Participants: Yvonne Lewis (Host), Ryan Mack
Series Code: DAS
Program Code: DAS000009A
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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 fincalc.com. 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 fincalc.com, 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 fincalc.com 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