What Happens to You and Your Stuff if You Don’t Make It Back from Spring Break?
By Claire Carter Bailey of the Law Offices of Bailey & Poarch
Morbid? Maybe, but Benjamin Franklin was right, “In this world nothing can be said to be certain, except death and taxes.” Yes, you too will die. And most likely, before then, you’ll be incapacitated for some period of time.
So, who will make your medical decisions? What factors will impact that person emotionally, financially, and relationally during that time? Who will live in your house? Who will pay the bills? What will happen to your family? Does anyone know the location of the courthouse? How much is all this going to cost?
What you think will happen:
You may have considered these questions and have a plan in mind. However, absent proper legal documents, your wishes may not come to fruition. A common misconception is that your property will pass automatically to your loved ones or that they will be able act on your behalf.
What will actually happen:
If you haven’t considered these and other issues in awhile, someone else has on your behalf—the Oklahoma legislature. And with the help of a judge, many months, and thousands of dollars, all these decisions will be made without your consultation.
Not what you had mind? Yeah, me either.
Now that we’ve gotten the bad news out of the way and before you panic, imagine that instead of worrying about it or passing your problems on to your loved ones and your decisions on to someone you’ve never met, you have an instruction manual, often called an estate plan, with everything needed to handle your legal and personal affairs. One of the best gifts you can give your loved ones during an already difficult time is the space to grieve free from difficult decisions, fights, and a costly drawn out process. By preparing an estate plan, you protect your health, home, assets, and family.
The tools in the toolbox:
An estate plan is nothing more than a collection of documents that address the specific medical and financial issues of the person for whom they are prepared. It is a way to opt out of Uncle Sam’s one-size-fits-all approach.
Determining which documents belong in each estate plan and what those documents say is like selecting and using the correct tools and materials to build a house. A house must be built with the occupants in mind. A ruler is sufficient to build a dollhouse but is too small to build a
doghouse; a handsaw works for a birdhouse but is inadequate to build a house for people. (Although I recommend saving the hassle of building your own house and calling your boy Grady!)
Estate planning is not a one-size-fits-all process. Some estate planning tools are universal like durable powers of attorney which give others the authority to act on your behalf in the event you are unable to handle your own affairs, wills which set out your wishes for the court to direct absent a fully funded trust, and payable on death designations which transfer funds in your bank accounts. Other tools, like specialty trusts, are used in cases with unique needs such as large estates with generation skipping gifts or special needs children who rely on government aid.
The swiss army knife of estate planning:
The revocable living trust is a basic trust that transcends death and has complex features that address both financial and medical issues. It can be changed or revoked, hold assets, direct that funds be dispersed to a beneficiary on a specified schedule, allow for a trustee to step in during times of incapacity, save money through avoiding a guardianship and probate, protect your privacy by preventing your affairs from being published in public online records, and so much more.
There was a day in which trusts were primarily used as tax avoidance tools for the wealthy. But trusts are no longer only for the rich and famous. In fact, for most people, they are a means of saving money.
Setting up an estate plan is a phone call away:
Determining your specific needs and seeing around the corner to what you’ll need in the future requires more than a google search. We have an estate planning toolbox and know how to use each tool. Let us explain your options and provide a custom instruction manual for your loved ones with everything they will need to address the legal and logistical issues to your specifications.
With a large number of people expecting an economic downturn sometime in the next year it’s important that we keep an eye on global markets. Places like Oklahoma won’t be affect as severely when crashes happen, but we will be affected. There are people who would disagree with Mr. Rattner, but I tend to agree with him, and I think it’s worth sharing this information to my clients/friends. Rattner was the Car Czar during the auto-bailout, and he’s been in the trenches. I happen to appreciate him a little extra due to his focus on trimming the debt – he’s very involved with the group Fix The Debt, and if you are interested in geo/national economics that is one corner of the ring that would be worth keeping an eye on. I hope you get something out of this article.
On MSNBC’s Morning Joe today, Steven Rattner presented charts showing the failure of Trump’s tariffs to shrink the trade deficit with China while at the same time inflicting substantial pain on American farmers and other targeted sectors.
