Dollars and Sense

Responsible Home Ownership Pt. 1

Three Angels Broadcasting Network

Program transcript

Participants: Yvonne Lewis (Host), Ryan Mack


Series Code: DAS

Program Code: DAS000009A

00:01 What is money for?
00:03 Is it a helpful resource to use for good
00:05 or is the love of it the root of all evil?
00:08 Actually, it's both, but God may have
00:11 a different definition of success.
00:13 Real success doesn't come overnight.
00:16 It takes hard work and faithful planning.
00:20 To use your dollars well,
00:22 it takes more than a little sense.
00:27 Hello and welcome to Dollars and Sense.
00:29 I'm your co-host Yvonne Lewis
00:31 and our primary host is Ryan Mack,
00:34 he is our financial literacy expert,
00:37 great teacher.
00:39 We're learning some great info.
00:40 And if you haven't been watching
00:42 all of the programs up to now, you can get them, watch them
00:47 because you're going to learn so much.
00:48 I'm learning so much, Ryan. This is great.
00:50 I'm having a great time with this series.
00:52 Oh, yeah, well, I think we're having an even better time
00:56 because there are so many great tips.
00:58 And the main thing to me is that we're learning
01:02 the relationship between scripture and economics.
01:05 Because every program is based on a scripture.
01:08 So what's our scripture for today?
01:10 Well, the theme of this show is really about home ownership.
01:13 And we want people to be homeowners.
01:16 We want them to do it in a responsible way.
01:18 And the scripture outlines exactly how we can do this.
01:21 So the first Scripture of the day is...
01:24 I have a lot today and we're going to see
01:27 exactly how following the Word and the will of God
01:31 could have averted this entire foreclosure crisis.
01:34 And all we had to do,
01:36 we didn't have to look at the experts,
01:38 we didn't have to turn on the financial expert channels
01:41 and whatnot, we just had to look at the word
01:42 and say, "What does the Bible say about
01:44 how we make our decisions,"
01:46 we could have avoided an entire financial crisis.
01:48 Wow.
01:49 And I'll be explaining that here.
01:50 So Proverbs 21:5.
01:53 It says, "The thoughts of the diligent
01:55 tend only to plenteousness,
01:59 but of every one that is hasty only to want."
02:03 And this really just speaks to us being hasty.
02:06 My father and mother always said haste makes waste.
02:10 And what happened was that we had so many individuals
02:13 who were so...
02:16 they just wanted to buy that home so bad
02:18 and they were so excited about the home,
02:20 so I wanted to kind of just take us
02:22 on a historical lesson.
02:24 From 2000 up until today and really just point out
02:28 some key areas to kind of just exemplify
02:31 what exactly happened.
02:32 Oh, good.
02:33 So in 2000, we had just come off a huge boom.
02:38 Okay.
02:39 And this was a huge boom based on a lot of stocks
02:42 and we're gonna have a whole episode on stocks.
02:44 So I'll get into that deeper and really just talk about
02:47 how the word as well could have averted that recession.
02:52 But the boom was going crazy
02:55 and everyone wanted to buy stocks
02:57 but then the market crashed
02:58 because people realized that the stocks
03:00 that they were purchasing
03:01 didn't have any underlying value.
03:03 So the market crashed.
03:05 So everyone took their money out of stocks.
03:07 And when was this? It was in 2000.
03:09 2000.
03:11 So in 2000, and so people said, "You know what,
03:12 what are we going to put our money into?"
03:15 And so they started to put their money in few assets,
03:17 one was gold and the other one was real estate.
03:20 And real estate became the new best thing.
03:22 That was the new thing. That was where...
03:24 All of sudden and then George Bush said,
03:25 "You know, we're going to have a home ownership society."
03:28 And then Dodd-Frank
03:29 and even the Democratic Congress said,
03:31 "We want to make sure people can own homes
03:33 and we want to make sure Fannie and Freddie
03:35 can be on the frontlines
03:37 of making sure people can buy homes."
03:39 And so what was happening was that
03:40 actually there's a thing called reverse redlining
03:43 even where many individuals
03:45 who before were discriminated against
03:48 in the '60s for redlining, they were actually targeted
03:51 and few organizations targeted minorities to say,
03:54 you know what, these individuals
03:55 who have low credit, and it was a color thing,
03:58 it was more of a class thing, to say these individuals
04:02 who have low credit
04:05 and they might not be ready to buy homes right now,
04:08 we're finding that they can...
