Although home prices haven’t increased much and interest rates have remained steady over the past year, it’s still going to be a more expensive to buy a home soon. The Federal Housing Authority (FHA) has decided to increase the down payment requirements on the mortgage loans they guarantee/insure. This down payment was increased a year ago to its current level of 3.5% of the purchase price. (Ex. $100,000 purchase price X 3.5% =$3,500 down payment). Buyers can still obtain a mortgage for the 3.5% down payment, but they must meet a minimum credit score. Additionally, the FHA insurance premiums will increase on each loan and the amount a seller can contribute to offset the buyer’s closing costs will be reduced to 3% from 6%. FHA insures the majority of mortgage loans held by borrowers that would traditionally not qualify for a mortgage on more conventional mortgage loan routes…as called bank loans. FHA appears to be adopting more stringent guidelines for its borrowers, however, conventional loans generally require at least a 20% down payment and much higher credit scores. (Ex. $100,000 purchase price X 20% = $20,000 down payment). FHA is more lenient on past credit issues and is accepting of credit scores below 600.

The FTHB Credit of $8,000(and $6,500 for repeat homebuyers) will be expiring soon. Those wishing to utilize the tax credit need to enter into a home purchase contract by April 30, 2010 and fully close the loan by June 30, 2010. The homebuyer’s tax credit can be used to offset expenses for a home purchase from the down payment to improvements. (Don’t forget the up to $1,500 energy tax credit for all home owners that receive energy efficient upgrades or additions in their homes.)

Buying a home is a big step for most; however, when considering your housing options, while reviewing your housing budget, sometimes seemingly more expensive moves may prove to be the most financially astute decision. Example – I purchased my first home…through FHA…. as a fulltime working student because I couldn’t afford the increasing rent at the time. My rent was increasing from $780 to 840/month and I was barely making ends meet and going to school. I took my father’s advice and decided to buy a home. Although I had to come up with approximately $1700 to close my loan, my new mortgage payment was $340/month and I had created a tax deduction with my mortgage interest payments. As the years went by the property became a pool of equity and eventually rental income. As a college student, it was strenuous to come up with $1700, but the temporarily more expensive choice made financial sense.

If you remember asking your parents for money, then you probably have heard of the concept of money not growing on trees. However, translating the true value of money to kids is not as easy as the classic statement is to repeat to another generation. There are several methods of exposing money to a child and it really depends on the age of the child. There are some kids that will pick up financial literacy concepts faster than others, but be patient as simple exposure to these concepts can place their financial education at a further head start than most. Start by finding opportunities to make money around the house or your office. I offer my kids money for reading books on my “reading lists” after they complete a written and oral report. I also offer small cleaning jobs with an opportunity to receive a larger job with more pay, if the initial assignment is completed to our pre-agreed on level of satisfaction. The objective is to tie in effort and money and provide money saving opportunities. Once the kids have earned money in their possession, the concept of money value and the relation to money producing trees are right around the corner. Stay tuned for more.

Sharing is probably one of the most compassionate acts of the animal kingdom and kids are taught to share with others from the very beginning of their socialization. However, sharing can sometimes mean spending more money. And while spending money to share is not a bad thing, it is helpful to start with sharing to begin a child’s financial education …which can very easily turn into a self-centered activity if not taught early to include thinking about others..when earning and spending money. The entire of concept of earning money in a manner that helps others is argued each day in court, so I wouldn’t go too deep on this concept with a kid, but when teaching a kid to save money, it’s also important to teach them to keep in mind those with whom they would like to share. That sharing could be as extensive as a research project on contributing to an established charity or just buying grandma (or daddy) a muffin, with the money the kid has saved. The idea is that money is for the things you want and need, but that there is more to having money than one’s sole self gratification. Starting a savings plan with a personal finance goal is great, but putting the benefit of others into the goal can make the financial achievement mean that much more to a child and helps to build a good citizen.

Mortgages are loans made by banks and lenders that package these loans (securitize) and sell them on Wall Street in the form of bonds called mortgage backed securities (MBS). The money made from the sale of the MBS them goes back to the bank/lender so they can complete more loans. The mortgage payments made by the homeowner eventually pay the investor that has purchased the MBS in which your mortgage resides with other like mortgages.

When the foreclosures started piling up, investors on Wall Street didn’t want to buy these MBS, which dried up bank’s and lender’s continual cash resource from the investor markets. The dried cash pools prevented lenders from mortgage lending. The White House administration pledged $1 trillion dollars to the buy those unwanted MBS, so that lending could continue and keep the housing market alive. The federal government’s involvement allowed mortgage interest rates to fall from 6% to its lowest 4.7% within a year of its involvement and made the volatile housing market an attractive bet as the government announced a healthy profit from its investment into the housing market.

