The Personal Finance Podcast - How to Buy a House The Right Way In 2024

Episode Date: March 27, 2024

In this episode of the Personal Finance Podcast, we are going to talk about how to buy a house the right way in 2024. How Andrew Can Help You:  Don't let another year pass by without making significant strides toward your dreams. "Master Your Money Goals" is your pathway to a future where your aspirations are not just wishes but realities. Enroll now and make this year count! Join The Master Money Newsletter where you will become smarter with your money in 5 minutes or less per week Here! Learn to invest by joining  Index Fund Pro! This is Andrew’s course teaching you how to invest!  Watch The Master Money Youtube Channel!  Ask Andrew a question on Instagram or TikTok.  Learn how to get out of Debt by joining our Free Course  Leave Feedback or Episode Requests here.  Thanks to Our Amazing Sponsors for supporting The Personal Finance Podcast. Shopify: Shopify makes it so easy to sell. Sign up for a one-dollar-per-month trial period at  shopify.com/pfp Monarch Money: Get an extended 30 day free trial at monarchmoney/pfp Thanks to Fundrise for Sponsoring the show! Invest in real estate going to fundrise.com/pfp Indeed: Start hiring NOW with a SEVENTY-FIVE DOLLAR SPONSORED JOB CREDIT to upgrade your job post at Indeed.com/personalfinance Thanks to Policy Genius for Sponsoring the show! Go to policygenius.com to get your free life insurance quote. Chime: Start your credit journey with Chime. Sign-up takes only two minutes and doesn’t affect your credit score. Get started at chime.com/ Delete Me: Use Promo Code PFP20 for 20% off!  Links Mentioned in This Episode:  Here is the Total Cost of Ownership Calculator Connect With Andrew on Social Media:  Instagram  TikTok Twitter  Master Money Website  Master Money Youtube Channel   Free Guides:   The Stairway to Wealth: The Order of Operations for your Money  How to Negotiate Your Salary  The 75 Day Money Challenge  Get out Of Debt Fast  Take the Money Personality Quiz Learn more about your ad choices. Visit megaphone.fm/adchoices

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Find your advisor at IG Private Wealth.com. On this episode of the Personal Finance Podcast, how to buy a house the right way in 2024. Thank you everybody and welcome to the personal finance podcast. I'm your host, Andrew, founder of mastermoney.com. And today on the personal finance podcast, we're going to dive into how to buy a house the right way in 2024. If you guys have any questions, make sure to hit us up on Instagram, TikTok, Twitter,

at Master Money Co. and follow us on Spotify, Apple Podcasts, or whatever your favorite podcast player is. And if you want to help out the show, consider leaving a five-star rating and review on your favorite podcast player. I can I thank you guys for leaving those five-star ratings and reviews. Now today, we're going to be diving into how to buy a house the right way in 2024. And we've done an episode years back on one of the first episodes we ever did on how to buy a house. And a lot of people have asked me, well, every single year, a lot of different things have changed. and can you do an update to that episode and talk through maybe some of the different ways that

you would look at buying a house in 2024? And that is something we can absolutely do. And we are doing it today. So really, really excited because there are some things that definitely have changed from the original episode that aired in 2020, obviously, and this episode that's going to be airing today. So really, really excited to dive into this episode. Now, a home purchase is one of the most important things that you have to think through when it comes to making a big purchase. And I want you to understand that we are going to talk through how to assess your finances up front. And that's probably going to be a big, heavy portion of this show is figuring out how to assess your finances and can you afford that. And in addition, I'm going to take you

through the home buying process and how you should actually go about doing this because it's really, really important to understand that process. And I want you to make sure that you don't make mistakes that a lot of other people make when they go out and buy a house, specifically through the home buying process, there are some very specific things that you absolutely should always, always, always be doing. So really excited for this episode. We're going to dive right into it. So if that's something you're into, let's get into it. All right. So the first thing we're to do is we're going to ask ourselves a couple of questions because these are the quick vetting questions that I want you to think through before you buy a house. And then we're going to dive into step

one in assessing our finances. So the first question I want you to ask yourself is, are you debt free because if you are someone who is in credit card debt or you have a personal loan or any high interest debt whatsoever, then you need to pay down that debt before you buy a house. You should not be carrying any high interest debt whatsoever before you buy a house. And along the same lines, don't take on any new debt, things like opening a credit card, things like buying a new car, before you buy a house. You don't want any of those things very close to purchasing a home. But you need to be 100% debt-free when it comes to high interest debt. Anything above a 6% interest rate, you need to be 100% debt-free.

