Helping Millennials–and others–buy a first home

Park State Bank logoBy Dale Lewis

In the Twin Ports and nationwide, we’ve seen a trend: Young people, and especially Millennials, are buying homes at a much lower rate than previous generations.

Why? Theories include student loan debt and a lack of employment opportunities, both of which have become a burden for young people as they try to establish solid long-term financial futures. Some also wonder whether Millennials, having seen their parents and others suffer from the effects of economic downturns—including waves of home foreclosures—simply don’t want the risk of home ownership.

All of these concerns are real. But as a banker, I will tell you that all are issues we have seen before with individuals who never thought they could buy homes. After working with a local community bank, many of these individuals are proud home owners today.

Let me take you through some of the steps we have used to help home buyers who never thought they could achieve the American Dream do just that.

A house doesn’t have to be forever. A big obstacle for many home buyers, especially first-time buyers, is a worry that once they buy, they’re locked in forever. They won’t have the flexibility for job or lifestyle changes—or even a different home.

In reality, mortgages have become much more flexible, and most of us will own more homes in our lifetimes than our parents and grandparents did. Home prices also are reasonable, and interest rates remain near historical lows. As long as you make sure your loan has no prepayment penalty, you should have plenty of flexibility to buy and finance a home and still accommodate changes in your life that may require you to look at other housing options down the road.

Renting costs about as much as buying. Especially in our market, this is true. With a limited number of rental properties, the cost to rent here can be greater than the amount a typical first-time homebuyer would pay in a monthly house payment.

Yes, homebuyers need to put money down to buy, and that can be an obstacle—especially if student loan debt and the applicant’s employment situation present issues. But even in those cases, it makes sense to talk to a banker. There may be opportunities to overcome the down payment hurdle with government and veterans’ programs, if you qualify. Once we get past the down payment, the monthly cost of buying often is about the same as renting for many first-time buyers.

Pay yourself instead of a landlord. The biggest benefit to home ownership is that buyers to pay themselves instead of a landlord for the right to live in their home. This is called building equity—essentially building your ownership stake instead of watching all of those rent dollars go to someone else.

When we sell, we benefit from the equity we have built up in our homes, as well as increased market value. For most of us, that helps purchase our next home—often a larger home that can accommodate lifestyle changes, such as a growing family. For most of us, home equity will be our single largest investment. So it’s best to start early and watch your investment grow.

The financial issues facing Millennials and other young prospective home buyers are real. But many of those issues are not unlike the financial concerns that have worried first-time homebuyers for years. For example, when I bought my first home in 1979, interest rates were at 16 percent

Today we have more options than ever to help young people and others achieve the dream of home ownership. If you’re wrestling with any of these issues, come in and talk to us or contact us online. Find out which options might work for you.

Dale Lewis is president and CEO of Park State Bank in Duluth. You can reach her at president@parkstatebank.com or 218-722-3500.

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Here’s what works when selling your home

Park State Bank logoBy Steven Raj

Warmer weather is here, and as the trees and flowers bloom, the home sale market is coming alive as well.

Simply put, now is a great time to buy or sell a house. Mortgage interest rates remain near historical lows. That means the cost of home ownership, in terms of long-term interest expense, is lower. That benefits both buyers and sellers.

This year, buyers and sellers also benefit from a healthier economy. With the job market and forecasts for consumer spending stronger, buyers are more confident and are out looking for homes in larger numbers. Prices have firmed up but have not shot up. Both situations benefit both buyers and sellers.

If you’re a seller, there are few things you should and shouldn’t do when preparing to sell your home. Consider this my list of what works and what generally doesn’t work in the home-sale process, informed by years of helping home buyers and sellers as their banker.

Any decision to buy or sell a home is wrought with emotion. That’s not surprising, considering that our homes are generally our biggest investment. But if you follow this list of what to do and what not to you, you generally can filter at least some of the emotion out of the process, which usually helps get a deal done.

Don’t go it alone. It’s true that some people sell their homes by themselves. But a sale by owner is a rough road for most of us. Unless you have sold a home or two before, I generally don’t advise doing this. Hiring a real estate agent is one of the best decisions you can make. Selling by yourself can be exhausting and confusing. Having an expert there to help you market your home, price it properly, bring qualified buyers to the table and close the deal is well worth it.

Accept constructive criticism. If you do bring in an expert, don’t react emotionally if your agent suggests that you make changes to better market your house. Instead, accept the constructive criticism, even if it means swallowing hard when he or she suggests repainting the bedroom from your beloved bright red to something more neutral. Your agent has been involved in many sales before. He or she knows what will help sell your house at the best price.

Don’t lose a sale over small stuff. It’s not worth watching a sale disappear over a minor fix such as replacing a broken window or repairing a deck railing. Sure, that extra fix will cost you. But don’t assume that another acceptable offer is just around the corner. A minor repair—or even a small difference between a prospective buyer’s offer and what the seller considers acceptable—may end up looking quite small, indeed, if it sinks the deal and the house continues to sit on the market. Be willing to compromise and keep your eye on the prize—selling the house at a reasonable price.

