Millionaire to Millennials: Don’t Rent a Home… Buy!

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In a CNBC article, self-made millionaire David Bach explained that: The biggest mistake millennials are making is not buying their first home.” He goes on to say that, “If you want to build real financial security, real wealth for your lifetime, then you need to buy a home.

Bach went on to explain:

“Homeowners are worth 40 times more than renters. Now, that first home doesn’t need to be a dream home, it can be a very small home. You might literally have to buy a small studio apartment, but that’s how you get started.”

Then he explains the secret in order to buy that home!

Don’t do a 30-year mortgage. You want to take that 30-year mortgage and instead pay it off early, do a 15-year mortgage. What happens if you do a 15-year mortgage? Well, one, you pay the mortgage off 15-years sooner, that means you’ll be able to retire in your fifties. Number two, you’ll save a fortune (on potentially hundreds of thousands of dollars in interest payments).”

What will it cost to pay your mortgage in fifteen years? He explains further:

“For fifteen years, you got to brownbag your lunch. Think about that! Brownbag your lunch literally for fifteen years. You can retire ten years sooner than your friends. You’ll have real wealth, because you bought a home – you’re not a renter. And you’ll be financially secure for life.”

Bottom Line

Whenever a well-respected millionaire gives investment advice, people usually clamor to hear it. This millionaire gave simple advice – if you don’t yet live in your own home, go buy one.

Who is David Bach?

Bach is a self-made millionaire who has written nine consecutive New York Times bestsellers. His book, “The Automatic Millionaire,” spent 31 weeks on the New York Times bestseller list. He is one of the only business authors in history to have four books simultaneously on the New York Times, Wall Street Journal, BusinessWeek and USA Today bestseller lists.

He has been a contributor to NBC’s Today Show, appearing more than 100 times, as well as a regular on ABC, CBS, Fox, CNBC, CNN, Yahoo, The View, and PBS. He has also been profiled in many major publications, including the New York Times, BusinessWeek, USA Today, People, Reader’s Digest, Time, Financial Times, Washington Post, the Wall Street Journal, Working Woman, Glamour, Family Circle, Redbook, Huffington Post, Business Insider, Investors’ Business Daily, and Forbes.

2 Major Myths Holding Back Home Buyers

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Urban Institute recently released a report entitled, “Barriers to Accessing Homeownership,” which revealed that eighty percent of consumers either are unaware of how much lenders require for a down payment or believe all lenders require a down payment above 5 percent.”

Myth #1: “I Need a 20% Down Payment”

Buyers often overestimate the down payment funds needed to qualify for a home loan. According to the same report:

Consumers are often unaware of the option to take out low-down-payment mortgages. Only 19% of consumers believe lenders would make loans with a down payment of 5% or less… While 15% believe lenders require a 20% down payment, and 30% believe lenders expect a 20% down payment.”

These numbers do not differ much between non-owners and homeowners; 39% of non-owners believe they need more than 20% for a down payment and 30% of homeowners believe they need more than 20% for a down payment.

While many believe that they need at least 20% down to buy their dream home, they do not realize that programs are available that allow them to put down as little as 3%. Many renters may actually be able to enter the housing market sooner than they ever imagined with programs that have emerged allowing less cash out of pocket.

Myth #2: “I Need a 780 FICO® Score or Higher to Buy”

Similar to the down payment, many either don’t know or are misinformed about what FICO®score is necessary to qualify.

Many Americans believe a ‘good’ credit score is 780 or higher.

To help debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.

2 Major Myths Holding Back Home Buyers | MyKCM

As you can see in the chart above, 53.5% of approved mortgages had a credit score of 600-749.

Bottom Line

Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier. Your dream home may already be within your reach. Call me if you want to discuss this further at 407-925-7721

Buying A Home Is More Affordable Than Renting In 54% Of US Counties

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According to ATTOM Data Solutions’ 2018 Rental Affordability Report, “buying a median-priced home is more affordable than renting a three-bedroom property in 240 of 447 [or 54% of] U.S. counties analyzed for the report.”

