3 Things You Need to Buy a House w/ Tammie Crainich Pt. 1

This is walk to wealth, Episode 21 My name is John Mendez and I am your host. Welcome to walk 12 Where I motivate and inspire people new to the world of personal finance by letting you all in behind the scenes of someone who's still on his way. Thank you for tuning into today's episode. For all my new listeners. Welcome. I'm glad that you're here. I'm glad that you can make it for all the old G's in the building. Welcome back home. Thank you for all the loyalty and all the support. Hi, everyone. Welcome to the walk to wealth podcast, I have a very special guest with me, my good friend, Tammy Kranich. Tammy, for anyone that may not know you, you know, what's your elevator pitch? Tell us about yourself.

Hi, John, thank you so much for inviting me, I'm so excited to talk to your listeners. I've been listening to your podcast myself. So I'm excited. It's an honor to like be a speaker, a guest speakers. And thank you so much. So I've been a loan officer in the mortgage business since 2002. I'm going to celebrate my 20th year this year. So it's kind of crazy to think I've been doing it for that long. So I've seen the market change many times. And basically what I've learned over the years is what makes me different than any lender is that I specialize in helping my clients integrate their mortgage into their long and short term financial goals. A lot of people think that a mortgage is just about the interest rate. And it's a fix and forget, and you don't have to think about it anymore. But it's not, there's so much more to a mortgage that people don't realize. And what I do is I help them manage their cash flow and equity position. Because at the end of the day, manage having a payment you can afford. And having an equity position so that you're not underwater are the two most important things when it comes to owning a house.

Definitely. Okay. And tell us a little bit about your walks. Well, you know, what got you into the mortgage industry. You know, how has that, you know, benefited your life on your, you know, your personal financial end. And I talk a little bit more to about, ya know, this past was a spring you went to the presidential retreat? That's sure. So like the specifics, but I know you have to you have originally a lot of loans to get invited to that. So you know, tell us a little bit about your entire walk, you know, how'd you get here?

Okay, um, so in 2002, it was summer, and I got laid off from my corporate job. It was the best day of my life because I realized very quickly I did not want like being a secretary. No offense to Secretary, I just wasn't a good one. And I got laid off from that job. And that summer, I decided I was just going to take the time to figure out what I wanted to be when I grow up. I was 27. At the time, I had done retail, I had done medicine, I had done now I was in corporate. And I really didn't know where I wanted to go. I was thinking I would go back to school. And I was just kind of taking like some odd jobs. I have a friend of mine was she was going to be out of her corporate job for two weeks, she was a receptionist at a company. And she had asked me if I wanted to cover for her while she was on vacation. For the two weeks, I would just go to work every day and cover the receptionist job and do her job for her while she was gone. So I was like, Okay, this is great. This, it was a commercial real estate company. And I thought, Okay, well, this will be good. You know, I don't understand commercial real estate. And everyone used to always tell me, I'd be great as a real estate agent. So I'm like, okay, so I met one of the owners, his girlfriend, she introduced me to the mortgage business. And she said to me, why don't you get into the mortgage business? And I was like, I don't really know if that's gonna be for me, I really don't know what a mortgage is. I don't know how to spell mortgage. You know. And if I back up even prior to that, a friend of mine around the same time had just gotten into the mortgage business. And he had also said to me, you should get into the mortgage business. And I was like, I don't I don't really know what a mortgage is. So after that conversation with her, she kind of started her own company. And she asked me if I wanted to come and work with her. And, you know, she would show me how to do everything I needed to do. It was quite the experience, to say the least. She basically had me doing all kinds of grunt work. Every piece of grunt work. You can imagine getting her coffee running to the store making photocopies. But there was something I knew there was something about it. So now fast forward a bunch of years I got into the business in the middle of a refi boom, very similar to what we just can't came out of. And I was almost one of those casualties, because the refi dried up very quickly. So now it was like 2005, the refi dried up very quickly, but the purchase market was still pretty hot. So I was in a bunch of different jobs, I had worked in a broker shop for most the earliest part of my career, I worked with brokers, then I had worked in a call center. And then I finally ended up in a real estate office and 2000 set I 2006, I started working in a real estate office. And I really got to understand how real estate agents think I really got to understand my value for as being in a real estate office. And I started to understand that real estate agents really, they needed me. Because there's so many people out there that don't really know what they're doing. They're just collecting a check, and it's very transactional. So I really started to make my niche market, real estate agents. And I didn't want to do presentations to talk about underwriting guidelines just spew off a bunch of underwriting guidelines, but I wanted to actually help them sell more real estate. So my mantra became, okay, this is mortgage news and information you can use to sell more real estate. And I've used that down to this day. Anytime I give a presentation to a real estate office, it's about okay, here are all the guidelines, but who cares? How is it going to help you guys sell more homes? How is it going to help you help your buyers understand what is going on in this market. So I've positioned myself to be I don't like to be looked at as a vendor, but more as a real estate partner, someone that's going to help you win deals, save deals, and close more deals, and help more families.

