Home Savings vs. Mortgages

Still beats the current situation at major banks—where interest rates are north of 6% 😉

A 2.99% interest rate on bridge financing? Are you kidding me? Where on earth are we finding those kinds of numbers these days? 🤷

wusternot linkić 😍—but I can’t quite figure out which specific rate they’re offering. That’s just the nominal one; I actually want to know what the APR is 😉
. I suspect the postal savings rate is hovering around 3% (or at least, that was their last big marketing push)
.
Here is the link for the postal option . Their whole setup seems to be this pattern where you sit at a roughly 6% interest rate during the interim financing phase, and then once that wraps up, they bump you down to a 3% or 4% rate (if I'm reading this correctly 🤷)

I was wondering, does the DPS actually get paid out while you're still chipping away at your mortgage?

You essentially "earn" this bonus for every calendar year you’ve been contributing to the savings plan. To be more precise—since I prefer clarity—for every year you put money in, the government tops it up by 15% the following year, though they cap that contribution at $250 per account. So, here was your situation: you wrapped up your savings in 2009, and in 2010, the government dropped that bonus for the 2009 period into your account—right at the moment you were already drowning in credit debt.
The catch, however, is that the government doesn't use these funds to subsidize your loans; they strictly incentivize saving. The only way you end up receiving these bonuses while carrying debt is through that final year of savings before you take out a loan—or during bridge financing where you are technically in the red, but the bonus is still calculated based on the actual deposits you made.

So, if I'm understanding this right, the DPS only actually pays out during the term of my IMF loan or my mortgage, and that's only if I happen to pay in way more than those $1667 throughout the year? Then they just roll that extra amount over into several years of those $250 every year for whatever I "overpaid" beyond the $5,000 mark?

Nah, the maximum DPS is $250 per year. It doesn't matter how much extra you dump into savings; the amount stays capped at $250. And that’s only while you're actively saving—once you stop contributing, the DPS stops too. It’s just like what Steven Reed mentioned: "the government isn't incentivizing credit through these funds, they're strictly incentivizing savings."

I wasn't being precise enough—it was late and I was half-asleep 😍. Essentially, during the bridge financing phase—which lasts either two or five years depending on the specific model—you are technically both in debt and holding savings simultaneously. A bank like Wells Fargo provides you with this bridge loan, but in exchange, you deposit a set amount into a savings account. This deposit is what legally qualifies you for a standard home equity loan once that initial period expires. To the IRS, that money looks like pure savings, so you earn interest—even though, in reality, you're carrying a loan. Once those two or five years are up, the bank uses those accumulated funds (your principal plus the interest earned) to pay off the bridge loan and transition you onto the regular mortgage, which you then pay down until it's cleared.

I don't know how else to explain it without making it sound like a legal brief—I've overcomplicated things again 🤣.

Henry Edwards33 said:Nah, the maximum DPS is $250 per year. It doesn't matter how much extra you dump into savings; the amount stays capped at $250. And that’s only while you're actively saving—once you stop contributing, the DPS stops too. It’s just like what Steven Reed mentioned: "the government isn't incentivizing credit through these funds, they're strictly incentivizing savings."

Well, I'm aware the cap is $750 annually. But if I happen to save, say, $16667 in a single year, wouldn't they owe me the full $750 for that year, plus some additional amount $250 every subsequent year until those excess funds above $1667 are eventually "used up"? At least, that’s how I understood it from the legal wording...

They just roll those excess funds over into the next year—granting you eligibility for the tax credit—but only for as long as your savings plan is actually active 😉
If you signed a two-year contract and contributed $17, you’ll qualify for the tax credits during the calendar years your savings were active (typically three years, since nobody starts a savings plan on January 1st) 😍

Since I'm nearing the end of my housing savings plan at the Federal Reserve, I've been following this discussion closely. I wanted to jump in with a question, but first, I thought I'd clear up a few things for those who might be a bit confused about how these housing loans currently work.

