Financial Feminist - 59. What You Need to Know About Mortgages with NerdWallet's Kate Wood

Episode Date: December 6, 2022

With the housing market in flux and a looming recession on the horizon, there’s never been a better time to learn about the home buying process. Today, we’re joined by NerdWallet’s Kate Wood to talk all things mortgages –– including what kinds of mortgages might be available to you, what other factors you need to consider aside from the monthly payments, and whether or not right now is a good time to buy or if you should wait it out. Regardless of if you want to buy a home in 5 months or 5 years, you’ll learn so much from Kate. Make sure to check out info on Kate and all our guests on our show notes page: https://herfirst100k.com/financial-feminist-show-notes Learn more about your ad choices. Visit podcastchoices.com/adchoices

Crypto is like finance, but different. It doesn't care when you invest, trade or save. Do it on weekends or at 5 a.m. or on Christmas Day at 5 a.m. Crypto is finance for everyone, everywhere, all the time. Kraken, see what crypto can be. Not investment advice. Crypto trading involves risk of loss. Kraken's registration details at kraken.com slash legal slash ca dash pru dash disclaimer. Financial feminists, welcome back. We're almost to the end of the year. How did that fucking even happen? I have no idea how it's already December, but hoping you're having a beautiful holiday season and finally adjusting to that time change.

Here in Seattle, it gets dark at like fucking 4 30 and I'm not into it but I am into Charlie Brown Christmas which is always what I listen to first I listened to it actually yesterday for the first time we're recording this in November and yes I listened to it I associate Charlie Brown Christmas more with cold weather than I do actually with the holidays because it's smooth jazz we have toddlers walking to smooth jazz. And if that doesn't do it, I don't know what's going to do it. All right. Today's episode, highly requested topic and even more relevant as we face an ever-changing housing market. I mean, I learned a lot in this episode. I have gone back and forth on whether home ownership

is right for me, what time I'm going to own a home, if I can't own a home. It's just crazy. So we're talking mortgages today with NerdWallet's Kate Wood. Kate Wood joined NerdWallet in 2019 as a writer on the homes and mortgages team. With an educational background in sociology, Kate feels strongly about issues like housing inequality and relishes any opportunity to demystify the home buying process. Prior to joining NerdWallet, she wrote about home remodeling, decor, and maintenance for This Old House magazine. You guys remember This Old House on PBS? It's like my dad, like, Saturday morning show. Despite having learned just how difficult old houses can be, Kate purchased and is slowly renovating an 18th century home in eastern Connecticut, and it is so fucking cute. It is,

oh my gosh, we get into it. It's so adorable. We spend time diving into the different kinds of mortgages and who might qualify for them, what the difference is between pre-approval and pre-qualifying for a house, and what to do about the looming recession. Kate was so great at breaking down a sometimes complex topic, and we're thrilled to have her here. So let's go ahead and get into it. I grew up dancing competitively. So like when I was eight years old, I started wearing false eyelashes, not on the regular, obviously. But like, that was something for me that was borderline traumatic. It was like my mom having to basically like, you know, hold me down and put eyelashes on me. But it did make

me feel very sophisticated. So that was fun. No, see, yeah yeah i didn't discover false lashes until much later in life and for me it was this revelation of like wait everyone on tv doesn't just look like that you know like you can just pop these on yeah yeah that is the funny thing you start realizing because literally like nature cannot compete with this. Mascara cannot compete with this. Yeah. It's something that's attached to your face. So once, yeah, once you know you can attach stuff to your face. Right.

And even if you don't do, yeah, the full like line of false eyelashes, right? You got the little tiny ones that are individual lashes or like the groups of two. So we were going back and forth on whether we were going to do that yesterday. And then I was like, can we just not do them? And she's like, actually, I think it'll look better. And I was like, great. Yes. So I got away with not doing them. We're so excited to have you. Can you tell us a little about yourself and what drew you to working for NerdWallet as a mortgage specialist? Sure. I was really excited to work for NerdWallet in general, just because it's a mission driven company and really focused around demystifying personal

finance for all people. You know, I will readily admit that I know mortgages inside and out, but other stuff, you know, when people hear you here for NerdWallet and start asking you about question cards, it's like, oh my gosh, I have a colleague that you can talk to who's terrific, but not me. I was really interested in focusing on mortgages and home buying because my educational background is in sociology, undergrad and graduate. And so I'd spent a lot of time learning about housing inequality and how housing policy in the United States is really a big driver of the wealth gap and of racial inequality. And I feel really strongly about providing information and tools that empower all kinds of people, whether you're a first-time homebuyer, whether you'd be the first in your family to be a homeowner, whether you're from a homeowning family, to understand the different

parts of the process and the ins and outs of both home buying and home ownership. So I hear home ownership as someone who lives in a major city and I'm like, cool, that's for my parents. That is for somebody else who has enough money to easily pay for a million dollar house that's only two bedrooms. Is that something you hear still from people all the time? I imagine if you live anywhere in a major city, that's probably the immediate feedback is like, okay, homeownership, cool, pipe dream, like not even for me. I mean, that's definitely the case. But you know, being a homeowner is different from owning a house, right? You know, in a lot of places, particularly major metro areas, yes, owning a detached single family home, forget that it's absurdly expensive.

It's literally not even an option. That's not what the housing stock is like, right? But if you've bought a condo, you're still a homeowner. If you've bought a townhouse, you're still a homeowner. Just because you share walls with people, that doesn't make you less of a homeowner. That said, you know, housing affordability, particularly in major cities is, it's really difficult. It's a tremendous hurdle for a lot of people. And so, you know, if the idea of owning rather than renting is something that really strongly appeals to you, that's kind of one of those things that you're going to have to weigh.

