Episode 3: Transcription

Steph:
Okay, yay. We're doing it. Okay, I'm going to say welcome and then you say who you are.

Kristina:
Okay.

Steph:
Okay, all right. Welcome to The Open House podcast, where women talk real estate. I'm Steph Douglass.

Kristina:
And I'm Kristina Modares. Welcome to our third episode. Today we are going to be talking about the five
things you should know before buying a house. The five things we're going to be touching on today are
how much does your realtor get paid, how much cash you'll need to buy a house, and then what is
earnest and option money, I think this is more specifically in Texas, and then what are the first time
home buyer benefits and then what are the tax benefits of buying a house?

Steph:
So we'll go deeper into these in this episode, and then even deeper in episodes to come. This is kind of
what we teach in our workshop, although our workshop is way further in depth. But yeah, this is
exciting, because we want you to be a homeowner, and these are the things you should know before
embarking on that journey.

Kristina:
Yeah, I think especially since, I think this just gives people a little bit of awareness of what to expect just
right before, also. I think some of this information, you might listen to it and be like, "Oh yeah, I can do
this now," or, "I could use a home buyer program."

Steph:
The main thing that people tell us when we have our consultation calls is that they feel really self-
conscious about not knowing anything.

Kristina:
Yeah, like, "I know nothing."

Steph:
"I know nothing," yeah, everybody says that. First of all, it's okay to know nothing, because this isn't
talked about. It's not taught, it's kind of hard to find it on the internet. You kind of have to trust your
realtor, which is also fine, like you should trust your realtor. If you chose them, you should trust them,
but it's also nice to have kind of a base of knowledge before you go into a situation, it just increases
comprehension overall.

Steph:
Okay, so the first thing to know, how does your realtor get paid, or are you paying your realtor? How is
this working? And that can be kind of an awkward thing to ask your realtor.

Kristina:
Mm-hmm (affirmative). Yeah, for sure, and I think a lot of people might not start, because they're like,
"Well, I want to get information, but I don't want to talk to this person and have to pay them right now,
and I don't know what I'm doing," essentially. So I think the first thing to know is as a buyer, you are not
paying your realtor, so you might as well get that free resource right off the bat when you first start.

Steph:
We also get like, "Oh, we're not ready, but we don't want to waste your time," which is really kind to
think that, but it's also kind of our job as realtors to answer questions, so get on the phone with
someone sooner rather than later for sure, and just remember that you don't have to pay them if you're
a buyer.

Kristina:
Yeah, and kind of how that works is when you go to sell your home, as a seller, you are paying both sides
of the commission, so you're paying the buyer's realtor and your realtor, so typically, I mean, right now
in Austin, typically the commission is around 6%. Sometimes it's 5%, it just depends. And typically, that
means 3% will go to the buyer's agent and 3% will got to the seller's agent.

Steph:
And that is a true seller cost. They can't inflate the price to cover those costs, because the market won't
allow it. There's appraisals that are protections for you and your lender, this is a true seller cost. So that
is something that you should take into consideration when you go to sell your house, but as a buyer,
someone else is covering that for you. And really, I think this stemmed from they want realtors, buyer's
agents to come through their houses, so they're kind of paying the agent to walk the buyers through
their house.

Steph:
Also, the seller's agent, or sometimes we call them the listing agent, they don't want to do the work for
the buyer, they don't want to do both sides, they're just listing the house. They're representing their
client, and then the buyer needs to be represented as well, so it's in your best interest to have a buyer's
agent, because they're fighting for you by law. They have a fiduciary responsibility to represent your
best interest, and they know what they're doing.

Kristina:
They should be a resource, right?

Steph:
Yeah.

Kristina:
They should be guiding you, and honestly, as a buyer, especially a first-time home buyer, you want to
work with an agent who is providing you resources, like obviously if you're not ready to buy for another
three years you're not going to be jumping on the phone with them every single day, because I mean,
honestly that's a waste of everyone's time. But even if you're three years away from buying, you want someone who's like, "Oh, okay, let's talk this through a little bit. Oh, here's where you are? Here are
three to five resources I can give you that will help you prepare."

