Join John Rush in a compelling conversation that touches on the nuances of market dynamics and personal finance. This installment features expert analysis on what might influence mortgage rates in the coming months, the influence of the bond market, and how these elements interact with broader economic indicators like inflation and unemployment rates. With practical advice from industry expert Kurt Rogers, uncover the strategies homeowners can employ to maximize returns on their biggest investment, their homes. Additionally, John breaks down the complexities of seasonal changes and home maintenance with practical advice. He addresses Colorado’s unique weather challenges and offers
SPEAKER 04 :
This is Rush to Reason.
SPEAKER 05 :
You are going to shut your damn yapper and listen for a change because I got you pegged, sweetheart. You want to take the easy way out because you’re scared. And you’re scared because if you try and fail, there’s only you to blame. Let me break this down for you. Life is scary. Get used to it. There are no magical fixes.
SPEAKER 07 :
With your host, John Rush.
SPEAKER 18 :
My advice to you is to do what your parents did! Get a job, Turk! You haven’t made everybody equal. You’ve made them the same, and there’s a big difference.
SPEAKER 10 :
Let me tell you why you’re here. You’re here because you know something. What you know, you can’t explain. But you feel it. You’ve felt it your entire life. That there’s something wrong with the world. You don’t know what it is, but it’s there. It is this feeling that has brought you to me.
SPEAKER 05 :
Are you crazy? Am I? Or am I so sane that you just blew your mind?
SPEAKER 06 :
It’s Rush to Reason with your host, John Rush. Presented by High Five Plumbing, Heating, Cooling, and Electric, where every call ends with a high five.
SPEAKER 03 :
And we are back. Hour number three, Rush to Reason, Denver’s Afternoon Rush, KLZ 560. Kurt Rogers joining me now, Affordable Interest Mortgage. Kurt, how are you?
SPEAKER 20 :
I’m doing fine on this beautifully warm day before the freeze. And the sun’s still up a little bit. Yeah.
SPEAKER 03 :
And it’s past five.
SPEAKER 20 :
It’s past five, yeah.
SPEAKER 03 :
So we’ll take it. Keep going. We’ll take it. Yeah, and, again, not trying to be depressing or anything along those lines. But, yeah, we’ve got some cold weather coming in over the weekend, most likely some snow as well. And I’ve tried to prep everybody along those lines as much as I can, Curt. And, again, it’s Colorado. These things happen. This is normal. Yeah, and for all you old-timers, natives – You get it. I’m not really talking to all of you, but we’ve got transplants and people that maybe haven’t lived here for a super long time that maybe haven’t experienced some of these things. So you need to make sure that you’ve got yourself prepared and dialed in and warm clothing and got things taken care of at home. And the last thing you want is problems when it’s cold out.
SPEAKER 17 :
Make sure all your faucets outside are definitely shut down.
SPEAKER 03 :
And if you’ve got some outside walls where there’s some plumbing on an outside wall, wouldn’t it be a bad idea, especially overnight, to open up your cabinet doors and let some of that heat in to kind of keep those pipes and things warm? It doesn’t hurt anything at all to do so. No, it doesn’t. And especially those, again, if you’ve got a wall, an outside wall where it’s going to be colder than an interior wall, wouldn’t be a bad idea to do that.
SPEAKER 17 :
We actually do that. Our main sink is exterior wall. And, I mean, it’s only got like three, four inches of insulation. So what we do is give it a slow drip.
SPEAKER 03 :
Yep. Doesn’t hurt anything at all.
SPEAKER 17 :
I have no problem filling up a bucket of water.
SPEAKER 03 :
That’s right. So those of you listening, those are some things that you can do, and it will help out immensely along those lines. All right. Talking about homes and mortgages and so on, and Kurt, again, we don’t have a crystal ball, although our first meeting of 2024 and kind of looking down the road in 2024 and what things we’re going to do and so on, I think the only thing that we may have been a little bit off on is I felt like Once the election was over, because I really felt like we’d have a change of power at that point. And I did feel like early in 2024 that when that happened, we see some things open up real estate market wise as we entered into the latter part of the year. And that did not happen like I thought it would.
SPEAKER 17 :
I think that’s a six-month delay.
SPEAKER 03 :
Okay.
SPEAKER 17 :
With where the economy was and some of the things that Trump has talked about with tariffs and things he’s going to do, it’s made the market a little uneasy. Inflation numbers are coming down. You can’t argue with those. The unemployment numbers that you keep hearing that one minute is this, one minute is that, they’re fictitious and they’re going to start to unfold. But once he gets in and he starts the movement, it’s going to settle. I just think we’re six months off.
SPEAKER 03 :
And you know what? I can’t argue that. I really felt like people’s confidence would change once the election was over. But to your point, still a lot of uncertainty around, you know, what’s happening in Israel, what’s happening in Ukraine with Russia and things along those lines. And I just think that a lot of people are like, OK, let’s see what happens once he’s actually in office and they’ll change some of their thinking and perspectives and so on. And that’s my thought.
SPEAKER 17 :
Well, we talked about Israel and Afghanistan, and we said once he gets here, they’re going to stop. Well, before he got there, he’s taking care of Israel. Right. I do not feel it will be much longer before Afghanistan goes away.
SPEAKER 03 :
Ukraine, you mean.
SPEAKER 17 :
Oh, I’m sorry. Ukraine goes away.
SPEAKER 03 :
Agree.
