First-Time Homebuyer Loans: Uncovering the Myths and Realities in 2024

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What if I told you that there was a home loan out there built just for you? No down payment, no closing costs, and it could be all yours if you're a first-time homebuyer. Sounds pretty good, right? And I'm sure you'd want to know more about how to get in on a deal like this, yes? After all, you're a first-time homebuyer with no cash to spare and no interest in paying any additional costs. So why wouldn't banks be falling all over themselves to offer you an amazing deal just like this? What's poppin' all you real estate rainmakers out there? Did you know that first-time homebuyers have made up 32% of all home purchases so far in 2024? And that's a pretty big jump from 2023 when these homebuying rookies accounted for only 26% of the homebuying population.

Now with inventory growing and rates coming down, but still not quite enough to offset current homeowners' lock-in effect, is it time to shift your focus to this expanding segment of the market? Well, today I've got some insights for you on this rising demographic. It's going to help you serve up marketing charm like scientists searching for jaws during Shark Week. This is the Texas Real Estate and Finance Podcast market update for the week of September the 10th.

I'm your continually underdressed but always over-informed host, Mike Mills, a North Texas mortgage banker with Geneva Financial. And I'm here each week to bring you the latest real estate news and actionable insights to help you and your clients navigate a market that changes more often than the lineup of the 2024 presidential candidates. And this week, it's no different.

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So we're going to kick things off with mortgage rates, which are now at the lowest level that we've seen in over a year. The big question is, are these lower rates enough to pull the housing market out of a 30-year low in sales volume? Or are there deeper issues keeping things slow? We'll discuss. Next, we're going to break down the latest inventory data.

So inventory is still growing, but the pace is slowing. Could this trend help sustain the growth in the first time homebuyer demographic through 2024 and into 2025? We'll talk about it. Then we've got a pretty juicy story about a new real estate firm on the block offering a flat fee to buy and sell your home.

And you're never going to guess who's behind it. But here's a hint. He was a major player in the big commission lawsuit that's been shaking up our industry for years.

I'm going to spill the tea on what's really going on there. Also with the presidential debate happening later this evening and affordable housing being a top issue for many voters, we're going to take a closer look at what each candidate has proposed in their plans to tackle the pressing issue that affects a good majority of Americans. And finally, for our main topic today, we're diving into the world of first-time homebuyer loans.

They're often advertised, but rarely fully understood. What are these loans? How do they actually work? Or is it just a big marketing campaign to get your clients to call that number on the screen? By the end of that segment, you're going to know everything there is to know about one of the most publicized yet fully misunderstood topics in all of real estate. So stick around at the end for that.

I got one quick thing before we continue. Of course, if you find today's content helpful or even just slightly entertaining, do an old Gen X podcast or a favorite and hit that subscribe button. You can leave us a review or even share this episode with someone in your network.

I'm here running through the streets, like Paul Revere shouting out real estate news. So all can hear me. And you guys are a big part of helping amplify our community.

And I truly appreciate each and every one of you. So share a little secret with a friend. I would greatly appreciate it.

And remember, if you have clients who could use a little guidance through this wonderful mortgage maze that's existing today to buy a new home or even refinance at 8% rate that they got last year, give me a call. I'm here to help. Podcasting is fun, but helping folks into the perfect home loan is fun.

Sorry. All right. Let's start off by getting into the question.

That's always on everybody's mind. Hey Mike, what are the rates? Well, according to mortgage news daily, as of September 9th, 2024, the average 30 year fixed conventional mortgage rate is 6.25. The average 15 year conventional rate is 5.63. The average 30 year FHA rate is 5.70. The average 30 year VA rate is 5.72. And the average jumbo rate is around 6.45%. Now these are the lowest rates that we've seen since April of 2023 over a year now. And last Friday we got the August jobs report, which showed that the job market is continuing to cool down.

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But the big moves last Friday, weren't just because of the jobs report. It was largely due to multiple fed members, all the confirming and expected rate cut next week. Really the only question now is, is how much are they going to cut? Will it be a quarter of a point or a half a point? My money is still on a quarter of a point cut.

This particular fed hasn't been known to overreact in any particular situation, whether it comes to rate hikes or rate cuts. And they're more likely to take it one meeting at a time and ease into the cut slope. Unless of course, we see even bigger cracks in this struggling economy.