Kristina:
And then they're still continuing to kind of educate you along your journey, essentially. So I mean, they
can add so much value to you, and yeah, you're not going to pay them. Obviously don't waste
everyone's time, but that person should be giving you resources right off the bat.

Steph:
And their job, I mean, now that we have the internet, their job is less about picking the perfect house for
you. I hear that a lot, actually, like, "Oh, my realtor didn't even send me the house, I found the house."
Well, you have the internet, so you find the houses and then they are the expert, so the main part of
their job isn't just walking you through houses, it is being that resource, them themselves, and then
providing recommendations for lenders, recommendations for inspectors, for contractors. They are in
the business, and they should have an arsenal of people that have been vetted by their own clients and
by even themselves. So it's just a very valuable resource to have, and they do get paid 3% of the sales
price, which seems like a lot, I think. When I bought my house I was like, "Oh my gosh, that's so much." But-

Kristina:

They do a lot of work for you. Behind the scenes, I know there's lots of times where I'm talking with the
seller or the lender and trying to either negotiate for them or try to save the deal, low-key my client is
just not, I don't want them to have to stress about that unless they absolutely have to. So there's a lot of
things that go on behind the scenes that people don't know about. They shouldn't, and that's the job.
You should feel, I mean, obviously there's a little stress that comes with this, it's a big purchase, but you
shouldn't be feeling the whole transaction on your shoulders alone. So that's the first, like, how much
does your realtor get paid?

Kristina:
Another thing we think that you should know before buying a house is how much cash you'll need to
buy a house, obviously. Math teacher, you want to take it away?

Steph:
Yes, okay. So this one is obviously going to vary based on the price of the house, but if you're a first time
buyer, and we're going to go over this in buyer benefits as well, first time buyer benefits, but you are
able to put as little as 0% down if you're using a down payment assistance program, but also if you just
want to straight up use a conventional loan, you can put as little as 3% down, which is very manageable.
I will forever put as little down as I can, just because I like the idea of keeping cash in my pocket, so if
that's you, obviously we're not proponents of just wiping out your savings and having nothing left, but it
is kind of nice to be strategic, so if you want to do repairs to your house, 3% down on a $300,000 house
is only $9000. So that just opens up a lot of possibilities for people who might have thought they needed 20% before, but-

Kristina:
And we grew up thinking that. I mean, I know I grew up thinking that I had to put 20% down to buy a
house, and my dad told me that, and he's changed his tune now, but why that was the reason back then
was because interest rates were so much higher than they are currently. I know we're having clients
who are getting like 2.8% right now on a conventional loan.

Steph:
That's crazy.

Kristina:
Where before, it was 8%. So it was much higher before, and so putting more cash down made more
sense, because you were paying more in interest. But now, yeah, if I can put less money down and have
higher savings in my pocket, I want cash in my pocket to make repairs and just have cash on hand.
Especially right now, we want more cash on hand.

Kristina:
And, as a millennial, we don't have as much cash. We graduated college and we're in debt, we didn't
graduate like, "Oh, we have 70k to buy this house and live the dream," we had to work harder for our
money and don't have as much of a savings as maybe our parents did.

Steph:
Agree, and houses are a little bit pricier, too, than our parents. But yeah, saving up $80,000 is really
hard, and I've never done that.

Kristina:
Especially as a young person.

Steph:
Yes.

Kristina:
I think, I mean, I want to have a nice chunk of savings, but it's really hard to do right now.

Steph:
It's really hard. And I think property ownership is more important than spending six years saving, so I
love the option to put less down.

Kristina:
Yeah.