President Trump is pushing hard for a trade deal with China and it’s not hard to see why: his trade war is not going well. Last week, the government reported that the United States’ trade deficit (in goods) hit a record $891 billion last year, as imports grew faster than exports.
To date, the tariffs that Mr. Trump has imposed on imports from China have had no significant impact. Since Mr. Trump began imposing his tariffs, imports from China have risen by $19 billion to a record $540 billion as Americans kept purchasing cellphones, computers, clothing and the many other items that China makes better and cheaper than we do (or used to do). All told, imports from China amount to 22% of what comes into the United States from foreign countries each year.
With imports rising and American exports to China falling, our trade deficit (in goods) with China rose last year to $419 billion, 24% above where it was just a year earlier.
Contrary to what Mr. Trump says, his tariffs are not paid by China; they are paid by American companies and consumers in the form of higher prices.
Part of the rising trade deficit results from retaliatory tariffs that China has imposed on exports from the United States. Indeed, Chinese exports from the United States declined 7.4% last year. China has been extremely clever about targeting its own tariffs to items that are disproportionately exported from “red states” that Mr. Trump carried in 2016. Texas faces tariffs on its exports of propane, sorghum and cotton. For Michigan, Alabama and South Carolina, the issue is autos. (Smaller retaliatory tariffs have been imposed by Mexico, Canada and the European Union).
China has also taken aim at American exports of soybeans; before it imposed a 25% tariff on imports from us, China purchased about one-third of our entire soybean crop. As this chart shows, soybean prices collapsed last spring as rumors of the Chinese action began to circulate and the country began to dramatically scale back its purchases. Perhaps not surprisingly, Mr. Trump won eight of the 10 states that are the biggest producers of soybeans. Another way to look at it: soybean-producing counties went for Mr. Trump by a margin of more than 12 percentage points.
While soybean prices have recovered somewhat from their lows, even if China resumes its purchases, it may be a good while before prices fully recover; soybean stockpiles in the United States are currently about twice their historic average.
For many years Norman has been needing and working towards a plan to better manage stormwater runoff. This is not something that people talk about a lot in comparison to other items with a similar price tag, but this is a big deal. On April 2nd Norman is going to take a vote on how we move forward, so it’s important that you learn something about this before it feels like a surprise. Our citizens will start paying a new utility fee to help manage the issues related to stormwater, so before you get too upset about that you might want to look into how this is all going to work.
*For more information visit the Vision For Norman website by clicking here.
The proposed $72 million transportation bond leverages City and federal funds to undertake 19 projects for a total investment of about $139 million in Norman’s transportation infrastructure. If approved, this proposition would provide funding for the City to address issues with the existing transportation infrastructure, including, but not limited to, construction of a new Traffic Management Center, widening and reconstruction of roads, installation of new traffic signals, improvements to stormwater drainage systems, and the addition of sidewalks and multi-modal paths.
The proposed $60 million stormwater bond would fund 33 stormwater infrastructure projects with the aim of reducing flooding in Norman and replacing aging, undersized drainage structures. These projects were selected from a list of 60 projects identified in the City’s 2009 Storm Water Master Plan as critical to addressing flooding and water pollution issues in Norman. If approved, this would be the first stormwater bond in the City of Norman and would provide funding for large infrastructure project needs where state and federal funding is not currently available.
If approved, this stormwater utility would provide approximately $4.2 million a year combined with $3.2 million from the General Fund to fund critical stormwater maintenance needs including, but not limited to, increased infrastructure maintenance crews, Stormwater Compliance Inspectors, a Neighborhood Assistance Program, and necessary equipment such as street sweepers and a camera truck to inventory the state of stormwater infrastructure. This utility would be established in an enterprise fund, which is a dedicated source of funding for stormwater services only.