Just to give you an idea where things currently stand, the S&P 500 erased 2.2 trillion in market cap during the first week of September. And it seems poised to continue sliding through the rest of 2024, even as we head into an uncertain election season. And the jobs report showed that full-time employment dropped by nearly 1 million compared to last year.

And while inflation is cooled, prices overall haven't come down, leaving the average American struggling to pay bills. So that's off landing that everyone's been talking about. It might still be possible, but it's looking like the landing could be rougher than some officials are letting on.

And if the landing gets too bumpy, we could see bigger rate cuts than what's currently being discussed. And I don't like to use the words crash when it comes to our economy, but it seems like it's going to be more than just a fender bender. So buckle up.

As for the August unemployment rate itself, it actually ticked down by a 10th of a percent, but that's really just a rounding adjustment that was made in the calculations. The unemployment level essentially stayed the same from last month. And on top of that, we saw more downward revisions for job openings, continuing the trend that we've seen 17 out of the last 18 months for June and July alone, previous job numbers were revised down by almost 90,000 jobs.

And don't forget last month's revision, which lowered job openings over the past 12 months by nearly a million. This is why the fed is focusing more on job numbers and talking less about inflation these days. Although the overall story of this economy right now is high prices because while inflation has slowed, it hasn't reversed.

And with rising job losses and even fewer jobs available, all of this spells concern for the average consumer. Right now we're seeing the lowest savings rate that we've seen since 2008. We have lower consumer spending and some of the lowest consumer sentiment that we've seen in quite a long time.

People just aren't feeling good about this economy or its near-term prospects. So even as rates continue to fall, home purchases aren't picking up. In fact, most of the purchasing activity in the housing market over the last 18 months has come from either wealthy individuals and or first-time home buyers using interest rate buy-downs offered by builders.

So when you hear things in the market, like listings are piling up, it's not necessarily because a bunch of people are in housing distress and need to sell because right now we actually have a normal or even somewhat below normal number of people listing their homes, but we have almost no demand or at least the lowest demand that we've seen in over 35 years. So until the election happens and people get a clearer idea of the plan to turn around the struggling economy, we're going to see people hunkering down for a cold winter, holding onto their jobs for dear life and cutting back on spending beyond the necessities. Rates may keep coming down, but it's not going to mean a big boom for the housing market, at least not for home purchases this winter.

I am still of the opinion though that we will see that next spring. But in the meantime, grab a blanket and channel your inner squirrel and store up for the winter because this market we have right now is probably what we're stuck with until the sun comes back next March. Okay, onto some housing data.

Now let's get a little deeper into the numbers showing how even with low rates and prices starting to level off, why haven't we seen hardly any growth in purchases recently? All right, let's start with inventory. So inventory growth has slowed even as mortgage rates have decreased, but new listings have seen some growth this year despite still being the second lowest year on record. So this slight positive change in inventory levels and new listing data suggests that there is some stabilization that's occurring in the housing market.

But last week inventory fell from 704,335 listings to 703,646 lists. And that's still a good number of listings, but it is starting to fall. And remember in 2015, the last time that we had a true balanced housing market, active listings were almost 1.2 million.

So we still got a long way to go here. Now, as expected with the seasonal market slowdown, pending sales have also started their decline. However, there is year over year growth in pending contracts from last week compared to last year, most likely because of the recent dip in rates, but it's minimal growth at best.

And from a point of one of the lowest levels that we've seen in 35 years. So in 2024, pending sales are sitting at about 358,670. But in 2023, at this same time, we were sitting at about 348,313.

And in 2022, we had about 390,543, but compared to September of 2019, before the pandemic, we were almost double that sitting in around 600,000 pending sales. Now the percentage of price cuts on these listings is also starting to normalize, but this is aligning with historical trends as inventory increases and rates start to fall. So far in 2024, we've seen about 39.8% homes taking price cuts in 2023 at this time is about 36%.

And in 2022, there was about 40%. So rates are down inventories rising, but purchase volume is not rising in response, but it is improving now how we're purchased applications doing because that measures people's desire to buy a home since they're starting to apply for a loan. Well, since mortgage rates started to fall in November of 2023, purchase application data has kind of shown some mixed results.

We've had 20 positive weeks compared to previous weeks, 18 negative weeks, and two flat weeks as compared to the week prior. But recent data does show an uptick of about 3% in weekly purchase application, but year over year, it does continue to decline indicating that there is some improvement, but the market is still pretty weak. And Oh, by the way, it's not making any dramatic turnaround anytime soon, even though right now the median monthly mortgage payment dropped to about $2,534, which is the lowest since that we've seen since January.

