George Kamel - Another Mortgage Trend That Scares Me

Starting point is 00:00:05 Do you need a house for a low, low price? Then get yourself on down to Krusty Camels Real Estate Lott. You won't find a better deal anywhere because our loss is your gain. We're slashing prices on Oceanfront property in Kansas, Palm Tree Paradise in Ohio, and we can even get you a mortgage with a 3% interest rate. Hold the phone. Would you just say? 3%?

Starting point is 00:00:24 Now, my guess is you haven't run into someone selling Oceanfront property in Kansas or Palm Tree Paradise in Ohio, but you may have heard someone in the real estate world talking about getting a 3% interest rate on your home loan, even in this year day and age. And if you haven't, you probably will soon, thanks to a new trend sweeping the nation. That's right, Assumable Mortgages, also called Assumption Loans, which have become a buzzword for real estate gurus on TikTok trying to get clicks and views. But what are Assumable Mortgages? And are they actually a good idea?

Starting point is 00:00:51 Before we answer that, I'm going to assume you haven't hit the like and subscribe button on this video yet. So I'm going to need you to go change that. And while you're at it, be sure to also hit that big red subscribe button to keep all crusty camel in business. All right, for starters, our Assumable Morrigues, mortgages a legit thing? Answer? Yeah. I mean, they're definitely not some kind of scam, unlike the business opportunity that left your cousin Karen with a garage full of expired skincare products that are now becoming a biohazard. Here's how they work. A mortgage assumption is when you buy a house, instead of going to get a brand spank and new mortgage, you take

Starting point is 00:01:23 over the seller's old mortgage. In other words, you assume their mortgage. Very clever. Marketing team really nailed it in that brainstorm. Genius. Now there's one big reason assumeable mortgages are so attractive to people. Interest rates. When mortgage interest rates are high, home ownership can be significantly more expensive. And right now, rates are the highest we've seen since their early 2000s.

Starting point is 00:01:44 Way back when, we were all just walking, skateboard, and hand down the boulevard of Broken Dreams. Just me. Am I the only emo skateboarder kid out there? But just a few years back, interest rates were the lowest they've ever been in the history of mankind. And let's be honest,

Starting point is 00:01:59 we were all hitting record lows in 2020. And that's why Assumable Mortgages are all the rage these days. because when you assume the seller's mortgage, you also assume their interest rate, which could mean serious savings for the buyer on that monthly payment. So these mortgages are legit and they are real, but are they a good idea? Well, not really. For most people, these suckers are actually a real problem for three main reasons. Reason number one, you need tons of cash to assume a mortgage.

Starting point is 00:02:25 Now, you should always have a nice chunk of change saved up before you buy a house, but the numbers we're talking about are astronomical. And that's because with an assumption loan, you'll need enough cash to cover all of the seller's equity. So here's an example. Let's say the Millers bought a house in July of 2021 for the median home price of $379,000. They used a 30-year FHA loan with a 2.78% interest rate, the average back in those days. And they made a minimum down payment of 3.5%.

Starting point is 00:02:51 Which makes their monthly payment about $1,500. Well, after three years of appreciation, their home is now worth $445,000, a value increase of $66,000. And now they're trying to sell it. it to Joe Mama. Joe Mama? Very funny, writers. Very clever. So if Joe Mama wanted to assume the Miller's mortgage,

Starting point is 00:03:12 they'd need enough cash to cover their down payment, everything they've paid toward their mortgage principle, and their houses increase in value, bringing the grand total needed on hand at closing to over a hundred grand, which I'm sure is jump change for Joe Mama. And here's the deal. A situation like that is essentially a best case scenario, since the sellers only bought their house three years ago

Starting point is 00:03:31 and took advantage of the absolute, lowest interest rate. When things don't line up so perfectly with an assumption, it can easily cost you over 200 grand to get into one of these loans. But George, I'll just get a second mortgage to cover that amount. Not so fast, Bucco. It's almost impossible to get a second mortgage to cover the difference on an assumption. I don't mean to sound like the Grinch here, but most lenders won't even go near these loans, not even with a 39-5 foot pole. Reason number two, assumable mortgages are a problem. They limit your options. This whole process doesn't work with conventional loans, which means you can only assume government-backed loans like FHA, USDA, and VA.