First off, Gaga23: there is no such thing as a "general purpose" loan once your housing savings are exhausted. You basically have two choices: a) withdraw your saved funds plus the interest earned, or b) take out a specifically designated housing loan. There isn't a third option.
Second, I see a lot of people mentioning bridge financing. I’ve had two separate meetings at the local Federal Reserve branch regarding housing savings, and they won't even entertain the idea of bridge financing. Their unofficial stance seems to be: sure, we technically offer it, but we aren't going to approve anyone because, well, we're in a recession. So, if you're counting on bridge financing—at least with this bank—don't hold your breath.

Now, for my actual question. I've been looking over the loan requirements (specifically the collateral terms) at the Federal Reserve after the savings period ends, and if I'm reading this right, they've changed the rules so that practically no one will ever qualify for a loan with them.

So, for a loan amount between $35,000 and $75,000 (which is roughly the starting point for any decent apartment), the terms are:

Model 1:

Borrower: creditworthy
A mortgage lien on the property in favor of the bank
Minimum loan-to-value ratio: 1:1.30
Property fire insurance policy assigned to the bank
2 individual creditworthy co-signers>

Or Model 2:

Borrower: creditworthy
A mortgage lien on the property in favor of the bank
Minimum loan-to-value ratio: 1:1.30
Property fire insurance policy assigned to the bank
1 individual creditworthy co-signer
A cash deposit equal to 25% of the approved loan amount>

I won't even get into the two co-signers requirement. Even if I didn't have my principles to consider, I wouldn't agree to that. After saving with them for years, and given a 1:1.30 loan-to-value ratio (!), they still demand TWO co-signers?

And this second model is even more nonsensical. One co-signer and a 25% cash deposit of the loan amount. For example, let's say I want to pull out a total of $100,000. That means I'd need to have saved $30,000 (30%), and then for the remaining $70,000 loan, I'd have to put down an additional 25% ($17,500). If I actually had $47,500 in cash sitting around (not to mention taxes and closing costs), I wouldn't even need the loan.

I'm curious to hear from anyone with recent experience. Are they really enforcing all of this?
Thanks!

urbanhawk14 said:Since I'm nearing the end of my housing savings plan at the Federal Reserve, I've been following this discussion closely. I wanted to jump in with a question, but first, I thought I'd clear up a few things for those who might be a bit confused about how these housing loans currently work.

First off, Gaga23: there is no such thing as a "general purpose" loan once your housing savings are exhausted. You basically have two choices: a) withdraw your saved funds plus the interest earned, or b) take out a specifically designated housing loan. There isn't a third option.
Second, I see a lot of people mentioning bridge financing. I’ve had two separate meetings at the local Federal Reserve branch regarding housing savings, and they won't even entertain the idea of bridge financing. Their unofficial stance seems to be: sure, we technically offer it, but we aren't going to approve anyone because, well, we're in a recession. So, if you're counting on bridge financing—at least with this bank—don't hold your breath.

Now, for my actual question. I've been looking over the loan requirements (specifically the collateral terms) at the Federal Reserve after the savings period ends, and if I'm reading this right, they've changed the rules so that practically no one will ever qualify for a loan with them.

So, for a loan amount between $35,000 and $75,000 (which is roughly the starting point for any decent apartment), the terms are:

Model 1:

Borrower: creditworthy
A mortgage lien on the property in favor of the bank
Minimum loan-to-value ratio: 1:1.30
Property fire insurance policy assigned to the bank
2 individual creditworthy co-signers>

Or Model 2:

Borrower: creditworthy
A mortgage lien on the property in favor of the bank
Minimum loan-to-value ratio: 1:1.30
Property fire insurance policy assigned to the bank
1 individual creditworthy co-signer
A cash deposit equal to 25% of the approved loan amount>

I won't even get into the two co-signers requirement. Even if I didn't have my principles to consider, I wouldn't agree to that. After saving with them for years, and given a 1:1.30 loan-to-value ratio (!), they still demand TWO co-signers?

