Think PMI is a scam? You’ve been lied to—and in this episode, David Sidoni sets the record straight with no filter. Part three of the Real Answers series takes a detour from step-by-step guidance and instead serves up a fiery PSA. David tackles the myth that first-time buyers must wait to save 20% down to avoid PMI—calling out the financial “experts” giving bad advice and explaining why this outdated thinking is hurting renters. There’s no soft delivery here: it’s a full-on rant from someone who’s tired of seeing people misled. Tune in if you’re ready for a raw, opinionated breakdown of one of the most persistent homebuying myths.
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Real Answers Pt 3: PMI Panic, Bad Advice & David Unleashed
Welcome back to part three of the Real Answers for First-time Home Buyers of the Twenty Most Frequently Asked Questions. Now, there’s a little bit of a warning in this episode. I do go through several different topics and I answer those questions for you. One of the questions, let’s just say it spurned a little bit of a reaction from me, so call it a trigger warning if you want, but enjoy the education and just know that at the end of this episode, I pretty much go off. I am so 24/7, 365 looking out for the first-time home buyer because I know that you guys have been screwed for so long. Yeah, this one, it pissed me off and I go a little crazy. Enjoy an old man unravel.
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What Is Private Mortgage Insurance (PMI)?
What is up, my How to Buy a Homies? I’m officially 25% done with the top 20 questions asked by first-time home buyers. This is part three of that series. At the end, I’ve got just a little protection thing I want to talk with you guys about and it’s really important. Stay tuned for that. Here we go. What is PMI, Private Mortgage Insurance, and how does it work?
It’s the three-letter acronym that strikes fear into the hearts of many first-time home buyers all across the nation. Okay, I am sorry. That is my inner angry dude coming out because there are so many financial planners out there advising millions, tens of millions of people, telling them they should stay renting for however long it takes them to save up 20% to avoid PMI. We’re talking $30,000, $40,000, $80,000, $100,000 that they should wait to save that up while the whole time they’re trying to save, each month, they have to pay $2,000, $3,000 or $4,000 a month in rent.
Why? Well, because you want to avoid PMI, that outrageous payment of an extra $150 a month. Most of the time, I’ve been hearing $100, and more recently, I’ve been hearing $50 a month. Let me get this straight. Paying $600 to $1,800 a year for PMI, the insurance, that’s worse than paying $24,000, $36,000 or $48,000 a year while you’re attempting to save up tens of thousands of dollars so you can get 20% down. All the while, those rent payments, not only are you paying that much more than the $600 or $1,800 but that money’s going to nothing as opposed to being something that goes into an appreciating asset. I guess those morons that are giving that advice never heard of the catchphrase that’s sweeping the nation, rent replacement strategy. This is a new economy. Boomers do archaic dinosaurs.
We’ve got to do planning that actually takes into account the current housing and lending markets and create that beautiful rent replacement strategy. Let me clear this up. PMI is not evil. It’s not a punishment. You know what? I also want to make sure you guys understand it’s not a scam. I’ve been hearing people say they think it is. It’s just a tool. If you understand it, you can actually use it to your advantage.
Its purpose is very simple. The lenders want to protect what they’re doing. If you’re putting less than 20% down on a conventional loan, you’re considered a higher risk. They require PMI a safety net in case you bail out on a loan before they get their money back. It protects them. The other thing it does is it gives a huge advantage to you so you can actually be able to afford buying a home in the non-Boomer way here in the new world where trying to save up 20%, it’s not saving up $8,000, it’s $80,000. Do the math.
While I was researching this, I read that in today’s economy, you don’t have to love PMI, but you do have to understand how to work with it. I have a little different take on it. Personally, after helping hundreds of first-time home buyers before this show and now tens of thousands through the show nationwide, I look at it this way. PMI is a privilege. It’s a beacon of hope so you don’t have to rent for years and years trying to save up some ridiculous, huge down payment. Grandpa who hates PMI, welcome to 2025. It’s just not realistic now. We want first-time home buyers to be able to pull this off and if PMI is what gets you in the game, instead of waiting on the sidelines for three more years paying that outrageously high rent, well then, it’s 100% worth it.