04:09 We might be able to get them some homes
04:10 because what we can do
04:12 is when we bundle these mortgages,
04:13 we can make a lot of money off these mortgages.
04:16 Now what's redlining?
04:17 Redlining is essentially discriminating
04:19 against a class of individuals
04:21 based upon race, creed, or color,
04:24 and saying that you're not allowed
04:27 to buy property in this area.
04:30 But reverse redlining happened in 2001 when they said,
04:34 as opposed to not allowing them to purchase,
04:36 we're going to target those individuals.
04:38 So say we want those individuals
04:40 who have low FICO scores to be able to...
04:44 We want those people to purchase homes
04:46 because we can give them loans
04:47 and charge them higher interest rates,
04:49 hence make more money off the interest.
04:52 So what was happening was that the market started to crash,
04:55 all this money started going to real estate.
04:57 So real estate started going crazy and crazy and crazy.
05:01 And I'm not gonna get too technical with it,
05:02 but in 1999 at the end of the Clinton era,
05:06 there was this thing at the end of the Glass Steagall Act
05:08 where essentially the various departments
05:11 of the banks essentially were separate before,
05:14 but now they were able to merge together,
05:17 where usually there was a thing called the Chinese wall
05:20 where they weren't necessarily able to combine the commercial
05:22 and the investment component of the banking system
05:25 and everything just merged together,
05:27 we're now to say, "Wait a minute,
05:29 we can take these mortgages that were given
05:32 and all these people all around it
05:33 because that's the new wealth thing."
05:35 Everybody knew this, haste makes waste,
05:37 back to the scripture.
05:39 Everyone said,
05:40 "Oh, I can buy a home. Wow, this is great."
05:41 So we need to find out ways
05:43 that we can get people into homes easier.
05:47 We need to make more creative mortgages even.
05:50 So they started making creative mortgages,
05:51 that's where they started making interest only and arms
05:54 and all these different types of mortgages, balloon,
05:57 all these mortgages came
05:58 because people wanted to make sure that
05:59 it was easier to get people into mortgages,
06:02 and so people were signing mortgages left and right.
06:04 They weren't even reading things.
06:07 It's true.
06:08 They even had multi-level marketing programs
06:11 for real estate. Exactly.
06:13 So you can help people get a loan
06:15 and you can make money, it was crazy.
06:17 Exactly. So it was going crazy.
06:20 And everyone was...
06:21 And literally you could, you know,
06:23 so let's just call her Susan.
06:26 She is walking down the street and a mortgage broker
06:29 can come up to her and say, "Hey, you know what,
06:30 have you thought about buying a home?"
06:32 And she says, "Well, you know, my credit score is only 500."
06:36 "Well, you know what, that's okay,
06:38 just come to my office tomorrow."
06:39 "Well, I don't have any savings in the bank."
06:40 "That's okay, come to my office tomorrow."
06:42 It's a hypothetical example, but a very real example
06:44 of what was going on all across the country.
06:46 So Susan goes to the office tomorrow,
06:49 he hands a huge big thick stack of documents, says,
06:53 "Sign here, and there you go,
06:55 essentially gave her the set of keys to a brand new home."
06:58 Now she didn't know what she just signed,
07:00 she had no idea of what she got into.
07:03 All she knew is she got a brand new home
07:04 because next door, John, he has a brand new home.
07:07 And she wants to buy it
07:09 and all these people in the world
07:10 hear all this stuff on the news,
07:12 everybody is buying a home,
07:13 I need to be a part of this movement.
07:15 So Susan jumps into there and next thing you know,
07:18 let's just say her mortgage payments
07:20 are only $500 a month.
07:22 Four years later, it was 2001 or so, 2005,
07:26 all of a sudden the interest
07:28 only component expires on that loan
07:30 because it was an interest only loan,
07:31 she only had to pay the interest,
07:32 didn't had to pay the principal.
07:34 Now that loan mortgage almost quadruples.
07:37 And Susan gets a mortgage note in the mail
07:42 and says, "What is this?