And this second model is even more nonsensical. One co-signer and a 25% cash deposit of the loan amount. For example, let's say I want to pull out a total of $100,000. That means I'd need to have saved $30,000 (30%), and then for the remaining $70,000 loan, I'd have to put down an additional 25% ($17,500). If I actually had $47,500 in cash sitting around (not to mention taxes and closing costs), I wouldn't even need the loan.

I'm curious to hear from anyone with recent experience. Are they really enforcing all of this?
Thanks!

That's just how it goes with inter-financing everywhere else too—well, at least it was when I was poking around about a year ago. They technically have the tools, but they don't actually want to use them. 🙂

And regarding glede jamac, take Wells Fargo for example; they only ask for one guarantor, and it can even be a spouse. You could almost think the folks over at the Federal Reserve housing department just want savers who will sit on money to chase some incentive, only to pull it all out later. But seriously, who's going to bother saving once those incentives dry up? I guess they just don't want their own loans competing with their own banking products. Or maybe we're just looking at some tightened "recessionary" lending rules?

Benjamin Rodriguez2 said:That's just how it goes with inter-financing everywhere else too—well, at least it was when I was poking around about a year ago. They technically have the tools, but they don't actually want to use them. 🙂

And regarding glede jamac, take Wells Fargo for example; they only ask for one guarantor, and it can even be a spouse. You could almost think the folks over at the Federal Reserve housing department just want savers who will sit on money to chase some incentive, only to pull it all out later. But seriously, who's going to bother saving once those incentives dry up? I guess they just don't want their own loans competing with their own banking products. Or maybe we're just looking at some tightened "recessionary" lending rules?

In my opinion, these are rigged terms designed to ensure nobody actually lands a favorable fixed-rate loan. It feels borderline predatory toward customers like me; when I first started my home savings plan, I had no idea the requirements would become this unreasonable. Back then, you didn't even need a guarantor, but now they're demanding two.

urbanhawk14 said:In my opinion, these are rigged terms designed to ensure nobody actually lands a favorable fixed-rate loan. It feels borderline predatory toward customers like me; when I first started my home savings plan, I had no idea the requirements would become this unreasonable. Back then, you didn't even need a guarantor, but now they're demanding two.

For those who don't believe me, let me clarify: the way housing savings programs work is nothing like traditional commercial banks. They operate more like a mutual aid fund where everyone contributes over time, and then loans are issued from that collective pool. That pool is built from savers' contributions, loan repayments, interest, and dividends. Unlike a major bank, a housing program can't just go out into the international market and borrow money from someone else. If a borrower defaults, the program loses our private money directly.

I don't quite follow your comment about this being "borderline fraudulent." It sounds like you might have had a lower credit score, which led to a denial or requests for extra collateral. To me, that makes perfect sense because it protects MY savings from the RISK of someone failing to pay it back.
And I'm certain that once your term ended, you received all your principal, dividends, and interest, so there truly isn't any evidence of fraud there...

crimsonseal13 said:For those who don't believe me, let me clarify: the way housing savings programs work is nothing like traditional commercial banks. They operate more like a mutual aid fund where everyone contributes over time, and then loans are issued from that collective pool. That pool is built from savers' contributions, loan repayments, interest, and dividends. Unlike a major bank, a housing program can't just go out into the international market and borrow money from someone else. If a borrower defaults, the program loses our private money directly.

I don't quite follow your comment about this being "borderline fraudulent." It sounds like you might have had a lower credit score, which led to a denial or requests for extra collateral. To me, that makes perfect sense because it protects MY savings from the RISK of someone failing to pay it back.
And I'm certain that once your term ended, you received all your principal, dividends, and interest, so there truly isn't any evidence of fraud there...

That's an assumption, and it seems you might have misread my original post.

The idea that my savings are at risk because some other saver fails to repay their loan feels like a bit of a stretch to me, though that isn't really my point.

No one is questioning my creditworthiness. I haven't actually finished my savings plan yet, so no formal assessment has taken place. But even when it does happen, I'm confident my credit score will be solid.