Steph:
So that's also super personal. You can also put 4%, 5%, anywhere from zero to 20%. Some people buy
cash, obviously not a lot of people that we work with buy cash, but it just depends on your situation and
it's so personal, so that's something that you'll talk to your realtor and your lender about.

Kristina:
So some of our clients are putting 20% down. If you just saved a lot of money and you're really, you're
like, "I'm going to buy this one house and I'm good. This is my one investment, I want to put more cash
down," that's totally okay, and also they might have heard of something called PMI, so if you put less
than 20% you're going to pay, what is it, principal]-

Steph:
Private mortgage insurance.

Kristina:
Private mortgage insurance. So I mean, I know I put 10% down on my house when I bought, and my PMI
was like $85 a month or something. So I think people get scared with PMI, but if you have to wait
another four years to save up 20% down just because you want to save for PMI, well, then you have to
consider your interest rate is probably going to go up, prices are going to go up, how much money are
you really going to save just for saving for 20% down?

Steph:
And your PMI, if you're using a conventional loan, so you've probably heard conventional and FHA, if
you're using a conventional loan, your PMI can drop off, which is kind of cool. So you're not going to pay
the PMI over the life of the loan, so it's really worth it to me to buy sooner rather than, like you said,
Kristina, buy later and save up.

Kristina:
Yeah.

Steph:
20%.

Kristina:
And lots of people, I feel like we're doing a home buyer workshop right now.

Steph:
Yeah.

Kristina:
We do monthly home buyer workshops and we teach a lot of this in our workshops. But off, what was I
going to say? Hold on, pausing. Oh yes, okay. So also, people don't realize, you can put less money
down, and then if you know, "Oh, in December I'm going to get that bonus of 5k," you can throw
additional monthly payments to your mortgage payment, does that make sense?

Steph:
Yeah.
Kristina:
You can throw additional payments to your monthly mortgage payment ever year, and that'll go directly
to your principal, so it'll be paying off your loan faster. So you could do a 30 year loan, but if you made a
few extra mortgage payments every year, that could go down to a 15 year loan.

Steph:
Yeah, it's so crazy the amount of time that you can cut off just by making one extra payment a year, and
if you do more than that ... I like the idea of having flexibility. Like, you want your payment to be lower,
but if you have the extra cash, throw it on there if you don't need it, and that-

Kristina:
Tell people how you got rid of your PMI.

Steph:
Oh yeah. So I bought my house and put as little down, I think I put 5%, and I've made a lot of repairs
right away. So we bought the house, basically, in the first house that I did this on, it was really minimal
repairs, I mean, it was very cosmetic, it didn't cost that much, but it made the house look way better
from before. And about, I think it was a year and a half in, maybe even less, I called my bank and I said,
"I think my house is worth more now." And they actually sent out a broker, it's called a broker's price
opinion-

Kristina:
Like a realtor, right?

Steph:
Like a realtor, yeah. It was a person that had my job, and he came out and he gave a price opinion,
which meant he pulled comps and he figured out how much, like if he were going to list it, how much he
would list it for, and it had appreciated enough, I had forced appreciation, plus the year of appreciation
naturally, it had appreciated enough to where I now owed less than 80% of the value, which means,
that's the "20% down," and so they took my PMI off, which-

Kristina:
That's amazing.

Steph:
... is so cool. So I paid PMI for a year or less, and now I just have a normal payment, so ...

Kristina:
That's awesome, yeah. You're saving lots of money, and I mean you put some money into your house, but then you got rid of that additional interest-

Steph:
Yeah, it was so nice. My PMI, I think, was 180 on that one.

Kristina:
Oh wow.

Steph:
So it was high, so that was like a little raise for myself every month.

Kristina:
Yeah, that's amazing.

Steph:
Yeah. So that's the first part of the cash you'll need down is your down payment. You get to choose that
percentage, but again, very flexible and personal. Then the second part of your cash needed is your
closing costs, and this can be kind of overlooked sometimes, and it's also kind of a mysterious phrase.
Like closing costs, what is that? Usually we say 1.5%, right?