07:43 Why is my mortgage now $1,800 a month
07:47 or $2,000 a month? I was paying $500 before."
07:50 Well, you didn't read the fine print.
07:54 You were only paying the interest before,
07:56 now you're paying principal.
07:57 Now that was just Susan.
07:59 Just think about there were hundreds of thousands of Susans
08:02 and Johns who did the exact same thing
08:04 all across the country.
08:06 And when people...
08:08 What was happening was it was easy to do this
08:09 because mortgage companies
08:11 would be able to get these mortgages,
08:12 they would bundle them, again, remember,
08:14 the repeal of the Glass Steagall Act,
08:16 the banks are working together now,
08:18 they can take those mortgages,
08:19 put everything together in one bundle
08:22 and say, "You know what, I want to get this liability.
08:26 I don't think Susan necessarily is a qualified lender,
08:28 but I made some money, I made my commission.
08:30 I'm going to take these loans
08:32 and I'm gonna sell them to Lehman Brothers."
08:34 Susan's a qualified as borrower.
08:35 Yeah, "I don't think she's qualified borrower.
08:37 So I'm going to sell all of these mortgages,
08:39 I'm gonna put them together,
08:40 I'm gonna sell them to Lehman Brothers"
08:42 because Lehman Brothers says, "Well, you know what, Susan,
08:44 all those Susans I can charge 7%-8%.
08:47 And they bundled these loans in technical things, CDOs,
08:52 all these type of, you know, collateral debt obligations
08:54 and all these types of technical things."
08:55 There were new securities that were created
08:58 to capitalize off of Susans and Johns
09:01 who now could have interest rates
09:04 that were just sky high, right?
09:06 So now here comes Lehman Brothers,
09:09 Lehman Brothers says,
09:10 "Well, I don't want to hold onto this stuff.
09:12 I mean what if Susan defaults? Oh, that's not gonna happen.
09:15 Okay, we know I need to protect myself
09:16 just in case it does happen.
09:18 Well, you know what, let's make this thing called derivatives."
09:21 Derivatives now essentially if she does default,
09:24 an AIG comes along and says,
09:25 we're gonna insure all those things
09:27 that default and we're gonna...
09:28 You can buy some things from us."
09:30 Now everybody's making money in all these transactions.
09:32 The mortgage brokers are making money from Susan
09:34 because he's selling.
09:36 Lehman Brothers is now taking
09:37 the collateralized debt obligations
09:39 and other fancy type of investment options
09:41 and they're putting everything together
09:43 and then they're pushing them off to portfolio managers
09:46 and all these other types of things.
09:48 And the portfolio managers are saying,
09:49 "Well, what if this defaults?
09:50 Well, don't worry about it, we've got all these derivatives
09:52 because AIG is insuring if everything defaults."
09:55 And AIG is just selling...
09:56 They had papers and papers of derivatives
09:59 just laying on the desk.
10:00 And trillions of dollars of derivatives
10:02 that were just written, they had no...
10:04 Didn't pay attention to them, they're like,
10:05 "It's never going to happen, never going to default."
10:08 So what happened is now greed came into play.
10:11 They started making tons of money.
10:13 Everybody is making money.
10:14 Susan's happy she has a home until that interest comes in
10:18 or till that mortgage note comes in
10:19 four times she defaults.
10:22 And the next door John defaults.
10:24 And then down the line everybody defaults.
10:26 Don't worry about it, it's not gonna be an epidemic.
10:28 It's not gonna happen nationally.
10:30 But all of a sudden, it did happen nationally.
10:32 And so all of a sudden now people started...
10:34 Lehman Brothers says, "Well, you know what..."
10:35 The portfolio manager says, "You know what,
10:37 I'm cashing in on my derivatives
10:38 because you said if my interest rate went
10:40 below a certain level or if people defaulted,
10:43 I'll be able to get my money back."
10:45 Was that kind of an insurance? It's like an insurance.
10:47 Yeah, derivatives is like an insurance.
10:49 Making sure that if Susan, if this security defaults,
10:53 then I have a protection.
10:55 And so that's why AIG the insurance company
10:57 was writing derivatives left and right.
10:59 And it was just amazing just to see
11:01 all this thing unravel right before our very eyes
11:04 where all of a sudden because of greed
11:07 and individuals who were not being informed about
11:10 what they were buying and people were having
11:12 hasty decisions.
