too, that was one of the, maybe not pitfalls, but, so I put 5 percent down. And I was like, worried about, well, do I need to try to put more down to get less interest over the life of the loan, this, that, and another, and the lender actually helped a lot, cause he was like, don’t stress between 5 to 7 to 8 percent, or unless you go up to like the next 10 percent, then just don’t worry about it, let’s stay with the 5 and move on kind of deal, which was good to hear, cause I guess I was losing sleep over it or like trying to find the perfect number to put down And he was like put the five and you got a good deal.

Let’s move on Now this is another topic that comes up a lot on the show Um for those of you thinking you can never save up. I know that you’ve reached out to other different people and Sometimes people will say, Hey, do you know that you can use your 401k for a one time, no penalty, non taxable event if you use the funds for the purchase of a primary residence?

Well, what I found out is a lot of listeners, they think this, when they hear that, I can’t believe that that scumbag just heard that. I don’t have enough money saved. So rather than taking time to work with me for six months or eight months and show me how to do a savings plan, they want me to pull from my own retirement.

Now again, I’m with you when it comes to a lot of people in the real estate industry. I’m bummed out. I am so bummed out with the way their industry is going and the service you guys are getting. A lot of the people that say that to you, they’re actually stealing it directly from those of us who know what we’re doing.

Um, I’ve been telling people that for years and it’s an interesting concept, but one, I understand it takes a little while. So instead of me telling you about it, uh, listen to Stephanie. Really smart lady. So what you can do is listen to stephanie. This is from episode 113 Uh, stephanie’s a very smart woman.

Not a kid. Definitely more gen x than millennial or gen z and she is Freaking on the ball Real smart person listen to this one Yeah. One revelation was I was listening to one of your episodes and I knew because I’m a single person that I would probably need to borrow from my 401k to make a down payment, which a lot of people tell you not to do.

And I knew that I would have to do that. And, and it gave me some hesitation. Like it kind of gave me a little anxiety and again, milestone age, you know, I got your beat. I’m sure. I don’t know about that. One of the things you said is you have to think of it as diversifying your investments. And that really made a lot of sense to me because I could, you know, keep stocking money away into my 401k and look at the number and be all proud, but I would still be renting and that rent would still go up.

So it made a lot of sense to me, especially how I could also. recalibrate my contribution so that I’m not, you know, putting my entire paycheck into my mortgage. So all of that was like, wow, I didn’t even think of it that way. So it made me feel a lot better about, you know, the direction I was going in. Now I talk about 401ks a lot more on other episodes, but you know, I think Stephanie kind of said it all there.

Another great topic. Is how to time your savings with the end of your lease Um, because after all if you’re busting your butt to save your money The last thing you would ever do is contemplate breaking your lease because that means you have to pay extra money And you’re spending all this time figuring out how to spend money Well gang sometimes the equation Of buying at that time breaking your lease Instead of you thinking oh, it’s costing me 2000.

You might be thinking but it’s saving me 20 Here listen to jeff and sierra episode 170 So we closed on our house in november. I’m sure we’ll get to that but we closed on our house Uh at the end of october and moved in november 1st And wait a minute. Wait a minute. That’s before the end of your lease Yeah, yeah, so Like I said Our deadline was we got to be out of here.

We got to buy a house before March. Let’s be well prepared and, you know, fast forward, we’re closing on a house before the end of the year. Um, so yeah, we had plenty of time. Um, and now, you know, we wouldn’t change a thing because we had a deadline and, and met that deadline well in advance. What are you guys, independently wealthy?

How can you afford to break a lease? That sounds like the stupidest thing I’ve ever heard of. Please explain to me why you would think it’s okay to break a lease. Why didn’t you just wait? So our biggest thing, like I said, we have just not to get into the details of where we’ve lived in the, uh, in the past, but we had not.

Finish a lease, or we have always finished the lease and then moved. It’s just happened that way. Coincidentally, it’s not that we were kicked out or, uh, weren’t told to renew our lease. It just worked out that way. But, and a lot of times it’s been cheaper to just go start a new lease than you have where we live renewed.

