🍽️ Mortgage costs are changing

Hey Future Funders Family,

Happy Monday!

This is the last week before we announce the winner of our $100 Amazon gift card prize. Refer at least 1 person to enter with the links at the bottom of this email. 

Ok, let's get to it!

💬 Quote Of The Week

📰 Headlines That Matter

Housing

Mortgage Fees Are Changing

🚀 The quick version: Starting May 1st, the loan level price adjustment fee that you pay (one of those pesky fees tacked on to your mortgage) will change for all mortgage loans that are backed by Fannie and Freddie Mac (this will impact roughly 60% of all US mortgages).

The fee change is being driven by the government's desire to encourage more home ownership primarily among people with lower credit scores amid a rising home price wave in the US.

The short version is that people with lower credit scores will see their loan level adjustment fees move lower than they were previously while people with higher credit scores may see their loan level adjustment fees move higher depending on how much they put down. Some examples:

• A borrower with a 700 credit score and a 20% down payment previously would have paid an upfront fee equal to 1.25% of the loan amount — $3,750 on a $300,000 loan. Now, their fee has been raised to 1.375%, or a total of $4,125 on a $300,000 loan.

• A borrower with a 600 credit score and a 20% down payment previously would have paid an upfront fee equal to 3% of the loan amount — $9,000 on a $300,000 loan. Now, their fee has been lowered to 2.75%, or a total of $8,250 on a $300,000 loan.

To see how the changes may affect you or your family buying a home here is the old fee table (first table on page two) and here is the new fee table (first table on page two).

👪 How it affects you:  You may have seen the news media hysterics about high credit score borrows now having to support lower credit score buyers and as with most news reports these days, this is not entirely true.

While higher credit score borrows may have to now pay a slightly higher fee, we would note this is not the case in all instances (and as a rule higher credit score borrows will pay a lower fee on an absolute basis than lower credit score borrows in every instance). 

That said, any relaxing of lending standards does eerily remind us of what happened in 2008 so we will watch how this policy plays out.

Lastly, when it comes to learning about debt and our kids, here is some further reading that may help:

• Here's how to raise your child's credit score before they turn 18

• Should I tap into my home's equity for a home reno? Here's what you need to know!

Personal Finance

Beware The Second Half Of 2023

To sound smart, all you need to know is: 

• Companies so far have reported strong results with the average company beating expert expectations on sales by 2.1% and on earnings by 6.8%

• While happy with current results, most companies are sounding some alarm bells on the economy in the second half of 2023 

To save you the time and trouble, here is some selected commentary from different types of companies this past week all sounding a bit cautious on the future economy:

• Amazon - "And so if it’s good for our customers to find a way to be more cost effective in an uncertain economy, our team is going to spend a lot of cycles doing that."

• Capital One - "We are assuming material worsening of labor markets with the unemployment rate rising from today's very low levels to above 5% by the end of 2023."

• McDonalds - "We expect short-term inflation will continue in the second half of 2023 and predict a mild to moderate recession in the U.S. and a deeper and longer downturn in Europe.

• UPS - "In the first quarter, deceleration in US retail sales resulted in lower volume than we anticipated...Given current macro conditions, we expect volume to remain under pressure.”

👪 How it affects you:  While predicting a recession is a fool's errand, it is at least worth paying attention to what big companies are saying.

As it relates to you and your family, we would use some of these headlines to chat with the kids. Some prompted questions:

• If (UPS) is seeing less people send packages could this mean that people are spending less money?

• Have you noticed more discounts and sales? This is usually a sign that companies are being forced to lower prices for more money conscious consumers.

• Looking around the neighborhood, would you say you see more or less construction happening?

A few more helpful resources on teaching our kids:

• Financial literacy questions: how to answer kids

• Teaching financial literacy: 10 board games for kids 10 and older

• Inflation games you can play with the kids

Dinner Table ❓ For The Kids

💡 Few People Know...

🫰 Are you being paid fairly? Know your worth will answer this question for you.

🈺 What are the highest paying internships? Glassdoor compiled a list to help you get started discussing money with older kids.

👧 The Girl Scout Business. Girl Scout cookies rake in $800 million each year. You may think it is due entirely to the adorable sales reps, but there is a lot more to the business. 

🏦 Apple jumps into banking. They are offering a 4.15% rate for anyone who starts a savings account with them. Not bad for parking short term cash, but we would also check out a treasury ladder.   

🏬 What to do with your Bed Bath Beyond Coupons? Last Tuesday was the last day Bed Bath & Beyond accepted its popular coupons as store closing sales were slated to start Wednesday. But several retailers have stepped in and are now accepting them for a limited time.

💰 This mom is killing it (and didn't even know). Erryn Rhoden didn't mean to enter the Candy Crush All Stars tournament, but she's now become an esports icon.

✌️ Why do people succeed? Is it because they are smart or lucky? Analyst Richard St. John condenses years of interviews into a 3-minute Ted talk worth watching with the kids.

🗓️ The Week Ahead

Week of May 1st

This will be the second busiest week of company earnings reports... so buckle up. Similar to what we say above, we would expect most company earnings themselves to be strong with some caution on the remainder of this year's economic outlook.

May 3rd

The Federal Reserve will meet and discuss interest rate changes. Many (including us) believe that this will be the last time the FED raises interest rates and people will be looking for indications in their statements that this is the case.

May 5th

Cinco de Mayo, or the fifth of May, is a holiday that celebrates the date of the Mexican army's May 5, 1862 victory over France at the Battle of Puebla during the Franco-Mexican War. My wife also felt it was important that I shared her favorite margarita recipe here.

🔍 Topic of Focus

Planning a Vacation?

This week we lay out 11 quick and simple ways for you to save some money as you go about planning that next family vacation, while also teaching the kids a thing or two about finance.

Dinner Table ❓ For The Kids