Do not be carrying credit card balances, specifically, personal loans. All those different things are really, really important to pay down before you get into a home purchase. Because what you're going to realize very quickly is houses cost a lot of money. And we're going to talk about how you can run the numbers on that in a second. Number two is, do you have a 20% down payment? When you have a 20% down payment, you avoid something called P.E. PMI is an additional insurance that if you have less than a 20% down payment, lenders are going to

require you to pay. So it's an additional cost that you're going to have to pay if you do not have that 20% down payment. Now, we're going to talk about if you're a first time home buyer, we will talk through that process today. But if this is your second home and you're buying your second home, you need to have that 20% down payment really, really important. And you can roll the equity from your first house into that second house. That is still a great option. But do you have that 20% down payment? Number three, here. huge, huge, huge factor here. Do you plan on living in that area for at least 10 years? Because that's what it takes when you buy a house to make sure that you do not lose your butt on a specific

house. So in 2007, what we saw was a lot of people would purchase homes and then all of a sudden they were buying these homes and they were not willing to stay in that home for a long period of time. Well, what happened in 2007? The Great Recession happened. And a lot of people ended up having to sell their homes at a loss because they had to move. for whatever specific reason. And so this can happen in any different market. A lot of people over the course of the last 10 to 15 years have noticed, hey, the market's been going up since 2007 and prices have been appreciating for a very long period of time. That will not last forever. As we all know, recessions are coming. We don't know when they're coming. We don't know what date

they're going to come. Nobody has a crystal ball to know that. But we know a recession at some point in time is going to come. So if you buy a house and two years down the line, housing prices get cut in half and you need to move, guess what's going to happen? You're going to lose a ton of money on your home. So you need to make sure it is very, very important that you're willing to stay in that location for seven to 10 years. 10 years is really where I want you to be, but 7 to 10 is the range that you can really think through here. If you're not willing to do that, then you need to rent. If you're moving to a new place and you don't know the area really well yet, it may be worth it just renting for a year or two, then you could buy a house. But the time frame adds to which you are

willing to stay in that location is very, very important. Do not skip out on that step. You need to rent if you're only going to be in that location for a couple of years. Otherwise, you need to be willing to stay in that house at least for seven years, even if it's not the best situation. Lastly, do you want to actually be a homeowner? Do you know what it takes to be a homeowner? Do you understand the ramifications of what it takes to be a homeowner? Are you willing to maintain that home? Really, really important stuff. If you don't want to be a homeowner and you don't really have a huge desire to be a homeowner, then you don't need to be a homeowner. This is not a requirement to building wealth.

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something that this is your lifelong dream. There's a lot of reasons to be a homeowner. There's reasons like you want to be in a good school district. You want to establish family values. You love renovating the property. There's a bunch of different reasons why you could be a homeowner. So if you want to be a homeowner, that is the last question you want to ask yourself. So these are four basic questions up front. I always, always, always, always tell everybody to make sure they ask themselves before they get into this. And if that is you and you think you want to move forward, let's get in to step number one. I remember when I needed to hire someone fast,

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Conditions apply. All right, so the first step is you need to understand what total cost of ownership is. Now, we have an entire episode talking about how to run total cost of ownership. And we will link this up down below is we have a total cost of ownership spreadsheet that you need to run these numbers for in your specific locations prior to buying a house. This is very, very important. Now, if you don't know what total cost of ownership is, a lot of people think that the cost of their home is just going to be their mortgage payment and they are completely done. That is absolutely false. And in fact, homes are extremely expensive.

And this can help you really figure out, hey, do I want to buy a house or do I need to rent a house for a little bit longer? Because total cost of ownership is the number one factor that is going to help you run the numbers. You actually need to approach buying a home in a very logical sense. A lot of people get their emotions involved, and you need to approach this in a very logical sense. So we have something we created called the total cost of ownership calculator. This is 100% free. I wanted to present it to you for free. And so if you are interested in this, we will put it in the show notes down below.

And I want you to take these steps and go through this. Because what you need to understand is that the price of a home is not just the purchase price and the cost of what you're paying your mortgage every single month. Instead, what it is is there's a lot of other factors out there that most people, don't think about. There are things like maintenance and maintenance, boy, oh boy, let me tell you. Maintenance can rack up like crazy on a home, specifically if your home is a little bit older. You can have maintenance left and right every single month and you have no idea how expensive that can be. There are things like repairs. So repairs actually will add up over time.

For example, every seven or so years you have to paint your house. And what a lot of people don't understand is it's thousands and thousands of dollars to paint their house. And seven years goes by really quick. And so all of a sudden, you get past seven years, and depending on how big your house is, you can be paying $10,000 to repaint your house and you didn't save any money up front in order to do that. So total cost of ownership is stuff like that. What are you going to do when you have to replace your air conditioning every five to 10 years or your heater? What are you going to do when you have to replace your roof every 20 to 30 years? All of these factors come in, your water heater is going to cost you $1 to $2,000. You're always going to have some of these issues coming up all the time.

So these big capital expenditures or these big repairs need to be factored into your budget. That total cost of ownership spreadsheet is going to help you do that. In addition, you have things like taxes that you always are going to have to pay. The taxes will never go away, which is a lot of reason why people like Robert Kiyosaki, if you originally remember the book Rich Dad, Poor Dad. He says your home is a liability because you always are going to have to pay out of pocket for things. These are some of the reasons why he states things like that.