It would have been more expensive than to just go get a new lease. Yeah. So we, we. Yeah, we wanted to avoid, you know, here’s, here’s your new lease that you can start for another year. Uh, we’re gonna, you know, increase it by X amount of dollars. We wanted to avoid that and, um, you know, as we approached it and got educated, we were like, wow, we have enough money to close on a house and we’ll talk about it.

I’m sure, um, the avenues that we took to get additional funds, uh, to help us. Cash the clothes and also use money to, I guess, help us move by. Yeah. Break the lease, move, buy furniture, do things to our new home, all that good stuff. So in general, when you’re a renter, uh, I’ll, I’ll take my facetiousness out of my voice.

Now, in general, when you’re a renter, you understand first and last, and you understand breaking a lease. Um, when you, when you sign a lease and you’re 12 months out, if you start working with an agent. And you have a professional people guiding you. The goal is we need to save a lot of money. And if you can do all that in six months, and you’re getting all set, suddenly 2, 000 for breaking the lease is just one piece of a much bigger puzzle.

See, I told you good nuggets, good tendies, epic episode. How about saving for a new build versus a resale home? A lot of people change their savings. Depending on if it’s new or resale, because you have to have your money at certain times. So here’s some information we got from Mr. WebMD. It’s John and Richard again in Vegas.

Let’s hear what they had to say. The other thing I, I will say that really came into play too for me was the monthly payment, I guess, because I manage our finances and in a new build, the tax payment. Just adds so much more money to the monthly Mortgage payment that we realized that even though technically this house was a little more expensive than any of the new builds We saw because of its prime location prime neighborhood It was still a cheaper monthly payment because we didn’t have the gigantic tax part of the mortgage there um Yeah, and that that made a huge a huge like game changer for us.

I was like for sure going with the resale like Even though we had already fallen in love with it, then it was like, numbers wise, it also makes sense, too. Yes. And I, at the end of the day, it was easier to sleep with that as well. Yeah. Okay, the marathon episode, but it’s really important that you hear all the different aspects for savings.

I want you to hear different voices. different ideas because maybe you hear yourself in that or maybe you hear, Hey, this can work for all kinds of people. And I’ve saved the last two super nuggets of valuable information to help you plan your debt reduction while you’re working your savings plan at the same time.

This one is one of my top three interviews of all time. Hands down. This is a classic. It was so poignant and so wonderful. I ended up naming. The podcast and I don’t like, you know, I did this in a non ironic nine non hyperbolic way I named the podcast achieving the american dream because my gal sally I am genuine when I say this If you haven’t listened to episode 161 You gotta listen to it And if you have go back and listen with your mind tuned to just the debt and saving aspects It’s really kind of cool.

If you just if you already heard it once you probably got So caught up in the motion. Listen again. It’s sally. I love her. She and her husband had 5, 000 saved up and they bought a 348, 000 home with only 23, 000 total now, I know what you’re saying. Well, tell me how to do that david Uh, is that really all I need to save it depends?

Maybe. Depends on your income, your debt, uh, and a million other things. Um, but the funny thing about this interview is, uh, in that interview at one point, she tells us she actually stopped in the summer. She got scurred. She got scurred. And she stopped. And she re signed an entire lease. And then she started thinking and rethinking about it.

Well, then she reached back out and, Oh, did she break the lease? Let’s listen. I took that little break because of the fear that, that I was still feeling. But, um, if it wasn’t for that, I feel like I would have closed during the summer. And honestly, I wouldn’t have to go through all the trouble with renewing my lease and all of that.

But yeah, it was, it was kind of crazy, the interest rates and all of that. I think that was one of the things that was also kind of like holding me back. But like I said, we reached out to Tara, she answered all the questions, I connected with Ashley again. She was like, you can do this, like, here’s the scenarios, this is what you need to do.