What I am addressing is how the insurance requirements have CHANGED (it actually feels like they've shifted several times) over the last few years—right during the time I've been saving. They've evolved into something that seems designed specifically to discourage people from taking out loans through these housing savings programs, mainly because the insurance costs are unreasonably high.

Rather than getting bogged into a debate about whether requiring two co-signers plus a mortgage at a 1:1.3 ratio is excessive, the easiest way to show you is to look at the insurance instruments at the SAME bank (Federal Reserve) for a standard mortgage not tied to a savings plan. Those rates are significantly lower; you can choose an option with just one co-signer or even none at all:

http://www.wellsfargo.com/my/bank/mortgage_rates_type=Citizen

My main takeaway is this: the bank doesn't actually want savers using their housing program to get favorable fixed-rate loans, so over the last two years, they've set such strict insurance hurdles that they effectively scare off almost every customer.

I didn't say it was outright fraud, because a bank is free to set its own lending terms. But it certainly feels borderline. Just imagine if, tomorrow, the bank told us they wouldn't issue a single loan unless we provided ten different co-signers.

*edit: Someone might argue that the whole point of these savings plans is to build up bonds rather than buy a home, but I don't see it that way. Based on the name, the mechanics, and what was presented to me at the local branch two years ago, it seemed like a perfectly valid way to tackle the housing market.

urbanhawk14 said:That's an assumption, and it seems you might have misread my original post.

The idea that my savings are at risk because some other saver fails to repay their loan feels like a bit of a stretch to me, though that isn't really my point.

No one is questioning my creditworthiness. I haven't actually finished my savings plan yet, so no formal assessment has taken place. But even when it does happen, I'm confident my credit score will be solid.

What I am addressing is how the insurance requirements have CHANGED (it actually feels like they've shifted several times) over the last few years—right during the time I've been saving. They've evolved into something that seems designed specifically to discourage people from taking out loans through these housing savings programs, mainly because the insurance costs are unreasonably high.

Rather than getting bogged into a debate about whether requiring two co-signers plus a mortgage at a 1:1.3 ratio is excessive, the easiest way to show you is to look at the insurance instruments at the SAME bank (Federal Reserve) for a standard mortgage not tied to a savings plan. Those rates are significantly lower; you can choose an option with just one co-signer or even none at all:

http://www.wellsfargo.com/my/bank/mortgage_rates_type=Citizen

My main takeaway is this: the bank doesn't actually want savers using their housing program to get favorable fixed-rate loans, so over the last two years, they've set such strict insurance hurdles that they effectively scare off almost every customer.

I didn't say it was outright fraud, because a bank is free to set its own lending terms. But it certainly feels borderline. Just imagine if, tomorrow, the bank told us they wouldn't issue a single loan unless we provided ten different co-signers.

*edit: Someone might argue that the whole point of these savings plans is to build up bonds rather than buy a home, but I don't see it that way. Based on the name, the mechanics, and what was presented to me at the local branch two years ago, it seemed like a perfectly valid way to tackle the housing market.

Since I don't have your specific data, I'm just making an assumption here... 🙂

Everything you're mentioning could simply be factored into the cost of a fixed-rate loan. For instance, in the European Union, variable-rate mortgages hover around 4% while fixed rates hit 7.8%; here, the situation is exactly the opposite.

And why did you even bother with a housing savings plan offered by someone selling a much more competitive product, like a standard commercial mortgage from the Federal Reserve?

Regarding your edit... I completely agree with you there. The logic fell apart once they introduced bridge financing—getting the loan immediately and saving up later. That's when the whole purpose of these savings plans started to vanish. You save for five years to cover installments, then ask for the loan.

urbanhawk14 said:That's an assumption, and it seems you might have misread my original post.

The idea that my savings are at risk because some other saver fails to repay their loan feels like a bit of a stretch to me, though that isn't really my point.

No one is questioning my creditworthiness. I haven't actually finished my savings plan yet, so no formal assessment has taken place. But even when it does happen, I'm confident my credit score will be solid.

