Transcript This presentation on buying a home is presented to you by DFW

Thank You For Attending!
Presented by Christian Cook
 Residential Home Mortgage Lender
 Town Square Mortgage & Investments
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A LITTLE ABOUT ME
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Chris is an experienced mortgage lender
He puts his 8 years experience as a mortgage
lender, to use when negotiating and working with
Lenders, insurance companies, realtors, and title
companies on behalf of his clients.
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While not working Chris enjoys DIY projects,
spending time with his 3 kids, and oh yeah………
ELVIS TRIBUTE ARTIST
Thankya…..Thankyaverymuch!
Topics to be Discussed
1. Are you Financially Ready
*Determines how “much” house can you buy
*Knowing all the costs
*Why your credit rating is important
*Mortgage basics
2. Building Your Team of Experts
*Your Home-Buying Team
Are you Financially Ready?
Credit
*How your score is determined;
*Hints & Tips to repairing & maintain
 Savings
*Down Payment – 3.5% to 5%
 What Can you Afford
*Household Income
*Debt Ratios
 Closing Costs
*About 5-6% of Purchase Price
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Are you Financially Ready?
Your Credit Score
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With the credit crunch lenders have increased their focus on credit scores when
determining lending approval and interest rates charged.
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Understand how your credit score is determined.
*Payment History 35
*Amounts Owed? 30%
*How long is your credit history? 15%
*Have you applied for new credit recently? 10%
*Type of credit accounts do you have? 10%
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Tips on Boosting and Maintaining Your Credit Score
*Maintain active accounts; no trades = no score.
*Allow increases to credit limits.
*Always make your minimum monthly payments on time
*Keep your credit inquiries to a minimum
*Check your credit once a year to prevent identity theft and/or other inaccuracies
What is a good credit score?
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720 and higher: Excellent
Qualify for best rates
650-719: Good
Eligible for good rates on most loans
600-649: Ok
Represents higher risk & borrowing options are limited
500-599: Not great
High risk for lenders = below 600 is “sub-prime”
If given a loan, will be higher interest rates & higher mortgage
payment
499 and below: Poor
Purchasing on credit not an option at this point
Are you Financially Ready?
Down payment
Minimum of 3.5% of the purchase price
1. Savings/Checking
 2. Retirement Plan
 3. Gift
 4. Borrowed from eligible sources
 5. Government/City Grant programs
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Are you Financially Ready?
There are industry standards as to what is considered
“affordable” by mortgage lenders.
 Housing ratio = “Top Ratio or Front End Ratio”
* PITI / Gross monthly income
*Usually 28%-31%
 DTI(Debt To Income) = “Back End Ratio or Total DTI”
*PITI + monthly debt / Gross monthly Income
*(Debts include car payment, credit cards, other loans)
*Usually 31%-43%
Have a mortgage professional calculate this for you.
Are you Financially Ready?
Closing Costs
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Appraisal Fee
Attorney Fees
Title Insurance
Title/Closing Fees
Credit Reports
Prepaid Taxes & Homeowner’s Insurance
Lender Fees
Closing costs can be estimated at 5-6% of the purchase price
Arranging Your Mortgage
Required Documents
Your approval will be based on the information given and the supporting documentation
provided by you.
Your information will be held in the strictest confidence and will only be used for your
financing application.
Written Verification of Employment (Lender to obtain)
Most Recent 30 days of Pay stubs
If Self Employed, Past 2 years of Tax Returns ***all pages and schedules***
Verification of Down payment
• Two Months Bank Statements
• Gift Letter
• Retirement/401K/IRA Statements
5. Identification – Copy of Drivers License and Social Security Card
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MORTGAGE BASICS
WHAT IS A MORTGAGE
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A large secured loan used to purchase a home.
Mortgage or Promissory Note
– Promise to repay the loan
– Terms & conditions of loan
– Details about monthly payment
Deed of Trust
– Pledges your home as security for the loan
Where can I go to get a
mortgage?