Actually, if you do the math from the example that I said, without even factoring in the tax benefits of home ownership and the appreciation or owning versus renting, it’s astronomically more than 100% worth it mathematically. Here’s more good news for you. PMI is not forever. On most conventional loans. Once you reach 20% equity on your home loan, either through your payments or the appreciation, you can call your lender and request to have your PMI removed.
Now, when you hit 22%, most of the lenders out there, they’re required to drop it off automatically. Some loans are even going to let you pay PMI upfront, it’s a prepayment, and you avoid it altogether with lender-paid options. Spoiler alert, what that means is sometimes they just might give you a little bit of a different, slightly higher interest rate. I have clients come to me because they’ve heard all these things about it and they freak out about PMI, then they realize it’s a temporary cost that opens the door to long-term home ownership and wealth building.
One buyer told me, “We were dead set on waiting until we had 20%, but then once we were doing our budgeting on a consistent basis, we realized that was going to be another two years of renting. We opted for 5% down with the PMI.” Guess what? Their home appreciated more than the PMI costs them in the first eighteen months by a lot. Now they’re sitting pretty and way ahead of the game.
The bottom line is PMI is not a penalty. It’s not a bad thing to avoid. It’s a stepping stone. It lets you start building equity now instead of chasing that absurd 20% down payment number while you’re continuing to pay rising rents. Work with a unicorn lender who knows how to structure the right loan with the best PMI terms for you and your personal situation. Don’t let those three letters keep you from owning a home. If I haven’t convinced you there’s an episode, 198, called PMI is a Privilege. I’ve got to have to do it again because people kept asking me. Episode 216, PMI is Still a Privilege and Still Not the Devil.
PMI is not a penalty and not a bad thing to avoid. It is a stepping stone to start building equity.
How Does My Credit Score Impact Buying A Home
Let’s get to question number six. How does my credit score impact buying a home? What should I know as a first-time home buyer? All right, let’s talk about the one number that quietly controls your life and definitely your home buying journey. Your credit score. You’re probably not going to get all pumped up to read this part of this episode. It’s not the sexiest thing in the world to talk about your credit utilization ratio, but I get it. I do want you to understand it’s not the sexiest thing, but it could be the silent killer or the golden ticket for your home buying process.
That stupid little number has a huge impact on what kind of home loan you can get, on what programs you’re going to qualify for, what your interest rate’s going to be and how much the fees are going to be, and ultimately, how much home you can afford. Your credit score is the key that unlocks all the best deals or it locks you out of them.
Here are the basics. Most lenders want to see 620, but you can get a home loan with as low as 580, but don’t let these minimum scores be your target. There’s twenty-point tiers and with each tier that you cross over while you’re saving up during your home buying process, well then, you’re going to get better fees, better loan products, all that stuff as you go up a tier.
You know how in the last episode we were talking about how many people were asking about how do I get a good interest rate? Here it is. Your credit score. Your credit score and your interest rate are directly connected. A 640 credit score, maybe you can get a loan but a 740 credit score, that same loan would have a gigantic difference in your interest rate, which could save you tens of thousands over the life of your loan.
Sometimes, that credit score can actually not only get you a lower monthly payment, but it can affect how much home you can buy. I’ve seen people with one credit score and they were only approved to 375 and then their credit score changed and they got approved up to 400, 410. The good news is you don’t need to be a finance whiz to boost your credit score. I’ve helped buyers raise their score 30 or 50 points in just a few months by following the steps from all the episodes that we’ve done on credit.
That’s really important because, yeah, you don’t need a perfect credit score to buy a home, but most likely if you don’t have a perfect credit score and you’re thinking about buying a home, you’re still going to need some time to get your ducks in a row. You’re going to be saving things up. You might be working on your debt-to-income ratio a little bit, so why not start as soon as possible working on a credit score? That way, when your ducks are in military formation, you’re going to get the best options possible for you.