Kristina:
Yeah, around there. And it really just depends, like what the year, the time of year you buy your house.

Steph:
Yes, it's so interesting. So included in the closing costs are your prepaid taxes, your prepaid insurance,
and any lender or title fees. And the biggest chunk of this is your prepaid taxes, and this depends on where you are, definitely, but your taxes are a big part of your payment, here in Texas-

Kristina:
At least in Texas, yeah.

Steph:
Yeah. It'll change, and definitely, like Florida has really low taxes. And every state does their taxes
differently, which is interesting to know, but in Texas, our houses are appraised every year by the
county, and it's a pretty big part of our payment. So that, you pre-pay that for the first year of home
ownership, and that comes out of your pocket up front. So that can be four grand. So 1.5% of 300, what
is that, 12,000? Which is, sorry, not 12,000. What is that? No, it's like six to 8000.

Kristina:
Let's do this, 300,000 times, what was it, 1.-

Steph:
.015.

Kristina:
So it is 4500.

Steph:
What the, did I say 12,000? Said it so confidently, too.

Kristina:
It's okay, we'll edit this out. Or will Alan edit it out, we'll see?

Steph:
Yeah, Alan, get it out of here.

Kristina:
So if someone bought a $300,000 home, and let's say they put 10% down, okay, so-

Steph:
Yeah, that's 30,000.

Kristina:
Yeah.

Steph:
So they put 10% down, 30,000, plus their-

Kristina:
So it could be-

Steph:
... 4500, so let's just say they're $35,000 if you're putting 10% down, but it could be as little as 15,000 if
you're putting 3% down. So if you have 15,000, so probably, a lot of you listening maybe have 20 to
25,000 in their savings, you're in a really good position to buy.

Kristina:
Yeah. Sorry if you hear, there's construction going on across the street from me right now, and I'm like,
"What is that noise?" So hopefully you can't hear it.

Steph:
That house across the street from you is getting a facelift?

Kristina:
No, not that one, the one diagonal to me is.

Steph:
Oh, okay. So I think we covered that. I mean, again, it's percentages of your sales price, so it really
depends. So let's say, on the conservative side, like 4.5%, that's including your down payment and your
closing costs, all the way to 22%, is what you could, so I would say research the houses in your market and see-

Kristina:
For what? Sorry, I lost ...

Steph:
Just for total cost. So 4.5%, so 3% plus-

Kristina:
Got it.

Steph:
... 1.5% of closing costs, and then all the way to 22% of the sales price.

Kristina:
Yeah. So the next thing, this really is applicable to Texas. I know other states have certain contingencies similar to this, but this section mainly goes along with Texas. So-

Steph:
Yeah, and this is, the jargon is definitely Texas, but I think the sentiment and the basis of this applies
nationwide, right?

Kristina:
Yeah, so the next thing we're going to talk about is earnest and option money. Essentially, what do you
do when you go under contract? Because I think a lot of people are like, "Do I turn in all the money
now? What am I turning in now versus when am I giving the rest of the money at closing?" So I guess in
Texas, when you go under contract, so both parties have agreed and sign the contract, there's two
things you do within 72 hours. It's kind of like a hurry up and wait process with buying a house, there's a
lot of things you do initially when you go under contract. So the first two things I guess you're doing
within 72 hours is you're turning in your earnest money and your option money.

Kristina:
Earnest money is typically 1% of the sales price. In Texas, you kind of get to decide that. If there's
multiple offers, maybe you're going to put 2%. Essentially when you're turning in earnest money, that's
just good faith money going to a third party like the title company, and they're holding that until you
close on the house. So whenever you go to close on the house, typically around 30 days after you sign
the contract, that money goes towards whatever you owe at the end. And that is being held in that third
party to make sure that you're kind of moving forward with the contingencies inside the contract, so for
some reason if you decide two days before closing that you're like, "Oh, I'm not buying this house
anymore," that money goes to the seller.