There is a website that I was introduced to a few years ago called “The Art of Manliness”, and it turns out that I like it more than I thought I would. I figured that it would be a site written about how to convince yourself that you’re tougher, and cooler than everyone else. It’s actually rather thoughtful, and it’s focus is to teach men how to live strategically, and purposefully – which I think is great in a world where men often seem overly insular. With that said, this article is not specifically written with men in mind. It’s actually written by a couple named Kate and Brett McKay
This article is about what it takes to buy a house from a layman’s perspective. One of the key portions of the article is when it talks about the advantages and costs of using a buyer’s agent (allowing a Realtor® to help you find and buy a house). There are a 2 main points about this that I would like for people to understand: Realtors® are paid by the seller normally, Looking for and investigating a house on your own can be tedious. Having an advocate who understands the market can be a very good thing, especially if you don’t already know a lot about the industry and have a lot of spare time. This article was written by someone who is not a Real Estate professional, and for that reason I thought it was worth sharing. The article is very honest and straightforward. Please feel free to like, comment, or share – it’s always more fun to have a conversation when there are other people talking too 🙂
If you think that you might be ready to start looking for a house the first thing that you need to do is get your finances in order. There is a mortgage calculator at the top of this page (unless if you are on a mobile device, and then it will be found at the bottom of the page), so feel free to start there and play for a minute. Then you should talk to a lender – talking to a lender is your very first real step. Ok, I’ll stop, but I do encourage you to read this article.
I had no idea what I was getting myself into when Kate and I decided we were ready to buy a home. I naively thought there wouldn’t be much to it. Visit some open houses, talk to the bank, sign some papers, and boom, I’d have a piece of the American Dream.
Boy, was I wrong.
Buying a home is a complicated, multi-step process. Down the road we plan to devote entire posts to many of the steps along the way. Today, however, we’ve set out to provide you with the big picture of what to expect when buying your first home. It’s basically the roadmap I wish I had when I was neck-deep in the process.
It should be noted that each state (and country) has vastly different laws regarding real estate. This is a rough idea of the process, but especially when it gets to working with realtors, making offers, and the closing process, things can look quite different. Research you own state’s or country’s processes.
Determine If Buying Is Right for You
Before you start attending open houses and munching on free cucumber sandwiches, you need to figure out if buying a home is even the right move for you. It’s a big decision that comes with huge time and financial commitments. When figuring out whether buying makes sense right now in your life, take into account your finances as well as your future plans. For help in thinking through the pros and cons, check out our guide on whether you should buy a home or rent.
Get Your Financial House in Order
Once you decide to move forward, it’s time to get your financial house in order to prepare for buying a physical one. Here are some things to consider doing:
Start saving for a down payment. If you haven’t already, start saving for a down payment on your mortgage. Most traditional mortgage brokers require that you have at least a 20% down payment to qualify for a mortgage. Even if you’re able to secure a Federal Housing Administration loan (FHA loan – for first-time home buyers only), you’ll still need to have at least a 3.5% down payment (some loans will require a 5% down payment. For a $250,000 mortgage, that means you’ll need at least $8,500 in the bank, and that doesn’t include all the other costs that go along with buying a home, as we’ll find out later. That’s nothing to sniff at. Start saving today.
Get a copy of your credit report and credit scores. When a bank decides whether to loan you money for a home, one of the things it’s going to look at is your history as a borrower. They want to know that they can trust you to pay back this massive amount of money they’re about to give you. To determine whether you’re creditworthy, the bank or mortgage broker is going to look at your credit report and credit score. Before the banks pull your report and score, it’s a good idea to take a look at them yourself to ensure that there aren’t any errors that could hurt your chances for securing a mortgage. Errors to look for include accounts that don’t belong to you, wrong addresses, incorrect payment status, and remedied delinquencies not reported as such. If you find any errors, take action to correct them as quickly as possible as they can sometimes take a long time (and be nigh near impossible) to fix.
If you don’t have any errors on your credit report, but your credit score isn’t that hot, start taking steps to improve it like paying your bills on time and reducing the amount of debt you owe.