However, the average home listing spent about 53 days on the market, making it the slowest August that we've seen in five years. So this indicates that even with more supply and better affordability buyers still remain hesitant because again, many buyers and sellers are holding out for further mortgage rate declines after the federal reserve rate cut. And this is what's contributing to a sluggish market.

Additionally, as the market slows because of seasonality, there's an expectation of lower competition in the fall of 2024. And again, some likely putting it off and deferring it to 2025 when they think mortgage rates might still be even better then, but even with all this recent increase in listings, the current inventory nationally still remains about 26.4% below the average August levels from 2017 to 2019. And this disparity is even more pronounced in certain regions, such as the Northeast where inventory is down 54.6% compared to pre pandemic levels.

So this gap highlights that despite the growth, the market has not returned to normal inventory levels, except here in Texas and other spots like Florida. But overall the U S market as a whole is still in the hole when it comes to inventory, which is why you haven't seen dramatic drops in prices as many people expected. So even though the overall environment for affordable housing is improving, it's not enough to get buyers off the fence in 2024 yet.

And I don't expect that to change anytime soon. As I showed you, there are still too many factors keeping potential buyers on the sidelines right now. Transactions are still out there to be done, but just in much smaller volumes.

So if you want to survive the winter, you're going to need to double your marketing efforts, build up your database and stay in contact with your past clients in your sphere. We're still very much in the quote, you got to work for every transaction phase of the market. I do honestly believe it's going to change in 12 months, but we aren't there yet.

And you still got to pay your bills. The good news is, is I'll be here each week to keep you in the loop and help you find innovative ways to reach more people. So keep coming back.

All right, let's get into some stories in the news that you may not have heard of, but you probably should be aware of. So do you want to make more money in real estate? Well, I've got a solution for you. All you have to do is simply drop a massive class action lawsuit on everyone and have your new business ready to go when it's decided in your favor.

At least that is what Josh Sitzer did. Yes. If that name sounds familiar to realtors out there, that's because it is.

So Josh Sitzer, the man behind the lawsuit that reshaped all of realtor commission structures, isn't just resting on his legal victory. It turns out he had a plan all along. He's come up with a new platform that forces agents to play by the very rules that he put into place all while he rakes in the profits.

So housing wire recently did a feature on a company called Landian. Now Landian is a new real estate startup founded by Josh Sitzer, Bryce Galen, and Neil Batra. Sitzer, known for his role in the Sitzer Burnett commission lawsuit, states that he launched Landian in response to frustrations over traditional commission structures.

The platform operates as a technology driven service that coordinates real estate services a la carte, allowing homebuyers to select and pay for services individually rather than traditional commission models. You see, Sitzer's lawsuit resulted in financial settlements and significant changes to the real estate industry practices, such as the removal of buyer broker compensation from the MLS and mandatory buyer broker agreements. And these changes have created a new normal in the real estate industry that Landian aims to capitalize on.

So unlike traditional brokerages, Landian does not act as a brokerage or represent clients. Instead, it offers a platform for homebuyers to book services like home tours and offer preparations from licensed agents for a flat fee. And fees range from $49 for a home tour to $17.99 for a more comprehensive package.

And if a buyer does not successfully close on a property, then they owe nothing to Landian or their agent. And agents using the Landian platform must sign a buyer broker agreement compliant with the NAR settlement changes. And this agreement ensures that compensation for services is clearly outlined and aligns with industry regulations providing transparency for both agents and clients.

Landian claims it can save consumers an average of $15,000 per transaction by using its flat fee model compared to traditional commission-based transactions. The company emphasizes its ability to provide a cost-effective alternative for homebuyers while maintaining compliance with industry standards. And right now, Landian is currently available throughout the United States and Canada, and it's operating with initial funding from friends and family.

It's currently in the process of raising a seed funding round to expand its services and market reach. Okay, so it turns out that Mr. Sitzer isn't quite the wounded consumer that he claimed to be when he led the against NAR and the major brokerages over what he called antitrust violations embedded in the traditional commission structure. Instead, it looks like he had a different agenda all along.

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Take down the old system and then build a business to profit from the very changes that he fought to implement. Now, look, I am all for spotting an opportunity in the market and creating something new to meet an unmet demand. But this guy is like a villain straight out of a Batman movie.