How important is it to me that, you know, I'm tied to the city that I remain in the city, you know, versus moving somewhere else if geography is really the thing that's holding you back? Yeah. So let's talk about if you are interested in being a homeowner, what your mortgage options are. So can you break down different types of mortgages a listener may get and then a brief summation of what they are and why someone would maybe choose one over the other? Sure. There are a lot of different mortgage types, but sort of like TLDR, almost everyone gets a conventional loan. They are like a conventional 30 year mortgage is by far the most common home loan type in the United States. It's something like 97% of the purchase

loan market. So conventional loans are really common. It's sort of they're sort of hard to explain because they're just like, it's the boring regular one, you know, you can say what it's not, but it's hard to say kind it is. These are loans that mortgage lenders make. They're packaged and resold to Fannie Mae and Freddie Mac, who set standards around lending. And so they can have potentially stricter qualifications because of that need to be resold to these government-sponsored enterprises. But if you do qualify, down payment amounts are as low as 3%. And they tend to have attractive interest rates. And so you know, there are a lot

of reasons why conventional loans are the most popular. In addition to just like their sort of default, like if a lender offers mortgages, they definitely offer conventional loans. It's just that's kind of how it is. There are a bunch of different options of government-backed loans, though, that, you know, depending on your priorities and your background and where you're looking to buy might work for you. FHA loans are backed by the Federal Housing Administration. And so because they have that assurance of this government agency backing them up, the lending standards can be potentially

like a little bit more lenient. It's not always the case since even though HUD sets the guidelines, individual mortgage lenders get to say like, we'll lend to you or not. But in theory, you can qualify for an FHA loan with a lower credit score. And depending on your credit score, you can potentially make a down payment as low as 3.5%. VA loans are backed by the Department of Veterans Affairs. So these loans have excellent terms. There's no down payment required. There's no mortgage insurance required, but they are not open to everybody. You need to be a current or former service member or a spouse. So if you have a military affiliation, these could be a really good option. But if you don't, no one's probably going to enlist just to get a VA loan. There are other choices out there.

Another one that's pretty uncommon, but I think mostly because a lot of people don't know about it and they can be a little bit harder to find, Not a ton of lenders offer them. The USDA, the U.S. Department of Agriculture, also does home loans. So they insure some home loans and then they actually give some home loans that are made directly by them. And they generally have geographic requirements that it needs to be in a rural area. But like if you use the zip code lookup on their site, you might be surprised what qualifies as a rural area, you can be pretty suburban or exurban. And it'll be like, yeah, it's a rural area that counts. They can also have income restrictions, depending on the type of loan that you're looking for. And then I would say the other sort of biggest type to know about just that are out

there are jumbo loans. They're pretty much what they sound like. So Fannie Mae and Freddie Mac set limits on conventional loan sizes. If for whatever reason you need a larger loan than that, either because you're just purchasing a really expensive property or you're in a place where purchasing a really expensive property is your option're in a place where purchasing a really expensive property is your option, you know, regardless of its size, you might need a loan that is bigger than their underwriting standards. And so then you need to look for a lender who will do a jumbo loan. There's stricter lending standards for that just because like it's a lot of money to deal with. And they usually ask for a bigger down payment. It varies. There's not like a rule, but it's generally more like a 10% down payment. Okay. So can we break down even further for a

listener who's like, I've heard what like a conventional loan means, but when we say a conventional loan, right, you and I know 30 years, but can we break down what that means? Like, so if you buy a house today, what does that process look like with a conventional loan? if you buy a house today, what does that process look like with a conventional loan? Well, so one thing to know, so 30-year conventional is the most common, but it doesn't have to be a 30-year loan to be a conventional loan. 30 years is the most common term just because it's generally a loan for a very large amount of money, right? You're buying a house. And so splitting it out over the longest possible period of time, like right now in the United States, 30 years is the longest term you can get. And

that's what most people go for. But you can, you know, depending on the lender and depending on what you need, you'll see 20 year, you'll see 15 year, you'll even see 10 year. My parents did 15 on their house. I remember them telling me that because they tried to pay it off sooner. They either, I think, started with a 30 and then refinanced, I think, to a 15 or they started right off the bat at 15. And we're just like, you know what, we're going to try to pay this off as soon as we can. Yeah. I mean, depending on your priorities, particularly also like if you're older and you're looking toward retirement, you might really be prioritizing like not having a mortgage once you're retired, which I totally get that. That makes sense. So there are different reasons that you might want to do different things in terms of

choosing your loans term. But in general, 30 year conventional is by far the most common, you know, in terms of like steps to getting a mortgage. So for me, the first thing would be really backtracking to you've decided that you want to become a homeowner, right? You've decided that that's in your future, that's part of your plan. And it's not necessarily right now, it's in like a year or two, or even five. That's a really good place to get started. Because before you're like taking it to that level of, you know, I'm looking at houses and I'm talking to lenders and this and that you want to make sure that your financial house is in order, like your metaphorical financial house, right? So if you've got anything

going on on your credit reports, if there's anything that you can, can, um, you know, if there's something incorrect in your credit reports that you need to fix, if there's anything that you can, you know, if there's something incorrect in your credit reports that you need to fix, if there's something that you can improve, do it, go ahead and do it. If you've got debts that you can pay down, go for it if that's possible. Try not to take on new debt. Like if you finish paying off your car, just keep driving it instead of getting a new one. Try to avoid opening new lines of credit. Like really just kind of get yourself in shape where then when you're actually going to a lender, you're a really well-qualified candidate. And you're someone where they're like,

I want to lend her money. So that's sort of your ideal scenario. Because when you are ready to start looking at homes, your first step, and I'm sorry, because I know like looking at homes is really fun. Like not even in person, just like recreational online home browsing. That's been my hobby slash activity during quarantine for the past two years is my best friend and I have sent Zillow listings back and forth to each other. And especially for the $10 million houses we cannot afford. It's just like very exciting. Oh, yeah. No, it's fun to creep on people's houses, right?

