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5 common mistakes first-time American homebuyers make

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Photo: Dan Moyle/Flickr

Buying a home is typically the single largest financial transaction of a person’s lifetime, and often comes after years of highly detailed prep work.

Yet, despite the many hours spent browsing listings, attending open houses and scrimping to save for a downpayment, many first-time buyers still fall prey to several common pitfalls along the path to homeownership.

We recently sat down with Bridget Harvey, a licensed associate real estate broker with the Harvey Team at Douglas Elliman, and Zack Tolmie, a home lending officer with Citibank to discuss some of the common mistakes first-time homebuyers make and how to avoid them.

1. Not taking advantage local experts

Americans use apps to buy everything from car insurance to tacos, but that doesn’t mean they should only rely on their smartphones when it comes to purchasing a new home. It’s understandable — apps are convenient, usually free, and devoid of human contact. And that’s precisely why homebuyers should skip the apps and opt for actual facetime with a living, breathing broker and banker.

“Often people just call an 800-number or go with their family banker in Texas when they’re ready to buy, but you need someone who understands the local marketplace to help with the process,” says Harvey.







Photo: Bridget Harvey

Ideally, buyers should look for someone who is not only personable, but professional, and who can offer knowledge, experience and local insight beyond the limited scope of an app.

Plus, navigating the murky waters of the internet can be tricky — not to mention misleading.

“Sometimes when consumers are browsing listings online, they think they are contacting that seller’s agent directly and will save some money. But really they are just giving their information away for free to someone who has purchased that information and likely has nothing to do with the property,” says Tolmie.

Many buyers use apps to avoid hiring a mortgage banker, but in essence, all they’re doing by using an app is putting an interface between the banker and themselves.

Tolmie adds that using online calculators is like selling your information to a cold caller who may not have your best interest at heart.

“And something you end up losing by going with an app is a professional’s local expertise, like not being able to meet at the agent’s favorite coffee shop or talk about local hot-spots or landmarks worth checking out,” says Harvey.

Also, the person lurking behind the app never gets to know anything substantial about the potential buyer beyond debt-to-income ratios and bank statements.

“There’s enormous value to having that social interaction with someone who knows what your down payment means to you,” says Tolmie.

2. Not understanding the numbers

Most popular home listing websites include some sort of “how much home can you afford” calculator, where users can enter their income and guess their creditworthiness. The website then spits out a potential price-range and estimated monthly mortgage payment.

Homebuyers frequently misread the information and end up buying more home than they can actually afford.

“An online mortgage calculator may tell you that you can technically afford to buy a house valued at $300,000, but in reality, based on your larger financial picture, including debts and goals, you really shouldn’t be buying anything over $250,000,” says Tolmie.

First-time homebuyers are often not aware of the “hidden” monthly costs that come with buying a home and extend beyond the mortgage payment, like lawn or pool care, home and appliance maintenance, and labor costs. According to the listing site Zillow, these “hidden” costs can easily add up to almost $10,000 annually.

3. Money trails

National home prices and rents have risen by 73 percent and 61 percent, respectively, over the last 18 years. Yet wages have only grown by 31 percent over the same period. So, it’s not surprising that one in three Millennials reportedly anticipate that family members will cover 30 percent or more of their downpayment.

But while such gifts are nice — and not to mention extremely generous — buyers don’t always account for the money properly.

“Because of the Patriot Act, the bank looks at two months of statements and if there is a large deposit from overseas, it has to be sourced and that can delay the process if the country of origin doesn’t handle statements the way the US does,” says Harvey.

Aside from gifts, buyers often liquidate their stocks to raise funds. But much like buying a home, timing is everything.

“Liquidate as soon as possible, a year to sixteen months out, and get that money into your account. You never know what’s going to happen to the stock prices and currency rates and conversion rates. You might not be able to afford tomorrow the same home you can buy today,” says Tolmie.

Plus, major world events like Brexit can significantly lower your buying power overnight.

4. Inadequate financial planning

Homebuying is a lengthy process, from the time it takes to save for a downpayment to the months of waiting for the sale to close. One mistake first-time buyers make is jumpstarting the process before they’re really ready.

Homebuyers should start working with a financial planner as soon as they’ve begun thinking about buying a home. The earlier, the better — especially if a buyer’s finances need a little help.

“Self-employed homebuyers especially should be having a conversation with their Certified Public Accountant (CPA) every year, and saying I’m not looking to buy right away but I may want to buy in the next couple of years and I want to make sure that my tax returns reflect adequate income to afford the kind of home I want,” says Tolmie.







Photo: Zack Tolmie

Looking at all the available options in terms of deductions with a CPA or mortgage banker is one of the most crucial and beneficial preparatory stage steps a buyer can take.

“Lockdown your finances and decide with your CPA what deductions to take and what to pass on if you plan on buying a home in the next few years. It’s a crucial step for anyone who is self-employed, but also worried about how much home they can afford based on their returns,” says Harvey.

Harvey suggests reverse engineering your taxes with a professional to ensure that it reflects adequate income to the bank for the home of your choice and you should be vigilant not to deduct more than that.