The US Treasury department believes the federal government’s involvement into the housing and MBS markets was supposed to be short-lived and its purpose now completed. Although, many believe it’s too early for a government pullout of the fragile housing market because sales are low and the economy is ailing, but investors and housing market professionals could easily become reliant on the government’s presence and never allow the markets to fully strengthen to a self supporting level.

Did you check the lottery numbers today? You know, if you don’t play u can’t win….well the same concept applies to being on the winning side of your personal finances and becoming financially literate. Many people think they will get their personal finances in order after they are in receipt of a bunch of money. But in reality from where do you think the “bunches” of money originate? If you said, your own efforts…then you’re right. You have to take a stance against your own habits to break free of the repetitive and less than exciting financial cycle in which your personal finances exist. So check all your coat and pants pockets, couch cushions, piggy banks or hiding places and pull some money out to put away the first piece of many to create the bunch of money for which you are waiting. This area is a magic, one way hole …only an entrance….for now. Congratulations. You are now really on your way to better finances partly because you have something at stake. You always have had something (your financial security) at stake, but now you will want to learn more about money that is seemingly sitting somewhere within arm length…just waiting to be spent…and we will spend it, once you become more financially literate. Stay tuned.

Credit card companies are full of surprises this year. With new consumer protection – credit card laws starting this year, many credit card companies are already changing fee policies to make up for the consumer protections the banking industry perceives as revenue decreasing. Don’t be tempted by lower rate offer without reading the entire agreement. Sometimes these lower rates carry a minimum usage clause, which require a certain dollar activity during a given period. Some credit card companies are now placing fees on accounts for non-usage or for not meeting a minimum dollar amount of activity per year. Make sure to open mail from credit cards and read the contents carefully. Part of the new law now mandates credit card companies to inform consumers with more advance, however, if the notice aren’t read the new protections would be useless.

When considering your finances, there are three areas that should dominate your thoughts…current cash situation, desired financial future and possible financial devastation. Current cash situations can be summed up quickly, by outlining all household incomes. Desired financial future is determined by what is done with said income in the terms of managing a regular budget and developing (and adhering to) a well structured investment strategy. However, planning for the financially unforeseen is the easiest for which to prepare, but most often ignored. There are a variety of insurance products to aid when income and investments are non-existent. Some people consider insurance a plan to fail, but its more of a safety net to ensure all the hard work and financial discipline does to disappear should a shot in the dark accident occur. Speak with a variety of investment counselors that offer insurance products as each product changes from company to company. Make sure to consider your health history (personal and family), physical demands of your profession and the future prospect of employment or retirement (voluntary and involuntary) when discussing insurance needs. Attention to these three areas of finance when designing a path to financial literacy will aid in a sure-footed path to perfecting your personal finances.

Before you can start your journey to financial literacy and well managed personal finances, first establish your financial goals. Without describing the finish-line or pit stops, exhaustion and frustration will soon loom over future personal efforts, thus lessening the chances of follow-through when a money crunch occurs or important financial decisions are made. Establishment of goals should be motivating and lie as an incentive to maintain regular participation and adhesiveness to the path of achieving those goals. Don’t just establish large goals that are only realized at the end of the year/term. Provide periodic benchmarks to check your status and to allow for small victories…end zone dancing is allowed. Make sure that goals are realistic and personal. Developing goals based on other people’s thoughts and wishes are a great way to abandon a task. Make sure the goals will affect you and that there is a real degree of selfishness in the achievement of at least a component of the goals to insure inner-self motivation. Even though the new year resolutions starting gate has opened, you will run a much more efficient and satisfying race by putting a little extra thought in your path, rest stops and finish line.

So what better time to decide to become more financially literate than the new year… especially after coming off a spend-heavy holiday season. Of course, like all New Year’s resolutions, we get off to an enthusiastic start, but then lose momentum after our efforts gradually wane for a multitude of reasons. Many financial new years resolutions die because the results aren’t seen immediately and the pain of change and new routine is just too great for some people to withstand. However, if nothing else happens this year, then be sure to focus on learning as much about financial literacy and personal finance as you can. As with any good plan there lies an even better purpose/reason for the plan. With a better understanding of the overall affects of a more solid financial background, then the easier the justification for maintaining “the New Years financial resolution” Don’t bite off more than you can chew, but don’t stop biting/reaching for new information that can help you to achieve your financial goals. Stay tuned to ColdFrenchFries.com as we will be recommending a number of books and literature to aid you in achieving financial balance.