Starting point is 00:04:09 And since only 22% of mortgages fall into that category, that means you're instantly cutting out 78% of the real estate world before you even start looking for a house. That's a bad plan. Plus, if you assume an FHA mortgage, you'll have to pay costly mortgage insurance premiums for at least a decade, no matter how much you put down. So bottom line, you always want to keep your options open. That's how you wind up in a home. That's a good fit. And when you limit your bad things can happen. Reason number three, Assumption loans are not a good idea?

Starting point is 00:04:36 The process takes a very long time. We're talking between two and four months if you're lucky, and on the slow end, up to six months. It didn't take much longer than that for my wife to grow a baby human. And that baby human, so adorable. Look at this thing. It's like too cute almost. So why does it take so long?

Starting point is 00:04:51 Well, mortgage companies would definitely rather you open up a new mortgage with a higher interest rate because that means more money in their pockets. So there's no real incentive for them to bend over backwards and work overtime to make this easy. for you. You'll have to fill out a ton of paperwork, and you'll even be required to do a lot of the communication through snail mail. And let's be honest, snail mail should really only be for birthday cards from Grandma and returning jeans when they're not quite tight enough, or maybe a little

Starting point is 00:05:15 too tight. I prefer sort of the Goldie locks of skinny jeans. And this is a good time to point out that you have to get the seller's permission before you pursue a mortgage assumption, and good luck finding a seller who's willing to wait six months for their house to close. For all of these reasons, mortgage assumptions almost never happen. Well, how much is almost never? Well, the VA and FHA only processed 6,400 assumptions last year. To put that number in perspective, it's about 0.1% of all new mortgages originated in 2023. So while you might find some needle in a haystack story out there of someone who made this process work, they don't represent reality. For most, a mortgage assumption is a long shot at best and an agonizing pain that you know what at worst.

Starting point is 00:05:54 There's kids watching. Family program. Not in front of the kids. Oh, sorry. And speaking of pains and the you know what. Have you ever gotten one of those annoying texts that was obviously a scam like this one? Or maybe this one? Well, if you have, it probably means your personal info is somewhere out there on the web. And that's why I love Delete Me, one of the sponsors of today's episode. Two of my least favorite words are data mixed with breach, and they help protect you from the risks of online scams and fraud and stalkers and spammers. So they scrub your info from these data broker sites to make sure no one gets their digital hands on your precious info. Plus, they send you an easy-to-read report that shows you exactly what they did and how much

Starting point is 00:06:29 time they saved you. And so far, I've saved 44 hours. Thanks, Delete Me. And right now, because you're a George Camel fan, you can get 20% off any of their plans by going to join Deleteme.com slash George. Or just click the link in the description below. And while you're banking all that time, you could be banking your money in a high-yield savings account like the one with online bank, Laurel Road, another sponsor of today's video. With their competitive interest rates, you can watch your savings grow beautifully while you sleep. That's a good feeling. And the perks don't stop there.

Starting point is 00:06:58 There's no minimum balance required, and there's no monthly maintenance fees, and your deposits are FDIC insured. So if you want to get started, be sure to check them out at laurel road.com slash George, or click the link in the description below. That's laurel road.com slash George. Okay, I know I've spent this whole video crushing your dreams about getting a super low interest rate with an assumable mortgage. But don't get the wrong idea, because I'm not saying you can't buy a home, I'm just saying this ain't your ticket to Palm Tree Paradise.

Starting point is 00:07:24 Besides, there are plenty of ways to afford a house without some kind of hell-marry mortgage. First, increase your down payment. A bigger down payment means lower monthly payments and less debt. And there's no rule against putting down way more than the minimum. Next, choose an affordable area to live. I know that sounds like a no-brainer, but if you can't afford a house and your dream destination, try expanding your search area by just a few miles. Adding 20 minutes to your commute could be the difference between getting a house or not.

Starting point is 00:07:50 And lastly, have some patience. I check the Constitution. There's nothing in there about having to own a home by the time you're 28 or 30 or any other age. So take your time, do it when it's right for you, and don't be afraid to adjust your expectations a little bit. For example, if you can't afford your dream single family home, a townhouse a little further out may fit in your budget.

Starting point is 00:08:09 And it may not impress your friends or your family, but that's A.O.K. Because not caring about what other people think is a superpower in today's world, and it will bring you more joy and peace than almost anyone you know. And if you want some more encouragement, check out this video I made, breaking down how 4.5 million people bought a home last year and what it took. You can also click the link in the description below. Thanks for watching. We'll see you next time.

George Kamel - Another Mortgage Trend That Scares Me

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