Buying your First Home with Jodi Litt and Susan Burke
[Music]
Matt: Welcome to Bellingham Technical College’s Money$marts Podcast. I’m your host, Matt Benoit and each episode we will talk with BTC students, staff, community professionals and financial experts about financial literacy and wellness all to help listeners navigate resources in the community and empower themselves, financially. Today we are here with two guests, the first of whom is Jodi Litt a Money$marts Financial Wellness Mentor. How are you doing?
Jodi: I’m doing great Matt, thanks for having me!
Matt: Excellent, excellent. And our guest today is Susan Burke. How are you?
Susan: I’m good thanks, Matt!
Matt: Great! So, first of all, what program are you in at BTC, Jodi?
Jodi: I started taking classes here last summer in kind of Continuing Ed, so a mish-mash of different topics that I’m exploring. I had a career change at the end of 2017 and I’ve come to BTC to explore what the next career, and part of my career might look like and in the process of enrolling in those courses I learned about the Money$marts mentor opportunity and I was immediately drawn, you know it’s actually funny, within five minutes I had sent Cheryl my, who’s the program lead, I had sent her my resume and my references and the application. That was how much I believed in what the college was doing to help students. So, yeah it’s been a great program and I’m really happy to be a student and part of the Money$marts program. 
Matt: And for those listeners who aren’t familiar, the Money$marts program is a financial peer-mentorship program on campus where BTC students can meet one-on-one with a mentor to learn about credit, budgeting, paying for college and help answer any other money related questions students might have. What got you interested in becoming a Money$marts mentor?
Jodi: The, I had a very successful business career for over 20 years in corporate America and when I stepped away from that I decided to take some time and really think about what my next move would be. And in exploring different classes, and talking to different people I found, and I knew this about myself, I had a real propensity for business. Making money over the years, while satisfying on a lot of levels, didn’t really feed a big part of me that was service oriented and working with the Money$marts programs allows me to give some of my wisdom and help a lot of students that I can relate to. I was that person when I was in my early thirties, so it’s been a great program and I’m really happy to be part of it.
Matt: So tell me about your current business, I understand it is a start-up.
Jodi: Yeah, it’s called Hand-Up Homes and it’s a start-up that my partner and I who’s here with me, Susan, who’s here with me, that works to fill the gap for those who can afford a medium priced home in Bellingham on their own and those who could qualify for a mortgage but don’t have the down payment.
Matt: So, obviously, both of you can answer this individually but what were your guys’ experience like when you bought your first home?
Susan: Yeah, I think I’ll take that one. This is actually the back-story of how Jodi and I got Hands-up started. Jodi was interested in perhaps looking at some real estate investments and I had just recently gotten my real estate license and I actually own a couple of rentals here in town along with my own primary residence. Jodi was intrigued by that, so she was looking over rental property and just happened to, over lunch one day say to her how I bought my first home. And, it kind of birthed our new start-up. Which is, I was working in Silicon Valley in the 80’s and I was making plenty of money, I was a relatively new grad and I had absolutely no money for a down payment of a house. And homes were increasing at about 20% a year which is not unlike how they are in Whatcom County right now and with no way to save for a down payment, but enough money to actually buy a home and really wanting to get into the real estate market feels like a big hurtle that you can jump over. And once you’re an owner you’re like in a club and I really wanted to be in that club. And so, I was lucky, my family doesn’t come from money, and I was lucky enough to have some family friends who, you know, believed in me and said, “Hey,” you know, “Let us help you! We’ll help you with a down payment” and so we started a partnership and it was wildly successful. It was a very straight forward deal, you know, they came in with the down payment, I made the mortgage, I had to pay them a part of the rent, etc. etc. Without going into the details, we knew that it had to terminate at the end of three years, we had agreed to that. At the end of three years I had the option of either buying them out if I could, or we would end up selling the home and then I would have enough money to then go on and buy my own home. So, I like to tell the story that my first house was half a house and that launched me into now owning, I don’t know I guess I have, five houses. And you know, again I don’t come from money, my family doesn’t come from money. There are ways to do it. And Jodi was like “let’s do that! Let’s do that with people in, you know, Bellingham and Whatcom County!” and I said, “alright, let’s do it!”
