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3 ways to navigate homebuying and down payments with student loan debt

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Over a third of American renters who plan to buy a home in the next year are carrying student loan debt, which they say is their biggest obstacle to homeownership, according to a new report by the listing site Zillow.

“Higher education pays off when it comes to lifetime earnings and the long-term odds of homeownership, but carrying any kind of debt limits how much home buyers can afford,” says Aaron Terrazas, Zillow chief economist, in a statement.

US student debt reached record levels this year, hitting $1.56 trillion at the end of the third quarter of 2018. Paying off student loans also makes it harder to set aside money for a down payment, which is one of the top barriers to homeownership.

And, as a result, saving for that down payment can take significantly longer for Millennials and Gen Z than it did for previous generations. It can take seven years — or longer — for some Americans to save for a downpayment in today’s labor and housing market, plagued by rising rents and home prices and stagnant wage growth.

1. Eroding affordability

On average, renters who are planning to buy in the next year are currently paying around $388 per month for their student loans — this on top of their monthly rent, which tops out at around $1,440 per month (nationally).

Making a budget — and sticking to it — can help would-be buyers get control of their finances and plan for the future. And, with apps like Mint and PocketGuard, tech-savvy renters can manage their savings and watch their spending with just a tap or a swipe.

Setting priorities for spending can help cut excessive spending, and money saving alternatives to routine spending — like bringing coffee or lunch from home five days a week — can add up quickly.

Paying bills on time — especially student loans — will help beef up your credit score, which can help you get a lower rate on a mortgage.

“Even if you don’t have plans to buy a home in the next year or two, it’s not a bad idea to start setting aside savings for a future home purchase,” Sklar Olsen, Zillow director of economic research and outreach, recently told Livabl.

2. Know all the options

The highest priced home a renter with student debt could afford without spending more than 30 percent of their income on housing and student debt is $269,400. In other words, they can afford to buy just over half of the homes currently for sale (nationally, based on the current median home value of $220,100).

But the number of affordable entry-level homes is at crisis levels and new construction has not kept up with demand in the years following the bust. First-time buyers should be prepared to look for as long as a year (or more) and be outbid in more competitive markets.

Many prospective buyers are not aware that they don’t actually have to put the traditional 20 percent down, which cuts down the time needed to save dramatically.

“It’s also important to remember that there are many options for mortgages requiring less than 20 percent down,” says Olsen. There are many programs available to first-time buyers to put as little as 3 percent down.

Another thing many prospective homebuyers under-estimate is the actual cost of homeownership that extends beyond the purchase — from moving costs to monthly home maintenance bills, the expenses can quickly add up to thousands that some first-time buyers may find they hadn’t properly budgeted for.

3. Location, location, location

Student loan debt plays the biggest role in affordability in the Las Vegas, Nevada metro area, where buyers with no student debt can afford a much larger share of the homes for sale than those with student debt (57 percent versus 29.3 percent, respectively). Las Vegas is one of the larger metro areas still struggling to regain home values since the housing bust.

It makes the smallest difference in San Jose, California, where buyers with student debt can afford less than 12 percent of homes, compared with the 18 percent of homes that would-be buyers free from student debt can afford to buy.

Despite the lure of high paying tech jobs, housing costs in San Jose are among the highest in the country — and even earning a “good” living may not be enough to afford a home in San Jose.

Many small and mid-sized metros, like Pittsburgh, Pennsylvania, offer many of the same local amenities as larger, big-name cities but at a substantially discounted price. And while living in Pittsburgh may not be as “cool” as living in the Big Apple, you’re sure to get a lot more bang for your buck in Pittsburgh.

And in some markets, the suburbs are often pricier than urban areas.

“In certain markets, buyers can find some relief from high prices and tight inventory. They just need to know where to look,” Justin LaJoie, RealEstate.com general manager, recently wrote.

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Covid-19 altering Canadians’ housing needs: RBC

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Amid a pandemic-driven shift in demand as well as a surge in new listings, the Canadian housing market remained strong in August, RBC Economics reports.

Citing preliminary data from local real estate boards, RBC said that markets in many areas of the country remained “red hot” in August.

“But the bigger story might be that Covid-19 is now prompting more people to sell,” the report said, noting that new listings surged in urban centres such as Toronto, Ottawa and Vancouver.

“We think this in part reflects the pandemic altering the housing needs of many current owners — who are opting to move, something they might not have considered just a few months ago,” it said.

RBC noted that the Toronto market saw new listings jump 57% year over year in August, powering a 40% increase in home sales.

Sales were up more than 20% from July’s near-record levels, it said.

“Clearly, [that] market has fired on all cylinders this summer, making up for the major disruption caused by Covid-19 in the spring,” RBC said.

The primary drivers of sales activity and higher prices were low-rise homes, including single-detached homes, RBC reported.

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RBC’s customer base makes it a favourite of cyber attacks – security experts

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Royal Bank of Canada is among the most targeted institutions by cyber attacks due to its broad customer base, according to an analysis by Palo Alto Networks.

From December 2019 up to present, cybercriminals have been establishing malicious pages disguised as websites by major companies to conduct phishing attempts and other similarly invasive attacks.

RBC ranked third in the most spoofed domains list, more than streaming giant Netflix and professional networking portal LinkedIn. PayPal and Apple ranked first and second, respectively.

“When you look at the broad customer base that RBC has, it makes sense, especially when you compare it to some of the other big names,” said Jen Miller-Osborn, deputy director of threat research at Palo Alto Networks. “These attackers are going after [domains] where they can make the most money, so they’re focusing on these organizations that have really broad customer bases because that really ups the number of potential victims.”

In an interview with BNN Bloomberg, Miller-Osborn outlined what consumers should be looking out for to filter our fraudulent emails.

“Typically, the ones that are going to be scam-related are trying to invoke some sort of emotional response,” Miller-Osborn said. “So they might say something like ‘Someone tried to change your password, click here to say whether or not that was you,’ or ‘Click here to confirm this charge on your statement,’ or ‘We’ve locked your account for strange activity.’ Essentially, things that will make people anxious and will make them want to click first, and not take a step back and pause to think, ‘Is that really the kind of email that my bank would usually send?’”

Other red flags include misspellings and basic grammar errors in the message, especially the sender line.

“Attackers try to closely mimic domain names, so you might see the number zero substituted for ‘o’, or a one substituted for the letter ‘l’. Little thing like an extra ‘s’ or ‘c’ in the name. These things, people tend to glance over very quickly and not notice.”

Miller-Osborn said that these measures should be done in concert with the most effective step in deflecting a spoofing attempt: Calling the bank and asking them if the email that they supposedly sent was legitimate.

 

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Queen confirms new home at Windsor Castle with Buckingham Palace for ‘selected events’

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The Queen will be returning to Windsor Castle in a matter of weeks, with Buckingham Palace only used for ‘select events’.

Her Majesty and her husband Duke of Edinburgh will first spend time privately at Sandringham when they leave Balmoral next week, Buckingham Palace confirmed.

She had been spending summer at her retreat in Aberdeenshire amid speculation that she would not return to the capital amid the coronavirus pandemic.

A spokesperson said: “The Queen and The Duke of Edinburgh will depart Balmoral Castle during the week commencing September 14 to spend time privately on the Sandringham Estate.

“Subject to the finalisation of the autumn programme, Her Majesty’s intention is to return to Windsor Castle in October and to resume the use of Buckingham Palace for selected audiences and engagements.

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