Exactly. And that's why we're here for to help families get into homes. And you touched on something a little bit that I honestly did not plan to talk about. But since you went over it, you said that you help people think of mortgage more than just the interest rate, but it helped them picture in terms like their entire financial plan. So yes, let's start there, you know, how, how do you go about doing that? Because for me personally, as well, I don't know, the most of my mortgages, I do know a little bit just because, you know, I'm now in the actual industry. So it's like, it's like something you have to know about, honestly, to be in a space. But um, for the most part, for even for me, like I think of mortgage rates, for the most part, just the interest rate. That's like the most important factor I don't really think of as how it could play into your overall financial picture unless I'm thinking about investing.

Right? Okay, that's a great, that's a great question, because so a lot of people think it's just about the pretty interest rate. But there's so much more to it than that the wrong interest rate in I mean, the lowest interest rate and the wrong mortgage product can cost you a lot of money, it really comes down to your payment. So, um, so what I do a lot of times most cases, I am the first financial person anyone has ever spoken to. Yeah, so you're trusting this big financial decision that you're going to make to someone on an intranet that you've never met? Yeah. Or they walk into a bank. And I will ask them, Well, did you and did you google your loan officer? No, most times they don't even remember the person's name. So if you're going to trust this person with this huge debt that you're about to take on, how do you not even remember their name? So I'm on a mission to help people understand. So when I say integrate it into your long and short term financial goals, I like to partner to make sure it's going to fit in. Are you a first time most people move every five to seven years? They do. They make a decision on their mortgage every three to five years. And life happens. You lose a job, you get a new job, you get promoted, you have a baby, you have baby number two, you have baby number three, baby number three usually means a bigger house, you get married, you get divorced, you're starting a family, your family is moving on. So all these life changes fit into what you're kind of mortgage you want. What really got me on this role is I had a client, I remember their names perfectly clear and they were my most favorite clients. And they he came to me and said to me, my son is going to be a doctor. He needs to go he wants to go to Cornell. I need to pay this mortgage off before he graduates high school, or I need it before he graduates his first four years of school so I can pay for Cornell. So at that time, his son was only like 10 or 11 years old. So we had to work out a plan so that he can get a 30 year mortgage so that he had the most flexible payment. And then he was going to aggressively paid off and we went through and every year But when we did our mortgage review, we were able to say, Okay, I'm on target. Alright, this is good. All right, let me actually let me double up on payments. Okay, this is good. Now I can, I don't have to make as many payments. So he was able to do it. And I'm happy to tell you that when he did, his son finally did graduate high school actually a little bit earlier than college, they were able to pay the mortgage off. So it's looking at it. And there's a lot of people who say that they can do this on our own. You know what, there's a lot of things we can do on our own. We can clean our own houses, we can clean our own cars, we can clean our own, we can walk our own dogs, we can make our own food. But yet we order out, we have housekeep clean house cleaners, we go to the carwash we hire dog walkers, because we want professional people to walk us through these steps. So that is what it is. So when you're first getting your mortgage, the first thing you need I need to know is is this the forever home? Or is this better than renting home? Or is this the mom is kicking me out? And I have to get a new house? I have to do something house? Yeah. So it's usually the first step. Well, then how do I help position you for the next one and the next one. And now when you make it to your third or fourth house, and you're in your forever home? And you've got your little family going? Well, now how do I help you get investment properties? How do you invest in real estate? How do you go into commercial real estate? How do you snap up a bunch of little condos and maximize your cash flow? And never in those conversations? Is it ever about the interest rate? It's always about what is the monthly payment? And how do I maximize that payment?

And so let's see, where do we start? She's you went through a whole lot right now. So if I think personally, at least from what I've seen, a lot of people first talked to lenders before he talked to agents. As you know, a lot of people try to like, you know, disregard the agent unless necessary at all costs and try to avoid agent. So if someone were to potentially start thinking about like, you know, potentially either moving out or mom's kicking them out, or whatever the situation is, how does one prepare prior to that? Or if they know someone's going to kick them out? You know, so prior to them actually meeting with you? How does one begin preparing and getting themselves ready? If they have, you know, the thought came to their mind?

