MILLENNIALS SQUEEZED OUT OF BUYING A HOME

The Millennial generation is great at many things: texting, social media, selfies. But buying a home? Not so much.
Just 36% of Americans under the age of 35 own a home, according to the Census Bureau. That’s down from 42% in 2007 and the lowest level since 1982, when the agency began tracking homeownership by age.
It’s not all their fault. Millennials want to buy homes — 90% prefer owning over renting, according to a recent survey from Fannie Mae. But student loan debt, tight lending standards and stiff competition have made it next to impossible for many of these younger Americans to make the leap.
“When we surveyed Millennials they cited several barriers to homeownership, especially access to financing,” said Steve Deggendorf, a senior director for Fannie Mae.
Many Millennials simply can’t come up with the hefty 20% down payments. Others don’t have good enough credit to qualify for loans. Making it even more difficult are the heavy student loan burdens many college grads carry.
“Our problem is an obvious one — debt,” said Mike Kennedy, a 32-year-old marketing director who lives in Northboro, Mass. “My wife just graduated with her master’s and I’m still paying off mine.”
Even without the $50,000 in student loan debt they owe, affording a home in their town is difficult, he said. Single-family homes there cost $300,000 and up.
Russell Cragun, an online marketing manager, and his wife, Chalay, are both 25. They are looking at homes in the Orem, Utah, area, where the median home price is more than $230,000.
Lured by tax incentives, tech companies have been relocating to the area and creating many high-paying jobs. That has heated up demand — and home prices. But with $15,000 in student loan debt to pay, it’s hard to save enough for a downpayment, said Russell.
Tech and other high paying industries have had the same impact on home prices in many of the cities where young adults most prefer to live. Places like San Francisco, New York and Los Angeles are unaffordable to most residents seeking to buy a home, but even more so for those who have not hit their high earning years.
Competition is so stiff in these markets that young buyers can’t compete with older, deep-pocketed buyers who are often able to pay for homes in all-cash. Thomas Bright of Richmond, Va., lost out on two purchases that way. “When you are a first-time buyer, you aren’t poised to compete with all-cash buyers,” he said. Just finding a property can be a challenge. Even though the housing bust has shaved about 20% off home prices, the number of homes available for sale has dropped significantly in many markets. Usually, the good homes go quickly, according to Richard Ernsberger, 34, an attorney who lives in Pittsburgh. “I have been in the market for a one- or two-bedroom townhome or condo for several months,” he said. “It seems as though a good number of homes go within days of being listed.”
Josh Czupryk, 29, who works as an education coach, and his wife, Bailey Cato, 28, a teacher, wanted to live in a safe Memphis, Tenn., neighborhood with good schools and nice older houses.
“Every one we looked at had a fatal flaw,” he said. One house had a blighted one next door. Another had a completely paved backyard.
Eventually, Czupryk and Cato found a four-bedroom for $295,000. Working in their favor was the fact that neither had built up any student loan debt.
There is a ray of hope for young wanna be homeowners, said Fannie Mae’s Deggendorf. “Mortgage lending is getting a little less tight, with lenders approving buyers with a little lower credit score and who have less of a downpayment,” he said.

If that trend continues, young buyers just might be able to buy homes again.

Millennials squeezed out of buying a home
By Les Christie @CNNMoney June 1, 2014: 1:41 PM ET
First Published: June 1, 2014: 1:41 PM ET

Painless ways to pay down your mortgage

Unless you lease a Lamborghini, the mortgage on your home is likely the biggest debt you have. So wouldn’t it be nice to pay down that debt a little faster? Of course, but I can’t afford to, you say.

Well, don’t dismiss the idea so fast. There are many stress-free ways to pay down your mortgage faster than planned. It’s also a way to reduce financial stress in the future, especially during your golden years, says David Bakke, an editor for MoneyCrashers.com, a personal finance website.

“Paying off your mortgage early is a great way to make financial management easier during retirement, especially since most people will be on a fixed income during those years,” he says.

If You Can Lower Your Interest Rate by 1.5 Percentage Points, Do it

Lowering your mortgage interest rate is an easy and stress-free way to pay down your mortgage, even if it’s a minor rate decrease.

Consider a report by Freddie Mac, one of the nation’s largest mortgage holders. It found that borrowers who refinanced their mortgage during the fourth quarter of 2013 lowered their interest rate by an average of 1.5 percent. According to their calculations, on a $200,000 mortgage that’s a savings of $3,000 - in the first 12 months alone. And those savings keep building every month.

In fact, when you look at the life of a 30-year mortgage, things get really impressive. Here’s an example that illustrates the savings from an interest rate dropping 1.5 percent on a $300,000 30-year fixed-rate mortgage. This example uses the average 30-year fixed interest rate of 4.4 percent, as of March 27, 2014 according to Freddie Mac.

Convert a Daily or Weekly Luxury into an Extra Payment Habit

There’s probably a small thing you could cut out of your life without much pain - whether it’s a latte, manicures, cigarettes, or dining out. As a result of your small sacrifice, you could reap the rewards in the form of paying down your mortgage.

For example, cutting out that daily $4 latte can save you $1,460 a year - which could be comparable to an extra mortgage payment per year.