SPEAKER 17 :
I agree. Those are going to be settled quickly.
SPEAKER 03 :
I agree. Okay, so when it comes to the mortgage, and this is another thing where there’s a lot of confusion, I think, at times. Some folks really understand the correlation. They get it, but a lot don’t. Explain the correlation between the bond market and mortgages and what people should be looking for if they’re looking to see what rates are going to do.
SPEAKER 17 :
The bond market is determined by the 10-year Treasury bill, which affects the mortgage rates. That’s why they call them mortgage-backed securities. Okay. And whatever the bond market is, like right now it’s 4.7. So if you want to have an idea what a 30-year mortgage is, you’re going to take about 2.5 to 2.75 and add that on top of whatever the bond market is. That’s going to be your what we call par rate. That margin is what the banks make. And that’s how they pay for everything. So that’s how you’re going to see that. That was all indications with inflation and unemployment going in the direction. That was going to drop back down into under four to three, three and a half, which is where we talked about rates being five and a half to six. Right. That’s not happening. Not going to happen.
SPEAKER 20 :
Now, it should have. It should have. But it hasn’t.
SPEAKER 17 :
But when the feds lower the rates, they’re lowering short-term loans because that’s what the banks get paid the difference, which is 3.25 is what the banks make because the feds’ fund rate is 1.75. So when you add that together, that gives you your prime rate. And that’s what the banks loan money, the government loans money to the banks for. So short-terms, car loans, home equity lines of credit, credit cards. Now, the credit cards, people aren’t moving on that at all. I’ve seen as high as 29.
SPEAKER 03 :
I’ve seen 32, 33.
SPEAKER 17 :
And I’m like, yeah.
SPEAKER 03 :
Yeah. It’s crazy. Yeah. And they’re making a boatload of money on that.
SPEAKER 17 :
Yeah.
SPEAKER 03 :
And by the way, some of their returns are saying so.
SPEAKER 17 :
CFPB just is suing CFPB, who is Capital One.
SPEAKER 03 :
And their profits are doing extremely well, and a lot of that’s because those interest rates on those credit cards are just making them bank right now. Yes, it is. So anyways, that’s a side note. But for those of you that are always wondering, okay, what are the rates going to do, you know, so on and so forth, just watch. that bond rate and if you see those start to tick down and there’s a lot of and we talk about this with other guests and so on you know during the week and there’s a lot of factors that come into play as to cons you know as to the confidence in the market and so on as to what those do i predict and i don’t think i’m going to be wrong here let trump get in office Let him do a few things, not only on the energy side, but some other things that he’ll be doing day one. And I think within 30 days, I don’t think I’m exaggerating here, watch for those bond rates to start dropping ever so slightly once he’s in about 30 days.
SPEAKER 17 :
I don’t disagree with that. They have been going up lately except for today. With the PPI numbers that came out, and they were lower then, and the CPI numbers came out, the stock market’s changed a little bit, and that 10-year bond started going down today, and we got a little bit of reprieve. I think we’re going to see it vacillate a little bit for a week, two, and then it’s going to consistently go. Once the stock market gets comfortable with this direction, it’s going.
SPEAKER 03 :
I think you’re right. We’ll see. Next time Kurt’s on in February, we’ll have conversation along these lines and see how accurate things are. But I would anticipate some changes along those lines. All right, we’re going to take a break. We’ll come back. We’ll talk about a few more of these things. Not only that, but when should you look at refinancing? Again, some of you may be looking at all of that wondering, hey, I do need to make a move. What’s my timing going to be like when it comes to some of that? We’ll help you with some of that as well. Geno’s Auto Service, again, cold weekend coming up. Make sure your vehicle’s ready to go as well, not only your house but your vehicle. Also, genosautoservice.com. Don’t forget, Geno starts with a J.
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SPEAKER 08 :
This is Rush to Reason on KLZ 560.
SPEAKER 03 :
And we are back, Rush to Reason, Denver’s Afternoon Rush, KLZ 560. Myself, Kurt Rogers, Affordable Interest Mortgage. If you want to call Kurt directly, 720-895-0500. That’s Kurt’s number. You can call him directly, ask questions, really, anytime. Just find out, hey, I’m thinking of doing X, Y, and Z. Kurt’s a great resource and can help you with those things. For example, some of the things we’re going to talk about right now is, Kurt, there’s people out there that have probably been waiting, thinking, you know, I need to make a move. You know, we want to do X, Y, Z. We also don’t want to do it when interest rates are where they are now. But on the same token, we don’t want to miss the window of opportunity on the buying side because it is a buyer’s market right now. So there’s a lot of people, I think, out there just on the fence trying to decide. what to do and really have no real idea what they should do because they keep hearing everybody around them well you know don’t get rid of your you know three and a half percent mortgage you have right now because that’ll kill you if you do you’ll never have it again well true but you’ll also have a different house and have different set of circumstances and and and and and and that should be in my opinion uh the leading cause of why you would do things not the current rate you have
SPEAKER 17 :
You’re talking about somebody refinancing?
SPEAKER 03 :
No, I mean moving. They’re looking to make a lateral move or a move up or maybe even downsize and make a move down.