Your home is definitely an asset when it comes to your net worth statement. I wouldn't consider it a full liability. but I do think they are very, very costly and they're not that great of an investment. If you look at the appreciation of homes over the course of the last 30 years, it's been like 2 to 3 percent. And so that is something where you're making 2 to 3 percent with your money in a house. Instead, you could be investing those dollars. So this is not to discourage you to buy a house, even though it sounds like I am. I've been a homeowner for a very long period of time. I am very happy to be a homeowner. And there is a lot of other reasons why I am a homeowner.

They are not financial. And that is the biggest thing I think most people need to understand. So go through that total cost of ownership calculator. And if you have not heard that episode on how we talk through how to run total cost of ownership, we will link both of those things up down below in the show notes up top here and want to make sure that you have those available to you. And make sure you check both those out and it will take you through step by step on why total cost of ownership is so incredibly important. Also, when you are assessing your finances, we have something called the 2033 rule.

This means that you put 20% down on your home. it means your home's expenses should be 30% or less of your gross income, very important numbers that 30% or less, and your home should be no more than three times your household income per year. And so this is really, really important stuff. So first, let's start with a 20% there. 20% down payment. If this is your second house, I want you to have a 20% down payment. Why? Because you're going to roll the equity from your first house into the second house, A. B, you should have enough wherewithal now to be able to save up that 20%. In addition, you can also make sure that you avoid PMI.

I don't want you having PMI on your second house. And so this is something that's really, really important for most people. Now, if it's your very first house, and this is the first time you are buying a house, I did not put 20% down on my first home. A lot of people I know did not put 20% down on their first home who are very, very good with money. And so this is something where I'm going to give you a grace period for your first house. If you want to get an FHA loan, that's a great loan to consider for some people, which means that you put 3.5% down and you can get into a house.

And it is less than 30% of your gross income being spent on housing, then that's absolutely great. Okay? So that is the down payment rule. 20% or more if it is your second house. And you can do less than 20% if it's your first house. Now let's talk about the second number, which is 30. 30% or less of your income needs to be spent on housing.

What does that mean? That means that when you go and buy a house, it needs to be 30% or less of your gross income on all your housing expenses. What this runs into is you're going to think through all the maintenance, all the repairs, all the extra things on top of that. It needs to be 30% or less of your gross income. Otherwise, you're going to become house poor. And what most people don't realize is your mortgage lender is going to run the numbers and they're going to give you an upper limit. And that upper limit is something that is going to make you house poor if you go with that number. And so you've got to run the math.

with your own finances and say, hey, I make $10,000 per month. My housing costs cannot be more than $3,000 per month. And this is really, really important to understand because if you go above this, you can get yourself in a big, scary financial situation. I do not want that for you. Keep it 30% or less. Now, a lot of people right now in 2024 are going to say, that's unrealistic. Rent is really high.

Housing prices are incredibly high. How am I ever going to be able to do that? You have to make it work in some way, shape, or form, or you have to sacrifice in another area. If you live in New York City and you don't have a car, well, that means you don't have those transportation costs, so you can adjust that number slightly if you want to. I would not do it because controlling your housing, food, and transportation, those three numbers allow you to spend so much more money in other areas that you actually value. So if you can reduce that housing expense as much as possible, really, really powerful stuff.

Now, if you want to be financially free in 10 years or less, meaning if you want to pursue financial independence, that number is going to drop down even more. I really prefer people to be at the 20% range if you're pursuing financial independence when it comes to the amount of money that you're spending every single month. And so this is a really cool number. If you're going to get really, really aggressive, 20% or less of your gross income if you're looking for financial independence in 10 years or less. And I know a lot of people listening to this podcast will. Now, that three number, three is three times your household income. So if you and your spouse make $200,000 per year combined together, that means you can spend $600.

thousand dollars on a house. If you and your spouse make $150,000 per year combined, that means you can spend $450,000 on a house. If you and your spouse make $50,000 per year, that's your household income. That means you can buy a house for $150,000. The math is really simple, and this comes from the book The Millionaire Next Door. And what the millionaire next door found was the majority of millionaire spent three times or less the purchase price of their house was three times or less their yearly household income. So that is where that number comes from. And it is one that I have always, always, always followed when purchasing my homes. And it keeps me out of trouble. It helps you stay out of trouble as well. And housing prices are really, really high. So if you can't really stay

within those parameters, then maybe it's still time to rent. Now, if it's like 3.5 times and you really love the house, you know, there are some slight modifications that you can make. But if you're getting about four times or five times, then you're getting way too high when it comes to how much you should be spending on a house. That means that you are losing five years that you could be putting towards your wealth building activities, meaning that you can have financial freedom much, much faster if you actually took those dollars and put them away somewhere else. So it depends on if you want to work forever, then hey, maybe you can break that rule if you want to, but you really got to understand those ramifications if you do break that rule what it means

for how long you're going to have to work. Lastly, when you're assessing your finances and you are in this a finance step, I want you to make sure that you're dialing in your budget. There are times in life. Even if you're doing the reverse budget, there are times in life where you really want to dial in your budget. One time is maybe when you're having your first child, you really want to make sure you're dialing that in because you have more expenses coming up. Or if you're putting your child into daycare for the first time, you won't understand what's going on. This is another time to dial it up. If you're buying your first house or you're buying another house, dialing up that budget is really, really important so that you know where your cash flow is going. And understanding that