Instead of going, “I’ve got a 640, let’s go out and get a house right now. I’ve got a 640, but what could I do to improve these other little things? While I’m doing that, let me improve my credit score at the same time. Take action, but on your credit score especially, take action early. Remember, you don’t have to do it alone. A unicorn lender and realtor can help you with your strategy.
Your credit score isn’t just a number, it’s leverage, so use it. If you do want to get deep into all those action steps, I mean the real tricks and tips that homies have used to boost their scores, I’ve seen people, especially if they’ve got a little bit of time, 6 months, 8 months, I’ve seen scores go up 70, 100, 125, 150 points for one person. “JT, go ahead and put all the credit episodes in the show notes.” I just made a task for the guy reading for the first-time. For reals, gang. There are a bunch of credit episodes and a cornucopia of credit tips vetted and verified by real people who use them and they’re all free.
What Are The Steps In The Home Buying Process?
Question number seven, what are the steps in the home-buying process? I went down the rabbit hole for this question. I found hundreds of these graphics, pictures, little roadmaps and arrows and Candy Land board game looking things for your steps to buying a home, all playfully depicting this colorful roadmap and usually 7, 8 or 10 steps laid out and they’re all wrong. That’s the reason I quit my broker in 2019 and decided I was going to be the maniac with a microphone and trying to start a revolution.
Almost every single chart or cutesy little map or article I read with a list, they were either selling themselves or selling the services of their company or even worse, or oversimplifying the process so someone would see maybe a way they could do it, but it’s not the best way that someone who’s trying to get the biggest financial transaction of their life wants to do it or should do it or needs to know how to do it.
See, I’m so flustered, even I’m getting confused. It’s not the best way for them. I looked around and whoever created all those articles or those little cutesy graphics, they just want to get someone to look at that and go, “I could do this,” and then reach out so that they could get paid quickly. Whether or not following their little arrows or their little ten steps or their colorful thing, whether that was the best thing for them or not, didn’t matter. They just wanted them to go, “That’s all I’ve got to do. Okay, cool.” It made me crazy. If you’re looking at it, you’re probably confused, perplexed, baffled, flummoxed, what else? Bewildered.
Luckily, the revolution has begun for you. If you want the actual steps, no BS, no sales pitch, the actual steps to buy your home, they’re right here. I broke them down in a true buyer-friendly version of the best practices for the ten steps for buying your home. It’s Home Buying 101. It starts at episode 301 and gang, it’s not magic and it shouldn’t be chaos. It’s just a system. This one is one that works and one that was created through years of work with me and years of work with the unicorns where we’re trying to get the best thing for you. The 10 steps starts at episode 301. Check them out. No guessing, no fear.
What Are Closing Costs And How Should I Expect To Pay?
Question number eight, what are closing costs and how should I expect to pay? Alright, let’s talk about one of the biggest curve balls that catch us first-time home buyers by surprise sometimes. The closing costs. It’s not some secret or shady charge, but I’ve got to tell you, there are a lot of people out there who feels like that and that’s because no one really prepares you for it.
What are the closing costs? This is just 1 answer in 20, so it would really be a disservice for me to try to give you this in a 3-minute answer. The reason for that is because it’s 100% of the time different for everyone. Never ever listen to a friend or a family member that tells you, “Your closing costs should only cost about blank dollars.” If they’re not looking at your entire contract and your loan, they have no clue. All of that gets explained in the other episodes where I talk about closing costs. The individual calculation for closing costs and the fact that it’s so individual, that’s why it can feel shady and surprise people. That’s also why other people can’t say, “This amount of house should be this many closing costs.”
For now, what I’m going to do is I’m going to give you a couple of quick points and then I’m going to refer you to episode 348. It breaks down everything about the closing costs so it makes sense to you and trust me, you’re going to need it. The closing costs are extra on top of your down payment. Your down payment is a specific percentage of the loan or if you decide to do a dollar amount, you can do that too of the purchase price, I should say, not of the loan.
Your closing costs are over and above that. There are two parts to the closing cost, and that’s what I explained in episode 348, the recurring and non-recurring. That’s what makes it so confusing. The good news about it is on the surface level of a closing cost, sometimes, you can negotiate seller credits to cover part or all of your closing costs. Now that means that your unicorn agent is going to structure the offer to get some cash from the seller directly to you.