SPEAKER 17 :
If you’re looking at buying a house and you’re holding off now because of where rates are, I understand that thinking. But some questions, some basic questions you need to ask, to me, you ask yourself, where do I think they’re going to move to? So if the rates right now were 7%, where do I think in a year from now, because I don’t like 7%, where are they going to be? Well, 6%, 6.25%. Okay, what’s the difference between 7% and 6.25 on a half million dollars? It’s 248 bucks. I’ve got a customer right in the process of doing that, and I just showed these numbers to him. So that $248 is what they’re going to save, but they’re going to wait a year to get it. Homes are appreciating year after year, according to the 2024 statistics, 4.76%. Okay. So in a half-million-dollar house, that’s about $23,000. That’s in a slow market because right now there’s a 45-day supply of homes. Okay. The funny thing about that, of the homes that are selling, 15% of them are selling for over sticker. So people think that everything’s being discounted because of rates. That’s not true. 37, 30% of them are being negotiated. And what that means that the seller is giving you concessions or lowering the price to get the home to go away. 50% of them are just as normal, normal deal. So we’re not losing depreciation in our homes. Well, if the rate at seven is slow people down, when the rate goes to six and a quarter, what do you think is going to happen? The market’s going to go up. Now all of a sudden, the homes are going to be worth more. And as they become worth more, that half a million dollar house at 6% now costs you $530,000. So you’re going to spend $30,000 more to buy it to save $248,000 a month.
SPEAKER 03 :
Which it comes down enough and you feel like you want to refi or refi.
SPEAKER 17 :
Yeah.
SPEAKER 03 :
Right?
SPEAKER 17 :
It works. Run the numbers. What do the numbers tell you that works for you? Use yours. That’s what I say. What do you think it’s going to go down to? It’s not going to go back to three to four. Especially not in 12 months.
SPEAKER 03 :
No. In fact… Not saying we’ll never see them again because you never want to say never. I learned that quick. I don’t know what’s coming down the path down the road. On the same token, this is, you know, Kurt and I talk about this a lot during this particular hour we do once a month. A lot of people look at rate like people look at buying a car on payments and what is the payment versus what is the overall deal give them when it’s all said and done. And I had a conversation with a business owner just yesterday. We were talking about some of these same things. And I am one, whether it be buying a business, selling a business, buying a house, buying a commercial building, whatever the case may be. To me, it’s not all about price. It’s the deal itself. In other words, what am I getting out of this? When it’s all said and done, how’s it structured? You know, how’s it going to work when it’s all done cash flow wise and so on? And to me, Kurt, those are the more important things than in this case, what’s my rate?
SPEAKER 17 :
Well, see, that’s a business owner. What’s my net? I’m going to invest this. I’m going to pay this. What am I getting back for it? I don’t care what the rate is to get me there. What’s that dollar figure I’m paying? Instead of focusing on rate, focus on mortgages, how much interest am I paying? When I combine my interest on car loans and I combine them on credit cards and a house.
SPEAKER 03 :
Across the board, right.
SPEAKER 17 :
Across the board, I’m paying way too much money in the interest going out, which is affecting me. I could pay a higher rate and save more money.
SPEAKER 03 :
And as I’ve said numerous times in the past, and this is something that I’ll make sure I explain again because I always get a comment on this. This is one of those topics, and whenever I say this, I usually get some questions on or a, hey, I never knew that because nobody’s ever explained that. And even though I’ve explained this particular thing, I mean, we haven’t heard on now for nine years plus, and I’ve explained this since then because it hasn’t changed. Right. The one thing that most people don’t take advantage of enough, if you ask me. Now, I understand that at some point in time, you may get to where you’re in your quote-unquote forever home. Okay, fine. If that’s you, I’m not talking to you. But for a lot of other people, you’re going to move periodically for whatever reason. And the way the IRS rules are, and it’s an incentive to get people to buy and sell homes, is if you’re single filing single, you can have up to a $250,000 gain. Profit. within primary residence within two years you gotta be in the home two years it’s gotta be a primary residence but once those two things are met so I’ve lived there two years as my primary residence if I have a capital gain on the home in other words if I paid 500 I sold it for 650 And I made $150,000. There’s no capital gains on that.
SPEAKER 01 :
It’s tax-free.
SPEAKER 03 :
No taxes due. Single. That’s single. If you’re a couple, it’s up to $500,000. Yes. So you can make up to $500,000 tax-free every two years on your primary residence. No capital gains owed. Where this got messed up years ago is there was a lot of misconceptions, even from accountants, where they would say, well, yeah, that’s all fine and dandy if you buy a more expensive home. That has nothing to do with it. You don’t even have to buy another home. That is irrelevant. It’s the sale and capital gain on your primary residence after that two-year time frame is met. That’s all it is. It has nothing to do with what you do with the money thereafter. You don’t have to buy a more expensive home. You don’t have to buy another home, period, if you don’t want to. If you just want to cash out and go to the retirement community, you can do so. The other misconception was, well, I can only get that one time after I’m 65. That has nothing to do with it either. There’s no age limit on this, young or old. And my point is a lot of people forget that you’ve got that freebie on the capital gains side. that if you look at buying and selling the right homes in the right areas at the right time the rate has nothing to do with it kurt because you’re going to make enough money on the end of it that i just said because if you you you don’t do it because you think the rate’s a half point too high you miss out on that opportunity you miss out on the opportunity that i just said take 250 000 at 20 capital gains that’s a whole lot it’s a huge number that’s a large amount of money you’re losing that’s right now It’s also why, and nothing against these individuals because I think they’ve learned something most people don’t know, it’s why most high-end homebuilders have their own home they live in, and they sell it every two to three years. Why do you think they do that? It’s not their forever home, even though they built it. And a lot of people think, well, man, you built this custom home for you and your wife and your family and so on, but yet now you’re selling it. Well, they’re selling it because of what I just said. If they could do everything at cost… and they have an opportunity to make up to $500,000 tax-free, why wouldn’t they? And I’ve known builder after builder after builder over the years, and at first, and I learned this, by the way, a long time ago, that’s the advantage of having auto repair shops, is you meet a lot of people. And I had a guy way back in the day where he would build a custom home and he would live in it for about two to three years and then he would sell it. And so one day he’s in my shop and, you know, and he was kind of a gruff guy, by the way. He wasn’t one of these guys that was, you know, all warm and fuzzy. He was kind of a gruff guy, but also a guy that knew money really well. And I watched him closely. And so one day he was in and we started having some conversation. I said, OK, so I got to ask. Why do you move every two to three years when you’ve built these? You know, I knew where these homes were.