Steph:
They kind of get compensated for having the property off the market for that amount of time, and for
you not following through with your legal obligation, which was to buy the house.

Kristina:
Yeah, for sure. And a lot of people, that might scare some people, but then you have to remember, what
is the option money? So option money is actually buying you something called an option period, so
option money is less, so that's usually like, that can be like $120 or so, and we also get to dictate how
much that is. If there's multiple offers, maybe you'll do $400. But what that means, option money buys
you your option period, and your option period is typically around seven days, and within those seven
days, you can break the contract as a buyer for any reason you want, and all you're going to lose is that
option money.

Steph:
And you get your earnest money back.

Kristina:
Yeah, and you'll get your earnest money back for sure. And a lot of people don't realize this either, is the
seller, once both parties have signed, the seller can't back out during that option period. The ball's in
your hand at that time. So during that you're going to get your inspection done.

Steph:
I like how you made up your own idiom where you said the ball's in your hand.

Kristina:
Oh, did I? I don't know what I'm saying. I'm just, I don't know what I'm saying anymore.

Steph:
"The ball's in your hand."

Kristina:
The ball's in your hand now.

Steph:
Okay, so once you execute the contract, you're under contract, and you've given your option money and
your earnest money, you just have to make sure that those are in an account that you can get money
out of.

Kristina:
Not under your mattress?

Steph:
Not under your mattress in cash, not in a brokerage account, somewhere where you can access the
money. Your realtor will prepare you for this also, but once you have turned all that in, you schedule
your inspector, which your realtor should have plenty of suggestions and recommendations for your
inspector, but this person is going to kind of tear apart the house figuratively. They are inspecting all the
systems underneath the house, they go on the roof, they go in the attic, and we always go to the
inspections of our clients, because it's overwhelming. Like, they're going to break it down to where, it's like, the tiniest thing could be wrong, and it kind of makes it seem like the house is about to fall down,
but it isn't. We are there to tell you what's a big deal, but also tell you what's not a big deal.

Kristina:
And it's good, because we're going to then try to negotiate. So that's another thing people, I guess,
might not realize, is during that inspection period, that option period, we're gathering a lot of evidence
to see how much is it going to cost to fix this house up, or is there something wrong that we didn't
realize through first walking through the house? So we might be able to negotiate a bit more, depending
on the house.

Steph:
You're kind of building a case.

Kristina:
Yeah.

Steph:
Like, "Okay, the HVAC is 12 years old, it's going to go out, it's not blowing correctly. What can we get?"
Either the options are to get the seller to pay for you to fix it after closing, or for them to fix it before
closing. We always negotiate, we always try. The worst thing they can say is no. We definitely don't try
to be outrageous and unreasonable, because that does not play well on the seller's side, but if we have a
good case and we've used our inspector, we maybe have gotten extra estimates so that we really know
concretely how much something costs, and then we send that case over to them and say, "Okay, here's
what we are requesting. We want the seller to fix the leak in the bathroom, we want the seller to pay a
$6000 seller credit because this, this, and this are wrong, and we want to fix it after closing."

Steph:
And then they might come back to us and say, "Okay, we agree with these things, we don't agree with
these things. We'll give you $3000 seller credit and we'll fix the leak."

Kristina:
And then both parties sign a document, and then those repairs just need to be done before closing. So
not within those seven days, just before you go and sign all the documents and the house becomes
yours.

Steph:
Right, and I think we do this so often, that the cadence of the real estate deal is really familiar to us, and
it's also familiar to the listing agent. So the listing agent should tell the seller to expect something after
inspection. No house is perfect, even in new builds.