So I am sorry that this is not the next step. The next step when you are really serious and you're actually going to buy a home is to start talking to lenders and look into mortgage pre-approval. And that hasn't always been the case. It used to be like once upon a time, yes, you would go and look at a house and be like, I like this. Now I'm going to figure out the money. These days, all the money stuff really needs to be kind of sorted and settled before you even start looking. A lot of times, real estate agents won't take you to a few houses if you don't have a pre-approval in hand. Sometimes sellers and sellers agents will ask for that as well. If you're a financed buyer, as opposed to a cash buyer, they want to see proof that you could be able to buy their home. Well, that's

happening so quickly now too, right? That's the other thing because I've started to tiptoe into kind of like talking to a realtor and he know he's sending me listings and I haven't done any of the paperwork yet because I'm not super serious yet but like in that conversation he's like okay if we're buying like you need to have because I live in Seattle like you need to have your stuff together because if you like a house you have to make an offer on it the moment you like it and then you'll have to fight six other people for it but like that's's the idea. So if you don't have all your paperwork together and you're spending at least another, I guess, week or so, week at the best, in the best case scenario, getting all that together, you've lost the house easily. Yeah. Yeah. You want to have that pre-approval in hand,

ready to go to say like, yes, I am. Hello, home seller. I am making you this offer and I am good for it, right? Like this sale, should you accept my offer? This sale would close. I am qualified to borrow at least this much money. And you can get a pre-approval from more than one lender. It often makes sense to get pre-approvals from more than one lender because you're not seeing the interest rate that you will be offered or that you will get when you actually apply, but you'll have an idea kind of relative to one another what the interest rates might be. And also different lenders might qualify you to borrow different amounts with that pre-approval. So some of them might be like,

you look a little risky to me. Here's what you can borrow. And another one might be like, Oh no, like I understand what's going on with you here. Here's this, uh, you can borrow more. So, you know, it's worthwhile to do that. And also, you know, another thing that's important to know with pre-approval is that you're giving the lender, you know, not free reign to kind of go through your stuff, but you are giving them some permission to look through your finances and actually like verify the things that you're telling them. So this is different than like, if you see a mortgage pre-qualification where it's like, Oh, you know, pre-qualify in minutes. Yes, you can pre-qualify in minutes. Cause you're just typing in some numbers and then they're spitting a number back at you. But you know, you could have put in whatever numbers you want. No one's checking. So a pre-qualification isn't

really meaningful. With a pre-approval, you're actually showing proof of income. They've got your social security number. They're going to do a hard credit poll. And so that is going to ding your credit score. But if you do all of them within like 14 to like on the outside, like 45 days, but really kind of once you're on a roll with doing it, it's like, oh, bing, bang, boom, just keep doing pre-approval applications. The credit bureaus can tell that you're shopping. And so they'll just count it as one inquiry instead of like, you know, five inquiries. So, you know, clump it together.

And that's helpful for you. and that's helpful for you. So you were mentioning, and I think the average person knows, that 20% down payment is like, that's what the goal is, right? A 20% down payment. But when we were doing research, the average down payment for new buyers is only 6% or 16% if you're a repeat buyer. So let's talk about private mortgage insurance, PMI, because it sounds like for the average person, they're going to have to take on PMI because they don't have that 20% down payment. So what are our options if we can't get to that 20%? So the whole you need a 20% down payment, like that is a myth. There is no loan type that actually requires you to have a 20% down payment. That 20% figure comes from, again, conventional loans being the most common.

And that if you put down less than 20% on a conventional loan, then you have to pay private mortgage insurance or pmi and that's basically you paying a little extra to the lender to reassure them that they aren't taking a big risk by lending you that large of a percentage of the home's value because that's what they're really concerned about you know sort of what percentage of the house do you own what percentage of the house do they own when you own 20 they're like, we feel good about this. We trust you. You're going to pay us back. But you know, even if it's like 19%, now you're going to pay private mortgage insurance. So for, yeah, for a lot of people, this is something to consider. Like when you're thinking

about your home buying budget and all the different things that go into it, you may need to factor in private mortgage insurance. Private mortgage insurance, again, is only on conventional loans. And so if you're using one of the other loan types, it's different. VA and USDA loans actually don't have any type of mortgage insurance, but they do have upfront fees that can be fairly significant. And sometimes they can be rolled into the cost of the loan, but it's still money, right? FHA loans, that's kind of the real downside. They have, confusingly, they have MIP as opposed to PMI. So they have mortgage insurance premiums. But with an FHA loan, you have to pay an upfront mortgage insurance premium like at closing and then if you put down less than 10

percent you have to pay fha mortgage insurance premiums for the life of the loan so until you sell refinance or you know actually finish out the 30 years you're paying that like forever the only way out is to refinance into a different loan type. If you put down 10% or more, your mortgage insurance premiums are canceled after 11 years, which is less than 30, but still like a pretty long time. Whereas with a conventional loan, you're only paying PMI until you get to that point of 20% equity. And now your lender has to automatically cancel it when you hit 22 so it's worth keeping an eye on because when you hit 20 you can ask them to get rid of it you don't have to wait for them to be like oh we see you've reached that point and if you're in an area where home values are going up really quickly and so you've actually got like more equity than you might have thought

like you've got more equity than the amount you you'd seem to have just based on your down payment. You can potentially use that and leverage that to get your PMI canceled sooner, but you might have to pay for an appraisal to show that, you know, this is the actual value of this home. You can't just be like, you know, well, I saw on an app that it looks like my home's value has increased. You, yeah. So you might have to pay. home, you can't just be like, you know, well, I saw on an app that it looks like my home's value has increased. You, yeah, so you might have to pay, I mean, it's a few hundred bucks to get an

appraisal done. But, you know, particularly in the last couple of years and a lot of markets where we were seeing just, oh, if I bought a house in Seattle four years ago or five years ago, suddenly it's worth a lot more. It's worth a ton of money. And so, yeah, so that new value, even though like you didn't put money toward it, you own it, right? You own that value above and beyond what was lent to you. So you might have a ton of equity and then you don't need private mortgage insurance. So beyond doing like home repairs that you want to do and, you know, any like upkeep of the house after it's yours, when you originally buy, can we just do a quick laundry list of all of the potential things you're going to have to

manage financially? So I'm thinking like a mortgage, potential PMI, property taxes, right? Are there any in addition to that? Because I think a lot of times, we've talked a lot in this podcast because I don't own a home. I probably could financially, but I choose not to for many different reasons. And one of them is like, a lot of people are like, owning a home is less expensive than renting. And sometimes not because you have all of these things as a homeowner that you don't have to deal with if you're a renter. So yeah, your mortgage, potential private mortgage insurance if you can't make that 20% down payment. Yeah, property taxes. What are some of the other ones? Right. So your actual mortgage payment is just your principal and interest.