What I am addressing is how the insurance requirements have CHANGED (it actually feels like they've shifted several times) over the last few years—right during the time I've been saving. They've evolved into something that seems designed specifically to discourage people from taking out loans through these housing savings programs, mainly because the insurance costs are unreasonably high.

Rather than getting bogged into a debate about whether requiring two co-signers plus a mortgage at a 1:1.3 ratio is excessive, the easiest way to show you is to look at the insurance instruments at the SAME bank (Federal Reserve) for a standard mortgage not tied to a savings plan. Those rates are significantly lower; you can choose an option with just one co-signer or even none at all:

http://www.wellsfargo.com/my/bank/mortgage_rates_type=Citizen

My main takeaway is this: the bank doesn't actually want savers using their housing program to get favorable fixed-rate loans, so over the last two years, they've set such strict insurance hurdles that they effectively scare off almost every customer.

I didn't say it was outright fraud, because a bank is free to set its own lending terms. But it certainly feels borderline. Just imagine if, tomorrow, the bank told us they wouldn't issue a single loan unless we provided ten different co-signers.

*edit: Someone might argue that the whole point of these savings plans is to build up bonds rather than buy a home, but I don't see it that way. Based on the name, the mechanics, and what was presented to me at the local branch two years ago, it seemed like a perfectly valid way to tackle the housing market.

Look, credit unions and savings institutions are independent legal entities. They have to turn a profit to justify why they even exist... and they make that money by issuing loans (the interest they collect on loans minus the interest they pay out on savings accounts)... if they aren't lending, they aren't making a dime.

Every major bank, including the smaller savings institutions, has tightened up its lending criteria—things like documentation, income verification, employment stability—while simultaneously cranking up insurance requirements due to everything that's been happening lately.

Just like big banks, these institutions want reliable clients. They assess risk, and naturally, they want to protect themselves (and the deposits of all the other savers). Now, sure... I get that to some people, it might look suspicious or predatory, but most savers actually look at it favorably because you can "see" that the bank or credit union is actually looking out for everyone's security.

crimsonseal13 said:Since I don't have your specific data, I'm just making an assumption here... 🙂

Everything you're mentioning could simply be factored into the cost of a fixed-rate loan. For instance, in the European Union, variable-rate mortgages hover around 4% while fixed rates hit 7.8%; here, the situation is exactly the opposite.

And why did you even bother with a housing savings plan offered by someone selling a much more competitive product, like a standard commercial mortgage from the Federal Reserve?

Regarding your edit... I completely agree with you there. The logic fell apart once they introduced bridge financing—getting the loan immediately and saving up later. That's when the whole purpose of these savings plans started to vanish. You save for five years to cover installments, then ask for the loan.

Well, back when I first started saving, the lending terms were significantly different. Even then, the Federal Reserve had its own competitive products available.

To address both you and Kimberly Nguyen, I completely get why market conditions might require stricter credit insurance. However, I feel what the Federal Reserve is doing isn't actually about security; it feels more like they’re intentionally pushing away 95% of potential users. It's easy enough to walk away when someone tells you that you need a 30% down payment, two co-signers, and property that has to be worth way more than the actual loan amount.

In reality, I’d have to find someone willing to sell me a condo—which an official appraiser values at $120,000—for roughly $110,000. Then I’d have to scrape together $30,000, plus taxes, a hefty down payment, and a cushion for unexpected costs. On top of that, finding two co-signers nowadays feels like a bad joke; your only real shot is usually parents or relatives who aren't even over 55 yet.

*Edit: I noticed that for amounts over $80,000, the collateral requirements are actually less draconian (they ask for two or three joint co-signers, whereas for loans under $80k, they want two individual ones). This really makes me think the Federal Reserve just doesn't want anyone taking these specific loans.

If things stay this way, I’ll simply pass. I'll either save up a bit more cash to buy a cheaper place or just take out a "standard" 30-year mortgage. With those, I might only need one co-signer or even just life insurance, even if the variable interest rate ends up being something like 7.5%. It feels like the bank is forcing me toward a much worse deal, despite all those "home sweet home" advertisements promising that their savings plan is the easiest way to become a homeowner.

