Housing Facts and Figures Without The Subjective Opinion

Zillow just released their 2016 mid-year report and 3 of the figures shocked me, so I thought I would share them with you.

The question I’m getting from clients is, are we in another housing bubble?

Based on these numbers below, you decide:

Less homes for sale = supply is down!

The number of homes for sale nationally are DOWN over 35% since 2011. Supply nationally is super low.

Homes selling faster = demand is up!

This graph is really amazing. The national average to sell a home from listing to closing is down 53%, and what is even more striking is that during that time the average time to close a mortgage has increased drastically due to the new TRID settlement requirements. Home loans nationally are averaging 53 days to close, which means homes are being put under contract on average within 25 days. That is very strong demand in action.

Rents are up = strong housing market!

Lastly, rents are rising at near historical pace. When someone enters the housing market, they have to decide to rent or buy. With interest rates moving down thus far in 2016 and rents moving sharply higher, I believe that bodes well for future home demand throughout 2016 and 2017.

I hope you enjoyed this information as much as I did!

Please contact me, Josh Mettle if you have any questions or if I can be of service to you, your colleagues, friends, or family by reaching out to me at at 385-355-2130 or you can write to me here: .

Is the Public Service Loan Forgiveness Program going to end?



We were fortunate to have Jan Miller, a student loan expert on our Physician Financial Success podcast, and he talked about whether the Public Service Loan Forgiveness Program was going to end. Watch this short clip from his very informative interview about student loans, IBR, the REPAY program and many other topics of interest to doctors.

Josh Mettle: Tell me what do you think that overriding intention is with Repay. I mean they made a pretty substantial change in direction here. What are they trying to accomplish? What’s the underlying desired end-result of this program?

Jan Miller: Right.

Josh Mettle: Do you have a gut feel for that?

Please go here if you can’t see the video to watch it.

Jan Miller: Yes, so this is a fantastic question. I’m glad you asked it because I have a lot of clients and again I would tell you physicians ask this question very commonly, “Is the Public Service Loan Forgiveness program going to be even there in 10 years? Can I count on it?”

I’ve actually heard of residency programs advising their residents not to PSLF because it’s not going to be there, and that’s not true. That is inappropriate even to say, so, the Public Service Loan Forgiveness Program is going to be there for you if you’re in that program now. You’ll be grandfathered into that program almost certainly.

Now with the Repay Program and its new changes, actually kind of sheds some light. They kind of foreshadow where they’re going with these programs instead of getting rid of it or putting some sort of huge cap on the forgiveness and so forth. They are trying to make the program make more sense for both low-income and high-income earners that qualify for the program. For example, removing the cap, the cap only benefits high-income earners because if you hit the cap, that means your payment is and your income is high enough to pay the 10-year standard, so you should be able to afford your loan payment.

Josh Mettle: Right.

Jan Miller: The people who are benefiting from the cap were making incomes far greater than that threshold and still qualifying for the forgiveness based on their payments, the smaller payments made in internship or in years before. That’s one of the things they have been talking about with eliminating that benefit to borrowers who have that big income jump, taking away the cap and letting the income skyrocket with it. So if you make so much money, if you make $1 million a year, well then your payment under the program gets high enough to pay off the loan and you don’t take advantage or anything of the program. So I think that’s actually not a bad idea and it’s also kind of an example of a specific legislation designed to address that issue, which has been something of a concern with a lot of people of late.

The other thing, too, is that this program is brand-new. The Repay Program is going into effect in December and it is specifically designed around the Public Service Loan Forgiveness program, so there you go right there. The government is still putting together new programs that are specifically designed to work in conjunction with the Public Service Loan Forgiveness Program. That’s again a sign, an indication, a foreshadow that Public Service Loan Forgiveness is here to stay.

If the changes happen that aren’t as favorable to some clients in the future, those will only affect new borrowers who take out loans after the legislation goes into effect. And that’s because the Federal government, they grandfather everything. In fact, the reason for the Repay Program is because of the grandfathering. When Obama back in 2014 put through an executive order to allow the 15 percent IBR people to qualify for 10 percent, the 10 percent version, they could have really made this easy. They could have said, “Okay, effective December 15th, everybody who is on IBR now qualifies as Pay As You Earn get the 10 percent.” End of story. That would have saved them millions of dollars in changing the infrastructure around Repay and all this stuff. They just simply would have let everybody join it, but they couldn’t do that because Pay As You Earn is already a grandfathered part of regulations. They can’t change that because it’s already in place. Instead they had to create a brand-new program, which also allowed them to implement some of these new twists on the rules.