11:14 All these things happened at the exact same time
11:16 where the entire thing fell out,
11:17 the portfolio managers cashed in on their derivatives,
11:19 Lehman Brothers said,
11:21 "Hey, AIG, I need those derivatives."
11:23 AIG says, "Well, I ain't got it."
11:26 You know, so they didn't have the derivatives,
11:29 the Lehman Brothers says,
11:30 "Well, oh, you don't have it. I ain't got it."
11:33 And so everyone is saying, "I ain't got it."
11:37 So no one has it. So what's happening now?
11:39 And the entire system just fell apart.
11:41 Wow. And it was really just a few...
11:45 I have some principles here that what happened...
11:48 Again, if we just go back to the beginning
11:50 and from when Susan was, again,
11:54 understanding exactly what was happening
11:56 from what we read there in Proverbs 21:5.
11:58 And so what happened here?
12:00 So I have some scripture outlined here.
12:03 Okay.
12:04 Okay, so Susan, she didn't understand...
12:08 We saw the Proverbs 21:5 was haste makes waste, right?
12:13 So she was led to plenty, now she's led to want,
12:16 now she's wanting to have a lower interest rate,
12:18 a lower mortgage note.
12:20 So she's like, "Man, I don't know
12:21 what the heck happened."
12:22 But in Proverbs 11:14, it says,
12:25 "Where no counsel is, the people fall,
12:28 but in the multitude of counselors,
12:29 there is safety."
12:30 So what it's saying is, "Susan, before you sign that note,
12:33 don't pay attention
12:35 to what the mortgage broker is telling you
12:37 because he wants to make money off of you.
12:39 There's a conflict of interest.
12:40 Find yourself a counselor that can sit down
12:43 and talk to you that has no money attached to it
12:46 and would give a good honest assessment
12:48 of exactly what you need to do
12:50 and exactly how you need to proceed."
12:52 So if she would have gotten a counselor like
12:54 the Word of God said, that individual would say,
12:57 "You know what, that home, this is an interest only loan
13:00 or this home might be out of your value."
13:02 And she wouldn't have bought it.
13:03 So next scripture, Proverbs 3:13.
13:08 Okay. So get a counselor.
13:10 So we have to get a counselor.
13:11 The first thing is don't rush into it.
13:14 Second thing is get a counselor.
13:16 Get a counselor. So Proverbs 3:13 now.
13:18 Okay.
13:20 So now 3:13 says,
13:24 "Happy is the man that findeth wisdom,
13:26 and the man that getteth understanding."
13:28 How can you sign something that you don't understand?
13:32 How can you sign?
13:33 This is the biggest purchase of your life.
13:36 This is the biggest purchase of your life.
13:38 And now you're essentially saying,
13:42 "I'm just gonna sign it without understanding it
13:45 and having no wisdom."
13:46 So before you sign anything, get educated.
13:50 I always like to use an example,
13:52 if I tell someone that
13:55 if I steal a car and I get caught,
13:57 I'm going to go to prison, does that make me an attorney?
14:01 No, I don't have to have...
14:03 I'm not an attorney to know that basic knowledge,
14:05 but I know the basics of law.
14:07 And it's funny that we will know
14:08 the basics of certain things, law,
14:12 I know that if I steal a car and I get caught,
14:14 I'm going to prison.
14:15 But I'm not an attorney.
14:17 I know that if I keep eating fatty foods,
14:20 I'm going to be unhealthy,
14:21 I'm probably gonna have poor health,
14:24 but I'm not a doctor.
14:26 So we know the basics of these things.
14:28 Well, I'm not a health expert.
14:29 We know the basics, but we don't know
14:31 the basics of finance,
14:32 let alone we'll allow ourselves to sign a mortgage
14:35 on the largest asset acquisition
14:37 of our lives in most situations.
14:40 So we have to understand
14:43 also the importance of patience.
14:47 And so when we go to Proverbs 14:29,
14:50 it talks about patience.
14:52 It says, "He that is slow to wrath
14:55 is of great understanding,
14:57 but he that is hasty of spirit exalteth folly."
15:03 So Susans and Johns were impatient.
15:07 And also the businesses, corporations were impatient.