SPEAKER 02 :
Nice homes.
SPEAKER 03 :
You drive by them, and they were gorgeous, beautiful homes. And I would say, you know, why are you selling these every two to three years? He explained to me what I just got done explaining to you, Kurt, and a light bulb in my head went off, and I’m like, oh, man, no one’s ever told me that. And it’s why he, as a developer, would build his own home and sell every two to three years because he had a… Think about that. If you did that every two years, you can make $250,000 a year tax-free. The example you used at $500,000 to $650,000. Let’s say it takes three years to make $150,000.
SPEAKER 17 :
If you could put… money into a stock and make $150,000 on it in three years and not have to pay any taxes on it, would you do that?
SPEAKER 03 :
Most would.
SPEAKER 17 :
Absolutely.
SPEAKER 03 :
Yes.
SPEAKER 17 :
I’m going to put in $200,000, I’m going to make $150,000, I’m in. It’s the same thing with a house.
SPEAKER 03 :
The difference is… People look at the stock market, well, sometimes emotionally, but most of the time you just look at it unemotionally and here’s an investment I’m going to make money on. The problem with homes, Kurt, and this is my opinion and what I’ve seen over the years is, and this is one thing he taught me as well, the one thing he said was, John, if you’re going to do this, there’s one catch. Don’t get attached. Yeah, you can’t think emotionally and you can’t look at this home as your forever home and you can’t be emotionally attached to it, because if you do, you’ll never sell and you won’t take advantage of the things that I’m teaching you here. You can take advantage of. So hold on loosely, realizing that this may not be your forever home, but if you’re going to do it to make money, here’s how you do it.
SPEAKER 17 :
There’ll come a time where you’ll quit. You may.
SPEAKER 03 :
That’s right. And he did, by the way. He was one of those where it got to a point where he’s like, okay, I’m done. I don’t need to do this anymore. Just pay cash for it. Just leave it alone. Don’t care. I’ve made enough money. I’m good. But he’s the one that taught me that, and I’m talking, Kurt, 30-plus years ago, That this is how you can do this and roll that money either into the next one and the next one and the next one. Or you can cash out or do whatever. Bottom line, do whatever you want to because you’ve got the ability and there’s no rule saying you’ve got to buy a more expensive home. You can cash out tax-free up to this dollar figure depending upon your tax status and away you go.
SPEAKER 17 :
You bring up a good point with that. Like you said, you must live in the home two years. Right. Two of the last five. Right. So if you rented it or if you own it and you want to rent it for a year and then do it, you still get it because you have to live in it two of the last five.
SPEAKER 03 :
Your primary residence, that’s all you got to do. That’s it. That’s it. And again, a lot of the reason why people don’t do this is because you get emotionally attached and it comes down to, well, you know, I love where the kids go to school and it’s convenient on this and that and so on. And my question always back is, OK, do you want to get to where you can retire someday? And I’m talking to guys like Al Smith from Golden Eagle Financial. You know, do you want to get to that point someday? is that not your goal and if it is then what are you doing to try to achieve that your home can be a great way to make that happen is my point especially as they appreciate it you know anywhere from in the colorado market that we’ve been in for the last you know 30 years kurt absolutely absolutely you can make that money pretty quick yeah where again a one or two point difference on the mortgage with everything i’m just talking about becomes irrelevant yeah but 248 a month Looking at everything I just said.
SPEAKER 17 :
And you’re walking over thousands to save the $240,000.
SPEAKER 03 :
In some cases, tens or hundreds of thousands.
SPEAKER 17 :
There’s some loan programs out that even make that program even better for you, especially now.
SPEAKER 03 :
We’ll talk about that in a moment. We’ll come back and do that. High-five plumbing and electrical. Again, as we head into this storm this weekend, coming in tomorrow afternoon, make sure you’re dialed in with your home. High-five can do that for you. Even if you have problems during the storm, give them a call, 877-WE-HIGH-FIVE.
SPEAKER 04 :
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SPEAKER 03 :
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SPEAKER 09 :
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SPEAKER 03 :
All right, Cub Creek, where if you’ve got furnace problems this weekend as well, please keep them handy as far as a… Somebody to call or if you need something, and you can do that by going to klzradio.com. Get that number written down. Have that in your phone because if you have any issues at all, Hunter needs to be your first call. Cub Creek Heating and Air. Find them at klzradio.com.
SPEAKER 07 :
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SPEAKER 03 :
All right, Kevin Flesch, if you need help civilly speaking or criminally speaking, Kevin is my attorney, by the way. He’d love to help you out as well. Give Kevin a call today, 303-806-8886.