Long story long, that’s what I try to tell people the Repay Program is actually an indication, whether you qualify or not or can benefit from it or not, it’s indication that Public Service Loan Forgiveness is likely here to stay.

Josh Mettle: Yeah, I would agree. It sounds like the terms make pretty good sense, right? I mean the intention sounds like we understand that physicians and other medical professionals are going to bear these student loans and there’s a lot of responsibility that goes along with that and a lot of risks. We want to provide a safe atmosphere for them to enter into Repayment and work for public service facilities. If income does spike, then they want to recoup those student loans, but they want to make it so that they can still afford homes, and families, and other things. It seems fairly like a reasonable program to me.

Our specially trained staff and underwriters know how to work with student loan debt to get you qualified for a mortgage loan. We can guide you on how to structure your student loan debt to maximize the likelihood of qualifying for your mortgage. Please call Josh Mettle at 385-355-2130 or here to get started. Rents are rising quickly and interest rates are at historic lows – it is a great time to buy your own home.

Dr. John Ramey – should residents avoid buying a home?

Should residents buy a home?Josh Mettle: That’s a great point. A couple of thoughts: I agree with you. It’s absolutely an individual decision, and I think that the comments on some of the websites that just talk about avoiding buying a house as a resident misses the mark just a little bit, although I do believe it’s well-intentioned. But where I think it misses the mark is, if you have two kids and two dogs, good luck trying to find a rental property. It is tough. I mean I know where we live. That is a really hard sell if you have a family that needs some space to find something. People call me all the time and say, “Hey, it’s just easier to find something that fits our family criteria to buy than it is to rent.

If we know that it is an individual decision and for some folks, you just have to buy for one reason or another, then I think the focus on some of these websites in general should be on education not risk-aversion. So it’s like, “Let’s just all rent.” Well that doesn’t work because some people have to buy because their family situation or they just have a strong desire to do so, we should be working more towards educating people on how to not make a mistake and how to be able to resell quickly. I completely agree with you there.

The other thing that you said that I thought was really important was and I’ll paraphrase but “location and neighborhood trumps the house.” So if I’m hearing you right, falling in love with the house on the busy street because you love the house is problematic as opposed to – this is a really good neighborhood, close drive times to the hospital, homes sell quickly. I’d rather take a lesser home, maybe even not as good a shape in that really healthy neighborhood. Would you agree with that?

John Ramey: Yeah, I totally agree with that. One of the things we try to tell our clients is that if you’re early in your career, you’re a medical student, a resident, you got your first job. If this is not going to be your final house, you don’t have to like everything about the house.

Josh Mettle: Right.

John Ramey: For me, it’s more important in looking at house as an investment and if you’re going to sell it, is this house going to resell or are there problems with the house. I’m going back to the house I was talking about earlier in the busy street. One of the things they messed up when they built the house and they didn’t put any bathtubs throughout the house. Well our clients, they want a bathtub in at least one bathroom and again you got to think it’s not what you like but what other people like in a house and make a good decision with that. It’s so important. We see it over and over that people make bad decisions about what they’d do in the house, how they remodel and stuff, so you get advice from realtors and professionals. Is this a good idea that I need to put this much money into the house?

Josh Mettle: Right. Like you said, if you’re going to be there for 15 or 20 years, time will cover up any of those mistakes. If you’re going to be there for 3 years or 4 years, you have to make wise decisions on your neighborhood and what improvements that you do in the house. I think that’s an excellent point.

John Ramey: Getting back to one other thing that you had said about the websites and advice to medical students and residents, I hate that when you give absolutes, and I think that’s the thing. I like your point about looking at rentals versus buying. We just bought an investment property that’s near the medical school. We’ve gotten a lot of phone calls. One common call is thing like you said is people have animals.

Josh Mettle: Right.

John Ramey: We’ve turned down every single one that called with animals. I like dogs, but I don’t like dogs when I’m the landlord because I have hardwood floors in those rentals and I’m probably going to have to re-sand them and refinish them in 3 to 5 years.

Josh Mettle: That’s right.

John Ramey: And so, as a landlord, a lot of times, you want tenants that are going to take good care of your rentals. Again, I agree with you. I think it’s hard when you know that somebody is going to bring pets into the house and maybe not take good care of it.