15:11 Don't worry about covering exactly
15:13 and writing loans that we can't cover.
15:15 Don't worry about writing derivatives
15:16 that we can't cover.
15:18 Let's not take some time to really understand
15:19 exactly how these things work, what products we're creating
15:22 because on both sides individuals
15:25 and corporations together
15:26 were exemplifying all the things
15:28 that the Word of God tells us not to do.
15:32 And now let's also
15:34 now go to Luke 14:28.
15:39 That says...
15:41 Because now Susan, she needs to figure out
15:46 can see afford to even buy this home,
15:50 does she have a budget.
15:52 Well, Luke 14:28 says,
15:55 "For which of you, intending to build a tower,
16:00 sitteth not down first, and counteth the cost,
16:07 whether he have sufficient to finish it?"
16:11 So Susans and Johns,
16:14 they were going out buying homes,
16:17 they didn't sit down first to count the cost
16:21 of do I have enough to buy this home.
16:24 This home is your tower.
16:26 It's the biggest tower that you'll ever purchase
16:28 in your entire life.
16:30 But you didn't figure out the cost
16:31 of exactly what it's going to take to buy this home.
16:35 And the Word is telling you, "Put a budget together first.
16:38 Don't buy that.
16:39 Don't just sign the document you don't understand.
16:41 Get some consultation, get some wisdom, be patient,
16:46 put together a budget, and then sit down."
16:50 Now Proverbs 28:25 says...
16:54 Again, to me it's just amazing how it is outlined
17:00 so eloquently in the Word of God.
17:03 Yes.
17:05 And people don't know, people don't believe that,
17:07 you know, you can find what you need
17:09 in the Word about money.
17:11 Exactly. And it says... And it's right there.
17:13 Proverbs 28:25,
17:15 "He that is of a proud heart stirreth up strife,
17:20 but he that putteth his trust in the Lord
17:23 shall be made fat."
17:25 In the NIV, it says, "A greedy man stirs up strife."
17:31 So now we have greed entering the situation.
17:34 How many people were greedy in this scenario?
17:37 Susan was greedy, wanted to buy the home
17:39 because everybody else was buying homes.
17:41 John wanted to buy homes.
17:43 Corporations were greedy because they wanted to continue
17:45 to make tons and tons of money.
17:48 Again, it goes on and on.
17:49 And lastly, Proverbs 16:11, that says,
17:55 "A just weight and balance are the Lord's,
18:00 all the weights of the bag are His work."
18:03 Whenever you are getting into a business deal,
18:08 it needs to be just, it needs to be balanced,
18:11 it needs to be fair, it needs to be on all sides.
18:15 Why are you giving this document,
18:19 this 50-something page document
18:21 that's all just loaded with fine print
18:23 and things that Susan and John don't understand?
18:27 Why are you giving this huge document
18:29 to Susan and John if they don't understand it?
18:31 Is that just? Is that balance?
18:34 Is that fair?
18:35 If we're really honest with ourselves
18:38 as much as both sides, not want to blame each other,
18:41 there's blame all around.
18:42 Right. There's blame all around.
18:44 But the Word, had it been followed,
18:48 we could have avoided this entire thing.
18:50 And I think that we have to understand
18:53 there are many things in the future,
18:55 now I'm also gonna talk about that
18:56 in another episode as well.
18:58 How can we now start to avert
18:59 and use the word to make sure that moving forward...
19:02 And that's what the beautiful part about the Word
19:04 is that it's timeless. Right.
19:05 That's what we want people to know.
19:08 It's taught... The principles are timeless.
19:11 You know, things that were happening
19:13 in the culture at that time,
19:15 that's one thing, that's culture bound,
19:17 but these things, these principles are timeless.
19:20 Greed and fairness.
19:23 I mean that transcends time. Wisdom, patience.
19:27 Yeah. Yeah. Budgeting.
19:29 All these things are in the Word
19:30 and the will of God, so I just think that...
19:33 And so that ended up happening.
19:35 And so we've had a lot of economic crises
19:38 that have occurred
19:39 and it's particularly this foreclosure crisis.
19:42 So I have a few tips that I would like to just give
19:46 for individuals who would like to buy a home.
19:49 And I think we're going to do part two about this episode.