Gather financial documents. When you apply for a home mortgage, your financial life is going to be put under a microscope. You’ll have to provide enough documentation to prove that you’re financially capable of paying back a large loan. I wish I had done this step earlier in the process and not waited until I was actually applying for a loan. Despite having most of my financial documents digitized, it was still a chore corralling them together. Below are the documents you’ll likely need when applying for a mortgage:
W2 statements (or 1099 income statements) for the last two years
Federal tax returns for the last two years
Bank statements for the last few months
Recent pay stubs and proof of other income
Proof of investment income
Get pre-qualified for a loan. Call up your bank and ask to get pre-qualified for a loan. When you get pre-qualified for a loan a bank takes a cursory look at your financial status and tells you whether you’d be able to qualify, and if so, roughly how much of a mortgage you can get. This can give you a rough idea of how much house you can afford when you’re out looking. Getting pre-qualified is quick and easy. You can usually do it over the phone or even online. One important thing to understand is that getting pre-qualified for a loan doesn’t guarantee that you’ll actually get a mortgage for the amount the bank pre-qualifies you for. That number can change as the mortgage broker takes a deeper look at your finances. Again, it’s a rough estimate.
Start Shopping for a Mortgage
One thing I wish Kate and I had done earlier in our home buying process was shopping for a mortgage. While we were pre-qualified, we didn’t start mortgage shopping until we actually found the home we wanted. There are a few advantages to starting the mortgage shopping process sooner rather than later, like negotiating a better mortgage rate or getting pre-approved (which is different than being pre-qualified – read on) for a loan. When it comes to picking a mortgage, we could write several posts about it (and we will in the future), but for now, let’s move on with the big-picture overview.
Where to get a mortgage.
Start your mortgage shopping with your personal bank or credit union. They often offer good rates for long-time customers. But don’t stop there. Hop online and use a web-based mortgage rate finder like Bankrate.com. You’ll find dozens of mortgage brokers to choose from. It’s worth considering local institutions as well versus just big banks. As with anything, they often provide a personal touch of service that you won’t find elsewhere. If you decide to work with a realtor, they’ll also often have good recommendations or lenders they routinely work with.
What type of mortgage is right for you?
You have several choices when it comes to picking out a mortgage. Each type has their pros and cons.
Fixed-rate vs. adjustable-rate loans. The most common type of mortgage is a fixed-rate mortgage. With a fixed-rate loan, the rate stays the same over the life of the loan. The big pro with fixed-rate loans is the peace of mind that comes with knowing that your monthly mortgage payments won’t fluctuate dramatically from year to year.
On the other hand, adjustable rate mortgages, or ARMs as they’re often called, have an interest rate that changes based on what happens to interest rates in the economy as a whole, which can be good or bad. If interest rates drop, your mortgage payment should drop. But if they go up, your payment can quickly get out of hand. ARMs are tempting for first-time home buyers because their initial rates are lower. And because monthly payments on ARMs are typically lower at the beginning of the life of the loan, they can also be easier to qualify for. The problem with ARMs is that you’re taking a big gamble. If interest rates go up, you may end up paying much more than if you had gone with a fixed-rate mortgage.
30-year vs. 15-year. This refers to the number of years it takes to pay off the mortgage. 30-year mortgages are the easiest to qualify for and are the most common. 15-year mortgages are much harder to qualify for and have higher monthly payments because you’re paying off the house in half the time. The obvious benefit is that you pay off the loan and build equity faster than you would with a 30-year mortgage. If you have a goal to pay off your home as quickly as possible, just get a 30-year mortgage and pay extra. Making just one extra payment per year on a 30-year mortgage can reduce the life of the loan by five years. If you ever have to cut back on mortgage payments, you won’t be stuck with the high minimum monthly payments that come with 15-year mortgages. Just make sure you get a 30-year mortgage that doesn’t have prepayment penalties.
Balloon mortgages. Stay away from them. The way they work is that you make small monthly payments for a fixed number of years — usually five to seven — and then you’re required to pay off the loan in one giant lump sum. Balloon mortgages got a lot of homeowners in financial trouble during our recent housing crisis. Folks who thought they’d be able to sell their homes before the lump sum came due were stuck in homes they couldn’t find a buyer for. Consequently, they couldn’t pay their mortgage, which in turn resulted in foreclosure and bankruptcy.