And I was like, okay, let’s do it. Wait, Ashley was saying you can do this? Yeah, pretty much everybody. Do they listen to the bar? I was, I was the only one who was thinking like, I don’t know, I don’t think this is possible because you still have that little voice in your head. Cause you’re, there’s so much miseducation and miscommunication out there.

You know, I grew up thinking like buying a house, it’s just for like the rich people, you know, it’s not something that everybody can do. Boy, I was so wrong. Wow. Okay. Hang on a second. I need to talk to all my video editors and anybody else. Save that last 20 seconds. That was it. That’s amazing. Okay. So everybody wants to know what, what got you over the fears?

I think, like I said, um, that reassuring and that support from everybody. You with the email follow ups and text messages. Tara answering all of my questions. Ashley running like a thousand scenarios that I was asking her for. It was just… that reassurance, reassurance from everybody and just not allowing that little voice that I was talking about earlier is just, you know, take over.

Um, that’s pretty much what got me through it. That’s incredible. And what’s so neat to hear about all that is that It sounds like you were presented options that you didn’t know about because everything out there is so confusing, but when you had a team of people answering your specific questions and that like, that was cool.

You said Ashley ran, Ashley was the, the lender unicorn through Tara and you had that full support team, but she was running different scenarios with you because as the market changed, I’m assuming pricing and everything changed. That’s cool. Yeah. And it was pretty much, um, My husband and I, because we bought together, he is a self employed person, so I was worried about his situation because we had moved to Florida from Chicago, so he was kind of like starting from scratch, building his clientele here, so it’s like, well, he’s not making enough money, I do make good money, but you know, it’s only me, maybe that, It’s not gonna be enough.

We have great credit score. Uh, we’re good savers, but I do have student loan debt, which is small. Actually, it’s not that big of, you know, it’s like, well, 30, 30 K, but I was worried about it. I was like, okay, how does my student loans impact my, um, Approval odds and everything like how much money do we need to save because you have this whole like 20 percent down that you keep hearing about so I was like well by the time we save that 20 percent for the house price that we’re looking at right now we’re not going to be able to afford it still because you know prices keep just going up.

So it was like all of that misinformation that I had, I didn’t know much about the PMI and all of that. So that’s why I was thinking like, this is not possible. And Ashley was Excellent in running everything and telling me like well if you used your 401k savings if you take a loan This is how much you need to for the down payment Um, if you buy a house for this price or this price or this price then she well She was the one telling me like you can afford This price.

And I was like, Whoa, really? Like, I have no idea. So yeah, all of that, that whole process was so, I don’t know, I can’t even describe it. It was so amazing, you know, to have that reassurance that yes, you can do this. And you’re completely wrong about thinking that you can’t afford it. You know, you’re not wrong.

You just didn’t know. Yeah, you know, it’s like, I don’t know how to fix a carburetor, but if you show me, maybe I can, you know, that I was just cracking up that you’re like five podcast topics. I’m like, Oh, my gosh, don’t need 20 percent down renewing your lease student loans. Yeah, those are pretty much. All of the podcast episodes that I really listened to, cause I gotta be honest, I didn’t listen to the whole thing.

But I, cause I feel that you should listen to a few episodes and you have all the information that you need. I obviously recommend everybody to continue to listen to everything. But I, like, I went immediately to the episodes that I wanted to know the most about, which was like, you know, debt and the down payment and PMI and renting versus buying.

Cause I was, Crazy thinking that renting was better than owning. I was one of those people Um, so I listened to those specific episodes and and it was so helpful No, that’s it. It’s fantastic. I mean, especially now, you know, we’re we’re changing things for 2023 because i’m like jeez I’m at 160 episodes or something right now that’s why I went back and redid one of the early ones and I said Pick the ones that matter to you.

You know? Yeah, exactly. I remember listening to that and I was like, okay, I don’t need to listen to this from episode one. Let me just go into the descriptions. And I listened to the ones that I really needed or felt that I needed to listen to. And it was super helpful. Your April numbers were insane. You came to me in April.