So that's only part of it. When you're looking at your budget of you as a renter, as a non-homeowner and thinking, okay, what can I afford? Your principal and interest and rent are not going to be strictly equivalent numbers because there are- Right. So if you're like, I'm paying $1,500 in rent, I'm trying to find a mortgage that's $1,500, that's not equivalent. It's not the same thing. You probably are going to want to be aiming for a principal and interest amount that's under that because also going into your mortgage payment will be property taxes, which depending on where you live in the country can be really big. I mean, it can also be really minimal, but that's

something that's really important to research. If you're looking at a specific town, if you're looking at a specific neighborhood, zip code, whatever, looking at kind of like what are the property taxes for homes of like a comparable size to what you're looking for or a comparable lot size to what you're looking for? Because that can really, you know, take up a big chunk if you're not careful or if you're not ready for it. Homeowner's insurance, which usually isn't, you know, a wild amount of money, but it's still something that you're going to want to have. And if you know, a wild amount of money. But it's still something that you're going to want to have. And if you also like if you opt to have other forms of insurance, like if you opt to have umbrella insurance, or it's like covering your home and some other stuff as well,

that will be part of that payment. And then also, if you are part of a homeowners association, that can sometimes be part of be part of your mortgage payment. And homeowners associations are everywhere. Like this is not just a like, oh, I live in a co-op kind of thing. Like, yeah, you can be in a neighborhood of single family homes. And it's like that developer was like, it's a homeowners association. And now you're paying a fee, you know, so knowing like what that is and what you're going to pay for. So those are all the things that go into your mortgage payment. The other things that I do think are really important to think about when you're comparing like your current budget to your home ownership budget are, you know, so say you're moving from an apartment to a house, like to a detached single family home, some of your bills

will be totally the same, right? Like getting Wi Fi a studio apartment and getting wifi to a house, like that's the same bill, no big deal, right? Heating and cooling a house versus heating and cooling a studio apartment. That's probably going to be a pretty big difference. Also, you know, as a renter, there might be stuff that was included in your rent, you know, whether it's like utilities or services, you know, like trash and recycling, pick up something like that. So that might be like new bills that you would be adding on as a homeowner. And that's something to kind of think through as well, because you want to have your budget be ready for your life as a homeowner. You definitely don't want

to be in the position where, you know, you've bought a house, you've gone through all this stuff. It's amazing. Like you've, you know, you've made it through and now, oh my gosh, you're putting a bunch of money toward this house and you're strapped and having trouble, you know, doing the other things that you need to do. Forget even things that you enjoy to do. Right. And then,, and then if something happens, or the basement floods, you know, right, right, you're the person who has to deal with it. That might be the one time where you're like, Oh, actually, an HOA would be really handy. Because if you're in an HOA, there's a higher chance that there's someone else you can call and make it their problem instead of yours. Yeah. That's one of the biggest reasons I haven't purchased a house is because I

travel a lot and it's like I am at the point I'm a single woman. I'm not very handy. I have a lot of other strengths, but like being handy dandy around the house is not one of them. And it's really nice. Like my yeah, my toilet downstairs toilet overflowed two months ago and I got to call my landlord and he paid the eight hundred dollars for the plumber to come fix it. So that was very nice. At this point in my life, that makes a lot more sense. Yeah. Oh no. As a homeowner, I like very much envy that. I think that's something that I like did not put enough value on sort of that like peace of mind value. You know, when I was renting and when I was in other types of living

situations where it's like, hmm, that was really, that was really nice. Just like not having to be the person who does all of the things. Totally. So actually, from our research, we know that you bought a house, which congratulations. Thank you. We're seeing studies that are showing that single women homebuyers are on the rise when most advice still is given to like couples or families on homebuying. So is there anything that someone specifically a woman might do differently as a single potential homebuyer over purchasing with a partner? Like I think immediately offhand, you probably have dual income versus one income. And that's tricky already. So what are some things if you're a

single woman, especially, you're going to have to navigate that maybe you and a partner wouldn't? I mean, income is really the biggest hurdle, right? Because you're a single earner household because you are the single earner. And so that can be, you know, difficult. You don't necessarily have the purchasing power of a multi-income household. You know, that said, it's worth looking into whether you would qualify for any kind of income-based first-time homebuyer assistance program, or honestly, even not income-based. Every state has a housing finance authority. Some cities and counties have them as well. So if you're on your own, this is your first time doing this, you can look into down payment assistance programs that they have. And those are often in the form of like a low

interest loan or sometimes even just like an outright grant. So just like here is free money to help you buy a house, which is very, very nice. And those are real, those can be really, really helpful. And I feel like not enough people know about them and are aware of them. Something else that's like worth noting about state programs is that a lot of times they define first-time home buyer as someone who hasn't had an ownership stake in a home in three or more years. So if you're someone who like your situation has changed, maybe you used to own a house with a spouse or partner and you don't now, you could still potentially qualify as a first-timer and take advantage of those benefits. So that's something that I think is really worth looking into. One thing that I will say, I feel like is actually an advantage of being a single woman buying a home is that if there's anything going on financially, like you can just fix