money flow is very, very important. And so I encourage you to definitely consider making sure you dial down that budget. Now, number two, before we start this house hunt, we've got kind of our numbers set up within our personal finances. And what we want to do is we want to go out and get pre-approved for a mortgage. Now, this is a step that I think is very, very important for a lot of people to understand that when you go out and get pre-approved, like I said at the top of the show here, a lot of times they will base it on maybe 36% of your gross income. Sometimes it's even higher from some people I've seen. In 2007, they were going really high, 50 to 75% of some folks' income, which is why everybody got in trouble in the first place. But you want to make sure that you have

your own numbers in place and you understand how much you actually are looking to borrow. Now, when it comes to lenders, a big, big topic and the elephant in the room right now at the time I'm recording this is interest rates. And interest rates are incredibly high. And what do you do with these high interest rates? Well, you're going to shop around for lenders. I want you to shop around for multiple different lenders. and I want you to talk to at least three to five and see, hey, I want to know, number one, what your interest rates are right now and they're going to say, well, it's 5% right now, but you've got to lock it in right away.

Otherwise, it's going to fluctuate all over the place. Don't worry about that right now. I just want you to interview each one of them and figure out what their interest rates are. Number two, what are the fees associated with closing on a home? I want them to give you a list of all the fees associated with closing on a home. And you need to know all of them. And if they can put them as a percentage, even, better, but you need to know all of those different fees associated with closing on a home, because

if you've never done this before, or if you haven't done this in a while and you really don't remember, there are a lot of fees associated with closing costs, which also factor into your total cost of ownership. A lot of those closing fees are very, very expensive. You need to know what it's going to cost when you are shopping around for lenders. Now, a lot of lenders are going to say, well, I got to get your information. I got to put this in my system before I can do this. If they can do that and without pulling a hard inquiry under credit, meaning they will not impact. your credit score, then go ahead and do that. A lot of them can do that now with just some preliminary information and say, just get me close to the number that you have there. And so as you

start to shop through this process, like I said, you're going to get approved for way more than you think. And you maybe get approved for something that P. Diddy would buy on MTV Cribs. Don't go for that option. Always make sure that you stick to step one, which is assessing your finances, understanding 30% or less of your gross income is going to be really, really important. And make sure you have those limits and parameters from the start. They're going to try to talk you into all kinds of stuff, just make sure that you have those limits and parameters and you're asking the right questions because it's really, really important to do this. And then they're going to have you fill out some information. And the one that you go with, I want you to just fill out the

documents with them and make sure that you go through that process. And they're going to give you what is called a pre-approval letter. This letter is really, really important because it's A, going to make agents understand that you are very serious about buying a home. And B, it's just going to help you through this process get your offer accepted much, much quick. So you want to get that pre-approval letter when you go to these mortgage lenders after you get approved with a lender and go and get that pre-approval letter. Now, if they have interest rates and you think interest rates are going to stay the same, then maybe you want to lock in your rate. Sometimes if you think interest rates are going to drop and maybe you can talk to a couple of

different people to see what they think, then that would be the time to not have to lock in your rate immediately yet. At the time I'm recording this, there are a lot of different debates about interest rates and what's going to happen. My personal guess is that interest rates will likely drop over the course of the next couple of years, but I have no idea. So don't take that as any advice whatsoever. I am not in the prediction business. I don't like predictions because nobody actually knows what's going to happen. My educated guess is that they will drop. I don't actually know that for a fact. And nobody in this world knows that for a fact. So don't listen to anybody who says they do know that because they absolutely do not. They do not have a crystal ball to know what's going to happen in the future.

Now, you've got your pre-approval letter. Now I want you to sit down and I want you to talk to your significant other. I want you to talk to your family. And I want you to pull out a sheet of paper. And when you do this, this is step three is I want you to define your housing needs and wants. This is before we're even talking to an agent yet. We're going to get our housing needs and wants on paper. Why is this so important?

This is really, really important for a number of different reasons. The home buying process is a very emotional process. And what this is going to do is help you create a list before you start actually looking at physical houses that you know what you want, you know what you're looking for, and you know the main things that you need, and you are not going to waver from this list because you see some really cool, amazing stuff as you're starting to walk through houses. You want to remove the emotions out of the equation. Again, I understand this is going to be an emotional process. When you see stuff that you want, you can dream of your life in this house. You can dream of what life is going to be like. Everybody goes through this.

Everybody is going to feel these feelings because your home is emotional. And so if you can remove as much of these emotions out of the equation as possible, by getting this sheet of paper ready with your parameters that are going to show, hey, these are what we are going to follow. So here's what I would do. I'd pull out my needs first. So needs would be your list of things that you absolutely need. This is really what you're sticking to.

So number of bedrooms, number of bathrooms. Those are really important. Square footage of the home. Things like, do you need a home office? Maybe you work from home and you need a home office. So adding things like home office in, size of yard. If you have pets or if you have kids who want to play in the yard, the size of yard is going to matter. What is the neighborhood like?

