Ways to Save When Planning to Buy a Home

 Planning to Buy a Home

It seems you have been saving for quite some time now to purchase your home.

The house prices falling continually and growth slow, the economic downturn could make you think of purchasing a home now

You are tired of paying rents and would prefer to own your own home. There would be so many extra advantages such as building up equity over time, tax breaks, low interest rates.

Affordability:

It not only includes the down payment but how much can you afford monthly. Each Federal Housing/Banking Act, and some State laws impose limits on how much of mortgage one can receive. Contact their office for more information

Equity:

You have to identify how much equity is available to you. Generally, this is the difference between the mortgage debt amount and the house value.

Your down payment is considered 1/3 of the total mortgage value. If the total mortgage amount is $300k and the house is worth $400k, then you have a $60k equity position.

If the equity is $40k, the down payment must be $80k, then you have $120k equity. The real value of the property is being depreciated, so you do not add on to the actual value the home.

Your tax advisor should help you with instruction on how to computation the equity.

Interest rates discussed in “Yield Spread Premium.”

The current Federal Reserve Chairman, Ben Bernanke, was previously a Federal Reserve vice chairman and now chief economic officer of the Federal Deposit Office, a U.S. bank. He is an economic professor at Princeton and also a consultant to the Office of Federal Banking, board member of the American Bankers Association, and a member of the Board of Directors of the Federal Home Loan Mortgage Corporation.

So what exactly is a Yield Spread Premium?

In short, he says that the interest rates you are quoted on the phone or in person are not at “par.” What does this mean exactly is that after receiving a quote, the bank is not bound by those rates and instead, it can quote whatever it wants at whatever rate it wants.

“There are many guarantees built into the Yield Spread Premium, including that banks will not discount any of the rates they quote” said Bobapper. “You might be surprised to know that they are guaranteed to at least quote the same thing you were quoted at.”

We will put this to test…

Sometime ago, we applied at a bank where we got a loan to start our spray foam rig for sale business and were recommended our 4.99% 30 year fixed rate mortgage by a knowledgeable retail banker. We did not know anything about the mortgage other than that it was a fixed rate, and we needed a $1,000 minimum payment.

We applied online, using our last four telephone numbers, and was referred to an insurance company representative by phone. The representative wanted to charge us 1 percent of the mortgage amount to lock the rate. When we asked how much we would be paying in closing costs, and who would be holding this money, she balked. Then, after we told her we would take our business to another bank, she started telling us how much we would be paying in closing costs and prepaids (assistant, escrow, attorney, title, appraisal, etc.).

OK, fair enough, we thought, I have to say something. So we asked about Yield Spread Premium.

The representative said she would need our last two years tax returns (ask your tax advisor about deductions) as well as Proofs of Funds and monthly statements from all of our accounts (we had three savings accounts, a checking account, a 401(k) and a retirement account). She would also need to see similar loans from our lending institutions, and a copy of our Purchase and Sales Agreement.

OK, no problem, said OUTLectar, we explained to her that we received stated income loans and our mortgage lender did not document our income at all. She said that we were fine and we had never had a problem so long as our taxes were sufficient and we stayed current with our payments.

We asked if she could please look at a amortization schedule for us to review before we met with her on the phone. She requested that we submit a 4506 tax form, American Mortgage Statement and a hardship letter.

We were done with this guy. He did have a license and PEOPLE working for him. But not exactly the type of person we want to lend money to.

Fifteen minutes later, he called us to tell us he was taking us out further to view some “nicer houses.” I saw the two kids he had driving up in a versus air and then the look in their eyes said “we can’t take no notice.”

OK, I thought, cool.