That is it such a great question. So there are three things you need to buy a house, you need credit, you need income, and you need assets. Yes, there are programs that offer downpayment assistance, we could talk about that, and my opinion on that. But those three things you need, if you are weak in one of those areas, then the other two have to be exceptional. So credit, if you are first, you know starting out and you're listening to this and you're young, your high school age or college age, you have got to establish good credit. Having excellent credit is going to give you more opportunities, an excellent credit is 720. And above, we can work with lower credit, but 720 and above your credit is like your reputation. Once it's tarnished, or once it's ruined. It's very hard to fix. And fixing it is like trying to quit smoking or trying to lose weight. Usually you need help to do it. So rather than getting to that point, don't even start make it a habit to pay your credit cards off every month. No matter what credit cards are not bad. A lot of consumer debt and carrying balances is not good is not good. You want to be able to pay those balances off every month. So you have to live within your means. The second thing is you need to save money. There are downpayment assistance programs available. But there is nothing better than having a house with equity in it. So the minimum downpayment requirements 3%. And I think that's a really great place to start. If you've got excellent credit, and you've saved up a 3% down payment on a $300,000 house that's about 10 grand, that is money that you can save up in a year. Along with that is you need to save your money 10% of your take home pay should go in a savings account every week, every time you get paid no matter what you should pay yourself first, because then that day is going to come and there are so many people who are not able to buy houses because they don't have a downpayment.

Yeah, definitely. And so let's take you back to the beginning where you talked about credit a little bit. So for credit cards, I know I talked about credit cards on one of my episodes. I'm a big fan of credit cards and you know playing around with them I get a I may have too many credit cards for most people's liking or taste but it has been actually has seven credit cards. We talked about it at one time. Where are the points and everything Yeah, I'm one of the points guys as well. I love talking about points. But for credit, let's talk a little bit more about. So I know for, I guess national things like you can have a certain credit score those 500. But typically most lenders have like overlays on top of that. So like, let's talk about a little bit about like minimums, where should they be at least? And is there a point where you know, a high credit score doesn't benefit you anymore as well. So let's start there.

Okay, so the lowest you can go is a 580. But usually, if you have a 580, it's not the number that matters. It's the why is it a 580. And unfortunately, when you see if I've under in the five hundreds, it's usually defaulted student loan debt. It's missed payments on a car loan, it's repossessions, it can be back child support, a lot of times it has to do with federal debt. And that is very hard to overcome. The best credit score where it stops mattering is a 740, if you have a 747 40 and 800 are about are the same, same options, same abilities. So anything above a 740 should be everyone's goal. A lot of things are taken into consideration as well, like, how long have you had your credit. So if you just open up your first credit card, and you've missed a payment on it, your credit is gonna go right in the toilet that very quickly. But if you make payments on it consistently, they usually want to see a two year track record, it's good to have three active trade lines, and have them for about three, two to three years. So the minute you can apply for credit, you should, and I'm my husband's a big fan of points, we have enough points to fly for the rest of our lives probably never pay a dime. So he's a big fan. But you need to be able to manage that he could probably be a good guest for you talking about that. But yeah. As far as, and people think if they make the minimum payment that that's okay. But what you're doing is you're racking up a ton of interest, yeah. And then people life happens, and then you lose your job. And now you can't pay that credit card. So if you're going to apply for credit, you're looking at the long game. So you want to have at least three active trade lines, maybe a car loan, a credit card, like a store card, and then a Visa or MasterCard, and you use it paid off, use it, pay it off, use it pay it off. If it's the choice between eating, or paying your car payment, you need to pay your car payment, you're not going to die if you miss two or three meals, so you need to make your car payment. And then that is going to quickly give you excellent credit and give you the ability to buy a house when you're ready.

And so for credit cards, I just wanna make a quick disclaimer though we are talking about points and miles it is a game and just like any game, you can get addicted and you can find yourself getting screwed over extremely quickly if you don't play the game, right.

100% and I know nothing about this points game.

Yeah, exactly. Okay, so that's a good place to start. And then now let's get into any comm a little bit. So most of my audience obviously is like along the younger generation. You know, how much income would they need about daddy's to start aiming for? So that, you know, they could probably qualify for a loan, because you know, home prices here in this area are pretty expensive. So like if we're looking at a what condos on average go around for like 300 here and Stanford. So like how much would someone need for for that about?