What is the school district like? All of those different things are big, big ticket items that you got to make sure that you want to have within that home. So these are your must have. You've got to have your must halves. then I want you to identify your ones. The things that would be nice to have, but you absolutely don't need to have. Whereas if a house is missing any of these things,

it doesn't matter if it's all of them or any of them, it doesn't mean you need to go out and purchase that house and you definitely will not go above that 30% gross because of these things. So really important stuff. So this could be stuff maybe like a pool, a three car garage instead of a two car garage. Maybe it is something like a fully renovated kitchen

or something like fully renovated bathrooms or a master onsuit or all these different things could be classified into your wants. And maybe some of those are your needs. Maybe you need some of those things or you think you need some of those things and that's why you're buying a home is to upgrade some of that stuff.

Then great. But at the same time, just identifying your differences between your needs and your wants to remove that emotion is going to be really, really important. What this is going to help you do is when you walk into a house,

if it looks like Chip and Joanna collaborated with the property brothers to create this amazing house that's going to be the best thing in the world for you, it's going to keep those emotions in check, and it's going to help you go through that process so you don't have to worry about this. And so we're going to fight this emotional roller coaster

with this sheet. So this one sheeter is going to be really, really important for you to go through this. Now, let's talk about agents. Now, when it comes to hiring a real estate agent, I actually personally have my real estate license, and the only reason why I have it is because I invest in rental properties,

and so I just want to go and walk into houses and be able to see them without having an agent and having to meet me there. But I have helped a lot, of friends and family members, dozens and dozens, actually, now that I went back and looked, go and buy their first house or go and help them buy a house. And so I know a lot of the agent side because of that. I just do it to help people. Typically, I haven't used my license in a couple of years now, but it's just one of those things that I have a large understanding of this.

And now a big settlement just happened with the NAR, the National Association of Realtors, where the 6% commission is most likely going away, which is something that I think a lot of sellers were sick of paying a 6% commission because you sell a a million dollar house. You have to pay an agent $60,000. And so they didn't want to pay that anymore. And it's one of those things that I think there are two sets of arguments when it comes to hiring an agent. First of all, if you are a first time home buyer, it may be helpful to have a buyer's agent. And the buyer's agent is the one that's going to help the buyer on the buyer's side. A seller's agent is going to help the seller and they're the ones that actually listed the property.

Now, a buyer's agent does not get paid a commission by you. They get paid a commission by a seller. So you can see the incentives there for the seller's agent is to find someone who will take both sides because they get the commission on both sides. Whereas if a buyer's agent comes in, they may not be as gung-ho to present that offer to the seller, even though ethically they are supposed to. So there's a lot of caveats there that we'll talk through here in a second. If you're a first-time homebuyer and you're going through and looking at houses and you're trying to look at as many houses as possible and you want to understand the process, then getting a buyer's agent may be very, very helpful. It may be helpful for you so they can talk you through

the process, talk you through some of the knowledge they have when it comes to buying a home. But in addition, making sure that this buyer's agent understands what your budget is and understands your parameters and your limits. Because I want you to make sure you interview a bunch of different buyers agents. So you have the right one for you because you want the right person advising you over time. Just because your mother's best friend is an agent doesn't mean they always have your best interest at heart. So you want to make sure you have the right person who has your best interest and is very knowledgeable and experience. Those are really, really important when it comes to your buyer's agent.

Now, if this is not your first rodeo, if this is not the first time you bought a house, you understand the whole process already and you want to get a good deal, there is an argument, especially in a market that as competitive as this, to not having a buyer's agent. Because I think you are at a disadvantage when there is a multi-offer scenario. And right now, when houses are good deals, there typically is a multi-offer scenario. What you can do, though, is you can work diligently with the seller's agent, meaning that you could go to the seller's agent. They're going to be more incentivized to present your offer because, A, they're getting the commission on both sides.

And so they'll make an offer and be more willing to push your offer to the top because they get both sides. Now, I'm going to show you how to sweeten a deal a little bit is when you make an offer. You can make an offer with a 1 to 2 to 3% seller credit when it comes to some of their fees that they have to pay. and an additional 1% commission to that agent as well. So as a buyer, maybe you can factor those numbers into your 30% and say, hey, I can sweeten this deal with some of this stuff where the seller is going to make more money. You are going to end up saving money in a multi-offer scenario if it's a really good deal, and the agent is going to make more money.

And so that is one way where you can kind of sweeten deals. And that's just a quick hot tip if you're in a really, really hot market where I've seen people do this. They'll offer 2% to the seller in addition to another 1% to the agent. And that wins them the deal every time because they are giving some of these compensation. You got to give some incentives and you got to sweeten the deal. But if you're a first time home buyer, you want to be handheld through the process, then maybe having a buyer's agent might be the way to go.