it. It's you. I mean, it might not be fun, right? But you don't have to motivate someone else to deal with their debt. You just have to motivate yourself. You have to like, you can check your own credit reports. You know, and currently you can get a free report from all three bureaus once a week. That is still going. It keeps being extended and it's kind of just been extended ad infinitum as far as I can tell. And you know, those are annoying. They're kind of

a pain to set up the first time, but once you've gone through it, you get that credit report. It's like, okay, here's what I need to do. You know, here are some things I need to fix. You know, when I did it, that was something I did pretty early when I, you know, had decided I was going to buy a home. And I couldn't believe like what the credit bureaus knew about me and also how different they were between the three, like that there were significant differences in each of the reports. You know, but like being able to just be like, OK, here's this and I'm going to deal with it instead of being like, did you fix that thing yet? Did you call that thing yet? Did you get that bill dealt with? Like, you know, you can just do it i talk all the time that you can

either view money especially if you're managing it you know as a single woman as oh fuck it's all me like oh my god it's all me and like i can't handle this and like what if i fuck up what if i screw up what if something happens versus like it's all me wow i am in complete control of my decisions i don't have to counsel anybody. I can spend money the way like for me, it's like going to an art museum. When I go to an art museum with somebody else, I am so conscious of like, okay, do they want to stand and look at this exhibit? Are they bored? Do they want to go somewhere else? Okay. I want to stand and look at this painting for 15 minutes, but I don't want to hold them up. Versus when I go to an art museum by myself, I'm like,

oh, I don't, I'm not interested in this exhibit. Hard pass. Like I'm just going to, I'm just going to skip it. Versus if there's a Jackson Pollock, I'm going to stand there for 25 minutes, like fully 25 minutes and stand there and look, and I don't have to apologize for it. And so that's how I feel. It's with like buying a house as a single person or just managing your money. I'm just like, I get to call all the shots. And yeah, it's sometimes a little terrifying. That's why you hopefully listen to this podcast and like go to NerdWallet. But like, you know, that that's that it's such a freeing option as well, because you're in complete control of all of that. Yeah. And I mean, that's sort of like the other side of that, like going off of the museum example, that can be why for some people going

through underwriting. So once you've had made an offer on a house, had it accepted, you've applied for a mortgage, you know,, you've applied for a mortgage, you're conditionally approved, but you're waiting for that final approval. So you're in closing. And that can be a very long time. Like 30 days is short in terms of closing. It can go longer. But while you're in underwriting, people at your lender are going through all of the money that came in, all of the money that came out.

And it can really feel like it can easily feel like they're judging you. Like they're judging how you chose to live or how you chose to spend your money or make your money. And that can be really uncomfortable. And it's sort of something to when they're asking you for things and you're like, why would you want this? Or like, I know I sent this to you already. Like what's going on? You kind of just have to like take a deep breath and just be like, you know what? This is terrible and it's so much paperwork and it sucks, but like I just have to get through it. You know, I just have to do this and like try to not take it personally because really like they're just doing like CYA work. Like they do not, you know,

want your mortgage to be the thing that like comes back to haunt them. So, and you know, you don't want that either. No one's out there like looking to default on their loan, you know, but it's really like, it's nothing personal, but it can, you know, it can feel really invasive and it's not always it's nothing personal, but it can feel really invasive. And it's not always something that people are expecting.

Right. And it's to your point, like it's potentially like you feel like you're being judged, right? Like you're having to put all of this personal information probably to a total stranger. And their job, right, is to make sure that hopefully their job is to make sure that your house, your metaphorical house is in order so you can purchase this home, right? So I think even just the mindset shift of like, okay, hopefully this person's on my side, right? And they're doing all of these things and asking all of these questions. So actually I can enter into this purchase, which is probably the biggest, if not one of the biggest of my life, knowing that I'm good. Like that should actually give you some peace of mind of like this person who doesn't know anything about me has looked at my hard numbers and has said that I'm good. Okay. Amazing. Yeah. Right. But I mean, in the moment when they're like this $10 check, where did it come from? And you're like, my aunt, she is 90.

And like, but that you actually have to show it. Like you absolutely have to show it. Anything that comes in that is not your paycheck. They're like, what is this? Where's this money from? You know? And it's like, oh, I oh, I used to have an Etsy store and I kind of forgot, but then it made a sale. Now I've got this $5 or whatever. I mean, they'll just find stuff and you're like, oh my gosh, honestly, you really want to see, but you know what? Fine. You're showing them. You did not get this money through a criminal or illicit means. It was literally a birthday check. Which let's talk about income because I am a self-employed person. I think a lot of people who listen to our podcast are self-employed or 1099s. I think generally,

right, mortgage lenders have seen W-2 income as quote unquote more reliable. But I'm, you know, if I want to buy a house, what are the sort of hoops you have to jump through as a self-employed person? Is there a different kind of preparation? What options do we have as self-employed people? So it's actually, it's not incredibly different if you're working with like 1099 income versus W-2s. It's not like, oh, there's a different type of mortgage for you, or there's something else you need to go for. You know, the exception would be if you were someone who's like, really just starting out, like you're like, 1920. And so you don't have a long credit

history. Or if maybe you just came to the US, and so you have a really thin credit file, you know, that would kind of be the exception. And that's really a different situation than just, oh, I'm self-employed, you know, rather than employed by someone else. You know, generally, if you are looking to buy a home as a self-employed borrower, you want to have been steadily self-employed for at least two years. Lenders can put different minimums on that. Usually like the bare minimum is like 12 consecutive months. But having two years of,

you know, solid, reliable income is better. But more broadly, you know, like I'm just making jokes about like birthday checks and stuff like that. If you are self-employed, you want to document everything, like every single aspect of your business, all your business expenses, because that can affect every part of your application. So to whatever extent that you can keep your business expenses separate, that can be helpful because it makes underwriting easier that they can see like, oh, okay, this is you doing something versus this is the business doing something. So maybe having like a credit card that you only use for business expenses and all the business expenses are the ones from that card, you know, that can be helpful because then the lender's not like,