So again, it depends on how much debt you're carrying. So but your incomes, there's a couple things to talk about with income. Number one, you want to at least have a two year job history. Now they do count school, if you're in a professional. So if you're, if you're graduating nursing school, and you get a job at and become an RN, those are considered professional careers. Legal, if you graduate law school, now you're an attorney, you you're a teacher, those are all considered professional careers, and they will count your schooling for those for those kinds of careers as part of your training. What they don't like to see is that you've had 12 jobs, you were at Target, you are at Walmart, now you're at the gas station down the street. Now you're here, then you don't like to see job hopping when it's not the same line of work. So if you went from FedEx, and you were at FedEx for a year, and now you're at UPS for a year, it's the same line of work. Yeah. If you were an airline pilot for Delta, and now you're an airline pilot for Southwest, that's okay. You're still an airline pilot. So they're looking to see are you in the same career? So you want to stay in the same line of work for at least two years. Couple things to that. This younger generation is all about being self employed, making money creating wealth, like your podcasts into shows. You have to be self employed for two years before your income couldn't be counted. And they're looking to average your income. So what happens with a lot of self employed buyers is they don't want to show all the money that they made, because they don't want to pay the taxes. Yeah, understandable. But if you don't show, if you tell the IRS, you only made $20,000, then that's all we can count as income. So when you're self employed, you're trying to buy a new house, and you're trying to avoid paying taxes, it doesn't connect. So either you pay your taxes, and be grateful that you have a self employed job that allows you to pay taxes, or you can't buy a house. So that's one thing about being self employed. Another thing is, a lot of people have a side hustle. So they'll have their regular full time job. But then they also have a side hustle, their tutor, they coach on the side, they do all these side hustles. That's great. But if your side hustle shows negative income, that negative income is going to ruin is going to affect your regular job. So you want to make sure you're always showing positive income when it comes time to buy a house. And then your question was about how much do you need? Yeah,

so let's assume because most people on average, sorry for interrupting at least according to Nar, if I'm not mistaken, I read the report about homebuyers and sellers. And he said, on average, most people carry about like 30,000 in college loans about so using that number to buy a $300,000 condo, assuming they have no other debts. How would that how does that look like numbers wise.

So if you're counting, if you've got $30,000 in debt, we're gonna have to count about $150 a month as your monthly obligations. So even if the payments in deferment, if you don't, if you're not making payments, we have to count a percentage, there's a couple of different either it's a half a percent of the balance, or it's 1% of the balance depending on who depending on the program you're in. So if you're doing $30,000, that's $150, we have to count right as part of your monthly debt, and then throw on a five or $600 car payment that that counts. So now you're chipping away at to what you can afford, yeah, you usually need in this area, if you're making about 60 to $70,000. And you have an average, like I don't want to say normal, but like, like a $300 car payment. And you're carrying small student loan debt, usually 60 to 75,000 is the number that you're going to need to make that work. But that depends again, on how much debt you have. So my my thought on student loans is, I know a lot of people rack up this D take out these student loans. But when I was in school, I paid my student loans as I was going, Yeah, so there's nothing that says you can't pay your student loans while you're in school. When I was in school, I was working, and I was paying my student loans as I went, so I didn't rack up this debt. So we don't have to pay. We don't have to take on all this debt. We can just pay our student loans as we go. Yeah, definitely

took a slightly different approach. And then I did I when I left school two years in, but for the two years that I did have student loans, I use it to invest. So all my student loan money is now in index funds, and Tesla, and yeah, everything people do that. Yeah, so all my student loans, they're all just they're all in high. Pretty much very, I have one with a debt, I have a couple of fidelity. And some of them have literally zero expense, expense costing you. So it's like I'm not paying for them to be managed. And then one of them was with Schwab, which is my high dividend one. So every quarter, I'm getting dividends and that's paying pretty well. And so yeah, that's what I did with my you

should be using those dividends to pay the student loans down.

I haven't thought about that, because I just normally just reinvested dividends, I just had to go back into behind it,

and I have to pay those student loans, people think they go away. And I will tell you that kiss of death more than anything else, the kiss of death is not is missing payments on your student loans. Yeah, my goal cannot recover from that

my goal is to pay off my student loan by the end of this year. And luckily, it doesn't take that many houses to pay that off. Because I'm only 20,000. And if worse comes to worse, and I have to sell. I just set off and pay it pay it all off. Because I made way more than I then what I invested. So I'm in a pretty good situation right

now. If since you're not in a position to buy a house at this, at this point in time. Yeah, just keep going. But then at some point, you're gonna have to know before you buy a house, you're gonna want to pay those off.