Matt: In relating all of this to students here at BTC and elsewhere in the community in Whatcom County, what are some of the barriers they face in general when they are looking to purchase a home?
Jodi: Yeah, this is exactly why Susan and I joined forces to start Hands-Up Homes because there’s quite a few of them. And if you think back to, at least for me, when I think back to my parents, you know, post-World War 2 there were so many resources out there, government resources, that allowed people to be able to easily finance their first home. It was back at a time where everything was a 30 year mortgage. It was at the same time where you joined a company, you know, for 30 years and you fast forward to where we are now and times are very very different. And so, it’s a huge paradigm shift from what that was and what we have in our minds of a first home and what exists today. The barriers are really pretty simple. They’re basically about how much money, median price income is here in Whatcom County and that’s just under 52,000 is the median household income in Whatcom County versus the price of a home in Whatcom County.
Susan: And you know, Jodi talks about that paradigm shift, one of the other things that has happened in the course of say, 20 years or so is that, in general, housing prices in Whatcom County have done nothing but really increase over the long haul. The last six quarters they’ve actually increased in double digits, right? So, we’re talking about increases annually to the tune of 30 or 40 thousand dollars a year that these houses are going up in value and at the same time, wages aren’t increasing, right? That’s on all of the national news right now is we’re talking about flat wages. At the same time we are talking about home prices that are increasing. So, this gap, this affordability gap is just increasing more and more and more. And as Jodi had mentioned, the old social contract, sort of post-World War 2 idea of, you know, you graduate college, you get a job, you buy a home is no more.
Matt: Yeah, I mean my grandfather, after he got out of the war, he took the G.I. Bill…
Susan: That’s right
Matt: …and built his own house. 
Susan: That’s exactly right! And you know, when you got out of, when you got out – the Veteran’s Administration still does offer low income loans for veterans but it isn’t what is was in World War 2, when you know, most of the men were veterans at that point in time, and several women too, right? So, the idea is, how are we going to change… even socially here, to actually make it affordable for people to own their own homes? I’m an economist I teach adjunct up at Western (Washington University) also and one of the things that I am terribly troubled by is that as a homeowner, I actually get to take advantage of a tax credit on the interest that I pay on my loan that non-homeowners don’t get to take advantage of. So, effectively, the federal government is sort of subsidizing my homeownership. When a renter doesn’t get that same sort of subsidy. And so when you think about, how do we help these people who are interested in becoming homeowners, get out of the rental market?
Matt:  Obviously, with some of these barriers only becoming larger, what is your advice to students to navigate these barriers? 
Jodi: We talk to first time home buyers a lot about getting creative. Those who are willing to look at, maybe a little bit bigger geographic area, then the core of Bellingham, looking maybe out in the county where things might be slightly less expensive is one good option. Those that are handy and are willing to sweat equity into their land or home that they buy can really benefit from finding a good value, relatively, in the market. There’s also a lot of start ups, like ourselves, who are poised to help first time homebuyers and a lot of resources are out there that can help first time buyers navigate those waters and also potentially, bridge the gap that we’re talking about.