For the report, ATTOM Data Solutions compared recently released fair market rent data from the Department of Housing and Urban Development with reported income amounts from the Department of Labor and Statistics to determine the percentage of income that a family would have to spend on their monthly housing cost (rent or mortgage payments).

Daren Blomquist, Senior Vice President of ATTOM Data Solutions had this to say:

“Although buying is still more affordable than renting in the majority of U.S. housing markets, the majority is shrinking as home price appreciation continues to outpace rental growth in most areas.”

However, the report also shows that the average fair market rent rose faster than average weekly wages in 60% of the counties analyzed in the report (266 of 447 counties). With rents rising, many renters should consider buying a home soon.

Bottom Line

Rents will continue to rise, and mortgage interest rates are still at historic lows. Before you sign or renew your next lease, let’s get together to help you determine if you are able to buy a home of your own and lock in your monthly housing expense.

Should Boomers Buy or Rent after Selling?

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In a recent CNBC article, it was reported that many baby boomers are selling their current homes and moving into rentals, rather than purchasing another home.

“Between 2009 and 2015, the number of renters aged 55 or above rose 28 percent, while those aged 34 or younger only increased 3 percent…

Meanwhile, more than 5 million baby boomers across the nation are expected to rent their next home by 2020, according to a 2016 analysis from Freddie Mac.”

This makes sense in the short term for many reasons. If you are moving to a different part of town or a new region of the country, you may decide to rent until you pick the perfect home in an area you love. However, is renting a good long-term strategy?

A mortgage payment remains fixed. Rents, however…

The Census Bureau recently released their 2017 third quarter median rent numbers. Here is a graph showing rent increases from 1988 until today:

Should Boomers Buy or Rent after Selling? | MyKCM

As you can see, rents have steadily increased and are showing no signs of slowing down. If you are faced with making the decision of whether you should rent or buy your next home, you should take this into consideration.

Bottom Line

One way to protect yourself from rising rents is to lock in your housing expense by buying a home instead of renting. Let’s get together so we can help you decide what the best step is for you and your family! Call me!

Don’t Let Fear Stop You from Applying for a Mortgage

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A considerable number of potential buyers shy away from jumping into the real estate market due to their uncertainty about the buying process. A specific cause for concern tends to be mortgage qualification.

For many, the mortgage process can be scary, but it doesn’t have to be!

In order to qualify in today’s market, you’ll need to have saved for a down payment (73% of all buyers made a down payment of less than 20%, with many buyers putting down 3% or less), a stable income and good credit history.

Throughout the entire home buying process, you will interact with many different professionals, all of whom perform necessary roles. These professionals are also valuable resources for you.

Once you’re ready to apply, here are 5 easy steps that Freddie Mac suggests you follow:

  1. Find out your current credit history & score – even if you don’t have perfect credit, you may already qualify for a loan. The average FICO® Score of all closed loans in September was 724, according to Ellie Mae.
  2. Start gathering all your documentation – income verification (such as W-2 forms or tax returns), credit history, and assets (such as bank statements to verify your savings).
  3. Contact a professional – your real estate agent will be able to recommend a loan officer that can help you develop a spending plan, as well as determine how much home you can afford.
  4. Consult with your lender – he or she will review your income, expenses, and financial goals to determine the type and amount of mortgage you qualify for.
  5. Talk to your lender about pre-approval – a pre-approval letter provides an estimate of what you might be able to borrow (provided your financial status doesn’t change), and demonstrates to home sellers that you are serious about buying!

Bottom Line

Do your research, reach out to professionals, stick to your budget, and be sure that you are ready to take on the financial responsibilities of becoming a homeowner.

Rents Are Rising

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Orlando’s 32826 wins the title of the most-expensive ZIP code in inland Florida, reaching No. 35 on the statewide list at $1,715 a month; 32814 and 32801 also made the top 50, coming in at No. 42 ($1,673) and No. 48 ($1,643), respectively.

These zips represent the Lake Nona area, Downtown Orlando, and Baldwin Park. Rents are rising everywhere in Central Florida/ Orlando – you need to buy before it is too late to afford a home.

Call me at 407-925-7721 Cell or Text!