Josh Mettle: And kids — don’t think landlords don’t think through total wear and tear with the number of bodies in the house and that just makes it more challenging to find good rentals out there.

John Ramey: Yes, and I agree and again in our market at least, the rental prices have gone up more than what you can get the same price you can get a lot nicer house if you buy one, too.

Would you like to compare different loan scenarios to see how current mortgage rates will impact YOUR budget? Call Josh Mettle at 385-355-2130 and ask for a Total Cost/Savings Analysis or to get answers to any questions you have about physician loans or conventional loans. You can always here as well.

To read more about renting or buying, please read this and this.

We treat you how we’d like to be treated

Our promise to our clients is that we treat you the way we’d like to be treated if we were in your shoes. We love it when we hear from you telling us that we met our goal!

Kapalis collage“I would highly recommend the Physician Group. They understood the unique needs of our family so well. My husband is very busy in his practice, so he told Joel (our loan representative) “Just talk to my wife”. And from that point on Joel and I were able to take care of everything in the loan process without bothering my husband (besides a few signatures). They were even able to grant us a loan in the midst of a job change. Joel helped me understand every step of the process. When the sellers got nervous that we were using an out of state lender, Joel worked with our agent and the seller’s agent to make sure they were comfortable with the process. He was truly committed to getting the loan process to work for us. We received emails on a Sunday on a holiday weekend. There were checks and balances all through the process to make sure we stayed on track for our closing. They were so efficient all the necessary paperwork for closing was in 1 week early. Not only was Joel easy to work with but so was Ashley. When working with her I was so at ease, and I really felt like I was emailing a friend. In the end that is what I would tell my friends… When dealing with you, I didn’t deal with agents, I dealt with friends. People that wanted the best for me and understood me. People that I trusted completely, and people who at the end of the process weren’t our agents, but our friends.”
Dr. Matthew Kapalis and Molly Kapalis, Doctor of Osteopathy, CHI Health Clinic

Daniel Johnson doctor mortgage“I have nothing but good things to say about David and his team. They were good communicators throughout the process, and provided me with answers to my many questions as a first time home buyer. As a medical student, it was hard for me to take time off of work for phone calls etc. during the day, which I was concerned about. David and his team were very flexible about this, and the majority of the process was done via email, and online document signing. Very efficient. Very professional. I also very much liked the financial info David sent me, very informative and easy to read for someone who doesn’t have a finance background. Thank you for everything.”
Dr. Daniel Johnson and Family, University of Texas Health Science, Resident Physician

Wood physician home loan“Our lending process with Josh Mettle was fantastic. I was a seamless process. He and his associates were available and easy to reach if we had any questions. Josh talked with us for quite a while; going over what options were available to us for a first time mortgage, and what options would best fit our financial status now and in the future. His rates were the best we could find. Josh was highly recommended to us by the Utah Medical Association for his first-hand experience in working with physicians and understanding their financial needs and assets, as well as the projected income changes for new physicians. We couldn’t be happier with the outcome of our experience. After years of moving across the country for schooling and training, we are happy to finally “put some roots down”. My family loves our new house and neighborhood, and I love the fact that I feel like I received the best deal and rates available for my mortgage.”
The Wood Family, Dr. Geoffrey Wood, MD

We’d love to treat you with the care and respect you deserve for your Utah home loan. Please here or give Josh Mettle a call at 385-355-2130. We love our clients and would appreciate the chance to help you with your next home purchase.

Harvard: 5 Reasons Why Owning A Home Makes Sense Financially

Doctor in homeEric Belsky is the Managing Director of the Joint Center of Housing Studies (JCHS) at Harvard University. He authored a paper on homeownership titled – The Dream Lives On: The Future of Homeownership in America. In his paper, Belsky reveals five financial reasons why people should consider buying a home.

Here are the five reasons, each followed by an excerpt from the study: 

1) Housing is typically the one leveraged investment available.

“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”

2) You’re paying for housing whether you own or rent.

“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.” 

3) Owning is usually a form of “forced savings.”

“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

4) There are substantial tax benefits to owning.

“Homeowners are able to deduct mortgage interest and property taxes from income…On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”

5) Owning is a hedge against inflation.

“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition. 

Thanks to KCM blog for this post.