Look into FHA loans. An FHA loan is a home loan insured and backed by the federal government. FHA loans offer low down payments and lower interest rates than traditional home loans. They’re geared towards first-time homeowners who might not have cash to pay the full 20% on a down payment. To apply for a FHA loan, you’ll need to find a FHA-approved lender and meet a few requirements. There are some downsides to FHA loans. First, you’re required to purchase an upfront mortgage insurance premium of 1% of the total loan. You also pay a modest fee with each monthly payment for the life of the loan.Check out the Housing and Urban Development’s website for more info about applying for an FHA loan.
Get pre-approved for a loan.
Whether you go for a 30-year fixed or a 15-year ARM, your goal should be to get pre-approved for a loan. Pre-approval is a step above pre-qualification. According to theConsumer Financial Protection Agency, when you’re pre-approved for a loan, “the lender has evaluated your creditworthiness and has committed to extending you a loan up to a specified amount.” To get pre-approved, you’ll need to provide a lender with pay stubs and W2s and two to three months worth of bank statements. When a bank pre-approves you for a loan, they’ll issue you a letter that you can show sellers during the negotiation process. Buyers with pre-approval often have a leg up on buyers who don’t. Put yourself in the seller’s shoes. Who would you rather say yes to? The guy with a letter from the bank that says they’ll pay the full amount for the home or the guy who has nothing but his word that he’ll be able to afford the house.
Pre-approval isn’t a guarantee that you’ll get the loan in the end. There’s a chance that something will pop-up in the more thorough loan underwriting process that will cause the lender to change its mind. Think of pre-approval like getting engaged. It’s a commitment, but until you get married (i.e. actually get the mortgage) each party can still back out.
Start Looking at Houses
Watch HGTV. I never watched a minute of HGTV before we started thinking about buying a home. But as soon as we decided to start looking, I was watching House Hunters all the time. While the show is definitely staged, I actually found it to be helpful in getting an idea of what I wanted in a house and how the home buying process, in a very rough sense, worked. It can also help tamper your expectations, as you often find happy-go-lucky couples who just expect to instantly find their dream home and for everything to be perfect. Not how it works in real life. (Watch episodes online even if you don’t have cable.)
Attend open houses. Browse through the real estate section of your local newspaper and find some open houses to attend on the weekends. You can also find listings on popular real estate websites and apps like Zillow, Trulia, and Realtor.com. Your goal at these initial open houses is to just get an idea of what you like and don’t like in a home. For me, I found this casual reconnaissance to be immensely useful. For someone who had only lived in one home his entire life (my childhood home), I really didn’t have a good idea on the different types of layouts and amenities possible in a home. Seeing several homes in-person helped me develop my preference. Open houses are also useful for scouting out possible buyer’s agents (more on that later).
Make a list of features your ideal home has and make a list of deal breakers. Once you have an idea of what you like and don’t like in a home, sit down with your spouse and make a list of the features in your ideal home, as well as a list of your deal breakers. What are the things you must have, and what are the things that you absolutely won’t live with? Housing and Urban Development has a nice little PDF to help guide you through the process. Make sure you and your wife are on the same page before you get serious about looking. It will take some negotiation and compromise, but the effort will be well worth it.
Decide whether you want a realtor. During the casual browsing phase of home shopping, decide whether you want a buyer’s agent. Kate and I initially wanted to buy a home without a realtor, but quickly discovered that finding homes that fit our criteria was super time consuming. I was spending hours each week browsing homes online and setting up appointments to look at them. It started to get tedious, so we ended up hiring realtor Ray Nash to help us out. Ray was awesome. We told him our list of likes and dislikes in a home and the next day he created a customized database of homes to browse through. When a new house came on the market that met our criteria, he added it to the database so we could check it out. All we had to do was tell Ray which homes we wanted to look at in person and he set up the appointments to visit them. Ray saved us a boatload of time. It was also nice having someone hold our hand and guide us through a completely foreign process. As we moved towards actually closing on a home, Ray took care of setting up things like the appraisal and inspections as well as ensuring all the loose ends were tied up before closing day.
Now you might be asking, “Will I have to pay for the services of a buyer’s agent?” The answer to that is quite complex, but typically it’s the seller, and not the buyer who pays the commission for the buyer’s and the seller’s agent’s services. However, the buyer and seller can negotiate the price of the home so that the buyer, in effect, pays for the commission of his agent. For details on how real estate agents are paid click here.