“It’s reflective of today’s economy. More of us are self-employed or commission-based, so you have to figure out how to navigate that kind of income and make it tell the story you need it to tell to buy your perfect home,” says Harvey.

5. Open houses

Many homebuyers only start attending open houses once they’ve begun the process. But, open houses can be a treasure trove of information and a great opportunity to connect with a local professional you may want to work with when you are ready to buy.

“Open houses are free to attend and buyers should attend a lot of them. They give a real-world view of what they can get for their money, and also help buyers nail down what they really want and don’t want in their ideal home,” says Harvey.

Open houses provide the perfect spot to network with local brokers and often bankers. Buyers can test the waters and ‘try out’ different professionals until they find their perfect fit. “It’s so important to like the people you are working with. You can end up having daily interactions with these people over the course of the two to three months it takes just to close on a home,” says Tolmie.

“It’s both finances and feels. You have to trust this person to know intimate details, not only about your finances but about your life, and to trust that they will use that knowledge to best serve your needs and wants,” adds Harvey.

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Is getting an MBA worth it? How to make a decision

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Obtaining an MBA degree requires a significant amount of investment. You’re not only spending money but investing a large amount of time and effort into it.

While preparing for your MBA, it is important to critically access if the benefits of enrolling in a graduate business school outweigh the costs, according to experts. Your current financial capabilities and commitments are key factors to consider before determining whether applying for an MBA is the right choice for you.

According to experts, one great way to weigh the short-term financial benefits of an MBA is to research the average salary of recent graduates of business schools and compare that figure with the average number of student loan debt.

Of all the ranked business schools that provided salary figures in the U.S. News Best Business Schools ranking, the average starting salary among 2018 graduates from full-time MBA programs was $87,683.88. While for 2018 graduates of full-time MBA program at the ranked business schools, the average debt burden was $51,671.90.

For schools that provided both salary and debt figures, the average salary for MBA graduates was $86,253.72—167% higher than the average debt burden at those schools.

Mike Catania, the founder of the coupon website PromotionCode.org and a student in the executive MBA program at the University of California—Los Angeles Anderson School of Management, noted that one of the major reasons he chose to attend business school was a strong desire to expand his network.

“I got exactly what I wanted – access to brilliant classmates and faculty that I would never have encountered on my own,” he noted. “It’s difficult to ascribe a value to that, but I look at it as only temporarily intangible – the relationships forged over the next few years will positively affect my opportunities as an entrepreneur moving forward.”

According to a financial ROI report on MBA published by Quacquarelli Symonds—a higher education data, consulting and research company—within 10 years of earning an MBA degree, the average MBA graduates from either a U.S. or international business school had an estimated ROI of $390,751—even after deducting tuition and opportunity costs of attending an MBA program. The report also went further to show that the average decade-long ROI of an MBA graduate from the Stanford University Graduate School of Business is higher than $1 million.

While the financial benefit of an MBA degree is a huge factor to consider, experts also note that there are other non-financial factors to consider, such as if getting the degree would either facilitate career change or accelerate career advancement.

“Often candidates have a career progression in mind – ask whether people who have followed that path have been helped by an MBA,” said Mark W. Nelson, the dean of Cornell University’s Samuel Curtis Johnson Graduate School of Management. “Also, consider your personal opportunities for growth. What do you want to work on? Consider how an MBA would help you develop those capabilities.”

For example, with the future of data analyticslooking bright for data scientists, getting an MBA might be what you need to boost your chances of landing a great job.

Another important thing to consider when deciding to pursue an MBA degree is your current lifestyle. It is a venture that requires serious commitments, said Catania.

“It’s just going to eat up so much of your time, and all of the (business) schools make it abundantly clear that this is on par with a job,” he adds.

Also, Nelson noted that an MBA is best suited for individuals who want to begin a major change in their career path. “An MBA is a good path when candidates are looking for a career switch or a significant career advancement,” he said.

However, Elissa Sangster, CEO of the Forté Foundation—a non-profit organization with a mission to increase the representation of women in business schools and corporate leadership positions—warns that an MBA is not necessary for every type of business career.

“You could trick yourself into thinking you need to go and pursue an MBA because, if you’re going to run a yoga studio or you’re going to … open up a car wash or run a food truck, those are all businesses,” she said.

“Getting an expensive MBA degree may not be a smart financial decision for someone who wants to run a small local business, while it could be a strategic move for someone who hopes to start or manage a large, influential corporation.”

According to Phil Strazzulla, an entrepreneur and the founder of two companies in the software sector – Select Software Reviews and NextWave Hire – who earned an MBA from Harvard Business School, he noted that while it is a chance worth taking, it is one that needs to be carefully analysed.

“Chances are, if you’re thinking about getting an MBA, you are an analytically rigorous person who’s done the analysis on whether it makes sense to pay now for future gains in salary,” he said. “And, if you go to a top school, it undoubtedly is. However, the other way I’d recommend thinking about your decision is how it’ll impact your overall happiness.”

Furthermore, SiqiMou, the co-founder and CEO of the tech-driven beauty company HelloAva who earned an MBA degree from Stanford, notes that one of the key advantages of attending a high-quality business school is that it provides exposure to a wide array of career opportunities.