This whole situation with the Federal Reserve housing savings program is getting quite interesting. Either they are changing their terms constantly, or they just happened to update them right now—or maybe they’re actually keeping an eye on this forum! (: regardless, the requirements have shifted. Here is what I copied from this page () just a few days ago:

urbanhawk14 said:Since I'm nearing the end of my housing savings plan at the Federal Reserve, I've been following this discussion closely. I wanted to jump in with a question, but first, I thought I'd clear up a few things for those who might be a bit confused about how these housing loans currently work.

First off, Gaga23: there is no such thing as a "general purpose" loan once your housing savings are exhausted. You basically have two choices: a) withdraw your saved funds plus the interest earned, or b) take out a specifically designated housing loan. There isn't a third option.
Second, I see a lot of people mentioning bridge financing. I’ve had two separate meetings at the local Federal Reserve branch regarding housing savings, and they won't even entertain the idea of bridge financing. Their unofficial stance seems to be: sure, we technically offer it, but we aren't going to approve anyone because, well, we're in a recession. So, if you're counting on bridge financing—at least with this bank—don't hold your breath.

Now, for my actual question. I've been looking over the loan requirements (specifically the collateral terms) at the Federal Reserve after the savings period ends, and if I'm reading this right, they've changed the rules so that practically no one will ever qualify for a loan with them.

So, for a loan amount between $35,000 and $75,000 (which is roughly the starting point for any decent apartment), the terms are:

Model 1:

Borrower: creditworthy
A mortgage lien on the property in favor of the bank
Minimum loan-to-value ratio: 1:1.30
Property fire insurance policy assigned to the bank
2 individual creditworthy co-signers>

Or Model 2:

Borrower: creditworthy
A mortgage lien on the property in favor of the bank
Minimum loan-to-value ratio: 1:1.30
Property fire insurance policy assigned to the bank
1 individual creditworthy co-signer
A cash deposit equal to 25% of the approved loan amount>

I won't even get into the two co-signers requirement. Even if I didn't have my principles to consider, I wouldn't agree to that. After saving with them for years, and given a 1:1.30 loan-to-value ratio (!), they still demand TWO co-signers?

And this second model is even more nonsensical. One co-signer and a 25% cash deposit of the loan amount. For example, let's say I want to pull out a total of $100,000. That means I'd need to have saved $30,000 (30%), and then for the remaining $70,000 loan, I'd have to put down an additional 25% ($17,500). If I actually had $47,500 in cash sitting around (not to mention taxes and closing costs), I wouldn't even need the loan.

I'm curious to hear from anyone with recent experience. Are they really enforcing all of this?
Thanks!

And here are the new terms:

MODEL 1

Borrower: creditworthy
Mortgage lien on the property in favor of the bank
Fire insurance policy on the property assigned to the bank
2 joint creditworthy co-signers
MODEL 2

Borrower: creditworthy
Mortgage lien on the property in favor of the bank;
Fire insurance policy on the property assigned to the bank
1 individual creditworthy co-signer
1 savings deposit equal to 10% of the approved loan amount

Essentially, the terms look much more "normal" than what was posted on the site a few days ago. They are still actually quite strict, though—they require either two joint creditworthy co-signers or one co-signer plus a savings deposit of 10% of the loan (previously, it was an unreasonable 25%).

Let me review the example I used earlier.

Suppose I am buying a condo for $100,000. Let's say I put down $10,000 for the down payment (I'll ignore other costs for simplicity). That means I would be taking out a $60,000 loan. My own funds are $30,000, plus $6,000 (that's the 10% portion) which goes toward the savings deposit. In total, for a $100k condo, I would need to scrape together about half that amount. On top of that, I still have to find one creditworthy co-signer.

The bottom line: it's better than before, but still incredibly difficult given today's climate. It is certainly interesting to note how frequently these terms seem to change.

So, if I want to pick up an apartment for $100k, I basically need $50k in cash upfront... great. 🙂