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1 Penny = 1 Billon Dollars
FiLife Take: Our mortgage guru Steve Heideman is looking for a bright spot in today’s tough environment. His back-of-the-napkin math suggests that falling gas prices could pad our budgets nicely. Here’s what Steve has to say…
The global recession has caused significant demand destruction of all commodities around the world. Arguably the hardest hit has been crude oil, down significantly from its peak. With the fall in crude oil prices, distillate prices have come down as well. Most notably for many of us GASOLINE!! I can’t speak for everyone, but at the peak, I paid $4.49 a gallon for gas. This morning when I had to fill up my tank again, I paid $1.72 per gallon. That is a savings of $2.77 per gallon!
Now here is where it get’s interesting: For every penny that gasoline falls per gallon, I calculate that American consumers gain more than $1 billion in purchasing power.
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Guru Q&A: Can I Afford My Dream Home?
FiLife User Question: I want to get a house for $240k in Sugarland, TX. My income for the last year was $43k, the previous year $18k, and this year $46k. I recieved a raise, so between now and next year I plan to be making $50-55k. I have car loan at $9k. My student loan is not in repayment until June of next year at $33k. I recently was approved for a FHA at $90k, but my dream home is $240k. Assuming it’s still on the market in 3 - 5 months because many homes aren’t selling, how do I qualify for a home that price? Credit scores: 683, 702, 690.
-houston27green
FiLife Guru Response: Depending on what your student loan payments are going to be, you might be able to afford the home on your new salary. Making $55k/year would give you an acceptable debt to income ratio given FHA mortgage standards. You would however need to show a history of making that amount and a liklihood for it to continue. I would say that you are about a year from being able to afford the home as long as your income gets to the $55k level. Don’t forget–you also need to come up with a 3.5% downpayment (as of January 1, 2009) which is $8,400. In addition you will have to come up with closing costs, one year of homeowners insurance premium and moving costs. All in all I would say plan on $10,000-$12,000 to get into your new home. It is important to save accordingly. For more information on getting a mortgage, check our the Filife Mortgage Guide.
-FiLife Guru Steve Heideman
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