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Wednesday, February 13, 2013

Budget 101

 Budget 101

I was recently standing in line at my Credit Union where my wife and I have been members for some 25 plus years.  I started paying attention to the television monitor on the wall behind the counter where the cashiers are seated.  There are mostly news articles but every so often they make a mention about other services that are offered by the Credit Union.  The one ad that I am about to address is going to save my wife and myself and at this point at least 10 other families untold amounts of money. What I am about to tell you will most likely surprise you.  Paying attention to the monitor reading the article and following up on it will save my wife and me over $120,000.00 over the next 30 years. I know I still can’t believe it either.  You hear all this talk about home refinancing, but half the time you can’t believe the hype. 
A large percentage of home mortgages end up owned by Fannie Mae, or Freddie Mac (government agencies).  The way it works:  banking institutions like Wells Fargo, Bank of America, Home Street, Credit unions, etc., promote their mortgage departments, and once they have a customer, they package a bunch of loans and offer them to Fannie Mae or Freddie Mac for sale.  There is a lot of money to be made over the term of the contract, just by looking at my savings and you know they are making more off of me than I am saving.  The problem for the smaller institutions is that they have to hold on to the mortgage for the length of the contract to realize the big profit.
By selling to the government agencies, they can make a quick sum for the sale and free their own money to keep financing homes.  What you need to know is that at present the interest rate is hovering right around 3.5%, so if you have a rate higher than say 5 or 6% you would save as much or more than I did.

There is a catch, you do have to qualify; make sure your mortgage is financed by one of the government agencies mentioned above (even if you are making your payments to Bank of America for example), and your income to debt ratio has to meet the requirement.  You don’t have to have positive equity but if you do it still works, this program is for people that are in trouble with their mortgage, but even if you are not you can qualify.  It’s worth checking out.
Just to tie this post to the blog theme, I will share something from the past.  The first home I ever bought was in Eastern Washington in 1971 and I bought it for $21,500.00.  The following are statistics for life in in the US (1971):

Cost of Living 1971
How Much things cost in 1971
Yearly Inflation Rate USA 4.3%, Year End Close Dow Jones Industrial Average 890 Average                                                          Cost of new house $25,250.00, Average Income per year $10,600.00 Average Monthly Rent $150.00 Cost of a gallon of Gas 40 cents Datsun 1200 Sports Coupe $1,866.00 United States postage Stamp 8 cents Ladies 2 piece knit suites $9.98 Movie Ticket $1.50
As we use to say back then put that in your pipe and smoke it.  Remember the best is yet to come….

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