Now, when it comes to agents, I want you to interview, like I said, a few of them to make sure there is one that is right for you. And then if you don't like your agent, if you've gone through this process and your agent really is not that helpful, you realize that, you know, two or three houses in, make sure you fire them quickly because it's a waste of their time and energy to go out there and show you houses if you're not going to stick with them. So just make sure that, you know, you're not wasting someone else's time. But in addition, wasting your time. If you're not going to be able to stick with them or you realize really quickly that they're not

going to be the right person for you, then move on because this is a massive decision for you. And I want you to make sure you have the right person in place. And so both parties can win by you moving on if you have to. So really, really important on the agent side. But definitely this would be the next step is once you get that pre-approval letter, then you're going to talk to the agents and start going through that process. Now, you have an agent in place or you're going to to start house hunting yourself. Now it's time to start house hunting. So your agent's going to start sending you MLS listings. And when they send you those MLS listings, you can go through in each and every single week. You're going to decide, you know, which houses do you want to go and look at.

Now, it's really important to make sure you set up alerts on a daily or even an hourly basis if you're really, really trying to get aggressive because when houses hit the market, you got to make an offer really quickly that day if it's a really hot market. So you need to go and visit that property and you need to make an offer on that property probably within the same exact day because people will coming in with cash offers at asking. And when they do that, you're going to lose every single time if you don't have cash. And you are financing that property. So really, really important to start to, A, look around and intend property so that you can see what's out there within your price range. Schedule viewings for home to find homes in your criteria. Look at some of those houses

that have also been on the market for a long time. If there's houses that have been on the market for four to six months, those listings are about to expire and the motivation is going to increase for some of the folks in that situation. We call those expired listings. A lot of in the real estate investing world will look for those to see what is around and see if we can get some deals off of those as well. And so you want to consider a lot of things. Number one, location really, really matters, obviously, the condition of the home, the size of the home, and the future resale value of the home. Now, I'm going to give you a little quick tip here on how I look for homes. And this is what I do if I find existing properties. The home that I

live in now, I built. But when I was buying properties before, I would find really good deals and make hundreds of thousands of dollars on my sale by doing this. I look for houses that need cosmetic upgrades. I look for houses that are nasty on the inside that need cosmetic upgrades. What are cosmetic upgrades? These are things like they need to have the kitchen renovated. They need the bathrooms renovated. They need new flooring. They need paint on the walls. Those are cosmetic upgrades. And if that sounds like a daunting task to you, it's really not that big of a deal as long as you factor in the cost and you get with a contractor and talk to them on how to renovate this stuff.

It's really not that big of a deal. They'll handle all the work for you. You just got to know what the costs are. And so cosmetic upgrades are not a big deal. What I'm not looking for, and now I do look for this, but before I didn't, because I know it's not that big of a deal, but I'm not looking for big capital expenditure repairs. Things like it needs a whole new roof, for example.

Well, that's not a situation I want to get myself in right away, especially as a first-time home buyer. Or it needs a brand-new AC. Well, if it does need a brand-new AC, what's the quote in that AC? And can they credit you? for that new AC. It has a leak in the pool. You know, these big, giant things that are just major, major issues, I'm not looking for those, but I am looking for cosmetic upgrades. And let me

just tell you a little story. So the first house I ever bought was a three-bedroom, two-bathroom, two-bathroom house, and it was about 1,214 square feet. And this house was in pristine condition when it came to all the capital expenditures, the exterior. Everything was very well maintained. but the folks who lived in that house just had very poor modern taste. So you walk into the house, the entire kitchen was painted like a bright, barney purple. Okay? So the entire kitchen was purple. The walls were just a weird baby blue color in the living room.

They were weird colors in each and every single bedroom. Everything was weird. The kitchen had weird finishes. The floor, it had a shaggy carpet floor. And the bathrooms were outdated. It actually had a pink bathroom that was from like the 1960s or 70s, whenever pink bathrooms were back in style. And the other bathroom was renovated, but it was just poor taste, in my opinion.

You know, everybody has their own opinion when it comes to finishes, but it was poor taste, in my opinion. But it had this amazing backyard, this amazing pool. The landscaping was fantastic. And so there was really dated stuff on the inside, which scared a lot of people away. But on the outside, it looked absolutely fantastic. So I walked into the house and immediately knew this was the house that I wanted because that everything was in good condition, except for these cosmetic.

upgrades. So what did we do? We bought the house. And at that time, this was a long time ago. This was in 2014, I believe. We bought that house for $169,000. So 10 years ago, it was $169,000. And we eventually sold it for $330,000, you know, a couple of years later. And here's what we did. We went in there, immediately, immediately took the flooring out and put in brand new wood tile flooring. And so that flooring went in immediately, painted the walls, just painted them a neutral white, and went through the house and just did some neutral things. Over time, we started to renovate the bathrooms and started to renovate some of the other rooms as well and make everything just look fresh, new, light, bright, and everything looked much, much better. That ended up costing us $20,000 to $25,000 to do all of that

stuff. And it really was not that big of a deal. And then we got ourselves a major deal. This house was probably worth $250. We got it for $169 because of these cosmetic upgrades, because a lot of of homebuyers out there just want this to be completely done and they can't visualize what this house can become. Well, if you can visualize what that house can become, it can be absolutely life-changing for you. So here's my tip. Find the fixer-upper in the best neighborhood in your area, meaning that find the worst house in the best neighborhood. This will save you thousands of dollars, A, and you can also make it one of the better houses in that neighborhood. B, and it will force appreciation into that house when you fix that house up. You will immediately have a ton of equity in that