Kristina:
I think this is also why it's good to work with a realtor who has, you know, if you're buying a total fixer
upper, you kind of want someone who has experience with that. Because when you first walk through a
house, as a buyer, you're kind of like, "Oh, I love this natural light, I love the layout," and then your
realtor should be walking around like, "Okay, this HVAC looks old, the roof looks a little old." Obviously we're not getting up there, that's the inspector's job, but we're walking around and kind of looking at
those big-ticket items, because as an investor you're like, "That's going to cost a lot," or, "Eh, that's not
that big of a deal."

Kristina:
Then, going into it, we kind of know, and then during the inspection that's confirmed. And during your
option period also, I know me and Steph, we've renovated homes before, so we kind of are like, "Oh, we
know how much some of these things cost," but you can also bring in contractors during this time and
get actual numbers.

Steph:
That's another pro about having a realtor who is also an investor, or even just a person who owns a
home, because you learn so much once you actually have to pay for these things, and we always get
three quotes when we're actually getting work done on our house, so we have a good range of how
much everything costs.

Kristina:
Exactly. Okay, well, I think that covers it for ...

Steph:
That's it, number four.

Kristina:
Number four, okay. So what are the first time buyer benefits? And I think obviously we can't talk
specifics, because there's so many programs, but I think it's good to just even mention that that's
available, because as a first time home buyer, I had no idea. And when I tried to buy a house, I found out
I couldn't, but maybe if I had talked to the right lender, they would've directed me to a program that I,
that could've, you know, bought earlier.

Steph:
Yes, if you have knowledge outside what your lender tells you, you have power. Because I did the same
thing, I was a teacher when I first bought my house, and there were definitely first time teacher buyer
incentives, and my lender really discouraged me from it, and I don't know exactly why, but I think maybe
now looking back, because he didn't have the program, so he was like, "Oh, no, don't worry, let's just do
it this way." But there are so many, so that's the main takeaway, is don't listen to the first thing that
someone tells you, because there's so many programs, so if you need the help, or if you need a down
payment assistance program, there's just so many different loan products.

Kristina:
Yeah, so that's why it's good to find, if you're a first time home buyer and you're interested in that, try to
find a who works with a lot of first time buyers who is probably going to be familiar with lenders who
have a lot of those programs available, because I think you do have to sign up as a lender for a lot of
these programs. There's a lot of different kinds, and there's also builders, actual building companies that
have programs like this as well. I know in Mueller there's a few builders that, well, Mueller in Austin is
like a, how would you describe that place?

Steph:
It's a urban living, but suburban feel.

Kristina:
Yeah.

Steph:
And close to the city.

Kristina:
So it's all walkable, there's a grocery store, there's a movie theater, there's restaurants, and different
businesses that people need to live in the community, and honestly it's so expensive now, but there is a
good section of Mueller that has affordable programs. One of my clients, she bought, I think she had a
income of maybe 42k a year, and she was able to buy a three bedroom three bath townhouse in Mueller
for like 170, like 170,000.

Steph:
So cool.

Kristina:
Which typically that would be like 600,000 or 500,000.

Steph:
Right. It's shocking, the discounts. And that is literally because she knew about this. They're not
advertising these a lot, and they go really quickly, but the reason that builders have these units is
because it, I think there's some incentive, or they can't build unless they have three out of the 10 units
as affordable housing units. So there's a lot of options, and the main takeaway is do your research and
find a realtor that is used to working with first-time buyers, because if you're using a realtor who maybe
just works with luxury clients, they might not have the resources that you need.

Kristina:
Okay, I guess people might be like, "Well, I'm not a first time buyer," but I think the federal government
definition of a first time buyer is someone who hasn't bought a property in three years, I think.

Steph:
Yeah, that was on my mind too. Three years.