Another reason buying a home now may be the best thing for most doctors is that the rental market is really tight across most of the country. Even if you can afford the rent, you most likely won’t find a place that meets all your needs, and if you do, you will probably be on a long waiting list of potential renters wanting the same place.

One way to protect yourself from rising rents is to lock in your housing expense by buying a home in Utah. If you’d like to see an analysis of how different financing scenarios for buying a home would look like for your financial situation, call Josh Mettle at 385-355-2130 or write to us here and ask for a Total Cost Analysis.

Dr. Wise Money – how to use cards to save $60k in interest

Doctor leverage credit cardsJosh Mettle: Well, so the next blog I read at your site was this really funny name and I thought, “What in the world is this all about?” The title was “All the Right Plastics in All the Right Places”. As a guy, I had to read that, I just had to know what it was about. So anyway, it obviously is a play on words and it talks about how you leverage credit card debt, a thing that most people are – it’s probably got to be like tarantulas, black widows, and credit card debt in terms of fear. But you’ve actually leveraged that to build your net worth and pay down your student loan debt. So tell us a little bit more about this strategy and how in the world did you come up with it?

Amanda Liu: Okay, again it came out funny way. Most of my life’s success came out of some sort of failure in the past whether it’s a failure on my part or failure from my parents’ mistakes, or someone else’s. So what happened is, when I immigrated to America when I was 16, my dad was already 50 and so he started a government job and he started using credit card, too. But he is very energetic like me and sometimes he could have all sort of energetic vectors running him in all directions and he’d be a little bit lost. So what happened is he fell behind on his credit card payments. His credit card interest rate was 30 percent.

Josh Mettle: Wow!

Amanda Liu: When I got that phone call as a second year at UC-Berkeley, I panicked. I panicked really bad and I picked up seven odd jobs while going to school fulltime and for a year and a half, I was sleeping 4 hours a day. I was trying to do everything I could to squeeze out any penny I have to send home to pay off this credit card debt. That actually started my deep-seated almost hatred towards credit card companies.

Josh Mettle: Sure.

Amanda Liu: Then I think so starting before medical school, I also had gone through some financial crises of my own. And so, I had some credit card debt but I was very vigilant, so none of my credit card debt ever had interest rate greater than 2.5 percent, and I used that to help me pay my car loan, which was 7.99 percent. In my scheme of things, basically it was just a buildup and practice of always leveraging debt in the sense that I’m perfectly fine with owing $50,000 on credit card as long as it’s 0 percent or in some of my posts I’ve explained it’s negative interest, literally negative interest not 0 percent.

I’m okay with that but I’m totally not okay with even $20,000 or $30,000 of student loan debt at 7 percent because it just doesn’t make number sense to me. So what happened in medical school is we have our financial aid office talk to us and say, “You know what, if you guys need money, just write us a little email, shoot a line to how much you need, and the money will be there in 30 days.”

I realized why are they so eager to lend us money? Why is the monopoly money so readily available? I know (1) we’re not big banks who can borrow and walk away at 0 percent and not knowing when to pay back. We’re just little people and why are they doing that, and I looked at the numbers. Of course, 4 percent origination fee, 7 to 9 percent interest rates. Who wouldn’t want to lend to us, right? I looked at it and say, “Okay, I’m going to try to avoid, minimize, delay the origination fee and interest rate for as long as possible.”

So what I did is every 4 months, each semester we would be paying about $16,000 just in tuition, then of course there’s living expenses and all the other stuff. So we can run like this parallel experiment. Basically what happened is a majority of my classmates would take out $90,000 of student loans day 1, first day of medical school, and they’ll put it their savings account, bearing 0.01, 0.1 percent interest, or they’ll put it in their liquid checking account. On the other hand, what I do ‑ and then they’ll pay everything with it – their tuition, their living expenses, all that stuff with that money sitting there that they borrowed.

What I would do instead is I would take out a credit card and use that credit card that has 18 months 0% interest on purchases and charge my $15,000, $16,000 of student loan on it.

Josh Mettle: Wow!

Amanda Liu: And so – yeah! So instead of writing $90,000 of debt, with 4 percent origination fee, well 4 percent is the highest origination fee. There was like 1 percent. You know it’s all gradient but so, just for an example, instead of doing that with that upfront fee that starts rolling on principle plus 7 percent to 9 percent. Grad PLUS was 9 percent I believe, and just letting it right snowballing starting day 1 of medical school, I was rotating, using all sorts of credit cards. And then what happened is, as I seemed to be a big spender and then I paid off with a different card and seems off to be responsible and pay off everything, all these big banks started competing for my business, helping me pay for my medical school.