Once you’ve found the home of your dreams, it’s time to make an offer. Before you do, know your “walk away” number — the price at which you’ll walk away from negotiations because it’s just too high. When crafting your offer, consider adding contingencies like having broken appliances repaired at the seller’s expense. You can even ask that the seller throw in a piece of furniture into the sale. Everything is negotiable!
Some things that can help you get a “yes” on your offer include being pre-approved for a mortgage and being flexible on the closing date. In our case, being flexible with the closing date helped us snag a deal. The guy we bought our home from hadn’t found a new place yet, so we offered to put off the closing date for an extra two months so he could find a new home. We still had a few months left on our apartment lease, so we weren’t in a rush. The other folks interested in buying the house needed to move in ASAP. Flexibility won the day.
When you make an offer, the possible answers are yes, no, or a counteroffer. Don’t expect to get a “yes” on your first offer. Unless you’ve put up a severely lowball offer, the buyer will likely return with a counteroffer. You can either accept it or give another counter. If the seller decides to end negotiations with you, lick your wounds and move on to the next house.
Get the Purchase Contract
Once you get a verbal “yes” from a seller, the next step is writing up a purchase contract. The purchase contract essentially puts everything you negotiated verbally into writing. The typical clauses you see in a purchase contract include the following:
Legal description of the property, including zoning information
Purchase price and terms of the sale
Down payment to be held in escrow, and future payment structure
Closing date — when the deed will change hands
Any items included in the sale, such as appliances and furniture
Disclosure of lead paint (lead-based paint disclosure form for buildings built before 1978) and other defects
Home warranties and warranties on appliances
Commissions, if any
Your purchase contract will likely have contingencies that could void the contract if they’re not met. Common contingencies include passing the home inspection, the appraisal meeting the selling price, loan approval, and the title being free and clear.
Get Home Inspected and Appraised
After you’ve signed a purchase contract, your next step is to get the home inspected and appraised. As a buyer, you’re responsible for these costs, so have your checkbook handy. If you have a buyer’s agent, he or she will usually take care of setting up the inspections and appraisal for you.
We had two inspections done on our house. The first was a termite inspection to ensure that we 1) didn’t have termites, and 2) didn’t have any termite damage. The second inspection was a general inspection performed by a certified home inspector. This is a pretty thorough inspection. He’ll check the condition of the house’s heating and cooling systems, electrical systems, plumbing, as well as the structural components of the home like the foundation, walls, and roof. He’ll then create a detailed report that includes things you should be concerned about. It’s good to be at the house during the inspection so you can follow the inspector around and ask questions that you might have. If the inspector finds any serious faults with the home, you’ll need to decide whether to re-negotiate with the seller or just walk away.
The mortgage broker will typically provide a list of approved appraisers that you can call to set up an appointment with. The mortgage broker wants to make sure that the home is actually worth what they’re lending to you. If the appraiser reports that the value of the home is less than the contracted price, your lender will likely not give you the loan. They don’t want to fund something that’s worth less than the amount of the loan. The appraisal contingency will allow you to either 1) renegotiate with the seller for a lower price or 2) walk away from the loan.
Shop for Homeowner’s Insurance
Assuming the inspection and appraisal came out fine, the next thing you’ll want to do is shop around for homeowner’s insurance. Your mortgage broker requires it before they’ll finalize your loan approval. Buying home insurance isn’t that hard. I asked my friends and family which insurance companies they used, called them all to get a quote, and went with the best deal. The cost of homeowner’s insurance (as well as property taxes) is typically rolled into your mortgage payment. The mortgage lender puts that money in an escrow account and pays the cost of homeowner’s insurance themselves.
Finalize Loan Approval
In the few weeks leading up to the closing date, your mortgage broker will be underwriting your mortgage application. The underwriter will likely ask for more documents or they’ll have questions about the documents you’ve already provided. Because I’m self-employed the underwriter had a lot of questions for me. I had to make several trips to their office with stacks of financial documents. Just roll with the punches.