Susan: You know, one thing that someone who’s interested in real estate, even if you don’t have an agent, even if it’s just a pipe dream for several years from now is, go see a banker. Bankers really become your absolute best friends in this journey. And, for the most part, they want to help you out. So, if you think, “I want to be a homeowner in a year or two years” – it’s ok to go in and talk to a banker right now and say “how much money do I need to make?” or “what is my credit score?” or – you know, bankers will tell you things that – and maybe you don’t want to hear it because it’s sort of like in the short term, it doesn’t make you as happy, it may mean less cappuccinos and that sort of thing, you know, less movies. They may tell you don’t buy a new car, you know, try to keep your debt down but you know, if you’re planning for a long trip, and hopefully that’s what the journey to homeownership looks like, then it’s really prudent to understand who’s going to be on my side here and going to a banker is a great way to start that trip. And the other thing is that Jodi and I don’t want people to feel like it’s overwhelming, just to give you a sense of when I bought my first home, so this was a long time ago, I was making 20 thousand dollars a year, and I thought that was just like, you know, I had, that was a finance degree, out of a good college, I had a great first job, I felt really good about life. And my first home cost me about $299,000 in silicon valley, right, so this is very expensive real estate in California. I owned that home for three years and I sold it for $385,000 thousand dollars. The point is, you can – you know, Jodi just quoted the median price of a home in Bellingham is $444,000 thousand dollars right now and if that just stops you, if that just stops you cold in your track, don’t let it. Don’t let it stop you cold in your track. You know, there are ways around this, I’m going to have Jodi here talk about Kulshan homes.
Jodi: So, actually, the median price home is 410…
Susan: 410
Jodi: Thousand dollars.
Susan: Thanks, Jodi.
Jodi: Let’s correct that. One of the things I was thinking about as we’ve been chatting here is, you know, what students can do today to prepare for purchasing a home for the future and Susan mentioned the importance of getting with a, a really great lender and interviewing them. Go to your bank, and hopefully as a student you’ve been in there and you’ve worked on, you know, a budget or, or gotten some financial advice or set up your bank account. That’s a really good place to start and see if you connect with that person and if not go and interview some other ones. Because having your financial, preverbal ducks in a row is really really important when you enter homeownership. Making sure your credit score paints and accurate painting, an accurate painting of your financial status. You need to know exactly where you are in terms of a credit score because a lender is going to be looking at that. If you do it in advance, like Susan mentioned, you have an opportunity to clean up some of your errors or small matters that can really skew how a financial institution might look at you when they’re evaluating whether or not they want to lend money to you. And garnering a way to save for a down payment is really important when you’re buying a home. And there’s something out there called private mortgage insurance, which if you put less than 20% down on a home, you’re actually paying insurance to the lender to make sure that you’re going to be good on your money. And so, getting a nest egg together where you have 20% to be able to put that down is a great goal for students as they looking ahead into the future.
Matt: So, what are some of the main differences between renting a home vs. owning?
Jodi: The differences between renting and owning are vast and huge and I think a lot of people miss that. They may see the financial advantage but they miss how much actually goes into being an owner of a home. The advantages are that, not just the financial commitment but also in terms of the money and responsibility put into a home is really really great. Thinking about, when you’re renting, you don’t think about, “well how’s the lawn getting mowed?” and “what if the water heater breaks? All I do is call my landlord” Or, what if you know, “my heat bill is really big.” I mean, those are things that you just turn over to somebody else. When you own the home, those are your responsibilities. Taking care of the lawn, making sure that if a water heater breaks that you have some, an emergency fund in place to help get you through that time. Susan mentioned the credit that you get back as a homeowner, that’s one of the huge financial benefits of being an owner vs. being a renter. Of course, when you rent, your money is going to line somebody else’s pocket, the owner of that home, but when you buy you’re creating wealth for yourself that you can utilize in your future.
Matt: If, for a lot of people who might be listening to this, a lot of students, it might seem like a pipe dream to purchase and own their own home in the future but what can they start doing today to make that a reality?
Jodi: Yeah, we’re really glad you asked because there are a lot of things you can do. Susan mentioned of course, going and meeting with your banker starting that process to just get clear on what that might look like, even if you’re not ready. That’s a really great first step. Being aware that there’s predatory lenders out there that they’re not all what you read online, might not be what you actually experience, just being aware of that is an important piece. Budgeting and knowing how to budget your money is something that we talk about a lot in the Money$marts program, becoming really aware of your income and what that money goes to, where you’re spending your money every single month is definitely the first step of knowing where it is. And, mint.com has a great budgeting tool on their app that we use a lot in the Money$marts program and we really recommend that first-time, people preparing for their first home become solid at budgeting their money so that they know where it’s going to go. Tracking your spending, there’s other sites, like Learnvest is a great site to educate and empower people starting out to reach their goals. There’s a lot of great information on that site to help people get prepared for that point where they are ready to purchase a first home.