SPEAKER 12 :
Here’s why you need personal injury attorney Kevin Flesch on your side. He understands the way the jury thinks. In the context of a personal injury case, you’ve been hurt by someone else’s negligence. The idea is that you’re going to try to recover so that you can get back to where you were just prior to that incident occurring. What that really means from a jurist’s perspective is that you’re going to be asking them to award you money. So when we talk about fairness, we’re talking about six people that you don’t know. Those six people view the evidence and make a unanimous decision that will decide what the fair value is. When you’re the one who’s hurt, you have a good idea of what you think it’s worth. The question is, can you persuade those other individuals whom you don’t know and were witnesses to believe that’s what the case is worth? Kevin Flesch understands the way the jury thinks. Call now for a free consultation, 303-806-8886.
SPEAKER 06 :
Back to Lush to Reason, presented by High Five Plumbing, Heating, Cooling, and Electric, where every call ends with a high five.
SPEAKER 03 :
All right, we are back. Rush to Reason, Denver’s Afternoon Rush, KLZ 560. Kurt Rogers with us, Affordable Interest Mortgage. Kurt, one thing we don’t ever talk much about, and people have aspirations. I’m not one of these, by the way. As much as I would love to build a custom home and do everything the way you want versus the way somebody else wanted, I’ve just never had the time or patience or wherewithal to go through all of that. You know, go find the lot. Get an architect. Figure out what home you want to build. Go through all the rigmarole of doing it. Be on site every day while they’re building it. It’s a lot of effort that has to go into it. Now, with that being said, just because I don’t want to do it doesn’t mean somebody out there listening doesn’t want to. And for a lot of people, it’s a dream. It is that last kind of forever home thing we were just talking about a moment ago. They’ve done well. They’ve been able to accomplish the things they want to do. And they want to build their last home and retire in that and live in it. until they die kind of a thing. How does that work if they decide that they want to go out and make that happen? Walk us through the steps in making that happen.
SPEAKER 17 :
They want to just buy their forever home.
SPEAKER 03 :
Build it. They want to start from scratch. They want to go buy a lot and build one.
SPEAKER 17 :
Okay. My first recommendation is there’s two processes. First, go buy the land.
SPEAKER 19 :
Okay.
SPEAKER 17 :
If you buy the land and the house being built at the same time, the bank’s going to loan you roughly 80%, 90% of the two numbers combined.
SPEAKER 19 :
Okay.
SPEAKER 17 :
So let’s say the house is $700,000 and the land’s $300,000. Okay. They’re going to give you 80% of a million dollars. You’re good. So $800,000. So now you turn around and you go out and buy the land first for $300,000. Then you have the house done at $700,000. So when you take that loan to the lender, they’re going to put the two together and value the two together because you own the land first.
SPEAKER 03 :
Because it’s free and clear and you already own it.
SPEAKER 17 :
At $1.2 million, they’ll loan you $1 million. So technically, you get 100% financing. If you own the land first, you’re getting a construction of perm loan on the property that you already own. And it gives you basically your down payment for the land. It takes care of everything for you.
SPEAKER 03 :
Now, walk us through how the construction loan end of things works, because in some cases it may take a full year or longer to even get everything built out. How does that part of it work?
SPEAKER 17 :
Normally what happens when you’re putting a construction to perm loan together, you’re going to get a line item from the builder as to what it is. The lender’s going to verify who the builder is, that they’re legitimate, they’ve got insurance to cover it. They’re going to give them a time frame of how long it’s going to take. The lender will, in most cases, add six months to that, sometimes 12 if you need it.
SPEAKER 03 :
So if it’s a 12-month deal that the builder says, the bank says, no, it’s 18. It’s 18.
SPEAKER 17 :
They’ll go to as much as 18. So let’s say you’re borrowing the $700,000. and you’ve all approved for it, what’s going to happen, they’re going to say at the beginning, the builder’s going to come up and say, I need $100,000 to pour to the basement.
SPEAKER 03 :
Get the foundation and everything in.
SPEAKER 17 :
So the lender’s going to give you $100,000, and your payment is calculated on that $100,000.
SPEAKER 03 :
Whatever’s outstanding.
SPEAKER 17 :
Whatever the rate is, interest only.
SPEAKER 03 :
Okay.
SPEAKER 17 :
So that’s the payment you’re making on the property as it goes along.
SPEAKER 03 :
So you’re going to be able to cash flow that plus whatever else you’ve got going on with your current home.
SPEAKER 17 :
That’s correct.
SPEAKER 03 :
Okay.
SPEAKER 17 :
And as that goes on, that keeps continuing to go forward. So you take 100, then you come back, take another 100 for this. And at each level… They’re called draws, right? They’re called draws.
SPEAKER 19 :
Okay.
SPEAKER 17 :
And at each level, as you go through these… the lender’s going to have it inspected to make sure that that portion’s done to go forward.
SPEAKER 03 :
Before they give you any more money.
SPEAKER 17 :
Right.
SPEAKER 03 :
So, you know, we’re going to go through the foundation part, and then we’re going to frame it and make sure that everything’s got the roof and so on, and that’s another stage. And then we do electrical or plumbing or whatever. And every stage where we’re writing big checks, they come in to make sure things are handled.
SPEAKER 17 :
That’s correct.
SPEAKER 03 :
Okay.
