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Self-made millionaire: Not buying a home is the single biggest millennial mistake

According to CNBC not buying a home is the single biggest mistake of a millennial. Financial author David Bach says that, “millennials are making a big mistake by not owning a home.” According to his calculations today’s homeowner is on average 38 times wealthier than a renter.

Rent vs. buy
There is a lot of debate out there on if it is better rent or buy. According to Trulia buying is 28% less expensive than renting nationwide. For those of you in the Austin-Round Rock area buying a home is 45% cheaper than renting.

Trulia makes this calculation based on the following assumptions: a $1,650 monthly rent, $230,000 target home price, staying in the home for 7 years, a 25% income tax rate, and a 3.65% mortgage rate.

Zillow also offers a breakeven horizon calculator to calculate how many years it will take before the cost of buying will equal the cost of renting. For Austin, TX, using the same $1,650 monthly rent and $230,000 target home price, after 1 year and 11 months, buying will be cheaper than renting when you out 20% down. If you put 10% down, after 2 years and one month buying will be cheaper than renting.

Making the investment
Bach argues that you have to live somewhere for the rest of your life, so you might as well invest in a home that you could own permanently. By the time you spend all of your money on rent, you come up empty handed with no investment.

For those considering home ownership for the first time, here are a few tips offered by the financial author.

Tips for first-time homeowners:

  • Calculate your costs.
  • Your first home expense can be minimized with a studio or smaller home.
  • Make sure your total monthly housing cost does not take up more than 30% of your take home pay.
  • Put down at least 10%; The bigger your down payment the lower your loan rate.
  • Borrow 10-20% less than the bank’s willing to lend you.
  • Don’t buy if you plan to move in less than 5 years.

Remember, your first home is more than likely not going to be your dream home. This is ok. Get in a home and begin to build your wealth. Bach says that by the time you are in your 50’s or 60’s you should be able to retire off the money from your home.

The decision is yours
As with any financial decision you make, it depends on your personal situation. Home ownership needs to be the right decision for you and one that you enter into both prepared and cautiously. It takes financial stability and responsibility to be a homeowner, and you need to fully understand the cost associated with your home. Make sure you partner with a trusted lender to understand your financial situation, a REALTOR® as you embark on this decision, and title company to help you through the homebuying process. The American Land Title Association offers a Home closing 101 to help you through this process.

With home prices remaining moderate with only slight increases and continuing low interest rates, my bet is that the American Dream is still a safe bet – no matter what generation you are.

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SOURCE:
http://www.cnbc.com/2016/12/30/self-made-millionaire-buy-a-home.html
http://davidbach.com/
https://www.trulia.com/rent_vs_buy/
https://www.zillow.com/rent-vs-buy-calculator/
http://www.homeclosing101.org/

 

ALTA urges CFPB to warn consumers about wire fraud schemes

From the American Land Title Association Title News Online.

In a letter to the Consumer Financial Protection Bureau (CFPB), ALTA urged the bureau to issue an alert warning consumers about wire fraud schemes attempting to steal funds for real estate closings.

“Despite efforts by the title industry and others to educate consumers about the risk, homebuyers continue to be targeted,” said Michelle Korsmo, ALTA’s chief executive officer. “With the spring homebuying season underway, it’s vital to continue raising awareness about these schemes. The CFPB should take this opportunity to protect consumers from criminals looking to steal their money.”

The alert should provide tips on how consumers can protect themselves and questions to ask to help determine if real estate professionals have procedures in place to protect their money. ALTA has educated its members over the past few years about these wire fraud schemes, but the best defense is to inform consumers about the danger.

“Unfortunately, these criminals frequently target homebuyers prior to the title company getting involved in the transaction,” Korsmo said. “In many instances, they obtain access to unsecure email accounts used by consumers or real estate professionals. They use this access to find transaction patterns and details to make their fraudulent communications seem legitimate. The criminals will instruct the buyers to send the funds to a different account and the money vanishes in minutes.”

RESOURCE:
http://www.alta.org/news/news.cfm?20170406-ALTA-Urges-CFPB-to-Warn-Consumers-About-Wire-Fraud-Schemes

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