It’s more likely to work in a buyer’s market, which we’re going into in some parts of the country right now. Even in the more competitive markets, I’ve seen it actually happen and go to the buyer as long as it’s presented and negotiated with the right strategies. The other way to cover the closing costs is that your lender might offer some credits in exchange for a slightly higher interest rate. I’m definitely not saying that’s always the right move, but it’s another tool in the toolbox if your cash is really tight.
The third way to make sure you’re covered for it is plan early and overestimate. The biggest mistake I see is that some people will save for the down payment and not save enough for the closing costs. I’ve actually seen people just forget about them all altogether, not my people, buyers coming in to buy with my sellers, because my folks, we have big long talks about it.
Don’t be that person who’s five days from the keys and then suddenly you’re $5,000 or $6,000 short because you didn’t make sure you were all up to date on your closing costs. Start talking to your unicorn lender as early as possible so you can try to get some of the initial estimates of everything that’s due at closing, not just your down payment.
Don’t just look at the down payment number. Always look at the down payment number and add at least 2%, sometimes 3%. I’ve seen both endings to the movie when people know about closing costs and don’t. The buyers who got educated and they get their keys and are super happy and I’ve seen other people blindsided and actually lose their home, have the whole deal fall apart at the very end. The difference between those two endings of that movie, information, planning and guidance. Overall, closing costs are not a scam. They’re just part of the process. With the right team and the plan in place, they’re not going to stop you. If you want to know how they get calculated, go to episode 348.
Is A Better To Rent Or Buy A Home?
Alright, moving right along. Question number nine, is it better to rent or buy a home? Let me get this straight right off the bat before I get into this because this is a big question, obviously. I’m 24/7, 365 all over this. It’s getting crazy. There are some people that have some very intense opinions on the answer to rent or buy on both sides. It’s a personal decision. No one is idiotic or stupid for choosing one over the other for renting or buying.
No one is idiotic or stupid for choosing either renting or buying a home. It all boils down to personal decision.
Everyone, just chillax. It’s a personal decision. To answer that question, keeping that in mind, when I talk to people about this, I always answer and tailor my response to this question based on one predominant fact. Over the last few years, 72% of the people that have reached out to me and thought that they were a year or two away from buying their home found out they were actually more than ready and they got under contract in 3.2 months.
That is a fact. That’s not theory, that’s not philosophy, it’s not a hypothetical. When it comes to the rent versus buy question, more people are thinking rent, but that’s because they think it’s their only option. This data shows that most people don’t realize all their options. A lot of people don’t even begin to go deeper into the research or to figure out this debate which side they should be on because they haven’t done the analysis to figure out where they actually are and what they could do.
Recently, I’ve been seeing a trend and I put a little bullet point here for me to talk about this because I want to talk with you guys because it’s really bumming me out. It’s a loss of hope. It’s despair. There are people that think buying a home is not an option. They’re basically saying, “It’s not as easy as it was for you, Boomer.” As a generation of twenty-year-olds that aren’t even looking into it now, sometimes, I don’t know even sometimes, but I think more people are not even looking into it because they’re hearing the headlines. I also think some people that do start to look into it are getting not the right answers. Not hearing about a rent replacement strategy, not understanding mathematically the whole thing. That’s why I started this.
In today’s world, when you hear something enough, you believe it. In the case of, “This whole generation’s never going to be able to buy,” there’s reasonable logic to people hearing that. The argument to stay renting, whether you like it or not, sounds reasonable. High interest rates, high prices. Of course, what happens, people don’t bother to do more research. They see the prices and the rates and you hear the noise about how go, “Okay, Boomer. I can’t do it. Your house was $87,000.”
