Within our black communities we are slowly becoming more aligned with saving money, investing, and buying products that offers numerous benefits besides just showing off to our friends or significant other. One of these beneficial items is a house, buying a house can help or hurt your financial/future goals depending on what you're attempting to achieve. If you are someone who may be tired of renting or living with relatives and would like to become a homeowner, here's a valuable suggestion when you find the house you'd like to purchase:

Reducing Interest

When you buy anything with a loan, we must pay that loan back...with interest. This fact doesn't exclude home loans and depending on the current market rate, the interest rate could be very high or fairly low prior to submitting your home loan application. When you submit a home loan application with your bank, the bank will decide if you can pay back the loan by evaluating your credit report, current spending habits, any current financial debts, current income, and much more. This helps ensures the bank only provides responsible and capable people home loans who're able to pay back that said loan. Now, if you're approved for a home loan, based on your credit, you're provided an interest rate. This interest rate along with the APR, affects your monthly mortgage, which is how much you must pay each month for the entire duration of your loan. Here's the good part, depending on the bank you're getting a loan with, you can pay an extra amount towards closing that's based on the value of the house to reduce your interest rate (points).

Allow me to break this down a bit more for you to understand. Navy Federal Credit Union currently has a VA Home Loan option available, with optional discount points of 0.875%, along with an interest rate "as low as 5.00%" which means, based on my financial profile, with my credit report being a major factor, I could be approved a VA Home Loan with an Interest rate

of 5%. Assuming I do get a home loan with a 5% interest rate, for a 400,000$ home, if I would like to reduce my current rate "5%" I can pay an extra amount based on the houses' value. In this example, the house is valued at 400,000$, if I need to pay an extra 1% towards the house value to reduce my rate by 0.875%, I would need to pay an additional amount of 4,000$. This will reduce my current rate "5%" down to "4.125%" which can reduce my monthly payments by more than 150$. For example, an estimated monthly mortgage on a 400,000$ home at 5% interest within the state of Maryland, and with no down payment will be 2,664$, but the same house with a 4.125% interest rate will be 2,455$. Also, you can pay more than just 1% of the house value, you can pay an additional 3% or 4% of the houses' value to further reduce your interest rate, thus saving you hundreds more.

My example on the monthly costs of owning a home, only gives us an idea of how much money goes into buying and keeping a home and you should always do your research, along with speaking to a trusted professional so that they can provide you guidance based on your current finances. Good luck and happy buying.