Now, one of the things we haven’t talked about savings is, you know, FOMO of YOLO, missing out, not living your best life. Thinking that. You’re going to be house poor and all your savings are gone. Here’s something cool from Sally. Listen to what her and her husband did. It might change your personal answer of, uh, how much should I save for closing costs?

Ever since I started the process, I went into super savings mode. Actually, like, I didn’t want to spend a penny, like, no, we’re not traveling, no, we’re not doing this because we’re buying a house, after we buy a house, we can do whatever, and that’s essentially what we did, pretty much, so I, I did save a lot, um, I was preparing myself for the mortgage payment, um, I really didn’t need to save that much because like I said, Ashley helped me a lot with the numbers and I knew right there and then that it would be fine like, you know, going into it, the transition wouldn’t be like too difficult or anything, but I did went into super savings mode because I just wanted to be safe.

I’m like, I really want this to happen. I don’t want anything to mess it up. So yeah, I just, I saved a lot and Pretty much the day we closed, we went on a shopping spree for the house. Pretty much like to buy a bunch of things for the house. Um, I, I traveled to Spain in the last two weeks. So it’s like we have our house now.

We have a bunch of house projects that we want to do, which is going to be super fun. But we’re in that place where we know what our our expenses are and we can now, you know travel and do more fun stuff Well, that’s the nuggets on debt reduction and savings Um, so that means we’ve done steps one, two, three, four and five In the 10 steps, and I guarantee you, steps 6 through 10 are going to go a lot faster than steps 1 through 5 did.

Because the reason is, doing this since 2006, one thing I hear more than anything from all my first time homebuyers is, Damn, Sidoni, if I’d planned earlier, I could have done this 6 months ago, or last year, maybe even 2 years ago. I had no idea how close I was to finally dumping my rent. That’s what I hear all the time.

From people so get ready for steps six through ten. Uh, a lot of the work it happens here Steps one through five and you’re gonna have by the time you finish you’re gonna have earned your own doctorate like dr. Kendall, uh, and you’re gonna be ready to be a first time homebuyer, but you know If you want to get started and you want to jump ahead a little bit You can always go to howtobuyhome.

com right now Hit the ask david button ask a question And start your plan while you keep getting educated. We are trying to bring something new to the real estate industry, which is educating while Helping people plan not just talking to people who are ready to buy a home this month or next month And the good thing for you is just a couple of moves with the guidance of a pro could mean You get ahead of the game Unicorns know when you call you might not be able to buy right now and that’s fine They’re not going to force you in fact Lots of times unicorns are going to ask you to take a step back.

Work your plan first. Get yourself in a better position so that you have more buying power. And they can get you the best options. Like I said, max buying power. That’s the key. If you want more how to buy home stuff, there’s the YouTube channel. Look up David Sedoni on YouTube. Uh, how to buy a home podcast is on Instagram.

How to buy a home on Tik TOK. I have a sweet LinkedIn account. You want to find me there? Old drink. Okay. To help us get ready for step six, which is coming up next. Here’s a little encouragement from Dr. Kendall on the way out. We were just so shocked at the immediate peace we felt once we moved into our own home.

I mean, I know there’s fear too. There’s fear around things, but there has just been such an immense peace and a settledness that feels really good. Or as Sally said, I was downstairs one Saturday and I just I ran upstairs. I don’t know. I was going to pick up something. And while I was running upstairs, I told myself out loud, Oh my God, I own a house.

And I just kept running. It was like out of the blue. It was that awesome feeling that, you know, you just like really realized that, Oh, like, this is mine. Yes, Sally. Oh, you did it. And Oh, for the rest of you, you can do this.

You Might Also Be Interested In:

Ep 230 – Interview With Self Proclaimed “Not Privileged” First-Time Home Buyers
Ep 229 – What Is A Unicorn Real Estate Team?
Ep 224 – Interview With Pedro – Bought With Zero Down, And NOT A VA loan, At 59 Years Old
Ep 215 – That ADU Guy Interview – The Ultimate House Hacks To Make Buying Affordable