What I’m trying to say is, most of the people who think that it’s hopeless, some of them stop, but they don’t want to stop. They really do want to buy a home someday. Maybe they don’t totally believe it, but they’ve heard so much negativeness. They’ve heard so many things telling them that it’s just really not a possibility that they just sink into the place where, “I’m just going to keep renting and save up and wait for a new era. Hopefully, things will change a little bit and I’ll be able to do this,” because they eventually do want to own a home. They don’t want to be beholden to rent for their entire life. It’s easier to believe the reasonable but not fully informed hopelessness and easier to do nothing.
Let me do a little aside here on this because people are starting to talk about the hopelessness and using some feigned, “We really want to help these people.” I can’t believe they say that. I feel so bad for them. Some people are really starting to take advantage of it. It’s not cool. I’ve actually got some pretty strong feelings on this.
I have been hearing from people trying to help this new generation that don’t believe that they can buy a home and they think that their age group are going to be stuck as renters and they don’t have an option. That information has been documented. There have been surveys and a lot of people are hearing that. The rent versus own question and that hopelessness and that discussion, it’s getting a lot of play within the real estate community.
I want to warn you that some of those naysayers, in a lot of ways are completely reasonable to have the despondent feelings based on the current market. They also might just be repeating what they heard on social media or one article or one headline because the negative headlines sell polarizing stuff and gets more views. A lot of these people are talking when they’re just talking in the headlines and they haven’t even really looked at the real numbers. I promise you, I’m going to help you break down the math and the numbers so you can figure out if it’s right for you.
I’m not saying it is. I’m saying a lot more people are burying their heads in the sand based on the cursory information. Here’s the other thing I wanted to warn you about, and this is the thing that’s really starting to piss me off. This is some real insider real estate information that you may or may not see in 2025. When you start doing your research and you’re looking for the answers to the questions, is it better to rent or buy a home, there’s going to be some weird new voices out there trying to talk to you. If you’ve read the show in the past, you probably read me say that the real estate industry like a lot of big industries or corporations or conglomerates, it’s corrupt. It just is. It was built that way. It knows it.
Now, nobody wants to rock the boat, but they could. Nobody wants to create a new system that would actually benefit the first-time home buyer best and still be profitable. Honestly, it is totally doable. Once people see a certain way to do things and make profit, it’s just sucks. These corporations and companies, no one wants to disrupt the status quo.
In part of that, I want to make sure that you guys are protected when they start reaching out to you first-time home buyers. In 2025 and 2026, you might hear a lot of real estate pros and experts, including some people in the industry that I know and that I respect. These surveys are coming out about what’s going on, suddenly, people are seeking to gain your trust to help you answer the question, should I buy or should I rent?
And they’re spouting empathetic BS, trying to sell you on the idea of buying a home. It’s not because they have your best intentions at heart. They’re doing it so they can freaking stay in business. Home sellers are the only thing the real estate industry has focused on for decades and decades. Don’t tell me that the real estate industry, though they have stuff for first-time home buyers, you give first-time home buyers crap and you know it, and the business model of real estate is to succeed and make money. What you do is you focus on the sellers, you get their home and list it on the market, and the buyers just walk in the front door. That’s their freaking business model and they haven’t changed it since we got the internet. Since buyers are way more informed and need a buyer’s agent, they don’t just drive down the street to find a sign.
Their entire business model is pre-smartphone. Here we are in 2025, and guess what? Being a real estate agent right now sucks. Sellers don’t want to move because they’re sitting there with a 3% interest rate. They don’t want to sell. In 2024, first-time home buyers were at an all-time low, like lowkey, a giant drop off.
I’ve been hearing people in real estate, I mean big names in the game, suddenly start talking about, “The poor first-time home buyers, they need help,” and they’re showering them with empathy, trying to fight the backlash of the hopelessness that they’re hearing. These corporate-minded jerk-offs have been ignoring and disrespecting first-time home buyers for 50 years. Now, when it hurts their bottom line, they want to start explaining to you that home ownership is still attainable.
Maybe some of them think that they’re doing it because they want to do good, but what I see is they’ve built a business to never serve the first-time home buyer with their best interest in the forefront because suddenly, in 2024 they lost 9% of their revenue. The huge drop off in first-time home buyers, now they’re scrambling. This is why the revolution of changing the level of service and the quality of real estate professionals offered to first-time home buyers must change.