19:51 Oh, good, good.
19:52 So I just wanted to at least get a good start
19:56 on what individuals should be doing
19:58 when they're purchasing their home.
20:00 Okay.
20:01 The first tip I would like to do
20:03 is really just exemplify how a practice
20:05 of those individuals who don't know
20:08 if they want to buy a home yet.
20:10 You don't know you want to buy a home,
20:12 a simple practice that I would like to give
20:14 individuals to do is if you're renting right now,
20:18 one, act your own wage, act your ownwage.
20:22 What does that mean?
20:23 That means you have to make sure that
20:25 you can actually buy or purchase a home
20:27 that you can actually afford.
20:29 Okay.
20:30 And there is a calculator that I always like
20:33 to refer individuals to, it's called
20:37 F-I-N-C-A-L-C dot-com.
20:39 It's a great website, it's free.
20:41 And individuals can go to this website
20:43 and there's tons of calculators on the site
20:46 that you can use to actually plug in
20:47 exactly how much you think you can afford,
20:49 you put your income in there and how much is in your budget,
20:52 and all these things, and it calculates,
20:54 it's a rough calculation
20:56 of exactly how much you can afford.
20:59 I love that that resource is there
21:01 because if you make $75,000,
21:06 let's say $50,000 a year, right,
21:10 and you want to buy this home but it's $500,000.
21:14 Now you look at that house and like,
21:15 "Wow, man, I really want that house."
21:18 You have no business buying a home like that,
21:19 but if you go to that website, you can see just how much house
21:25 that $50,000 can get you.
21:27 And the thing is that there's so many
21:29 free resources available for individuals to use.
21:33 There's really no excuses anymore.
21:35 I mean, we can get homeownership counselors.
21:37 We can get those for free.
21:39 We can get credit counselors for free.
21:41 We can get budgeting coaches for free.
21:43 All these things are free of charge
21:44 and we'll be putting all this information
21:46 on the Dare to Dream Facebook page.
21:48 So we want people to understand that the resources are there.
21:52 Okay, so you're acting your wage, okay,
21:56 and you really understand and you've gone to,
21:59 you've got a general indication of exactly how much you think
22:02 you can actually afford in the website kicked it out.
22:05 Now I want you to fake it till you make it.
22:07 Okay. Now what is that?
22:09 How are you gonna do that? Fake it till you make it.
22:11 This is one of the best things that I'll tell you that
22:13 I've actually done myself.
22:15 I've had other individuals do.
22:17 When you are renting a home but you want to buy a home,
22:21 you essentially start to...
22:23 When you calculate how much you can afford,
22:25 let's just say your mortgage, your rent is $700 a month.
22:30 Let's just say you calculate your mortgage to be,
22:32 let's just say it was $200 a month or more.
22:34 Okay.
22:36 Many cases people are paying more rent
22:38 than they would be paying mortgages.
22:40 And that happens in many cities across America
22:44 where the amount they're paying for rent could be a mortgage.
22:46 So we have to be mindful of that as well.
22:48 So if that's your scenario, think about
22:51 how can we create a legacy and become a homeowner.
22:54 But let's just say your mortgage is $900 a month
22:56 that you've calculated on or another site.
23:01 And that $200 a month difference,
23:03 you start putting into a savings account
23:05 every single month and you start acting
23:07 as if you're actually paying that mortgage, okay?
23:10 So you're paying the mortgage or you're acting like
23:13 you're paying the mortgage
23:14 and your pipes burst in your home.
23:16 Well, you're renting, so you don't fix it,
23:20 you don't pay the plumber, but you call the plumber,
23:22 but you want to talk to your landlord
23:23 and say, "How much did you pay the plumber?"
23:25 So now whatever she says or he says you pay the plumber,
23:29 you act like you pay the plumber,
23:31 but you put that into the savings account.
23:33 And everything, the leaky roof, you see some roof,
23:38 you come home in your renting home
23:39 and you see people on the roof and they're fixing it.
23:43 The landlord had to pay for that.
23:45 Well, how much did you pay for that?
23:47 Well, that was, fix the roof, it was,
23:49 you know, $3,000, $4,000.
23:51 Well, try to come up with $3,000 or $4,000
23:54 because that would be an expense
23:55 you would have to pay anyway.