house if you can enforce this appreciation. Every house you look at, try to make it the one with the shaggy carpets, the purple walls, and the outdated bathrooms. And here's the cool thing about this is then you can make the house your own, A, B, your net worth goes way, way up because you force that appreciation in there. So you've got to run the numbers on this, but make sure it works. But you're going to force that appreciation in there. And then C, you can really make it exactly how you want it, which is one of my favorite parts of doing this. And it's actually a fun little process. You get the contractors to come in. You get to pick out all the tiles. You get to pick out all the different things. And so it's a really fun process. And once I did this, that gave me the confidence,

well, hey, I can do this with real estate investing or, hey, I can do this with any other thing. And it gives you a ton of confidence when it comes to this stuff. So when you start to house hunt, look for houses that you can add value to because that's exactly what you're doing when you renovate some of this stuff. And so next, let's talk about what happens once you find that house that you want to make an offer on. Step six is you're going to make that offer. And so it's really, really important that when you make an offer, you want to have a calm, rational mind about this, just to understand, maybe expect the worst, hope for the best,

that type of thing. And when you go through this, this is a business transaction. You're buying land, you're buying building materials. That's what you're buying when you buy a house. And so you got to think through this and don't let a whirlwind of emotions hit you when you make that offer, especially your first one, your fingers are crossed, you're sweating it out. Maybe you're not sleeping that night.

You just got to make sure that you understand this is a business and you just got to be really even keeled about this. So the first thing you're going to do is you're going to talk to your agent and you're going to decide on the offer price. A lot of times now you've got to come in at asking and some people come in over asking. If it's a really hot house, you're definitely going to have to come in over asking if it makes sense for you. And so look at the comparable houses in your area. Your agent can pull those for you and you can make that offer in that way. And then you're going to submit a formal offer. They're going to actually submit a written contract and usually it is a specific contract based on your state. So in Florida here, for example, there is a contract

that most people use called the FAR bar and it's a contract that a lot of people will go through and fill out. And it's just your standard real estate contract. So make sure your agent is using that standard real estate contract. They're filling out all the information for you and you're signing on the dotted line. And so you submit that formal offer. With that offer, you're also going to be submitting your pre-approval letter. So they know you're serious and you've already been pre-approved for a loan. And you're going to be submitting any content. you have. Now, number one contingency I always want you to have, no matter what, is that you have an inspection period. You must have an inspection period or a time period when you are allowed to have a home

inspector come into the house and inspect the property. Never, ever, ever, ever, ever forego a home inspection. I've seen way too many people do this. They open up the walls and all of a sudden there are so much issues in that home. It's not even funny. So what the home inspector is going to do if you've never had a home inspection is they're going to comb through every inch of this house. So you want a home inspector who is really, really meticulous. They're going to look at the electrical. They're going to look at the heating and cooling. They're going to look at the roof. They're going to look at every single faucet in the house. They're going to look at how every single piece of plumbing in the house. They're going to go and comb through even the cocking within the house, making sure the windows are

sealed, making sure the bathrooms are cocked, making sure everything is in line. Every single light they're going to check. They're going to go through the whole house. They're going to walk through the attic. They're going to make sure there's no mold in the house. They're going to do some mold detection things. They're going to do wind mitigation. They're going to do four point inspections. There's all these different things that they're going to do. And so it cost you a couple hundred bucks.

Last time I did it, it was depending on the size of the house, it can be anywhere from, you know, 400 bucks all the way up to, you know, a thousand bucks or if it's a massive house, it could be a couple thousand bucks. So it just depends on how large the house is, how much time they have to spend to check the house. This is something I never want you to skip. So when you do this, that's exactly what they do. But make sure you have that home inspection in there. and then you're going to send off the offer.

Now they may come back and try to negotiate with you. When it comes to negotiation, you have a final number in your head. Make sure that you do not go past that number because negotiations are emotional. And when you go back and forth on this kind of stuff, they're going to say things like, oh, we got a bunch of offers at the same level as you. What's your highest and best offer? And if you're not comfortable going any higher, do not go any higher. You may lose the house.

That's okay. You can walk and move on. But do not go any higher if you're not comfortable going any higher. A lot of times they just ask them. that so that you can increase your bid instead of just staying where you're at. So just make sure that you stick to your guns if you want to. But it's negotiation 101. You and your agent are going to have to walk through that based on that specific situation. Now the next step is once you get your offer accepted, A, high five, congratulations, but it's not over yet because a lot of times

contracts will fall apart because of this next process. So now you have a specific amount of time that you can do a home inspection. Hopefully it's at least seven days. It's difficult if it's longer than that. And when they do this home inspection, you want to get in there and call up your inspector, have them go to the house, schedule a time to comb through the entire house, and they're going to give you a report. And you're going to look through that report and figure out, what are all the things that I would need to repair on this house? And when you see all those things that you need to repair on this house, you have one of two options.