Kristina:
Yeah, three years, so I mean, if you bought a house 10 years ago, you're a first time buyer. And also,
some of these are not just first time buyer programs, they are also income incentives. So if you're, like
Steph said, if you're a teacher, or you make under a certain amount of money, then there might be
programs, housing programs in general. The one thing to know about them is it is a higher interest rate.
But it might make sense, it just depends. Like how we said, if you're going to wait three years or
something to save up money to buy sooner, just make sure to do the math. Like okay, interest rates right now are 3%, so if I do a home buyer program, maybe my interest rate's 5%. What does that look
like over the next few years? Am I able to ever refinance out of this program to get a better interest
rate?

Steph:
That's good, like know the questions to ask.

Kristina:
Yes. And maybe we can, we should be write an article on that.

Steph:
Because some of them are like you get 2% set appreciation every year, and so when you sell, you don't
get the benefit of the whole appreciation, but you get a guaranteed 2%.

Kristina:
I know the Mueller one is that you only get, I think it's 7% appreciation-

Steph:
A year?

Kristina:
They cap your appreciation every year, and then when you want to sell it, they sell it for you. So your-

Steph:
Right, you could put it back into the program.

Kristina:
Yeah, they're going to put it back in, which is good.

Steph:
Yeah.

Kristina:
And I mean, it makes sense to a lot of people, especially if you just graduated and you're already going
to live with two roommates, why not get that program, live in an awesome area for affordable price,
have a roommate or two, help you pay that mortgage payment, and you're saving thousands of dollars
every year.

Steph:
I love that. And you're not sacrificing quality of life.

Kristina:
Exactly. And then, I know I helped my boyfriend when I first met him, I think he was making, I don't
remember, well, I don't know if, I should ask him. Before we post this I'll make sure he's okay with this,
but I think he was making like 40 something a year, and he didn't think he could buy a house. He was
just like, "No, I can't." And then we started talking and I told him, [crosstalk 00:31:52]-

Steph:
[crosstalk 00:31:52] day one.

Kristina:
Literally date one I was like, "Oh, you could totally buy a house."

Steph:
Yeah, if you're around us for an hour, you're about to buy a house.

Kristina:
Oh my gosh, I went on a trip with someone to, I think, yeah, we went on vacation and I didn't really
know him that well, and he had lived in Austin for like his whole life and had not bought a property, and he got back and within a month had bought a property, and I was like-

Steph:
Oh yeah, I'm sure you made him feel so silly. Like, "You lived in Austin for how long?"

Kristina:
But he could, like I mean, I was like, "Wait a second, you live with three roommates right now?" I was
like, "Wait a second." I just showed him the numbers and he was like, "Wait, why had I not thought" ...
And I mean, again, we're going on a tangent, but back to what I was talking about is, he found out he
qualified for a first time home buyer program. This program, actually, I think they lost funding recently,
which is a bummer, but there's more. This one actually paid for a certain amount of your closing costs
and your down payment, so in the end I think he only paid like $5000 total to buy his house, and his
interest rate was 5.5%, he bought his house for like, I think it was 260 or something, thousand dollars, and-

Steph:
Is that a four bedroom house?

Kristina:
It's a four bedroom house, yeah. So yeah, there's just different programs out there. I think it's just good
to be educated and know that that exists and you can kind of seek out different people to help you find
programs in the town you live in.

Steph:
Yeah, truly. Knowledge is power. You don't have to use down payment assistance programs, you don't
have to use first time buyer programs, but it's so important to have the option and then be able to
choose what's best for your situation.

Kristina:
Yeah, for sure. Okay, so the last thing we think you should know before buying a house, obviously
there's lots more, but the fifth thing we really put priority over is knowing the tax benefits of being a
home buyer. So one major tax benefit is the homestead exemption. This is if you buy your house and
you live in the house, and that just means that you cannot, they put a cap on how much they can
increase your taxes every year. What is it ...

Steph:
10%.

Kristina:
10%?

Steph:
Which is still really high.

Kristina:
Yeah, that is high.

Steph:
But they also, like each section of what you're taxed in, like the school districts, and you can see the
breakdown of what you're taxed on, you also get a tax deduction there, or like a benefit. So it's not just
capping it, it's also you get a little bit of a tax break if you live in the house.

