The British Petroleum (BP) oil spill has severely affected the economy of the Gulf of Mexico region. The nine-week-old oil disaster has badly affected the coasts of Louisiana, Mississippi, Alabama and Florida. It has been estimated that around 12,000 jobs could be lost in the Louisiana region alone. Apart from this, due to a ban in oil drilling, a large number of people living in Alaska and Virginia will also lose jobs.

Government sponsored mortgage purchasers, Fannie Mae and Freddie Mac along with Citigroup have come up with mortgage relief for the homeowners residing in the affected regions. Let’s take a look at what type of mortgage relief homeowners would receive:

• Forbearance: Both Fannie Mae and Freddie Mac have instructed the mortgage servicers to reduce or suspend the payments of the borrowers for 90 days.

• Extension of forbearance: In certain cases, the servicers may reduce or suspend the payments of the borrowers for 12 months even.

• Cancellation of late fees: If the borrowers stick to the forbearance agreement given to them by the servicers, then they won’t have to pay any late fees. In such cases, the servicers have been instructed not to collect the late fees from the affected borrowers.

• Suspension of foreclosures: Citigroup has announced that it is suspending loan foreclosures throughout the affected region till September 17, 2010. Thus, those borrowers, whose first mortgage is owned by CitiMortgage, will not be subject to foreclosure sales if they are occupying homes situated within 25 miles of the affected coastal region.

I feel this is an excellent gesture on the part of Freddie Mac, Fannie Mae and Citigroup to help homeowners who are in the midst of an unprecedented disaster. The steps taken by them will not only help the homeowners to weather this disaster but will also allow them to save their properties from foreclosures and help them get back on their feet.

Getting a mortgage, credit card or an auto loan with a mediocre credit history has become a thing of past. If you want to get best rates on your credit cards, home loan or car loans, then you should have excellent credit score. The FICO scores help the lenders/banks to judge your creditworthiness. So, you should always take steps to enhance your credit score and avoid doing things which may destroy it.

Let’s take a look at 5 things to avoid and save your credit from taking a hit:

1. Applying for credit: Your lender/creditor will check your credit report once you apply for new credit. This credit inquiry will be mentioned in your credit report. It should be noted that 2 or more inquiries within two months will negatively affect your credit score. Thus, applying for too much of credit can be harmful for your credit score.

2. Late payments: Any late payment will be mentioned in your credit report for the next 7 years as a negative item and will reduce your credit score by 80-110 points. Try to pay off the credit card bills, mortgage payments, car loans, etc., on time or within the grace period. If you don’t do so, you are at a risk of damaging your credit scores.

3. Inadequate credit: While calculating your credit score, the credit bureaus take into account as to how long and how much credit you had. If you have 2-3 credit cards, 1 mortgage and a car loan and have paid them faithfully, then your credit score would be much higher than that of a person who has a single credit card and 1 auto loan.

4. Opening a new credit line: As you apply for a new account, you actually lose some points off your credit score. When you open a new account, the bank or the credit card company will check out your credit report and such inquires are generally hard inquiries (inquiries which take place when a person is applying for a car loan, mortgage or a credit card). Such inquiries will lower your score by around 5 points. Apart from this, opening a new account will lower your score by 5-15 points. However, this is a temporary ding and may last for around 6 months.

5. Maxed out on credit cards: If you’ve reached the maximum limits on all your revolving credit accounts, then your credit score will get negatively affected. You should try and pay off your credit cards completely every month.

All of us have learned it in a hard way that budgeting is a must if we want to survive during the times of crisis. However, while planning for a budget, many of us tend to make certain mistakes which may cost us dearly. Let’s take a look at some of the budgeting blunders and how we can avoid them:

1. Avoiding entertainment and fun stuffs: Eliminating recreation totally is a major budgeting blunder which many of us make. One would self destruct oneself if he or she goes for cutting out on all fun stuffs. Any kind of budget should allow for entertainment. However, one should decide as to how much he or she would spend on fun stuffs and entertainment. It’s ideal to spend a total of 5% of your household budget on entertainment.

2. Savings: Many of us do not decide as to how much we need to save in every month. Most of us put whatever amount we have in our hand into the savings account. This will not be of much help in the long run. The savings should depend upon our monthly income. The deposits that we make to our savings account should also be consistent. One can go for an automatic payroll deduction in order to save a stipulated sum of money every month. By saving just $100 a month, one could accumulate approximately $6,800 in five years if the interest rate is 5%.

3. Emergency savings: A large number of people are prone to this budgeting blunder - they don’t have an emergency fund to fall back upon. Thus, if there is a job loss or medical emergency, the financial ruin starts off immediately for that person. It is ideal to save 3-6 months’ worth living expenses in a liquid interest-bearing account. This emergency fund will come handy in case of a sudden financial crisis.

4. Spending more than what you earn: This is another budgeting blunder that should be avoided at any circumstance. One should always remember the eternal rule - “live within your means“. It is very important to resist unnecessary spending. This will not only help us in saving money but we’ll be able to pay off certain debts which would have been otherwise impossible for us to pay if we had spent the money in buying unnecessary things.

5. Paying minimum on cards: We generally tend to make minimum payments on our cards to ease our financial burden to some extent. However, in the long run, making minimum monthly payments can cost thousands of dollars in interest fees. If you pay off the dues in full, you can use the thousands of dollars paid in fees towards savings or entertainment. So, try and send as much as you can to the credit card company each month and get rid of the late fees.

Various personal budgeting tools are found online which can help you in planning your budget in a better way. You can insert your monthly income in the personal budgeting tool and prepare a monthly budget for yourself.

The Basic Allowance for Housing (BAH) is a military benefit that comes in handy when applying for an FHA or VA home loan. It is based on pay grade, geographic duty location and dependency status. It helps the lender to judge a veteran’s ability to pay down the mortgage. The main aim of BAH is to provide identical and equitable housing compensation based on housing costs in local civilian housing markets. This allowance is payable when government quarters are not provided to the servicemen.

Features of Basic Allowance for Housing (BAH):

• BAH is calculated on local rents.
• While calculating BAH, mortgage is not taken into consideration.
• You may offset some or all of your monthly mortgage payments using BAH, but it’s not planned to do so.

In the year 2010, BAH has some additional features. If a veteran has moved to a new zip code where BAH is lower compared to his previous location, he or she will get a BAH rate protection. This rate protection will help the veteran to receive the old higher amount.

However, there are certain exceptions in receiving the old higher amount. Let’s take a look:

• Permanent change of station - If a veteran is permanently transferred to a new area with a lower BAH for that zip code, then that person will start receiving a lower amount as allowance. This won’t be a problem for them as BAH is tied to the housing market.

• Changes in dependency status - The BAH rate will change as per your dependency status. If you are single, then you will receive the BAH as per the rate given in that zip code. However, if you get married then the rates will change. Your new BAH will be the current amount per month at the “with dependents” rate.

• Promotion - With a promotion, your BAH will also change. Your new BAH will be the current amount in that zip code assigned for your new rank.

• Demotion - If a person, entitled for BAH, gets demoted for any reason, BAH will also change. It will become the current amount authorized for that rank and zip code.