SPEAKER 17 :
So as that process goes forward, those payments are accumulating. Then at the end of that, you have what’s known as the takeout loan. That will normally start at about 45 to 60 days prior to completion.
SPEAKER 03 :
Okay. That’s going to be the loan that ultimately pays everything off and we make a mortgage payment. Correct. Okay.
SPEAKER 17 :
Because you don’t want to get a permanent loan at the beginning of a construction, a permanent loan.
SPEAKER 03 :
Too many variables, right?
SPEAKER 17 :
Way too many variables. You’re locking in yourself when you shouldn’t do that.
SPEAKER 03 :
Okay.
SPEAKER 17 :
All the lenders that do construction to perms, they will override everything by 10%. So if you tell them $700,000, they’re going to give you a loan for $770,000. Okay. Because they know overrides are coming.
SPEAKER 03 :
The contingencies and so on are there. They know they’re coming. Got it. Okay.
SPEAKER 17 :
So that’s how the process works.
SPEAKER 03 :
So in that whole process, and I’m guessing it comes down to you, your finances and timing, when do you sell your home? In that scenario.
SPEAKER 17 :
Most people that I have found that do this, they may in turn as they start, some will just decide to rent, sell the home, take the cash and move forward.
SPEAKER 19 :
Okay.
SPEAKER 17 :
If they rent their house out, they’re collecting rent for their house so they don’t have that debt so they qualify for more.
SPEAKER 19 :
Okay.
SPEAKER 17 :
That’s what some people will do. Okay. The other people will just decide that they’ll put it up for sale 60 days to give themselves room. Okay. With the time saying, we want to close on this date because that’s when my house is going to be done.
SPEAKER 03 :
Okay, and that’s where things can get a little tricky, right? Because the builder has to make sure they actually get done in time, and you’re selling your home, and you’re going to move out, yet you need a place to go, and, and, and. We call it the two-step. This is where some people go live with relatives for a little while.
SPEAKER 17 :
It’s the country two-step.
SPEAKER 03 :
Am I right? That’s it. In some cases.
SPEAKER 17 :
Move in with someone.
SPEAKER 03 :
You need to move in with mom and dad for a month while your house is getting finished because it was supposed to be done a month ago, and now it’s not.
SPEAKER 17 :
Well, my son did that. He moved to Tomball, Texas, and the house wasn’t finished, so he lived in an Airbnb for the last 30 days before it could get finished.
SPEAKER 03 :
There are ways around that. There are ways around it. You just got to figure out how to get your stuff stored and handled and so on.
SPEAKER 17 :
Put it in one of those big trailers.
SPEAKER 03 :
Whatever they’re called. He was fine. Pots. Yeah, thank you, the pots. So there’s ways to work all of that, but… Now, how does the qualifying of all of that work? So if there’s somebody out there listening thinking, you know, that doesn’t sound like a bad deal. Maybe I will work this out to where over the next year I’ll build a house because by the time the house is done, the rates may actually come down, which, by the way, they may get you permanent financing at a lot less rate. How does the qualifying of all of that work?
SPEAKER 17 :
In most cases, they’re going to count both payments against you. So your ratios need to be… You got to have all your ducks in a row. You got to have all your ducks in a row.
SPEAKER 03 :
Okay.
SPEAKER 17 :
Now, a lot of banks will look at the payment that you’re making on that. It won’t count that because they own the land. They’re already leveraged on the whole project.
SPEAKER 19 :
Okay.
SPEAKER 17 :
That’s why they’re giving you 80% of because they know the future value of the home.
SPEAKER 19 :
Okay.
SPEAKER 17 :
Oh, you have to qualify for both. I was going to say, so there’s… It’s like a customer going out to buy a new build. They’re driving an area and there’s these new builds over here. They have to qualify for both unless they qualify for, by the time it’s finished and my first payments are due on this new house, I got to sell this one.
SPEAKER 03 :
Okay. So they can force you to rent or sell the house. A little dance that has to go on with some of this.
SPEAKER 17 :
Yeah, it’s two-step, we call it.
SPEAKER 03 :
Okay. Okay. So for some of you listening, there are options on that. And keep in mind, we’re at a point in time right now to where for you it would work. And again, one thing you have to remember, this is the one thing that I don’t think a lot of people do think through. And you can see different testimonials on this and so on. And I’ve got even family members that I know have done this before. You have to have time, and I’m not exaggerating when I say that. Yes, I know you’re going to hire a general contractor. Yes, I know they say they’re going to be on site every day making sure everything’s all dialed in for you. But believe me, you’re going to want to look at that home site, if not daily, every other day. To make sure that everything is going the way that you wanted it to go and nobody has made any mistakes. Nobody’s read a plan wrong. Because keep in mind, you designed the home. You got together with an architect and an engineer and you had all that stuff dialed in. So you know it inside and out. The guy framing it, by the way, doesn’t.
SPEAKER 04 :
Correct.
SPEAKER 03 :
The guy running the electrical doesn’t. The guy doing the plumbing doesn’t. You do. They don’t. Meaning, Kurt, as you know, you pretty much have to be maybe not on site the entire day while they’re all working, but you better be rolling in and checking on what’s going on periodically or something’s going to probably get screwed up. And that’s nothing against the GCs. It’s just how it is.
SPEAKER 17 :
Not at all. I grew up in the construction business as a laborer with my dad who had a company. So when I had my first home built, I learned something really quick. In the morning, I’d drive by, say hi to the guys working. I’d set two six-packs of beer down. At night at 4.30, I’d come by and I’d have another two six-packs. And I’d just have conversation with them.