Know what improvements help. Sometimes, even small enhancements can improve the curb appeal of a house for sale. Better landscaping, including updated or refreshed walkways, patios, lawns and flower beds, make any home look better. Likewise, outdoor lighting, a new front door and improved house hardware—a new mailbox, house numbers, door hardware and even a flagpole and flag can make a difference.

If you think you need to make bigger improvements, such as new paint, siding or interior remodeling, ask your agent whether the work is necessary and whether you can recoup the cost in a higher sales price. That’s part of the expertise you’re getting when you hire an agent to help.

We’ve officially entered the home sales season in the Twin Ports. This spring has brought a stronger housing market. At the same time, we’re still enjoying interest rates near historical lows. It’s a great combination that makes for a great time to enter the market as a buyer or a seller.

Steven Raj is vice president of lending at Park State Bank in Duluth. You can reach him at stevenr@parkstatebank.com or 218-727-8001.

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Park State proudly supports entrepreneurs

Christian Benson (left) of Frost River accepts the Established Entrepreneur Award from Park State Bank President Dale Lewis .

Christian Benson (left) of Frost River accepts the Established Entrepreneur Award from Park State Bank President Dale Lewis .

Entrepreneurs make the world go around.

That’s our strong belief at Park State Bank. We began 99 years ago because of the dream of a local entrepreneur who wanted to start a business that would help people live their dreams, too.

Park State Bank is proud to have sponsored again the Joel Labovitz Entrepreneurial Success Awards of the Center for Economic Development at the University of Minnesota Duluth.

Park State President Dale Lewis on Wednesday presented the 2015 Established Entrepreneur Award to Christian Benson of Frost River, the outdoors gear manufacturer based in Duluth. Congratulations to Frost River and all of the 2015 Labovitz Award winners!

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What works for you?

Park State Bank Northern Comfort B&B owners 01-20-2014What works for you?

Park State Bank is interested in sharing tips and suggestions for how individuals, businesses and organizations work successfully with their bank to achieve goals.

Do you have a savings plan that works for you? A checking process that is foolproof? A story about how a loan helped you achieve your goals, like our clients here at Northern Comfort Bed & Breakfast?

Please stop by our Facebook page and leave a comment about what works for you when you bank.

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Millennials want to spend and save in balance

Park State Bank logoBy Dale Lewis

There’s a new generation of savers in America, according to several recent studies by the banking industry.

Millennials, those mostly 30-somethings so named because they entered adulthood right around the year 2000, want to save, realize they need to save and in some cases have begun doing so.

This is the generation of student loan debt. This also is the generation that ran smack dab into the Great Recession not long after they entered the workforce. Not surprisingly, their trust of big financial institutions has waned.

Indeed, this generation has had more than its share of wind in its face when it comes to personal finances. But some of those difficult experiences are prompting Millennials to put more emphasis on traditional savings tools.

Those tools include certificates of deposit. CDs are term contracts in which a bank commits to a pay a higher rate of interest if the depositor commits to a longer period of time. CDs are insured, and the interest payment is guaranteed.

They’re safer than the stock market, and your return on investment is certain. They never lose value, and some banks will even increase the interest rate during the term of the certificate. This reduces the investor’s interest rate risk.

To anyone taking a new look at savings, I say congratulations. The question is not whether to spend or to save but how to do both in balance. Maintaining healthy personal finances has always been about striking the proper mix of spending and saving and finding the right tools to accomplish financial goals smartly and efficiently. The goal, after all, is to constantly grow your personal net worth.

You don’t have to start your savings plan with a large amount. I suggest starting small. Open an account at your local bank that pays interest and that won’t eat up your balance in fees. A traditional savings account is a good option. But a CD is worth considering also, for the reasons already mentioned.

Consider adding to your savings with regular automatic withdrawals from your checking account or, better yet, directly from your paycheck. Most employers allow you to directly deposit a portion of each paycheck into a savings plan.

If you never see the money to begin with, chances are you won’t miss it. And you will quickly build up a savings balance that will allow you to join the new generation of savers. Even saving $50 or $100 a month is plenty to get started. The point is to get started.

Saving for retirement through a 401(k) program at work also is a great idea, especially if your employer has a program to match your contributions. An Individual Retirement Account, or IRA, is another way to build a retirement nest egg. I also advise anyone struggling with debt to get that under control as a first step in a smart savings plan.

In all of this, the encouraging news is that more Americans, including the generation of Millennials, recognize the importance of saving and want to save more. My advice is to create a plan, start saving and stick with it.

You’ll be surprised how quickly you’ll become a saver.

Dale Lewis is president and CEO of Park State Bank in Duluth. You can reach her at president@parkstatebank.com or 218-722-3500.

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Animal Allies wins February ATM Charity Challenge; March contest has begun!

Park State Bank Animal Allies logo 01-17-2015Congratulations to Animal Allies Humane Society, winner of the February Park State Bank ATM Charity Challenge, with 274 logo “likes” on our Facebook page. Animal Allies will receive a $250 donation from Park State Bank, representing one day of bank proceeds from our ATM network. As a previous winner, Animal Allies will rotate out of the contest for one month, but please vote for your favorite local charities in the March contest on the Park State Bank Facebook page. And don’t forget to “like” our page!

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