Most People Should Buy. Some Shouldn't.

Mike Domangue is the reason I have a house close to work in Houma. He was my lender. So this episode of The Last Zebra was a little unusual. I wasn't interviewing a stranger about his field. I was asking someone who'd already walked me through a mortgage to explain it to everyone else.

His position is clearer than most of what you'll read about housing. He thinks buying is the right call for most people, and he added the exception himself: “There are some people that are better off renting. Most people, that's not the case.”

He didn't pitch it as houses versus stocks. A home is one more place to put money that can grow. His worry is about what happens when you put money nowhere. We tell ourselves “investments can wait a little bit longer,” he said. “And then we wake up forty years later and we have a bunch of stuff, we have no savings.”

That line stuck with me more than anything he said about rates.

He had things to say about rates, though. When we recorded, a 30-year mortgage was running around 6%, closer to 6.5% depending on the day. A lot of buyers treat that as a disaster because they're comparing it to the last few years. Mike doesn't. In his view “the 6% number is not a bad number,” and the ultra-low rates people are nostalgic for came from trouble in the economy. “It was not good for anyone.”

He also walked through what lending looked like before 2008. Lenders were writing what the industry called NINJA loans (no income, no job, no assets) and lending up to 110% of a home's value, so buyers walked out of closing with a check to furnish the place. That only worked while prices kept climbing. I'd rather have 6% and real underwriting.

Where I'd add caution, and this is my view rather than his, is the word “most.” A mortgage payment is only part of what a house costs. The Consumer Financial Protection Bureau lists property taxes, insurance, mortgage insurance, association fees, and repairs, and notes that selling within a few years can leave you with little equity once transaction costs are paid (CFPB, “Making the decision to rent or buy”). If you might move for a job in two years, or if buying would empty your cash reserve, you may be one of the people Mike was talking about when he said some are better off renting.

What he wants from a buyer is simple: “I want them to at least be educated and to make an educated decision.” There's no shortage of information, he said, good and bad, and “just because you hear something and you hear someone say it doesn't mean it's correct.”

The other thing he said: “It doesn't matter if you call me to buy a $50,000 house or a $50,000,000 house. I'm gonna show you the same respect and I'm gonna work for you just as hard.” If your lender doesn't sound like that, find another one.

Did you buy, or decide not to, and do you think you got it right? Reply and tell me.

Dum spiro, spero. — Ugo