Yeah, the goal is by the end of this year, the goal is by the end of this year. And then the third thing that we talked about, you said is assets. Yeah. And so you also talked about paying yourself first. So for someone starting off, you know, which route would you suggest going with that

10% of your take home pay is the bare minimum. Yeah. So if you get $1,500 A week, you know, or $1,500 every two weeks, then you should be taking $150 of that money and saving it, do Robinhood or Schwab. And just, you know, you may not have enough to invest, because I think Schwab has probably maybe $5,000 that they want first. So you just put $150 in there. And then when you get to $5,000, then you can do what's called split stocks, where you pick five of your favorite stocks, and divide it among 5000 to $5,000. And then now every time you get every time you pay yourself 10% of your take home pay, you can take that money and invest it and split it among those five stocks. And you'll see how that will grow over time.

Yeah, definitely. So now let's shift gears a little bit. So um, most people now, if I'm not mistaken, are waiting longer and longer to buy their first home, if I'm not mistaken, he talked a little bit more about you know, why home ownership is actually way more important than people realize, and why renting for the most part is doing people more harm than good.

So my thought on this is a lot of people, you have to live somewhere, right? So either you're living in mom and dad's basement, you're gonna live in a cave, you're gonna live on i 95 somewhere, or you're gonna have to rent. So you need to live somewhere. So your choices, I mean, basically, you have three choices you can live with stay with your parents, you can rent, or you can buy your own place. living with your parents work for a while, you know, I did it as long as I could. So it works for a while. And in that time period, you should be saving money. The second option is to rent, when you're renting, you're actually paying someone else's mortgage, and you're paying 100% interest, everybody's always concerned about what the interest rate is, but you're paying 100% of what someone, someone else is making money on you on you. If their mortgage is $2,000, and they're charging you 25, they're cash flowing, so you're paying 100% interest on that, at the end of five years, you have nothing left. Now, when you're buying, yes, there's a little bit of money that you have to pay up front, we've got down payment, we talked a little bit about we've got closing costs, so maybe it's going to cost you $20,000 to buy your first place. But then in five years, you're going to have equity to show for it. I don't have the exact numbers to give you. But if you just keep making those payments, all of that principal payment is being applied towards your equity and your rent five years later, you still have nothing

before. So for anyone that may not know what do you mean by equity? What's equity? No equity is

the difference of what you owe on the house versus how much of that is yours. So the equity is your money. So for example, a person who has no mortgage but owns the house with no mortgage, they're sitting on a pile of cash, that entire price of that house, if it's a house for 300, a condo for 300,000. With no mortgage, they essentially have a $300,000 asset. If it's if it's worth 300,000, and they owe 150, they have 50% equity, so that 150 is still held by the bank, but the other 150 is theirs, it's their money.

And then once someone starts accumulating, someone has this, you know, this equity, they bought their first home, they're paying it down, and the home prices are going up slowly. What can you know, what opportunities does he open up for them once they start getting this equity.

So that's why equity position is so important. You want to at least have a 20% equity position. Once you have 20% or more. Now you can start tapping into that equity a little bit that cash that's yours to do other things with, you can take out a 10% home equity loan and tap into the free equity not free but tap into the equity that's yours and buy an investment property or take that money and invest it into the stock market into the s&p or take it and maybe do a rehab property, buy a small place and fix it and flip it. So there's lots of things that you can do and what's nice about it is you borrow that money then you pay it back then you borrow it again. So every time so when that so that becomes money that is yours to do with whatever you need to do. Some people can be foolish. I think it's foolish, but you don't want to pay bills with it. Although it happens people get themselves into concern Over debt. Now we use that equity to pay off bills. Some people will use that money to go on lavish vacations. Some people use it to buy vacation homes, you can use it for all these things. You can use it to buy investment property, as we said, and you can buy it to do fix and flips, which is a fun thing to do with it.

Thank you all for tuning into today's episode. Again. I'm your host, John Mendez. You can find me at John Mendez underscore realtor and at walk to wealth on Instagram, make sure to subscribe and leave a positive review. If you're loving the podcast so far. New episodes released every Sunday. I can't wait to see you on the next episode.