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He's like the penguin taking down a mob boss only to replace it with his own racket. It's a classic kind of bait and switch. And personally, I've always argued that the old system actually worked pretty well.

It was kind of a pay it forward model as a new buyer, especially if you didn't have a ton of capital, you could buy a home with someone representing your interests and the seller would cover that cost a seller, by the way, who most likely benefited from that same system when they were the buyer, because it's a cycle that worked for over a hundred years. Now, sure, there is room to debate how much that service is worth in relation to the price of the home and how these fees are determined. But overall, the cooperative compensation model was more often than not very clear to everyone involved.

But I guess Mr. Sitzer thought that he had a better idea and was willing to bring down an entire industry to prove it. Now, time will tell if this vision holds up, but he's already collected a settlement money and now he stands to profit from the new model that he helped create. Quite the fun world we live in here, isn't it? How do you feel about that? All right, next up, let's get into a little politics porn, as I like to call it.

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So this year's presidential election is shaping up to be one of the most contentious, divisive, and globally impactful elections that we've seen in our lifetime. And tonight, Kamala Harris and Donald Trump are set to face off in what's looking more and more likely to be their only debate before we head to the polls in November, which is terrible, but true. So the number one issue for most Americans heading into this election is the economy as it always is, or more specifically, affordable housing in this economy.

So I'm going to break down what we know so far about each individual candidate's position on the housing market itself and what they claim they're going to do to fix it. Let's be honest, there isn't a ton to go off here. And we all know just because they say it does not mean that they're going to actually do it, but we're going to go through it anyway.

So with as little personal commentary as I can manage to hold back, here's what each candidate has said that they plan to do to address the growing affordability crisis that's affecting many, many Americans. And by the way, I bet this topic barely gets touched on in tonight's debate. I hope I'm wrong, but I'm guessing I'm not going to be.

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All right, so let's start off with the Democratic nominee, Kamala Harris. So her first plan is to increase housing supply with tax incentives. So Harris proposes to build 3 million new housing units over the next four years by offering new tax breaks for builders focused on first-time home buyers and expanding incentives for companies that construct rentals.

She also supports a $40 billion federal innovation fund to empower local governments to find local solutions for housing. So I do like the sound of this one. So our biggest problem in housing right now is that we have a supply issue and this would appear to address that, but sounding good and doing good.

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If implemented are two very different things. And personally, I'm not a big fan of a billion dollar fund that we really don't know who has access to and who gets to use and what's clear on that because it typically ends up that money just being spread around your friends. But at least it sounds like a plausible solution.

So next thing is that she wants to help with down payment support for first-time home buyers. So Harris's plan also includes providing up to $25,000 in down payment assistance for first-time home buyers, targeting working families who've consistently paid rent on time for the last two years. This policy aims to help over 4 million first-time home buyers over the next four years.

So to me, this one is just kind of giving away money and driving up more demand, which isn't really the issue that we have right now. At least not when rates start to decline. We do have a demand issue today, but it's not going to persist.

Plus it also doesn't address the actual issue, which is the cost of housing. And if you're just going to be throwing money around, I really don't think that we need to further add to the $35 trillion national debt that we already currently have, but that's just me next. She wants to challenge corporate landlords and implement some sort of rent control.

So Harris pledges to cap quote unfair rent creases and take on corporate landlords, a controversial stance as economists generally believe rent control reduces rental supply. She's also called for legislative changes to end tax incentives for corporate landlords who do not cap annual rent increases below 5%. Now, anytime the words federal government and control are mentioned in the same sentence, I'm generally pretty much against it.

And who gets to decide what quote unfair rent increases are. Don't get me wrong. I'm all for holding large controlling interests accountable for actions that hurt the consumer, but rent control is not really the best way to do that.

These types of actions or anything that you're going to do to these large companies really need to be done kind of on a case by case basis. And these decisions shouldn't be made with just blanket legislation placed on them because that just puts more power and control in the government and less in the market. All we need is for the federal government to be a ref and just make sure that competition's allowed to thrive.

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And most likely this kind of stuff is going to take care of itself. Okay. Now let's move on to the largest threat our democracy has ever faced.

Although he was president for four years already, and we're still all here and doing just fine. But Donald J. Trump, the biggest boogeyman that every institution running our country right now has seen in the last 30 years, at least according to the national media. But what are his plans to solve the affordability crisis? Well, first off, he says he's going to reduce mortgage rates and increase housing supply.