23:58 This is great.
23:59 You know why this is so great
24:01 because if you are a first time home buyer
24:05 and you've come out of apartment,
24:07 you don't think about the leaky roof, the plumbing
24:11 because you've always had
24:13 the super to come in and fix it.
24:16 So now what you're saying, I love this, this is so good.
24:19 Now what you're saying is you take that money
24:23 that would have been spent...
24:25 Well, you didn't spend it, but you act as though you did
24:28 and that lets you know whether or not
24:29 you can afford that house too.
24:31 And after time, you're now building up
24:33 your savings account. Right.
24:34 And the goal is, again, because you've gone,
24:37 you've calculate how much you can afford,
24:39 you've calculated how much you think you can afford,
24:41 you want to go towards 20% down on a new property,
24:45 piece of property because as we'll discuss
24:48 in the second episode is when we put down 20%,
24:51 we can avoid this private mortgage insurance,
24:54 where essentially now the bankers want to see that
24:58 you have enough skin in the game
24:59 and if you don't have enough skin in the game,
25:01 they're gonna charge you a little bit extra
25:02 to make sure that they're gonna be able
25:03 to cover themselves in case you would leave.
25:05 And that's what PMI payment is.
25:07 But if you have 20% down on your piece of property,
25:09 you don't have to have PMI payments.
25:11 So that's a goal in a traditional conventional loan
25:14 that you can get.
25:15 And I know there's many other types of loan out there
25:18 and many other types of loans, but I always advocate
25:21 in a very conservative way
25:23 to do a traditional either 30-year...
25:26 You get a 30-year loan and you pay it off
25:28 as if it was 15-year loan if that's possible
25:31 because a 30-year loan is gonna have slightly lower payments
25:34 because they're spread out over time than a 15-year loan.
25:37 But if you take that 30-year
25:39 and you pay it as if it's was a 15-year
25:41 you're actually paying more of that principle back
25:43 and have a little bit more leeway
25:44 for each individual payment of that piece of property.
25:47 So by acting your wage
25:50 and by faking it till you make it,
25:52 you are building up your savings account.
25:54 If there was a time where you were not able
25:57 to make that payment, well, then you know that
25:59 you're actually out of your budget range.
26:02 You should have had more liquidity.
26:04 All these things you'll be able to tell
26:06 and basically have a free look,
26:08 it's a free look inside
26:09 of what would being a homeowner really be like,
26:13 but it takes diligence,
26:14 it takes patience, it takes wisdom,
26:16 it takes all these things that the Word talks about
26:19 to actually go through the process
26:20 of getting that stuff done.
26:22 That is rich. That is rich information.
26:26 If I want to recommend somebody,
26:30 okay, you want to get a home, go and get some counseling.
26:36 Right.
26:37 They might not even know where to go.
26:39 The Internet can give you all this information.
26:42 There's so much of information out there, absolutely.
26:44 This is such great information.
26:47 I'm looking forward to part two.
26:48 Me as well. And your takeaway.
26:50 Absolutely.
26:58 I would love to have more people in America
27:01 come to realize the dream of owning their own home.
27:03 To come home to something that we own
27:05 is truly a magical feeling.
27:07 However, we need to be diligent enough
27:09 to do our own research
27:10 and not leave our own financial futures
27:12 in the hands of others.
27:14 Make sure to personally cross every T
27:16 and dot every single I.
27:18 Thomas Stanley, author of The Millionaire Next Door
27:20 says, "If you are not wealthy but want to be someday,
27:23 never purchase a home that requires a mortgage
27:26 that is more than twice your household's total
27:28 annual realized income."
27:30 While I believe that statement
27:31 may over simplify the situation,
27:33 the thought behind it is very true.
27:35 If you want to purchase a home, you should act your own wage.
27:39 Make sure you purchase a home within the limits
27:41 of what you can afford.
27:42 I have witnessed many people going out to look
27:44 for a new home without any idea
27:46 of how much they can afford to pay.
27:48 I urge you, everyone, to take the time to do the math
27:51 before beginning the hunt for a new home.
27:53 Until next time, be the change you want to see,
27:56 and remember, the purpose of life
27:57 is a life full of purpose.
27:59 Dollars and Sense, signing off.


Revised 2017-10-19