oh, like, you know, what's this versus what's that? You're spending $30,000 a month. I'm like, no, the business is. Right. Yeah. No, the business is spending it. Right. Right. But I mean, that's, you know, because they're looking at things like your credit utilization. And so you want to be like, really, you know, be able to be really clear about that. And so it's really being assiduous about having, you know, not just your 1090 nights, but paperwork for everything, whether it's like, you know, profit and loss statements, your business license, business insurance. They might want like, if you have a CPA or anyone who helps

you manage your business finances, they might want something as simple as like a letter from them, which you then have to go get. But basically, like if you have documentation of it, save it, you are probably going to need to share it with your lender. I've heard about the three-year rule. Is that a myth? That you have to, like, have been self-employed for three years in order to qualify for a mortgage? So usually two, like, having two continuous profitable is helpful. You know, where it gets trickier is if they start asking you to try to predict the future. Right? is if they start asking you to try to predict the future, right? So if they start being like, well,

you know, you've had solid employment these past two years, but like, is there going to be, continue to be a market for this, you know? And that's like, I hope so. Right? Yeah, you obviously hope so. But like, that can get extremely subjective. And, you know, in that kind of case, that might be why. So if you are self employed, look for lenders who specialize in helping self employed borrowers, like once you actually go to the trouble to advertise that fact, you know, or if you're looking like, depending on the lender, sometimes you just kind of like get thrown onto whoever, but sometimes you can choose your loan officers. Loan officers will often specify if they have like any kind of expertise or experience working with self-employed borrowers. So like being on the lookout for that, because that means that it can potentially go

faster, not just because like they've seen this stuff before, but also because like they can look at what you have and alert you to like, oh, you know what? Like if you want to get approved, like you should probably get this thing too. And that can be really helpful. Okay. The elephant in the room, which is a looming recession. And the question we get all the time, which is, is now a good time to buy a house? And we get that when things are great and we get that when things are terrible. So interest rates are on the rise. We want this episode to be as evergreen as possible. So regardless of when you're tuning in, right?

But is there ever a quote unquote bad time to buy a house or a good time to buy a house? And like, is there a housing crash coming? Because that's the question we get all the time. Sure. So it's kind of a multi-part question. You know, is it? Yeah. I asked you about six questions on that one question, but. It's okay. It's okay. These are, this is stuff that I spend a lot of time talking about in my job. And also like, if I go to a bar, and that's someone finds out that this is what I do for a living. Right. And I'm like, I don't know, I'm not an

investing nerd. But you know, I'm also not a financial advisor. So this is not financial advice. But if you want to ask me, like, you know, do you think there's gonna be a housing crash? Why? Why not? Like, yeah, I can give you an answer. Ready? Sit down. You know, it's gonna take a minute. It's not gonna be like a quick chit chat. You know, I mean, I think it, your point that people ask you this when the housing market is really like, quote unquote, good, and when it is bad, already kind of gives you the answer, like, whether or not it's a good time to buy a home isn't about like, what is the housing market doing? Or what is the stock market doing? Or like, you know, what's inventory like or whatever? Is it a good time for

you to buy a home? Right? Like, is this a time in your life where you're like, I'm ready to set down some roots? You know, like, I am planning to stay in this place for you know a lot of people will say like oh five years is a rule of thumb but you know whatever I'm willing to kind of be settled for a while because you know sure yes you can sell a home but it is much more complex and expensive than breaking a lease right so if you're at a point in your life where you're more like oh like you know I might do this but I might go back to grad school or I might want to travel or, you know, I might want to switch careers completely. Like being a renter and having that flexibility is probably great for you. Right. Whereas if you're like, you know, I'm really digging into my career. I'm really happy with

the place that I live. I, you know, could see myself like living in this community, like, in the future, it's probably a good time for you to buy a house, right? And so there, it's worthwhile to look at kind of all of these, like, you know, softer, more emotional, just like life stage things than just like, Oh, do I have a down payment saved? Or like, you know, can I can I like, afford it financially? Like, that's a relatively straightforward question. You can use calculators to figure that stuff out. And I don't just mean like the one on your phone, like on Nord Wallet, we have tons of different, very specific calculators for like, how much house can I afford? You know, what kind of mortgage

payment would I be looking at comparing different loan terms, stuff like that. Right. So you can see really specifically, like, is it a good time for me to buy in terms of my financial situation? But also, like, is it a good time for you to buy in terms of where your life is? Right. Because it is, you know, even though I was saying earlier that, you know, yes, the most common loan term is 30 years. Most people don't, you know, keep the same loan for 30 years, they sell, they refi, different things happen, whatever. But that doesn't mean it's not a commitment. You know, that doesn't mean that it's not like a really big deal, a really big change to your life in a lot of ways. And just kind of like something that you shouldn't take lightly, Like, you know,

being like, oh, like the housing market's really hot right now. Our interest rates are really hot right now. This isn't like a prime day sale, you know? Like it's not like, oh, I got to get this now. Like I'm, you know, I'm going to miss it. Being like, oh my gosh, like all my friends are going to be homeowners and I'm going to be renting. Like that's not a great it. Being like, oh my gosh, all my friends are going to be homeowners and I'm going to be renting. That's not a great reason. Or like, oh, my mom keeps reminding me that my cousins bought houses and had babies and whatever.

