Episode•September 8, 2022•22 min

Frugal Living with Jim Markus | Ep. 136

Jim Markus joins Tiffany this week to break down all things mortgage related, what's happening with the housing market right now and what you need to know as a buyer/seller. About Our Guest Jim Markus hosts Frugal Living, a podcast for smart shoppers and savers. He works as an editor at Brad's Deals, where he evaluates and negotiates deals for bargain hunters. He worked as a mortgage banker during the financial crisis in 2007 and in recruitment during the ensuing economic recovery. Connect with Jim Spotify: Frugal LivingApple Podcast: Frugal Living Connect with Tiffany on Social Media Facebook: Money Talk With Tiff Twitter: @moneytalkwitht Instagram: @moneytalkwitht LinkedIn: Tiffany Grant This podcast uses the following third-party services for analysis: Podcorn - https://podcorn.com/privacy OP3 - https://op3.dev/privacy

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Key Takeaways

1
Multiple mortgage options exist beyond the traditional 20% down payment requirement
Conventional loans allow less than 20% down but require PMI
FHA loans require only 3-5% down payment
On a $100,000 house, FHA allows $3,000-$5,000 down versus $20,000 conventional
2
Current market conditions favor buyers over sellers
Higher interest rates (5-6%) have reduced buyer pool significantly
Sellers are more willing to negotiate concessions and repairs
Buyers can request credits at closing for needed repairs instead of paying above asking
3
Post-2008 regulations provide stronger consumer protections
Stated income loans are no longer available
Underwriters require documented proof of income and assets
Mortgages cannot be sold without proper documentation
4
Focus on credit improvement rather than specific credit score targets
Three credit bureaus produce different scores; middle score typically used
Better credit leads to lower mortgage rates and higher approval likelihood
Fixing damaged credit is the biggest long-term savings strategy

Intro

Tiffany discusses the current housing market, mortgage options, and economic conditions with Jim Markus, host of Frugal Living podcast and former mortgage banker who worked during the 2007 financial crisis.
Jim Markus hosts Frugal Living podcast for smart shoppers and savers. He works as an editor at Brad's Deals evaluating deals for bargain hunters. He worked as a mortgage banker during the 2007 financial crisis and in recruitment during the economic recovery.

Frugal Living on Spotify Frugal Living on Apple Podcasts Brad's Deals

– Mortgage Types and Down Payment Options

Jim explains that the traditional 20% down payment mindset is outdated. Multiple mortgage options exist for buyers who cannot afford large down payments.

You don't need that. That's not always necessary. You can put down less on a conventional mortgage.
– Jim Markus

Conventional loans with less than 20% down (requires PMI)
FHA loans with 3-5% down payment
Lower credit score requirements for FHA loans

– Credit Scores and Mortgage Qualification

Jim advises against fixating on specific credit score numbers. Three credit bureaus produce different scores, and the middle score is typically used for mortgage decisions.

The better credit you have, the lower your rate on your mortgage and the more likely you'll be to be approved for a loan.
– Jim Markus

Tiffany shares her experience using an FHA loan as a single mom, putting down significantly less than 20% on her home purchase.

– Current Interest Rate Environment and Market Conditions

Jim explains how Fed rate increases affect mortgage rates. Adjustable rate mortgages (ARMs) are particularly vulnerable to payment increases as rates rise.

When your interest rate goes up on a mortgage, even by a point, like 1%, your monthly payment can go up astronomically.
– Jim Markus

The housing market saw unprecedented bidding wars with buyers offering tens of thousands above asking price, contributing to current inflation.

– Comparing Current Crisis to 2008 Financial Crisis

Jim notes that post-2008 regulations prevent many risky lending practices from the previous crisis. Stated income loans are no longer possible.

Underwriters are like, no, that's insanity. That doesn't make any sense at all. Prove it.
– Jim Markus

Unemployment remains at historic lows, unlike 2008-2009, providing additional economic stability.

– Buyer's Market Strategy and Negotiation Tips

Jim emphasizes that current conditions strongly favor buyers. Higher rates have reduced competition, giving buyers leverage in negotiations.

As a buyer, you're holding all of the chips. All the bargaining chips are in your corner right now.
– Jim Markus

Requesting repair credits at closing instead of paying above asking
Avoiding realtors and mortgage officers for negotiation advice (they're incentivized by commission)
Seeking flat-rate negotiation partners who aren't paid on purchase price

Resources

Topics

mortgageshousing market interest ratesFHA loanscredit scores2008 financial crisisbuyer's marketnegotiationreal estatefrugal living