So Trump's plan focuses on reducing mortgage rates by slashing inflation and opening up federal lands for new housing construction. He also aims to quote cut unnecessary regulations to reduce housing costs. So with all things, Trump, this is a little vague on details.

How does he plan to slash inflation exactly? And what are quote unnecessary regulations that he's talking about? I'm not really sure on the federal land piece because it kind of depends on what lands he's talking about. Like, are we talking about national parks, which I would be against or other places owned by the government that I'm just not thinking of, but I am in favor of reducing any regulations on what it takes to build a home, which would be helpful in lowering the cost to bring new homes to the market. So I'm all for that.

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It just depends on what exactly he's talking about. Now, Trump also mentions criticism of zoning and environmental regulations. So Trump criticized zoning laws and environmental regulations as major obstacles to housing development, suggesting that these issues significantly drive up costs.

So in this case, he is getting a little more narrow on some of the regulations that he's talking about. And for the most part, again, I'm all for reducing some of the zoning. If that means making the process of changing zoning in certain areas a little bit easier, but not particularly if it means allowing massive apartment complexes to be built near residential neighborhoods.

And on the environmental regulation side of things, to me, again, it kind of depends on what he's talking about because there are a ton of environmental regulations that have just been created to make sure that government employees have a job. So for some of those, I'm all for getting rid of them, but there also are necessary environmental regulations related to things like runoff on construction sites that can impact water quality in certain areas. And this kind of thing has led to issues that we've seen in places like Flint, Michigan, and even locally here in my area, Grand Prairie, Texas.

So again, it just kind of depends on what we're talking about. Trump also does a direct link between immigration and housing costs. So he argues that curbing illegal immigration will help reduce housing demand and therefore lower costs.

However, experts note that this could also negatively impact the housing supply as immigrants make up a significant portion of the construction workforce. So on his point about housing demand, again, right now there's not a ton of demand, so that's not really a big issue, but also as a lender that deals with issuing home loans every single day of my life, if you don't have a social security number or an ITIN number, you can't really get a home loan. So illegal immigrants at least are not putting undue demand on homes for purchase.

Now, if you're talking about apartments and renting, well, then that's another story. But for right now, at least we do have an oversupply of spots to rent as well, and rents are actually starting to come down a little bit. So it doesn't seem like that that's really an issue either right now, even with the massive amounts of illegal aliens crossing the border at this time.

Now, just to be clear, this isn't a comment on the immigration issue as a whole, just how it relates to housing. And I'm sure that this could be an issue if everyone is automatically granted citizenship or something like that, which is being proposed currently by the blue team. But at least at this point in time, I don't know how illegal immigration is going to help with housing affordability.

But cheap labor does mean cheaper cost to bill. So again, I'm not arguing for it, I'm just stating what I know to be true as it relates to housing. Okay, look, no matter what team you're rooting for, if you're asking me personally, I think this whole thing is an illusion of choice.

Both the red and blue teams have their own brand of corruption. So I really don't have a dog in this fight. But when it comes to housing, if you want to drive down the price of homes, the solution is very simple.

We need more homes. And that means more building, more incentives for builders, and less regulations and costs that make building so expensive. And to be fair, both parties kind of touch on this problem.

But if all we do is stimulate buy-side growth without addressing the underlying issue of supply, then the cost of these homes is going to continue to rise. In fact, when rates start to come down significantly, which they probably will, it's just going to make things worse. And look, right now the government heavily subsidized agriculture, oil and energy producers, automakers, and even some parts of healthcare.

Believe me, I've got my opinions on all of that stuff too. But if we really want to solve the affordable housing issue, we need cheaper homes to buy, not just to rent. And that means incentivizing builders to construct affordable housing that's sold to families and not snapped up by big corporations looking to rent them out.

So if we're already in the business of heavy subsidizing anyway, why not throw the builders a bone and see if that works? I'm not saying it's the perfect answer, but it's a start. And really and truly, I just hope that we can all hold it together after this election and just try to get things back on track. We just need a little less hate, a little more love in this world.

And all of those lessons and values start in the family household. So let's help more families find the American dream that we were all promised was possible. That's my choice.