“I would say the advantage of coming to one of these relatively prestigious business schools is that you have a lot of options that are open to you,” she said. “You can go back into finance or consulting types of jobs, or you can also start something yourself.”

Bachenheimer, a clinical professor of management at Pace University’s Lubin School of Business in New York City, added that an MBA provides project-based learning activities that allow students to practice solving real business problems.

“An MBA can be much more than the knowledge and skills acquired through coursework; it can truly expand you and your world,” he said.

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Comment se protéger des risques associés à l’utilisation des outils bancaires

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La technologie financière est en constante évolution. L’introduction continuelle de nouvelles options bancaires en est la preuve.

Fintech (abréviation de technologie financière) est un terme qui désigne tout type d’innovation technologique utilisée pour soutenir ou fournir des services financiers. Une telle innovation entraîne des changements importants dans le secteur financier, et donne naissance à une gamme de nouveaux modèles d’affaires, d’applications, de processus et de produits.

Si les applications financières vous permettent d’accéder facilement à vos finances personnelles, elles peuvent aussi comporter des risques allant du vol de vos renseignements bancaires, tels que votre numéro de carte de débit ou de crédit, votre nom d’utilisateur et votre numéro d’identification personnel.

C’est pourquoi il est important d’être très vigilent en partageant vos informations personnelles et bancaires en ligne. Saviez-vous qu’en fournissant vos informations bancaires ou de carte de crédit à une application financière, vous pourriez risquer de violer l’accord d’utilisation de votre institution financière?

Ce qui veut dire que, quelles que soient les caractéristiques de sécurité mises en place par une application financière, votre institution financière peut vous tenir responsable en cas de vol et d’utilisation de vos renseignements personnels à votre insu ou sans votre approbation.

Voici quelques conseils pour vous aider à protéger vos informations personnelles et bancaires, ou celles de votre carte de crédit lorsque vous utilisez les applications financières :

  • Vérifiez l’accord d’utilisation de votre banque avant de partager vos informations personnelles et bancaires, ou de carte de crédit à travers les applications financières.
  • Consultez la politique de protection contre la fraude de votre institution financière pour savoir qui est responsable de toute transaction non autorisée par vous-même .
  • Cherchez à comprendre quelles mesures de sécurité sont en place et comment vos renseignements personnels pourraient être utilisés.
  • Vérifiez régulièrement votre dossier de crédit pour voir s’il n’y a pas de demande de crédit que vous n’avez pas faite ou encore une transaction que vous n’avez pas effectuée.

Si vous soupçonnez que vos informations ont été compromises, changez immédiatement vos mots de passe. Examinez vos relevés de compte et de carte de crédit pour y détecter toutes anomalies, et signalez toute transaction suspecte à votre institution financière.

Vous pourriez aussi commander et vérifier votre dossier de crédit.

Visitez le site web de l’Agence de la consommation en matière financière du Canada pour de plus amples renseignements sur les risques associés au partage de renseignements bancaires sur des applications financières à canada.ca/argent.

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Comment agir efficacement en cas de fraude

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Chaque année, des milliers de Canadiens perdent des millions de dollars à cause de fraudeurs. Adolescents, aînés, gens d’affaires, tout le monde peut en être victime. Pourtant, seulement 5% des fraudes sont signalées aux autorités.

Si vous avez été victime de fraude, la meilleure chose à faire est de le signaler aux autorités concernées, et peu importe son ampleur. Ne vous sentez surtout pas honteux d’avoir été piégé car vous n’êtes pas seul à être tombé dans le panneau. En rapportant cette fraude, vous allez aider d’autres personnes à ne pas en être victime. De plus, dans la plupart des cas, l’institution financière ouvrira une enquête et vous remboursera l’argent perdu.

Gardez en tête que protéger vos renseignements personnels est essentiel pour éviter la fraude. Voici comment agir si vous suspectez une transaction inhabituelle dans vos comptes :

  • Changez immédiatement votre NIP et signalez la fraude à votre institution financière et au Centre antifraude du Canada. Informez-les également de toute correspondance suspecte que vous recevez au sujet de vos comptes.
  • Lorsque vous communiquez avec votre institution financière, assurez-vous d’utiliser le numéro de téléphone figurant sur votre relevé de compte ou au verso de votre carte de crédit ou de débit.
  • Si vous recevez des courriels trompeurs, vous pouvez envoyer une plainte au Centre de signalement des pourriels. Les escroqueries financières comprennent souvent des offres de vente ou des promotions de produits et services financiers, comme les régimes de retraite, les fonds de placement gérés, les conseils financiers, l’assurance et les comptes de crédit et de dépôt.

Le Bureau de la concurrence du Canada dispose d’un excellent guide appelé le Petit Livre noir de la fraude, et fournit beaucoup d’autres renseignements utiles par l’entremise du Centre antifraude du Canada.

Pour plus d’information, visitez le site web de l’Agence de la consommation en matière financière du Canada qui offre également une foule de renseignements et d’outils pour vous aider à vous protéger contre les fraudes et les escroqueries à canada.ca/argent.

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