After weeks or maybe months of work, the big day has arrived: Closing Day. Closings typically take place at a title company’s office. Depending on the complexity of the sale, closing usually takes about an hour and a half. Because you’re a buyer, you’re going to have a huge stack of papers to sign and initial, so make sure to warm up those finger muscles. To ensure that the closing goes off without a hitch, make sure to bring the following items:
A certified or cashier’s check. Federal law requires that you be told the exact amount of the check you need to bring to closing at least one day before settlement. You will have to pay the down payment, plus the closing costs — usually 3 to 5 percent of your home purchase price minus your earnest money deposit. The closing agent will tell you whether you need one check or two and to whom they should be payable. Do not bring personal checks or cash.
Proof of insurance. The closing agent needs to see proof you have the insurance in effect on closing day. Your lender likely has a copy of your proof of insurance, but bring an extra copy just in case.
Photo ID. The closing agent needs to know you are who you say you are. A driver’s license or current passport will do the trick.
Your agent or attorney. Especially if you are a first-time buyer, you should have someone with you who understands the process and represents your interests. In some states, you’re required to have an attorney present. Check your local laws to find out if that’s the case for you.
Purchase and Sales Contract. Just in case you need to double-check a detail against closing costs.
Congratulations! You’re a Homeowner
Once you’ve signed the last document and the closing agent has dropped the keys in your hand, you’re officially a homeowner. Congratulations! Go out and celebrate with a big juicy steak. As soon as you’re done, though, it’s time to start thinking about moving in. But that’s a subject for another post.
A lot of people scroll right by when they hear they see links about legislation, but if you or someone you care about is thinking about buying a house this could be a big deal! A huge part of my motivation for being a Realtor is helping people make a plan that will change their life in the long term, well this is a little slice of good new. I happen to believe in paying taxes, but incentivizing this process for people is a good idea, in my opinion. Now, it’s just up to people to buy within their means. Watch this space.
As a millenial who owns a home and is soon getting married I don’t feel that this article speaks to me entirely, and I think that’s partially because the market that I live in is not exactly as extreme and unpredictable as more populous coastal cities. I have found that even though articles like the one below don’t fully describe my own environment they do point to something. I have many friends who are seemingly holding off bigger life decisions because of financial constraints. With that said, I find it very important to explain that the longer that someone owns a property the more their equity and personal wealth grows (and at an exponential rate). If somebody wants to take control of their own life in my generation one of the best ways would be to own their home. Even if they don’t use me to fulfil that process I recommend they do it. If you are a millenial and feeling a bit stuck it’s time to look at how your life would be different if you bought a reasonable/affordable house and lived in it for the next 5 years – but the longer you own it the better it is financially. OK, have a great day you crazy nuts!
I spend more time than I would like to admit looking at real estate listings online. I recently found a nice townhouse in my neighborhood that costs 25 times my annual salary, which is honestly a better deal than most other places in the surrounding area. The moral of the story is that I’m convinced I’ll never be able to afford a home, at least not anywhere I’d like to live.
According to a new study by Bank of America, I’m not alone in my pessimism. Its annual homebuyer insights report, released on Wednesday, found that 72 percent of millennials, which the report identified as being born between 1978 and 1995, consider being able to own a home a “top priority” — more than traveling (61 percent), getting married (50 percent), or having children (40 percent). Millennials may be killing the housing market, but it’s not because they don’t want homes of their own.
Even if millennials are putting off having kids (which are expensive to raise) and weddings (which are expensive to have) to buy a home, a host of structural factors are getting in their way. High rent prices, student loan debt, and the toll of the 2008 financial crisis are all keeping young people from buying property. Some of these hurdles are purely psychological — naturally, a generation that grew up in the midst of foreclosures and evictions would be scared of buying property — but most are material. Young people spend a lot of money on student loans and rent payments, which keeps them from having money for, well, anything else.
Millennials spend too much money on rent
Generally speaking, young people prefer to live in cities, where both rents and property values are higher, according to a July study by the Urban Institute. The Bank of America report, which polled 2,000 adults who own a home or plan to in the future, also found that 90 percent of first-time buyers would rather find a place in their preferred location, which also drives up prices.