Then I got more and more offers and I just never really needed to take out student loans until like the very, very last chance and the last draw I just need cash fold, and that’s when I do it. I did some calculations. Conservatively just by doing this, not even counting all the cash back that I get, all the free mileage, all the rewards, I saved $60,000 just in interest during 4 years of medical school.

Josh Mettle: Wow!

Amanda Liu: Yeah, and then so part of me just said right back at you, credit card companies, you eat off of on us people’s backs like my parents. It’s time for me to get some of that interest-free dollars that you borrow from taxpayers.

Josh Mettle: Wow! I love it. Okay, a couple of thoughts.

First, brilliant. I mean you looked at the black widow tarantula fear right in the face and you figured out how do I reverse engineer this thing to make it work for me. If any of our listeners haven’t read the blog, she goes into greater detail, so go do that. Read the blog, and it’s very analytical. There’s spreadsheets. There’s dates due. She’s got all this master planned.

But what I think is so beautiful here is that there’s a financial strategy called the carry trade and carry trade is very simply the strategy that most investment banks use where they’ll borrow from the Fed. They’ll get the Fed funds rated at you know 0.25 percent or whatever it is, then they turn around and then they use that to lend out and they get mortgages, commercial loans, cars, student loans, credit cards, and as you just heard Amanda say, some of that money was going out to her parents at 30 percent interest. You borrow at 0.25 percent, and you lend out at student loans between 7 percent and credit cards at 30 percent and that’s why Wall Street is Wall Street, right? That’s a pretty good spread.

Well, you did that. You employed the carry trade strategy. You borrowed at zero to negative because of your rewards. You utilized that capital, and saved yourself all that interest, so you borrowed at a low, and deployed what would have cost you more and that spread is called the carry trade. It’s just that you don’t usually see everyday folks use that kind of a strategy because there’s this fear of debt. Well debt can be bad unless you’re making more money than it costs to service the debt. That’s what you figured out that I can borrow between strategically, intentionally between zero and negative cost with my points back, and I can deploy and save myself 7 percent or your car loan and your student loan debt, so beautiful. I applaud you.

Second, I think it’s so cool that you’re now bringing this strategy to folks that can use the same thing if they go about it intentionally.

Amanda Liu: Yeah, I hope people will open up a little and give it a try because honestly some of my friends, they’re pretty scared just like you said about this big black tarantula. But the truth is, if you think about it, it’s not even that much effort. All you need to do is have an Excel sheet, know your due dates, and a month before your due dates, write another balance transfer check to yourself or open a new credit card. When you open a new credit card in the frequency that is between 18 months to 21 months, all it does is to boost your credit score, really.

Josh Mettle: That’s correct.

Amanda Liu: A lot of people are concerned, right? And so like for me, over the times of kind of practicing and using my financial muscle and borrowing power, I mean I’ve only had $60,000 of annual income, but I have $250,000 of credit limit. That allows not only for a buffer let’s say because of let’s say – what do I want to do with $30,000? Let’s say I put $30,000 in retirement. Right now I’m at zero consumer debt, zero credit card debt right now, but let’s say I just went ahead and will use a Chase Slate card and open, use that and write myself a $30,000 check to fund my retirement or Ella’s 529 this year, and so also I have $30,000 of revolving debt at zero percent for 15 months on that card.

Now it would look really bad if I only have $30,000 of credit limit and it completely maxed out at 100 percent credit utilization. However, $30,000 out of $250,000 is a low credit utilization, which will not hurt much of my credit score.

Josh Mettle: Well and the thing is that the other credit card companies don’t know that you’re carrying all that credit card debt with zero interest. All they see is she has credit card debt, she pays on time, she’s a doctor, let’s give her more credit.

Amanda Liu: Yeah, exactly.

Josh Mettle: And you’ve just figured out the system, so beautiful. This kind of enabled you then, to have you save $60,000, which by the way, $60,000 in saved interests, when you start to pay that back once you’re an attending, don’t forget that you got to earn $100,000 as an attending. You have to save $60,000 because you’re going to pay taxes on all that money.

Amanda Liu: Yeah.

Josh Mettle: That $60,000 in interest that you save really equated to saving yourself $100,000 in income as an attending.