Who cares? Or even now's a quote unquote good time to buy a house. We've talked about this in previous episodes. I almost bought a house when I was 22 and it would have been the worst decision I ever made. I was a day from closing and it was a condo an hour outside of Seattle next like 20 minutes from my parents because that's all I could afford. But my parents had told me renting is throwing away money. You need to buy a house. You need to buy property. And I my entire life would have been

different and probably for the worst. Like I love my parents. I would have been hanging with them every weekend would have been awful. Like I would have been an and probably for the worst. I love my parents. I would have been hanging with them every weekend. Would have been awful. I would have been an hour away from anything. I wouldn't have made friends because I would have had to commute two hours to work and two hours back from work every day. My company probably wouldn't have been founded in the same way because I didn't have the connections of the city and also that commute four hours a day would have been rough. So yeah, 100%. It was the quote unquote financially right thing to do. It was emotionally, psychologically, like from a point of like, where am I at? Where am I at in my life? 100% of bad decision. 1000% of bad decision. Yeah. So it's not just about like, oh, like, well, you know,

do the finances work out, right? Because it's like, they don't. And honestly, sometimes like they, you know, they never will, like you can look at, you know, so we have a like a rent versus buy calculator on our site among many calculators. And so you can look at like, oh, okay, like, you know, when do you reach the point where your investment has paid off, and it costs you, you know, less to own a home than it does to rent. If you're in a really high cost city, those are just two parallel lines that go up forever. It never gets cheaper. It's just very expensive. But like, you know, people still do buy homes in those markets. Like, yeah, it's probably not a single family home. It's like a condo. But, you know, regardless, people still do it.

And it's not because they're like, hmm, you know, here's how my investments can go. And here's the return I'm going to get. It's because they're like, you know, here's how my investment's going to go. And here's the return I'm going to get. It's because they're like, I love living here and I want to stay living here. And like, you know, I am, I am able and willing to make that commitment. So it's not just like, oh, well, here's, you know, here's when I'm going to start getting this ROI. And so like, let's all add this up. Like, so speaking of that commitment, I want to know everything. You bought an 18th century home in Eastern Connecticut. Oh my gosh. I just like had like, I just got tingly. Oh my goodness. Okay. Tell me everything. Tell us about

the process, both like the financial process and also the emotional process. Like what do you wish you'd known? What is your favorite thing you've done to the house? What does the house look like? Give me the HDTV version of you buying your house. house. Oh my goodness. Well, so I would say like, I, you know, I did not practice what I preach. I had also, I'd been in this job for, for considerably less time when I bought my home, I bought in 2020 and I very much decided like I was ready to buy a home based on the math. I was like, oh, like I've got, you know, this much safer down payment. I've got this much safer closing costs. I've got cash reserves. Was it pandemic fueled? Was it like, I'm getting antsy and I want a place to be? So there was a bit of that. I was, I was living back home with my mother,

which like, I'm really grateful for. Like, that's exactly how I saved a down payment and closing costs and cash reserves because I wasn't paying, you know, rent or food or utilities or a lot of, so I was in an extremely privileged position to have that kind of family support. But I'd also like, you know, been in my childhood bedroom in lockdown as a full grown adult. And that was getting really, that was getting really old. You know, yeah. So like, I don't know that I necessarily was like emotionally 110% ready to buy a home, but I just sort of hit a point where it was like, there are only so many puzzles knew, so I knew going in, I was like, I definitely want to buy an older home. I thought, because I have a lot of mid-century furniture, like mid-20th century furniture, I was like, oh, like I would really like to buy a home from like the 1950s or 60s. But so, you know, this is spring 2020. At the time, everyone's like, this real estate market is unprecedented. It's, you know, I can't believe what's going on. This is wild. Oh, we had no idea how much more intense it was going to get. I cannot, you know, I feel

so much for people who bought or tried to buy in 2021 and 2022 because everything that I was seeing as a buyer myself in 2020 only intensified from then um so i only even saw my house because it was like you know i had set up a whole i'd already been looking for a while i was on my second real estate agent uh the first one was just like oh like no good like do not hit the tour with agent button because they just give you whoever needs a lead you know like you're not getting someone who's necessarily like interested and in helping you or yeah like you're not getting someone who's necessarily like interested in helping you or yeah, like they might be more interested, at least in my case, in showing you properties that they are selling, which is dual agency. And that's like straight up illegal in some states. So

you don't want that. So I've got the good agent. I'm all ready. We like, I'd taken the day off. We planned a whole day of looking at houses. So we had a bunch of showings lined up. taken the day off, we planned a whole day of looking at houses. So we had a bunch of showings lined up. Over that night, all four went into contract. And so but I'd already like taken the day off, whatever. So she's like, Okay, I'm gonna find you some other properties to look at. And, you know, and so she found me the home that I ended up buying. And like, it sounds like, so weird and improbable. But like like when I was driving up the road to come to this property, which I had not seen, I felt like I'm driving to my house. And then I like fell in love with the house.

And it was, I mean, it was like a, it was like a home buying rom-com basically where like, of course it was like, I was instantly smitten, but it was actually much more complicated because it turned out the house was already under contract and the selling agent was just like, well, it's under contract, but it hasn't gone through yet. So we can keep showing it. The house is, uh, you know, older than the United States as a country. It's very, very old. Um, which in a lot of places is like, oh my gosh, how is that even possible? Did you want a project? Because in 2020,

I started getting the nesting bug. Because I was living in a 650 square foot apartment that I was in for four years, running my business out of that apartment too. And I loved it until I outgrew it. And until I was just there by myself in the pandemic for years. And I was just like, I just want my own place. I just want projects. I want to paint things. I want to like buy pretty furniture. Like that's all I wanted to do for those like two years. I was, so I was definitely like overconfident about my old house abilities. Like I was like, Oh, you know, like my childhood best friend lived in an 18th century home. One of my close relatives did.

I was like, I know what this is like. This will be fine. So spoiler alert, it has not been fine at all. I spend an unconscionable amount on trying to heat this place. And the actual temperature that I achieve is 60 degrees. Um, so yeah, so it's physically, it's a bit like living in a cabin. Like, you know, I wouldn't highly recommend it, but like winterize it. Do you, have you spent a winter there yet? I have. And I was like, never again. And yet here I am about to spend another winter.