Yes, put that money toward your mortgage, says Jim Duffy, a senior loan officer with Primary Residential Mortgage, Inc., and it could reap benefits bigger than any latte high. “Do that on a regular basis and it could really save a lot of money, in addition to paying off your home sooner, which makes for a more stress-free retirement,” says Duffy.

He says one thing is very important, however: Be sure to write “Principal Reduction” in the memo line of your check. Otherwise, your lender may not know where to apply it and may even assume that it’s meant for your next mortgage payment. As a result, it could just sit around unused until you specify where it should go.

Don’t Think Paying Down Your Mortgage is Important? Use a Mortgage Calculator

It takes a lot to get off the Starbuck’s habit, we know. So perhaps a little motivation is in order. That’s where an additional payment calculator can really come in handy.

They work like this: You fill in your mortgage amount, interest rate, and term. Then you input an extra amount that you can afford to pay along with the amount of months per year you plan to pay it. Then it calculates exactly how much money you’ll save in interest over the life of the loan and how many months or years early you’ll pay off your home by making the extra payments.

One of the great things about using these calculators, says Duffy, is that they’re flexible. Using your up-to-date outstanding balance, you can change and compare the additional payments as much as you like. You can even see how making an extra payment once, twice, or any amount of times per year will affect paying down your mortgage.

“Once people actually see how much they can save by paying just a little extra every month, it almost always motivates them to do it,” he says. And finding an additional payment calculator online is simple, and it’s easy to use.

Let’s plug in some numbers to see exactly how it can work.
We’ll use a $300,000, 30-year mortgage at a fixed rate of 5 percent.

No Extra Payment
Years to Payoff -30
Total Interest Paid-$279,767
Total Time Saved-0 years


$150 Extra per Month
Years to Payoff-24 Years, 10 Months
Total Interest Paid-$224,164
Total Interest Saved-$55,604
Total Time Saved-5 Years, 2 Months

$300 Extra per Month
Years to Payoff-21 Year, 4 Months
Total Interest Paid-$188,027
Total Interest Saved-$91,741
Total Time Saved-8 Years, 8 Months

You can see how adding extra money to your payment each month, whether it’s $150 or $300, can put a real dent in the time and interest on your mortgage. Check out a mortgage calculator(bankrate.com) to see how much extra you can swing each month and how it can painlessly help you pay down your mortgage

Article Credited to Terence Loose-Yahoo! Homes

Why you need to shop around for a mortgage

Interest rates are at a record low, but many borrowers are still reluctant to shop for the best mortgage loan – a decision that could cost them money.
Looking at data from the November 2012 National Housing Survey, Fannie Mae researchers found that close to half of lower-income mortgage borrowers said they did not obtain more than one quote when signing up for their current mortgage.
Comparatively, three out of four higher-income respondents explored competitive offers and said better deals would definitely have an influence on their decisions.
“Although a home purchase is the largest financial obligation most people will ever make, many borrowers do not fully understand their mortgage products and costs,” said Fannie Mae chief economist Doug Duncan. “As a result, some homeowners in this position may find themselves with unsustainable payments down the road.”
Fannie Mae reported that failing to shop around for a mortgage can end up costing borrowers $1,000 or more in closing costs.
As a housing counselors, it’s our job to educate people on the importance of comparative shopping. We encourage clients to attend first-time homebuyers’ workshops as well as one-on-one pre-purchase and post-purchase counseling.
Education is the best way to avoid paying too much for a mortgage. Want to know more? Sign up for our next series of classes!

Seven Secrets for First-Time Homebuyers

Seven Secrets for First-Time Homebuyers
1. Visit a certified housing counselor at a nonprofit organization.
Housing counselors credentialed through a nonprofit agency provide objective advice and unbiased recommendations.
2. Get your finances in order.
Find out what your credit report and credit score are and correct any inaccuracies. Lenders look at factors called the four Cs of credit: credit history (timely bill paying), capital (money available for a down payment), capacity (income versus debt), and collateral (the value and condition of the house).
3. Look for down-payment and closing-cost assistance programs. Some nonprofit organizations and state or local government agencies can help you with down payment and closing costs through grant money or low-interest loans.
4. Make sure homeownership fits with your lifestyle.
If you will be in a particular community for less than three years, if the local economy is not doing well, if unemployment is rising, or if your future income will not provide you with enough for mortgage payments and other financial responsibilities in owning a home, then renting may provide the better option.
5. Shop around for everything related to your home purchase.
Follow the “rule of threes” by comparing at least three products, professionals or services before making your final selections.
6. Get pre-approved for financing before shopping for a home.
Pre-approval is different from pre-qualification, which refers to when a lender calculates how much mortgage you likely can afford based on unverified information. A preapproval is a guarantee that the lender will loan you a fixed amount of money, as long as the property appraises over the amount for which you are qualified and you buy within a certain time period.
7. Carefully select a location.
Research area schools, property tax rates, insurance rates, and crime statistics. Spend time thinking about things that may be important.

*You can order your credit report and credit score from each of the three major credit reporting agencies: Experian; Equifax; and TransUnion. For more information on credit scoring, visit http://www.myfico.com.