It is said that your best clients come from referrals. It is a good feeling when people call and say that a friend, relative or business associate has referred them. As we get into the telephone prequalifying process for a real estate loan, many people have a misconception regarding this procedure. As it pertains to income, the basis for qualification is gross income, not net income. Yet when asked for income, many will respond with the take-home figure or ask whether take-home or gross should be used. We have become so accustomed to what actually goes into our pockets after all deductions that sometimes we don't realize how much is taken out of our pockets.
Buying a home and qualifying for a loan should be a simple process. What you need to know is the monthly costs for principal, interest, taxes and insurance. It is an easy figure to determine. The next step is to calculate the monthly payments for ongoing installment and revolving credit balances. Based on these numbers the ratios are figured (based on gross income). Credit grade is evaluated. The question is, does it fit our budget or not? Sounds simple, doesn't it? We know that it is not as simple as it sounds. I qualify using gross income; you buy using your net income. There is a difference.
And it is more than just a quantifiable difference; it is an emotional difference. You know how much it takes to make ends meet today. As I review tax returns and W2s, I see the amount of money that goes to governmental entities. You see it every time you look at your paystub. There are deductions for federal income taxes, state income taxes, social security tax (FICA), Medicare, state disability insurance etc. What is left is the money with which you have to work on a weekly or monthly basis. Maybe what's left seems sufficient at first glance but yet, for many of us, we never have enough.
I received a letter from my long distance telephone carrier stating that they have added the following service(s) to my account. It's called a Flat Rate World. It offers a flat rate for international calls for $5.00 per month. First, I can't tell you the last time I made an international call. Second, if I don't make a single call that five-dollar fee will be added to my bill each and every month. Third, I never asked my carrier for this added benefit and expense. I immediately called the company and while on hold I turned the letter over and noticed a statement that was preceded by a notation called The Fine Print (and it was fine print.) In essence, it stated that all long distance carriers will pay a fee to the local phone company for originating and terminating long distance calls. The Federal Communications Commission requires the fee. The fee is $2.75 per line. So if one has eight lines the monthly fee is $22.00 per month. That is $22.00 per month before any calls are made. I then pulled out by my monthly bill and reviewed the fees, taxes, etc.
It turns out that my taxes and surcharges for the month of April were higher than the costs for the long distance telephone calls I made. There are ten different fees and surcharges on the bill. I won't bore you with a recounting of each. You can look at your own bill. To follow the same trail I got my local phone bill. There are eight different taxes, funding allocations, surcharges, temporary surcharges and fees under the taxes and surcharges column on the local phone bill.
In California, voters passed Proposition 13. By virtue of that proposition, we can determine the taxes on our property when we purchase. We also know increases to the property taxes are limited to 2% per year. We pretty much know where we stand. Our paycheck shows us the deductions for taxes. We know our gross income and we see the net. We may not like the figure, but it is there. Our representatives talk about reductions in income taxes and how much should be given back to the people. That is all well and good.
Yet, there are taxes, surcharges and fees never mentioned. These are the unknowns until reviewed. These taxes are insidious. No one voted for them. No one is held accountable for their imposition. They are just there. They are easily mandated because they bypass the scrutiny that it usually associated with a tax increase. Yet, an increase it is.
It would be revealing for each of us to figure how much we actually pay in taxes. How much goes to non-deductible sales taxes each month? How much of what we pay for gasoline is tax? What would our telephone bill, water bill, gas or electric bill be without fees and taxes? How much do we pay for the personal property tax on our automobile compared to the actual registration fee? Is the tax rate we pay truly reflected on our paystub? Why do not the extra pennies spent on each dollar make us question the total amount we spend on taxes? Is it because it is piecemeal? As we get to the end of each month, many of us know that we had to forego something. Maybe we should determine why!
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