Yeah, it's, it's pretty brutal. But you know, it has a lot of things that are like, you know, it's really distinctive. There are not other houses like it. I mean, there are other houses that are similar. Like it's, it's just a, you know, it's a Cape. It's, there are a lot of them around this area, but you know, there are a lot of things that like you know, it's a Cape. It's, there are a lot of them around this area, but you know, there are a lot of things that like you wouldn't find in a modern home that I just like, I absolutely love where it's like, things are not built like this anymore. Like things weren't even built like this in the 1900s. I mean, I have floorboards that are more than 18 inches wide, you know, and are just like unbelievable old growth, you know, oak.

And it's, you know, so there's stuff like that where I just am like. I'm literally so tingly. It makes me so happy. Like, oh, my little HDTV heart is just like, oh, this sounds lovely. But also like really challenging. Yeah. How do they give you have NerdW nerd wallet give you a show where you like renovate the the yeah new england country home where is that show i would watch that it's

so much it's so much so much so much harder than it looks on tv and it's almost also so much more expensive when people aren't you know sponsoring you like i'm just buying paint i don't have a paint brand sponsoring my walls. Going in, I was like, oh, I had a bunch saved up for repairing the home and doing stuff to it. And I burned through that really quickly. I've done a lot of really big projects that are like, this is why I haven't gotten around to some of this other stuff, like ripping off the siding, adding insulation, you know, probably doing new siding is because I've been spending money, you know, doing all this other stuff, everything that buying it. I was like, okay, I know this is toward the end of its service life, but I'm hoping to

last like one more year was like, no, I'm ready. Replace me. You know, so I would replace the furnace right off the bat. I replaced the roof right off the bat projects that were very expensive. And that also, you know, couldn't, couldn't wait, like, right, if I just kept letting moisture come into the house through the leaking roof, that's not gonna get better with time. So, you know, you don't really have, you know, have an option. And so, fortunately, like, working at NerdWallet, I have learned a lot of different ways to like pay for these things and deal with them as they come up.

But, you know, it is challenging. Like, as I said, of like when I'm like, I do envy renters that like it's very challenging that I am the person who has to like deal with all of these things. And, you know, especially like when I first bought the house, I was very like, well, you know, this was a choice I made and I did this, so I have to deal with it. And that wasn't like a really helpful attitude. Like it mostly just made me like very upset and frustrated. Like I made a mistake and now I need to fix it. When really it was just like, And now I need to fix it.

When really it was just like, I needed to ask for help. You know, I needed to like be honest with people and be like, here's, you know, can you help me do this thing? Or, you know, if this happened to you, like, who would you call that kind of thing? And I've been really fortunate to have friends and family members who have been really supportive and like, you know, when it is something that is DIYable have like stepped up and like help me with stuff. You know, and also over time, I found tradespeople that I'm like comfortable working with and, you know, who are good and I trust. But dealing with tradespeople as a single woman homeowner is like another episode. Oh, gosh, I think of Gilmore Girls, that episode where she's doing repairs on her house and

she's like changing in front of them. And she's just like, yeah, they're like friends. And Luke is like, what are you doing? Kate, thank you for being here. If you could leave people listening, which is like one last piece of advice or like if you could tell somebody who is listening, who is anxious about the home buying process, what would you tell them? I would really say, you know, as I just said, like I didn't do this, but like you should do it. You know, don't be ashamed to ask for help. The home buying process is really complex and really confusing. And again, because the market has been so intense and so irregular, just so, you know, out of the sort of like norms that people expect from real estate for the last couple of years. You know, even if like your parents bought a home or, you know, friends who are homeowners, like that kind of thing. They can tell you their stories and they can give you advice, but it might not necessarily be relevant or helpful in the market that's going on right now. be relevant or helpful in the market that's going on right now. And there are so many resources out there that can help you understand what's going on right now. And there's nothing that you should feel embarrassed that you have to ask it, you know, whether it's like understanding the different

steps, what order to do them and how they work, even just like what the different terms mean, you know, there's so much stuff and it can feel overwhelming, like because the amount of information that's out there is really vast. But if you break it down to sort of like the simplest question you can, like, what's the difference between pre-qualification and pre-approval, or do I have to get a home inspection and an appraisal? Like that is very look up a mole that is very find out of all and like you can really like empower yourself to learn the stuff and be able to make a well informed decision. on very short notice, going into them already knowing, you know, all of these things about what you want, what you can afford, what works for you, what is like the right thing to do, you know, what is something that like is a concession that you're willing to make to a seller and what is something that like, no, you're going to hold firm on that.

You know, having all of that and being like in control of the process is really important. So just, you know, arm yourself with that information and like, don't, don't be afraid to ask for help. That's amazing advice. Kate, thank you for being here. Where can people find you? No, thank you for having me. They can find me on nerdwallet.com. nerdwallet.com. And if you want to see my semi crumbling home, you can find me on Instagram as at a mid 18th century modern. So the 18th is one eight, but mid 18th century modern. Oh my gosh. I'm so excited. Thank you so much, Kate, for being here. No, thank you. Thank you once again to Kate for joining us. Such a great resource this episode.

So please feel free to share it with your friends and family and make sure to check out Kate on NerdWallet. We'll make sure to link it in the show notes. Another great episode to check out if you're interested in learning more about real estate is our interview with Selling Sunsets, Maya Vander and our conversation with Ramit Sethi. These are episodes 39 and 41.

So listen to your heart's content. Thank you as always for your support of the show, for your support of this movement. Don't forget to rate, review, subscribe wherever you listen. Have a great day, Financial Feminists, and I'll catch you later. Thank you for listening to Financial Feminist, a Her First 100K podcast. Financial Feminist is hosted by me, Tori Dunlap, produced by Kristen Fields, marketing and administration by Karina Patel, Olivia Koenig,

Sharice Wade, Alina Hilzer, Paulina Isaac, Sophia Cohen, Valerie Oresko, Jack Koenig, and Ana Alexandra. Research by Ariel Johnson.

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