Susan: There’s also first time home buyer classes that you can take.
Jodi: It’s offered through Kulshan Land Trust offers free home buyer education classes. They’re open to the public and they’re held once a month. They’re free but pre-registration is required and we really recommend that potential buyers take a course to dive deeper into what we’ve been talking about here.
Susan: It’s not at all, unusual for, banks to offer those classes, other realtors will offer those classes, you can see them. So, you know, the more that you just immerse yourself in the language, it’s off-putting sometimes with how much the vernacular, just the language of the whole thing can be incredibly confusing and it isn’t anything that you would expect that you would understand after hearing it just once. You know, so even going back and talking to multiple bankers, going to multiple first time homebuyer classes and immersing yourself in that. I think the human brain needs to hear something five times before it lands and that’s if it’s a comfortable, easy thing to learn. And this isn’t necessarily that easy so I would say educating yourself and talking to people
Matt: Now, how soon should students start saving for a down payment if they’re looking to…
Susan: Yesterday! [Laughs]
Matt: Yesterday, yeah. [Laughs]
Jodi: And when we talk about solid financial planning, having that bucket of money set aside for emergencies as they come up but also for your future. That’s where we recommend that people setting aside – it doesn’t have to be a lot. But just setting aside a little bit, getting in the habit of setting aside money so that when they do go to purchase the home, they’re prepared to at least put a debt into that down payment.
Matt: Now, you guys mentioned the Kulshan Land Trust classes, what other resources are there in the community that can help the first time home buyers? Is there anything that the Money$marts program can do to help in any way?
Jodi: The Money$marts program is great because it’s really getting students thinking about financial wellness and that’s sometimes the first step in this is just getting people, it’s like Susan said, getting the mind used to thinking about – not looking at this as a child anymore, where you’re dependent on other people, but looking at yourself as the adult in the room and trying to get to that goal of homeownership. So, in the Money$marts program there’s a lot of time spent with students, mentoring them about budgeting, about preparing for the future, about credit scores and how to improve that and how to make decisions that allow you to have a, you know, the kind of life that you want to have and what the trade-offs are for some of those decisions that that we want to make in our youth. One of the other great resources out there that we mentioned, Kulshan, Habitat for Humanity is a great place for a lot of people to start with the first home especially if they’re willing to put a lot of sweat equity into that ownership, they’re another great resource for students to look at.
Susan: And both Kulshan and Habitat – those are examples of places where you can learn things without committing. You know, that idea of, you know, “I don’t want to call habitat because I’m not really ready to make a commitment to habitat,” you don’t have to be, right? You just call them up and find out what they have to offer and see if any of that sort of resonates with you, I think speaking to people about your dreams is really really important. You can call a realtor, you know, you can get in touch with Jodi and I to say, you know, how do you realize these things? I think what Jodi said about, you’re not a kid anymore, you’re sort of stepping into the adult world and one of the huge lessons that I learned, and it was how I was able to get into my first home, was asking for help, also. You know, I mean, when you ask for help, and you’re dependable and you’re accountable, and the people that, you know, you’re asking for help know that, it goes a long way to getting you to your dream. 
Matt: That’s and excellent point. Well thank you Susan and Thank you Jodi for being here…
Jodi: Thanks, Matt
Susan: Thanks, Matt
Matt: Yeah! And thanks for listening to this episode of the BTC Money$marts podcast. Be sure to check out all our episodes on the BTC website. They’re loaded with stories, tips, tricks and strategies for financial literacy. This podcast is produced by Cheryl Kennedy with music courtesy of Bensound.com. I’m Matt Benoit, see you next time!