Our specially trained staff and underwriters know how to work with student loan debt to get you qualified for a mortgage loan in Utah. We can guide you on how to structure your student loan debt to maximize your chances of qualifying for your mortgage. Please call Josh Mettle at 385-355-2130 or write to us here to get started and to get your complimentary Total Cost Savings Analysis, which helps you evaluate which loan is best for your situation.

DrWiseMoney on Physician Financial Success podcast

drwisemoney.comPlease tune in to hear our latest episode of the Physician Financial Success podcast. We had such fun talking with Dr. Amanda Liu who is the creator and blogger for DrWiseMoney.com.

Amanda is a PGY2 at Banner University Medical Center and her blog serves to leverage her voice as she achieves her financial goals of purchasing a home, paying off student loans, maxing out retirement savings, and becoming retirement eligible by 2023. Dr. Liu was generous enough to share:

  • how she has beaten big banks at their own game by leveraging credit cards to pay down her student loan debt and save $60,000 in interest
  • how she uses those same cards to maximize her cash in reserve and put money into retirement
  • how she was able to make $3,000 by just moving money around – this is is the first time she’s shared this publicly
  • her bad experiences with mortgage bankers and her how she’d advise others on how to find a great lender

Please follow this link to tune in and listen to all of Amanda’s amazing advice.

Jan Miller on what to look for when deciding to enter IBR or Repay

Student loan debt - IBR or Repay?Jan Miller: Yeah. The Repay Program is basically a better version of IBR. There’s already a better version of IBR called Pay As You Earn but that program is only for new borrowers. In other words, if your loans are too old, so to speak, then you don’t qualify for the Pay As You Earn program. Of course as we know most docs have been in school since the Stone Ages, so their loans are simply too old to qualify for that program whereas the Repay Program allows them, in many cases not all, to qualify for a lower payment on a 10 percent calculation without having to worry about the age of the loans. That’s the basic gist of it.

Josh Mettle: Got it. That makes sense. Let’s go just a little bit further here and do these new changes to the Repay Program, do they give us some clues or are you reading anything into some potential changes to the Public Service Loan Forgiveness Program and is there any correlation there that you can draw?

Jan Miller: Right, so now okay as it relates to the Public Service Loan Forgiveness question that the concern is – do I lose what I’ve already accumulated in qualified payments under IBR? If I switch to Repay, does it still qualify for public service. The answer is you got to keep all of your existing qualifying payments, so if you put 3 years in, at the lower payment on IBR and you qualify for the Public Service Loan Forgiveness program, you’ll only have 7 years left even if you switch to the Repay Program, so there’s no problem there. It does still qualify of course your payments under Repay qualify for the Public Service Loan Forgiveness as well. So there is no loss in benefits or qualification in that regard.

The difference is with the program is there are a couple of caveats to it that are important to understand. With the IBR program, first of all your payment is determined on your adjusted gross income, so if you are married, you have to include your spouse’s income, so that can dramatically raise your payment, right? Well, the IBR program has a little loophole to get out of that and you can file married separately, so then it only includes your income. That can be very beneficial to a lot of borrowers who have spouses who make a lot of money and can sometimes make too much money and disqualify for the program. All they need to do is file separately and they can exclude their income from their payment.

Well, the Repay Program doesn’t let you do that, so that’s the one caveat there. If you have a spouse that makes a significant income then the Repay Program’s benefit of 10 percent is going to be offset by the increased income of your spouse, so that’s something to be aware of. The other thing that gets a lot of attention is that there’s no cap on the Repay Program. What that means is under the IBR Program, your payment can only go so high basically equivalent to the 10 year standard payment.

With the Repay Program, your payment can go up and up and up as your income does. Well, you can see especially for a physician where that would be a drawback because they may start out at $50,000 a year in residency but jump to $250,000 a year when they go up to permanent position, right? Their payment can get greater and greater and greater with their income and it can kind of pay off more, majority of the loan before they reach the 10-year forgiveness that way. That’s a possibility. That’s one potential drawback. However, we’ll say that because of the 10 percent calculation often it takes so long to get to that cap that it’s not really relevant in many cases, but it can potentially eliminate any of the benefits of the program.

Our specially trained staff and underwriters know how to work with student loan debt to get you qualified for a mortgage loan. We can guide you on how to structure your student loan debt to maximize your chances of qualifying for your mortgage. Please call Josh Mettle at 385-355-2130 or write to us here to get started. Rents are increasing – it is a great time to buy your own home.