Kristina:
Yes, and it's good to know that Texas is a non-disclosure state, which means you don't need to tell the
county how much you paid to buy your house. So, for example, I bought my house for 280,000, I think, a
couple years ago, and the Travis Tax County appraiser this year has appraised my house for 265, which is-

Steph:
Wow.

Kristina:
... great.

Steph:
That's so good.

Kristina:
I still try to fight them every year, just to keep them low. But yeah, that's pretty low. And then I had an
actual, when I was trying to refinance my house and I had a lender, like a bank do an appraisal on my
house, and that appraisal came out to 415,000.

Steph:
That's so crazy, so that is just showing you that the tax appraisal and the market appraisal should be
pretty different. So your payment as far as taxes goes, like your principal and interest never changes
throughout the life of your loan, so you're going to pay the same amount on that principal and interest,
but then your taxes, like we said, you're appraised every year, so your taxes will likely go up a little bit,
and so it'll be an incremental increase in your payment every year. Hopefully, if you fight your taxes and
keep that appraisal low, like Kristina obviously has kept hers low, then it shouldn't be a crazy jump in
your payment.

Kristina:
Yeah. So what are some of the benefits, are there tax benefits for buying an investment property?

Steph:
Oh yeah. There's not as many, but-

Kristina:
Which is fine.

Steph:
... on any property that you own, yeah, any property that you own, you get to write off the mortgage
interest, and I think you get to write off the insurance that you pay. It's like interest, insurance, and then
your depreciation every year, which is kind of counterintuitive, because we talk about appreciation,
which means your value's going up, which it is, especially if you live in a growing area, but depreciation
is kind of assuming that the more you live in your house, the more wear and tear that happens to your
house, and so you get to claim that on your taxes. So I wholeheartedly recommend that you have a tax
person do your taxes if you own property. What do you think?

Kristina:
Oh my gosh, yes. It goes over my head so much. Like, I try to comprehend, but it's hard. But I've learned
a lot more through having an accountant who is also real-estate savvy, that's super important to have.

Steph:
Yes, if you're an investor, even if you just have a house, a primary residence, it's important to have
someone who knows how to get you the most benefit from the taxes. Maybe we should have, maybe
Paul, our tax person, on, or someone who could talk about the intricacies of the tax benefits of owning
property.

Kristina:
Yeah.

Steph:
But yeah, so I think having someone do your taxes is important, so that you don't have to remember all
of these. But the basic takeaway from this one is the government really likes a real estate investor. They
want people to buy houses, because that stimulates the economy, so they are trying to make it so that
you're able to write things off, you can write off your maintenance that you pay, or any capital
expenditures, which means anything big that happens in your house. So, like if you replace the HVAC,
which I feel like I've said HVAC 25 times, or if you replace the roof or the foundation, all of these things
can be written off, and again, tax professional is the way to go.

Kristina:
I agree. Well, that, I feel like that kind of sums it up for this week's episode, right?

Steph:
Yes, that was great.

Kristina:
We would love to hear your questions if you want to email us, or even suggestions. I would love to hear
if you're going through something right now, currently in a purchase, our email is
podcast@openhouseaustin.co, so please, please reach out. Our Instagram is openhouse_austin,
openhouse_austin. So goodbye, we love you, and goodnight.

Steph:
Don't cut that out, Alan.

Kristina:
Math teacher, you want to take it away?

Steph:
So 1.5% of 300, what is that? 12,000? Which is, sorry, not 12,000. What is that, what is that? No, it's like
six to 8000.

Kristina:
Let's do this, 300,000 times, what was it, 1. ... So it is 4500.

Steph:
What the, did I say 12,000? Said it so confidently, too.

Kristina:
It's okay, we'll edit this out. Or will Alan edit it out, we'll see?

Steph:
Yeah, Alan, get it out of here. (silence)