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All right, let's get into the heart, meat, and potatoes in the main part of this episode today. What if I told you that there was a home loan out there built just for you? No down payment, no closing costs, and it could be all yours if you're a first time home buyer. Sounds pretty good, right? And I'm sure you'd want to know more about how to get in on a deal like this.

Yes. After all, you're a first time home buyer with no cash to spare and no interest in paying any additional costs. So why wouldn't banks be falling all over themselves to offer you an amazing deal just like this? All right.

So if you didn't catch the sarcasm in my tone there, then the rest of this might go over your head a little bit, but I doubt that's the case because you're smart enough to know that if something sounds too good to be true, probably is. So let's get real here. Do you really think that banks, States, municipalities, or any of these programs are just handed out money for free? Of course not.

There's always a catch. So today I'm going to pull back the curtain on the so-called first time home buyer loan, what it is, what it isn't, and whether or not it's something that you and your clients should actually consider the good, the bad, the ugly. So let's dive in.

All right. First off, what is a first time home buyer loan? Well, in short, it's a fairy tale. It doesn't exist.

There is no specific loan product called the quote first time home buyer loan. So generally speaking, there are five types of loans that you can get to buy a home conventional FHA, VA, USDA, and jumbo. There are also a whole other subset of loans called portfolio products like bank statement loans, DSCR loans, et cetera.

And these are for people who don't fit into the traditional box, meaning that they have some sort of unique income credit or asset situation that doesn't fit into the big five. Typically, if you don't fit in that box, the loans harder to get and much more expensive. So for today, we're just going to focus on those big five.

And oh, by the way, let's take jumbo loans off the table right away. A jumbo loan is for amounts over about $760,000. So it's not really designed for first time home buyers.

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Although in this market, as prices go up, maybe one day it will be. So next we have FHA loans. Now these loans require a three and a half percent down payment, no exceptions.

They're often thought of as first time home buyer loans because of their lower down payment and looser qualifying guidelines regarding credit and income. But you don't have to be a first time home buyer to use an FHA loan. So then there's a VA loan, which doesn't require a down payment at all.

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However, you don't have to be a first time home buyer to use it. You just have to be a veteran. So it's not a loan that's available to everyone.

Now, what about a USDA loan? Well, this loan also doesn't require a down payment, which is awesome. But the catch is that the property itself has to qualify. It's got to be located in a designated rural area.

And this loan also comes with a bunch of restrictions like income limits, loan limits, and lower ceilings on your debt to income ratio. But again, you don't have to be a first time home buyer to use it. You just have to meet the requirements that the loan asked for and the house has to qualify.

And because of all these restrictions, that's why USDA loans aren't usually widely used. Lastly, we have conventional loans. Now this type of loan does have an advantage if you haven't owned a home in the last three years, not necessarily a first time home buyer, but rather someone who hasn't been a homeowner for a little while.

And this is kind of going to be a theme here because a first time home buyer is often classified as someone who hasn't owned a home in the last three years. So keep that in mind. Now, some of you might say, see, Mike, there is such thing as a first time home buyer loan.

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Well, sort of, but that lower down payment on this conventional loan also comes with some costs. First off, your interest rate is usually going to be a little bit higher. Your mortgage insurance is typically going to be more expensive and you do have to pay for a home buyer education class, which usually costs anywhere between 50 to a hundred dollars.

So while you might save some money upfront from your down payment, you're paying a little bit more in overall costs to get that loan. So when you look at the big five, only conventional loans have a specific first time home buyer option that allows for a lower down payment, but it comes with some additional expenses. All right, now let's talk about all of those ads that you've seen here from every mortgage company on the planet, promising these special programs just because you're a first time home buyer.

Well, the vast majority of these loans fall into a category that we call down payment assistance. So what is down payment assistance? Well, these are bonds and grants usually issued by state or local government entities that if you qualify, will give you a percentage of the home's cost to use towards your down payment and closing costs. Aha.

You might say there's that free money that you said didn't exist, Mike, hold on. Most of these special programs do come with a cost. First off, you have to meet the program qualifications, which typically include having income limits, minimum credit scores, and purchase price caps.

Some even require the home to be in a specific area and spoiler alert. These areas aren't usually the areas that most people are clamoring to live in. Hence the incentive.

Next most, if not all of these programs come with higher and sometimes much higher interest rates than you could get if you didn't use them. And depending on the program and the amount of money it offers, the rate increase could range from half a point to as much as one and a half points, therefore making your monthly payment significant higher. And these days, many of these programs also come with a payoff penalty.