The biggest financial transaction of these people’s lives should not be the answer to the industry’s problem every time the market fluctuates. These clients are forever clients who are going to be an important part of any real estate business. Why would you not give them the top-tier best service right from the start?
Let’s talk about you guys need to have your guard up more than ever. These new people who are suddenly talking to first-time home buyers and people are going to be out there, they need deals, they need sales. They not only need to make up the 9% in the lost revenue, the decrease in first-time home buyers in 2024, the lowest in history, they also need first-time home buyers to get out there and buy the starter homes.
They need viable people to buy the listings they’re going to get because who else is out there buying all those starter homes? The hedge fund investors. Do you think as if you’ve only put all your work into helping sellers for 50 years, 98% of the industry only care about sellers. Now you go to work with your starter home seller.
The only people that are putting offers in because no one’s helping and educating first-time home buyers to understand if they could do it are hedge funds, and so they low ball. If anyone in the real estate industry actually cared about serving first-time home buyers properly, they would change the rules for licensing. In fact, they would’ve changed the rules for getting a real estate license decades ago and not built this business, this whole business model that colossally under-trains new agents.
If anyone in the real estate industry actually cared about helping first-time home buyers properly, they would have changed the rules for licensing decades ago.
Thrust them on all the first-time home buyers and what do you know? You’re a first-time home buyer, but all you’re told is this is a licensed professional. Eighty-seven percent of them quit in five years. If I had 87% turnover rate for my business for the last 50 years, I probably, at some point, would’ve looked around and thought, “87% of my customers are getting crappy service from people who aren’t invested, aren’t very good, or are one foot out the door.”
When you hear anyone talking to you that owning is better than renting, be categorically sure that they’ve been working with first-time home buyers for more than a minute and not just trying to stay in business for one more year before they quit and get out of real estate. Straight up, homies. Watch out for posers and don’t let anyone talk to you into something without knowing that they have your best interest at heart.
If you’re reading this and you’re a new agent, and I know there’s a bunch of you out there that read, instead of getting your training from me, maybe you should be asking more from your broker. If you’re not getting it from them, then I don’t know. Be better. Don’t put people’s lives in your hands if you think maybe you’re part of the 87% that’s going to quit. That’s not fair to the people.
Ask yourself, do you actually know enough right now to be sure you’re not going to be part of the 87%? What about the veteran agents? I know there are some of you out there reading. You’re probably mad at me if you’re not in it to win it. Don’t do that to these people. Stop. I’m sorry if I hurt your feelings. Don’t whine about the public perception. Change it. Be part of my revolution.
National Association of Realtors, Zillow, Redfin and all the big brokers online or not, I’m putting you all on blast. Stop peddling “licensed real estate agent” as though it means anything and stop feigning value and care for first-time home buyers all of a sudden when you are offering to them rookie, newbie, untrained agents that you know to be horrendous and undertrained and underqualified service.
See You In Part Four
Homies, these people are out there and they’re coming for you. Be informed and stay protected and don’t be the answer to the real estate industry’s problem. Find someone who wants to be the solution to what you’re trying to do. Rant over. I’ve got the math and the facts and the figures and everything on the rent versus own. I’ll get it to you in the next episode.
Do not be the answer to the real estate industry’s problem. Find someone who wants to be the solution to what you are trying to do.
I went off because I care. I’ve been doing this for years. Yeah, I mention it every once in a while, but I don’t go off about it because I don’t feel like it’s getting to the point where it’s getting predatory against you. Now I do. There are people out there that are in trouble and they’re gunning for you. Just be careful. That’s all. I just wanted to tell you to be careful because I really do believe in you guys. I had such a great day with so many great interviews. There are so many people that are doing well. Be careful, know you’ve got one really weird dude getting angry at nothing, but it’s not nothing. It’s your life. You can do this. I’m out.
Important Links
- Ep. 198 PMI is a Privilege
- Ep. 216 PMI is Still a Privilege and Still Not the Devil
- David Sidoni on LinkedIn