SPEAKER 19 :
Okay.
SPEAKER 17 :
When I had questions, they were more than likely to answer my questions. They were very friendly. Makes sense. When I wanted to make alterations and say, what about, they said, we got it. Okay. So I was able to help get the house more in my line. And all I did was bring my couple six-pack of beer. Point being, though, you had to. I treated them with respect.
SPEAKER 03 :
Well, and point being, though, you still went by.
SPEAKER 17 :
Yeah, I went by every day. I wanted to see it.
SPEAKER 20 :
Okay.
SPEAKER 17 :
Because I wanted to see it.
SPEAKER 03 :
But my point on that is, for people that have ever thought of building homes, just my advice. make sure you have enough spare time to do the things that Kurt and I just mentioned, because if you don’t, I hate to say this, something’s going to happen. You’re not going to be happy. There’s going to be a lot of finger pointing that goes on as to why something turned out the way that it did. And ultimately you’re going to be left holding the bag because you weren’t there to check on what’s going on. And yeah, you might be able to fix it and take care of it, but that’s a headache you don’t want.
SPEAKER 17 :
Well, when you walk in a house that’s just been framed, you can see gaps in the studs on the floor and bad studs in the wall. You get to see that. Once they put up the plaster, you’re done. The drywall, you’re done. So going by is very important. How are they hanging that door? How’s that window looking? Did the concrete be broke underneath?
SPEAKER 03 :
There’s things you get to see. That’s right. And, again, this is nothing against the general contractors out there and so on. You may be one of them listening, and some of you may be listening, shaking your head or nodding your head, agreeing with us, realizing that, yeah, there’s something about the homeowner being by and looking at things because they know exactly what they want versus all of us interpreting a set of plans and communication and so on and knowing what we want. Now, I also will say this. Let me throw this in. Also, don’t be that person that makes a change every day. No. Nobody wants that. No. They’re going to hate you.
SPEAKER 17 :
No. I actually had a customer who was having one done, and because he went by, he kept looking at lot lines and where things was. And he told me, he says, you’re pouring this slab into their property. It shouldn’t be this far.
SPEAKER 19 :
That’s not correct.
SPEAKER 17 :
And after a week, they finally came back and said they realized, and they had the whole layout of the house off by four inches. They shifted it. So he had to make some alterations, but he caught it early enough to where it wasn’t a problem.
SPEAKER 03 :
I had a track house getting built once on a track house. Yeah. Did that, and it was a major ordeal to get all of that dialed back in and straightened out because in my case, they didn’t re-pour the foundation and everything. They went and adjusted the lot lines, which meant they had to go back through city-county approval and all sorts of things to get that changed around, and it was a major hassle. And when I first looked at it, they looked at me like, oh, no, that can’t be. I’m like, it’s off. I can look at the pins. I can run a string right now and tell you that it’s off.
SPEAKER 17 :
I got a tape measure.
SPEAKER 03 :
I know how that works. Sure enough, and the point being, if you’ve ever thought of doing that, and Kirk can help you through this whole process, as you can tell, he’s familiar with how all of this works, and he can help you with that. Just make sure you’ve got enough time set aside to where you can make all that happen. Somebody, somebody in the family, you, spouse, somebody has to be able to be going by there on a daily basis.
SPEAKER 17 :
Let them know that you care about what they’re doing to your house.
SPEAKER 03 :
If you can do that, great, more power to you. All right, let’s close out with self-employed, given it’s this time of the year where folks are going to be looking at doing taxes and year-end stuff and all of that. And this is where, again, there’s another quote-unquote dance that goes on when it comes to being self-employed and what you do tax-wise, what you pay versus what you write off and so on. And there’s a line there. To where, you know, the accountant will tell you, yeah, write all this stuff off, you know, depreciate all these things off and don’t owe any taxes. Well, that may be great. Might be legal, all fine and dandy. But now you go to get with Kurt to try to do something on a mortgage and you might have just taken yourself out of the running for that. Am I right, Kurt?
SPEAKER 17 :
Yeah, what I’m about to say is that I agree with, but this is how lenders look at it. They’re a risk-based lender, so they’re looking at what past history has done. When you’re filling out your taxes as self-employed, they’re going to look at basically the first page, the bottom line is what you’re going to pay taxes on. The lower that number is, that’s your income. That’s what they look at. There are some exceptions to that rule. You may have in there depreciation that you’re writing down, depending on how you’re doing it. But the depreciation you can add back in as income. You may have a major expense. You may have had to go out and buy a $30,000 machine to help you through the year. That can get put back in. But if you’re just doing your taxes the normal way, what that line is on the first page is what they’re going to count as income. They don’t care you made $800,000 and your net’s 50. They’re going to give you 50. Right. Now, in that $800,000, are you paying yourself for salary? We have a mutual customer. His company makes money, but he pays himself for salary. So I get that.
SPEAKER 03 :
Yeah, you can take that and add that in. Absolutely.
SPEAKER 17 :
And I get to add that back in, plus his depreciation, plus the fact that his company is paying for some of his vehicles, for his health care. Those are things that can be added back. I get to add them back in. They don’t get charged against you. But knowing those things before you get out there, if you’re wanting to buy a house and it’s an $800,000, $900,000 house, you better start wanting to make $100,000, $150,000 to qualify on that bottom line.