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That means if you refinance this higher rate within three years of getting that loan, you'll often have to pay back all the assistance that you received. So you're locked into that loan for at least three years, unless you want to pay off all the benefit that you got from it upfront. In other words, again, it's not free money.

And by the way, every single loan that you do is going to have closing costs, appraisals, title fees, surveys, insurance, et cetera. Someone in the transaction is paying those costs, whether it's you, the seller or the bank on your behalf. But if the bank covers it, it's not free either.

They're going to charge you a higher rate to offset those costs. And again, most of these programs don't even require you to be a first time home buyer to have access to them. Okay.

Now to be fair, there are a few programs out there that don't raise rates or don't have a prepayment penalty or don't have tight restrictions on your home or the home's qualifications, but never all three of those together. And these loans are few and far between and usually don't last very long on the market. Often they're what we call community reinvestment act or CRA loans.

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So CRA loans are offered by banks to support low end and moderate income individuals and neighborhoods. They often come with lower interest rates or down payments as banks aim to meet federal requirements for investing in their communities. And by offering these loans, banks can improve their CRA ratings, which can affect their ability to expand and operate more branches.

But again, these loans are usually very specific about who they can offer them to and often only lasts for a short amount of time. It's kind of like finding the leprechaun under a rainbow. It can happen, but not everybody gets to see it and you better move fast because they disappear quick.

Now I'm sure someone out there will bring up a specific loan from a specific bank in a specific area that could be considered one of these unicorn loans. But my bet is that if I could dig into the fine print on that loan, I'd find something that makes it not quite as amazing as advertised. So bring them on.

Let me see. But this gets to the real crux of the first time homebuyer issue. While there are programs out there to help people who need assistance due to lack of funds to buy homes, like here in Texas, we have the Texas department of housing and community affairs or TDHCA.

And it's offering a program like my first Texas home loan, my choice Texas home, or we even have the state affordable housing corporation, which is what we call TSHAC offering assistance programs, tailored to first responders, teachers, and veterans. There's also something called the Southeast Texas housing finance corporation or Seth that offers down assistance like Seth's five-star Texas advantage program that provides eligible homebuyers up to 5% of the loan amount to cover down payment and closing costs. So these things exist and these programs can be incredibly helpful for someone who hasn't been able to save enough for a down payment and closing costs, but wants to stop renting and throwing money away every month.

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And they exist for that very reason and have helped thousands of people achieve the American dream of home ownership, but they aren't free money. And any bank or salesperson that pitches it that way is being disingenuous at best and outright deceptive at worst. So is there a first time homebuyer loan out there for you? No, not really.

Are there special loan programs that can save money out of pocket today and help you stop renting and give you a shot at home ownership? Yes, there certainly are. But are there some magical loans out there with no costs, no down payment and no restrictions and anyone can apply? Absolutely not. So these programs can be helpful if they're used in the right circumstances, which is why it's so important to talk to a lender who's going to give you the truth and lay out all your options so you can make an informed adult decision about what's best for you and your family.

Now there might be a rare, well-advertised loan product that seems to check all the right boxes. I've seen them. They do pop up from time to time, but they are rare.

And more often than not, they have some sort of a catch or unattainable requirement in order to qualify. And usually they're just chumming the water to get you and your clients to pick up the phone and call only to end up with a regular FHA or conventional loan. Because at the end of the day, that's what they all are.

A regular old home loan dressed up in a pretty marketing slogan to make you feel special. Because after all, it's your first time. So why would they take advantage of you? All right, guys, that is a wrap for today's episode.

I hope our dive into mortgage rates, first-time homebuyer options, and housing policies gave you some valuable insights to help you navigate this changing market just a little bit better. Remember, change always brings opportunity. So stay sharp and stay informed.

And don't miss my next episode with Corey Harris. So Corey is the president-elect for the Arlington Board of Realtors. And we're going to be discussing the potential merger between Arbor and the Greater Fort Worth Association of Realtors and what that could mean for our industry as a whole.

Now this is a local Texas story, but it's also a snapshot into what's happening all over our industry and markets all across the country. So tune in to find out what's really going on and if it could be something that's happening in your market. But guys, I appreciate each and every one of you for being a part of our community and for tuning in each and every week.

I really hope you have an awesome rest of your month. But until next time, be great humans, just keep grinding. Because life is what you make it.

So make it great. See you later.