Nearly half the people polled by Bank of America said they spend more than 30 percent of their income on rent, meaning they can be described as being “rent-burdened.” Rent-burdened households have higher eviction rates and are more financially precarious than homeowners or renters who spend a smaller proportion of their income on rent, according to Pew.
It’s not uncommon for people to be rent-burdened in cities like New York or San Francisco, where rent prices outpace wages. This means they have less money left over that can be used for a down payment — and 53 percent of those polled said they’re waiting to buy until they have enough money saved up.
The massive burden of student loan debt
Ten percent of the 2,000 people polled by Bank of America say they have put off buying a home because of their student loan debt. This seems like a relatively small number, but other studies have suggested that student loan debt — especially when coupled with stagnating wages and rising property values — can be an insurmountable burden for young people who want to buy homes.
The average student loan debt in the US is $32,731, according to the Federal Reserve— and the collective student debt carried by all Americans hovers around $1.5 trillion. These high debt levels prevent millennials from purchasing homes, even if they really want to. A 2017 study by the National Association of Realtors (NAR) and American Student Assistance found that student debt delays millennial homeownership for seven years.
According to Lawrence Yun, a chief economist with the NAR, student loan payments prevent people from saving for a down payment or being able to afford a mortgage. “Sales to first-time buyers have been underwhelming for several years now,” he said in a 2017 statement. “Even a large majority of older millennials and those with higher incomes say they’re being forced to delay homeownership because they can’t save for a down payment and don’t feel financially secure enough to buy.”
That said, there’s no real way to win here. A June 2018 study by ApartmentList found that indebted graduates take four years longer to put down a first home payment than those who have no college debt — but those who didn’t finish college take even longer.
Kathy Cummings, the senior vice president of Bank of America’s Homeownership Solutions and Affordable Housing Programs, told me that college grads are generally better off than those without a degree. “Even though you take on the student loan debt, the earnings potential that you have is higher than if you just have a high school diploma,” she said. “The key is really completing that degree.”
The looming threat of another recession
Even if the economy has largely recovered from the 2008 financial crisis, young people haven’t. Materially speaking, the Great Recession widened the wealth gap between millennials and preceding generations, according to a May study by the Federal Reserve Bank of St. Louis. Millennials carry student loan debt, but also car and credit card debts that prevent them from taking on a mortgage — which is a “good” kind of debt that has the potential of appreciating in value.
And psychologically speaking, millennials are still feeling the effects of the Great Recession. One Morgan Stanley analyst told Business Insider that the financial crisis left an entire generation with a “significant psychological scar.” They’re scared of losing their jobs. They’re terrified of the stock market. And this feeling of financial precarity, coupled with a less than ideal financial reality, is keeping young people from buying houses.
“That fear is healthy,” Cummings told me. “That really gets you to the point where you’re making sure that you understand things before you move forward.”
She added that young people often believe “persistent myths” about buying homes, like thinking that they need a 20 percent down payment to have a home.
“There’s a lot of misinformation out on websites that encourage people to put down 20 percent,” she said. “Financially, it is a good practice, but it’s typically not necessary — especially in markets where there are increasing home prices, and there are currently affordable homes, it’s something to consider.”
“If you don’t have 20 percent down, there is absolutely an opportunity to pursue a mortgage,” she added. She also noted that some providers have 3 percent down payment requirements, some people may qualify for down payment assistance programs, and you don’t “need to have a perfect credit score” in order to qualify for a mortgage.
For recession-scarred millennials, though, the idea of buying a house with less-than-perfect credit or a small down payment may not sound like the smartest financial decision. After all, the people who took out subprime mortgages in the years leading up to the 2008 financial crisis were evicted from their homes; the banks that approved those mortgages were ultimately fine. And for those who can’t scrape together enough money for a down payment of any kind — or who are too scared of another financial crisis to take out a mortgage when they don’t have enough money saved up or have a lower credit score — putting off other major milestones is seemingly the answer.
Millennials aren’t intentionally killing homeownership, or marriage, or having kids; they just don’t feel like they can afford it.