When Is It A Good Time To Rent? Definitely NOT NOW!

We often write about when to rent or buy a home. Now is definitely not the best time to be renting in most situations.

The Census Bureau recently released their first quarter median rent numbers. Here is a graph showing rent increases from 1988 until today:
Rent since 1988

A recent Wall Street Journal article reports that rents rose “faster last year than at any time since 2007, a boon for landlords but one that has stoked concerns about housing affordability for renters.”

The article also cited results from a recent Reis Inc. report which revealed that average effective rents rose 4.6% in 2015, the biggest gain since before the recession. Over the past 15 years, rents have risen at a rate of 2.7% annually. 

Where are rents headed?

Jonathan Smoke, Chief Economist at realtor.com recently warned that:

“Low rental vacancies and a lack of new rental construction are pushing up rents, and we expect that they’ll outpace home price appreciation in the year ahead.”  

Bottom Line

NAR’s Chief Economist, Lawrence Yun had this to say in the latest Existing Home Sales Report:

 “With rents steadily rising and average fixed rates well below 4 percent, qualified first-time buyers should be more active participants than what they are right now.”

One way to protect yourself from rising rents is to lock in your housing expense by buying a home in Utah.
If you’d like to see an analysis of how different financing scenarios for buying a home would look like for your financial situation, call Josh Mettle at 385-355-2130 or write to us here and ask for a Total Cost Analysis.

Thanks to KCM blog for the information in this post.

The real ROI and tax advantages of real estate

Real ROI of real estateHere is a great clip from Josh’s interview with Steve Harney of Keeping Current Matters where Josh talks about the real Return on Investment and tax advantages of real estate.

Josh Mettle: I want to point out just one thing, Steve, because we talked about appreciation in real estate and there’s a wrinkle in there that I just want to bring the light, make sure our listeners realize. So we talk about 3 to 4 percent appreciation rates as kind of the economist’s consensus over the next 5 years and compounded over a 5-year period 21.6 percent appreciation. Now let’s call it 20. What’s interesting and what I want to bring to light is let’s say you buy a $100,000 home and like most people, you don’t pay cash. Let’s say that you put down 10 percent or $10,000. If that $100,000 home appreciates by 4 percent or $4,000, your return on your investment is not 4 percent because your return on investment is $4,000. That’s your appreciation and you only invested $10,000. So if you have a 4 percent appreciation rate, then you’re putting 10 percent down on a home, then you made a 40 percent return on investment. You made a $4,000 gain on a $10,000 investment.

Now I know there’s other things to consider because you might have maintenance costs or this, that, or the other but I think it is an important piece to think through when you look at a piece of real estate appreciating from let’s say $100,000 to $120,000 over the next 5 years. If you put $10,000 down, that means you have a 200 percent return on investment and that’s when you talk about stocks or bonds, usually you’re talking about return on investment but that’s a little nuance in real estate that some people don’t realize.

Steve Harney: You are 100 percent right, Josh. As a matter of fact, Eric Belsky from The Joint Center of Housing Studies at Harvard University put out a paper, I guess it was 18 months ago, maybe now 2 years ago, that he talked about that exact situation. You have multipliers, very few people buy stock on launching, meaning they put up a small amount now as a down payment toward that stock. Most people can’t even get that option and most financial planners will tell you don’t do that. It’s risky. Well, in the housing market, that automatically happens. You still have a place to live in or a place to rent out because more and more smarter investors will and that’s already happening in investing in real estate. It’s second, third, fourth homes, all right.

But Eric Belsky himself from Harvard said, “Listen, there’s a multiplier there.” He explained it almost as well as you just did where he talked about you have to look at the return on your investment based on the cash in to that investment not the total investment and that’s exactly what you’re talking about, the down payment. As far as like you there’s maintenance costs definitely just those things occur. There’s also some great tax reductions.

Josh Mettle: That’s right.

Steve Harney: Tax advantages that far outweigh any maintenance issues and vacancy issues that you have.

Josh Mettle: That’s particularly relevant for our demographic of listeners. Anybody who’s outside of their initial training years, tax advantages are huge especially if you live someplace like California where you got a state tax on top of it.

If you’d like to see an analysis of what impact different financing scenarios would have on your bottom line, call Josh Mettle at 385-355-2130 or here. Be sure an ask for a Total Cost Analysis.

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