A, you can go back to the seller and try to negotiate the cost of those items off. Or B, if it's a really competitive market, then B, you can just eat those costs, factor them in before you move into the house so that you can get those repair. of time. And so those are the two things that you definitely want to make sure that you do. And so you'll get that at home inspection first. Then you'll also get an appraisal, meaning an appraiser is going to come in there and they will do an appraisal for your lender to make sure that home is actually worth what you're offering. If it's not worth what you're offering, then there's a couple options there. One, you have to put additional cash down for the difference. Or B, you can talk to your lender

and they can give you a couple of different options that you have available to you. But A, never, ever, ever forego that inspection. Really, really important. Now, as you go through this process also, if you get through the home inspection period and you want to move forward, then what's going to happen is you're going to go through and finalize a lot of the paperwork with your mortgage company. And a lot of that will be, you know, much more smooth sailing than it would be on the inspection process, meaning that you go to the mortgage company and now you're locking in your rates, you're finalizing all the paperwork for your loan. And usually this takes like 20 to 30 days. Sometimes it could take longer. And so you want to try to finalize your mortgage as much as possible.

Now, you definitely need to make sure you're getting a fixed rate mortgage. Do not get an adjustable rate mortgage, get a fixed rate mortgage. Arms are the enemy to me because it can adjust any which way, and I'm not interested in that. And then you're going to submit your final documents and send those in, depending on what type of mortgage you get, and you're going to submit those final documents. Now, there are a bunch of different types of mortgages out there while we're on this topic, and this could be an FHA, which is a first-time homebuyer's loan, where you put 3.5% down, and you can buy a house with 3.5% down. It's just got a matter. It's got to factor in your numbers. There's traditional mortgages, which we'll do a whole episode on this, but there's traditional mortgages.

You know, you can put anywhere from 5 to 20% down or even more if you want to and get a mortgage that way. If you're a veteran, there's VA loans, which a lot of times they have 0% down on some of those VA loans, which is a great little perk, especially for people who want a house hack or things like that. You can get into a house hack really, really cheap. So there's a couple of different things that you can do there. And so if you're getting some of those loans, they're also going to want your inspector to do specific inspections, like the 4-point inspection, maybe a wind mitigation for the lender as well. So the lender will have some additional requirements when they go through that process. Now, after all this is done, you've secured the loan, you've got the home inspection, everything looks good, you've agreed with the seller.

Now it's time to go to closing. And so when you go to closing, you're going to be working with the seller's title company, typically. And so the seller's title company is a company that's going to be handling all the closing documents. And what you need to do is you're going to be talking with them back and forth with your agent. And so you need to review those closing documents and understand all the fees and the charges that are associated with this. So there's a bunch of surprises.

Make sure you start to ask questions and make sure you factor that into your total cost of ownership calculations if there are surprises. You've got to go back in there and make sure you're factoring those in. You're also going to pay closing costs and your down payment at the time of closing. So on the date of closing,

you're going to pay your closing costs, your down payment, you're going to wire those over at that time. And they can be anywhere from 2% to 5%. The total cost of ownership calculator will actually show you what the typical amount is. And then also on the day of closing, you're going to do the final walkthrough, meaning right before you sign those closing documents, you're going to do a final walk through the property. Just make sure they moved all their stuff out and everything is in the condition of when you were originally solid. You always want to make sure you do that final walkthrough because the last thing you want to do is sign those closing documents and they took an axe to the walls or something is just way out of whack.

So just make sure that you do that final walkthrough day of and go from there. And then congratulations. You're going to get the keys that day. it's going to be a very happy day for you, your family, really exciting. So that is the last process is you'll get your keys and then you move in. So you plan your move in on that day or whenever you want to do it. Now what I did with my wife is we actually did a lot of the renovations up front and we moved in, you know, seven or eight days later.

We made sure our lease on our rent made sense for that to work. But we moved in seven or eight days later and did all the renovations up front. So that's something that you could consider if you are looking through this. And then from there, you got to make sure you have a home maintenance schedule. you got to stay on top of your finances. All this stuff really, really matters after you buy this house. But that is the exact process that you would actually go through. So that is how to buy a house in 2024 the right way. And I want you to kind of think through this and make sure the majority of your work needs to be up front on that finance stuff. You need to make sure that you are diving

into step one and understanding where your financial situation is. That makes sure that you do not get house poor and that's going to protect your wealth building forever. And wealth builders, what they do is they want to protect their finances specifically against buying too much house. so that they can take those extra dollars and put them towards financial freedom. Listen, I hope you guys enjoyed this episode. Thank you so much for listening to this episode. Cannot thank you guys enough? All we want to do with this podcast is bring you as much value as possible.

So cannot thank you guys enough for listening to this podcast episode and investing in yourself. I hope you all have a wonderful rest of your week and we will see you on the next episode. Rosen lasagna, medium power, 15 minutes. Sounds like Ojo time. Let's play. Feel the fun with Playojo. The online casino with all the latest slot and live casino games. What you win is yours to keep with no wagering requirements, instant payouts, and no minimum withdraws.

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