SPEAKER 03 :
Right. If not, you probably are not going to get it done.
SPEAKER 17 :
And if you don’t, there’s alternatives to it, but they then become a higher risk to the bank, which means the rate goes up, which means the payment goes up.
SPEAKER 03 :
They’re not as friendly of a loan. Let’s say it that way.
SPEAKER 17 :
Is that right? Yeah, there’s a lot more paperwork and issues with those.
SPEAKER 03 :
And those of you that are self-employed, you know some of what we’re talking about. Here’s another little tip for you as well. Some of you that may be thinking about being self-employed, which, by the way, is great. I coach other businesses. I’ve been self-employed since I was very young. I enjoy it. I don’t think I could work for anybody else. I enjoy that aspect of things. But what I will tell you, and I’ve consulted others on this, if there’s anything you’ve thought of doing mortgage-wise especially, not car alone, but mortgage-wise, and you’re thinking about starting a business, Get all of your mortgage stuff handled now while you’re a W-2 employee because otherwise you’re waiting at least two years to do anything on a mortgage being self-employed, meaning that you’re not doing anything. If you’ve thought about moving or anything along those lines, when you pull the trigger, become self-employed and no longer have W-2 income, It’s a two-year process before you can apply for anything. Am I right, Kurt?
SPEAKER 17 :
You are correct. One of the other things I know is coming this year because the last couple of years has been very profitable for self-employed. They are going to look at your gross on the last two years. And they’re going to average them out. They’re going to look at your net. They’re going to look at your expenses. If you’ve had a depreciation or a decline in income of over 20%, you’ve almost made it impossible because the way the lenders look at it, this isn’t me, the way the lenders look at it is that your business is declining. You may not be in business anymore. We’re not going to loan you money. They just will just turn you down. They don’t care.
SPEAKER 03 :
My suggestion for those of you that are self-employed, if you’re thinking about doing anything mortgage-wise in the next 12 to 24 months, yes, and I’ll explain what I mean by that quickly, even 12 to 24 months because they go back X amount of years on these things. So my point is if you’re looking at doing anything, before you do your taxes, have a sit-down conversation with Kurt on hair. Here’s where we’re going to have to be to make all of this work, and then take that information to your accountant saying, this is what I need to make sure I can get done tax-wise to make sure I qualify for the things I need to do in the next 12 to 18 months.
SPEAKER 17 :
You give me the practice copy of the tax return, and I’ll say this is what it shows. This will only allow you to have this much payment.
SPEAKER 03 :
And my point is you may need to slow some things down depreciation wise or whatever to make everything work out at the end of the day to make Kurt be able to get you qualified. That’s my point.
SPEAKER 17 :
There are loans available, but your best loan.
SPEAKER 03 :
There you go.
SPEAKER 17 :
That’s what this works for. There’s other ways as self-employed to get it, but you’re going to pay a higher rate to make that happen.
SPEAKER 03 :
Disclaimers.
SPEAKER 17 :
NMLS 217147 regulated by door equal credit lender.
SPEAKER 03 :
Kurt, love you. Appreciate it. 720-895-0500 is how you get a hold of Kurt. Dr. Scott’s our doctor. He’s mine. He’d love to help you and have you as his patient. Give Dr. Scott a call today, and he’ll take great care of you. 303-663-6990.
SPEAKER 15 :
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SPEAKER 03 :
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SPEAKER 14 :
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SPEAKER 03 :
All right, Al Smith, we’ve talked a lot about houses, mortgages, things like that. Make sure all that is dialed in when it comes to your future financial plans, and Al can help you with all of that. Al Smith, Golden Eagle Financial, klzradio.com.
SPEAKER 11 :
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SPEAKER 16 :
As independent brokers, GIA Insurance can help you shop the market so that you get the right coverage at the right price. Whether it is your home, auto, classic car, or liability insurance, GIA has got you covered. Call 303-423-0162, extension 100, or go online to e-gia.com.
SPEAKER 08 :
It’s time to leave your safe space. This is Rush to Reason on KLZ 560.
SPEAKER 03 :
All right, got about a minute or so left here of today’s program. And again, reminding you all of the snow and the cold weather coming in this weekend. Make sure you’ve got everything all dialed in. Of course, we’re still going to be on air tomorrow live. I’ll be here live Saturday morning as well. Rest assured, I never have any problems getting around. So we’ll be here on Saturday morning as well to help out with anything that might come up. And don’t forget all of the different partners we have when it comes to the cold weather stuff, whether it’s your car, your home, whatever it is, we’ve got you covered there as well. So don’t forget, you can go right to klzradio.com and find all of our partners there, or rushtoreason.com and also find them there. One last thing on Kurt, by the way, 720-895-0500. I cannot stress enough, those of you that are self-employed, and or thinking about being self-employed. I will tell you right now, straight up, I have dealt with a lot of different mortgage brokers over the years. Again, I’ve been self-employed since 1986, and I will tell you that of all of the individuals I have used over all of those years, nobody comes close to understanding how that side of it works outside of Kurt and I mean that sincerely known him now for 10 plus years and he is the guy when it comes to self-employed individuals and there’s a lot of brokerages you know brokers out there like Kurt that frankly will not even talk to you if you’re self-employed. So please keep that number handy if you’re self-employed and Kurt’s there to help you with all of your mortgage needs. 720-895-0500. This is Rush to Reason. Guys, be safe. Have a great night. KLZ 560.
