Asking For Directions: A Personal Finance Story (Chap. 13)

Authors’ note:

Explaining personal finance can be pretty dull. That’s a problem, if you need to learn about personal finance.

On a plane from St. Louis to Seattle, I decided to try and fix the problem. What if I could wrap some personal finance concepts inside of a quirky (funny?) short story? My goal here is to present some information, and then add another step in the story. So, when you get to the end, you’ve been reminded of an personal finance concept- but you’ve received the information in a light-hearted way.

Anyway, that’s the goal here. The stories are written in chapter order, so that there is a logical flow for the reader. Enjoy!

The Buick was going 15 miles an hour in a 30 zone- and occasionally drifting into the other lane. Greg checked his mirrors and drove around the Buick, a little annoyed that the driver might cause an accident. He didn’t get a good look inside the car as he drove by, but figured it was someone older.

He turned left, drove six blocks in pulled a gas station- only to notice that he Buick was right behind him. He hustled toward in front door, when he noticed the Buick driver walking toward him.

“Excuse me- do you live near here?” She was an elderly woman in a Christmas sweater and wrap around sunglasses. Her hand might have been trembling.

Greg gave her a weak smile. “Yes, I live right around the corner…can I help you?”

The Buick driver rubbed her hands nervously. “Well, I’ve been driving for about an hour trying to find this store. Do you happen to know where it is?” She handed him a crumpled piece of paper.

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“Ummm… sure, I know the store. Let me pull up directions on my phone, then explain how to get there.”

He told Jill once he got home. “I guess it was my good deed for the day- she seemed pretty upset.” He laughed. “I thought she was coming up to me because I passed her on the left 5 minutes earlier…. so, what are Bruce’s options for the home loan?”

Jill pulled up a document on her laptop. “Here’s what Chuck- that realtor contact- emailed me. Let’s just scan down the sheet so we’re up to speed, then we can talk about it with Bruce when he comes over for dinner. He’s got some options, even if he doesn’t have a big down payment.”

FHA Loan

  • Mortgages issued by the Federal Housing Administration (FHA), that are created for low-to-moderate income borrowers who cannot afford a large down payment.
  • 5% down payment required (as of 2017), and the down payment can be a gift of grant.
  • Popular loan option for first-time homebuyers

“Chuck sent me a link to an FHA Loan calculator, too”, Jill continued. “You can plug in the home price, the interest rate and the down payment- it gives you the payment breakdown with principal and interest payments, property taxes, and homeowners insurance. Pretty easy to use.”

Jill scrolled down the screen. “Now, it’s likely that Bruce will need to get Private Mortgage Insurance– remember PMI when we got our first home loan? It’s a fee you pay to protect the lender from a loss on the home loan. If Bruce puts less than 20% in as a down payment, he’ll need to pay for PMI. Anyway, the payment calculation can figure in PMI.”

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Greg jotted down notes as he nodded his head. “OK, I guess we know what to talk about at dinner- either home loans or my good deed for the day.”

As always, check with a CPA and a financial advisor for specific answers- this is for information purposes only.

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) http://www.accountingaccidentally.com/

(you tube channel) kenboydstl

 

Image: Karol M. Houses all in a row (CC By 2.0)

 

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