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Commercial Banks
State and Federal Savings Banks
Savings & Loan Associations
Mortgage Companies
Credit Unions
Remember:
These institutions may or may not own your loan
They may sell your loan to another company
Mortgage Terms
Principal
– Amount of original loan
 Interest
 – Fee you pay to borrow money
 Term
 – Length of loan (period of time)
 Escrow
 – Account opened by lender
 – Holds money for taxes & insurance
 Equity
 – Amount of principal you’ve paid = portion of home you
own
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Mortgage Terms (2)
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Loan-to-Value Ratio (LTV)
– Ratio that determines your down payment
– 80% LTV means you put 20% down
– Some first-time home buyer loans allow 95%, 97% or even 100%
LTV
Points
– Loan Origination Fee
– Discount Points: 1% of loan, used to lower interest rate
Annual Percentage Rate
– Total cost of loan
– Interest + loan fees + mortgage insurance + points
– Good way to compare options (includes all fees)
Mortgage Terms (3)
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Amortization Schedule
– Timetable that shows each payment
– Indicates how much paid towards principal & how
much to
interest
Insurance
– Hazard Insurance
– Private Mortgage Insurance (PMI)
Qualifying Ratios
– Used by lenders to determine how much you can
afford
Your Monthly Payment
 P = Principal
 I = Interest
 T = Taxes
 I = Insurance
Types of Mortgage
FHA (This is most common loan now, and
most likely what you will be using to buy
your home)
 2) Conventional (Traditional Mortgage)
 3) VA (Veteran’s Administration)
 4) USDA (United States Dept. of Agriculture)
 5) Sub-prime……..obsolete, see ya, kicked to the curb,
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scram, beat it, get lost.
Federal Housing Administration Loan
FHA mortgage loan types are insured by
the government through mortgage
insurance that is funded into the loan.
First-time home buyers are ideal
candidates for an FHA loan because the
down payment requirements are minimal
and no FICO requirements****
 Requires only a minimum 3.50% down
payment
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Veteran’s Administration Loan
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A VA loan is a government loan is available to
veterans who have served in the U.S. Armed
Services and, in certain cases, to spouses of
deceased veterans. The requirements vary
depending on the year of service and whether
the discharge was honorable or dishonorable.
The main benefit to a VA loan is the borrower
does not need a down payment. The loan is
guaranteed by the Department of Veteran
Affairs, but funded by a conventional lender.
USDA
Rural Housing
Primarily used to help low-income
individuals or households purchase homes
in rural areas.
 100% Financing
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USDA available in rural-outlying areas
No down-payment needed
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Eligible North Texas Cities
As of July 20, 2008
This list is not all inclusive of the eligible areas in North Texas. It only covers the major towns serviced by Area 3. For specific
eligible areas, check our eligibility website: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do or contact the local
Rural Development Office. You can find all Texas USDA Rural Development offices at www.rurdev.usda.gov.
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County Serviced By
Cities
Archer
Decatur
Cities include Archer City, Windthorst, Holiday and Lakeside City
Baylor
Decatur
No ineligible areas in the County. Cities include Seymour
Clay
Decatur
No ineligible areas in the county. Cities Henrietta, Byers, Petrolia and Bellevue.
Collin
McKinney
Cities include Princeton, Farmersville, Nevada, Lavon, Prosper, Celina, Anna, Melissa, Westminster, Blue
Ridge, Wylie
Cooke
McKinney
No ineligible areas in the county. Cities include Muenster, Callisburg, Valley View, Lindsay, Gainesville.
Cottle
Decatur
No ineligible areas in the county. Cities include Narcisso and Paducah.
Dallas
McKinney
Eligible cities include Seagoville and Combine
Denton McKinney
Cities include Aubrey, Corinth, Little Elm, Justin, Roanoke, Krum, Highland Village, Lake Dallas, Ponder,
Sanger, Pilot Point
Foard
Decatur
No ineligible areas in the county. Cities include Crowell and Thalia
Fannin
McKinney
No ineligible areas in the county
Grayson McKinney
The entire county except the city limits of Sherman and Denison is eligible to include Van Alystine, Gunter,
Whitewright, Tioga, Whitesboro, Pottsboro
Hardeman
Decatur
No ineligible areas in the county. Cities include Chillicothe and Quanah.
Hunt
McKinney
Cities include Quinlan, West Tawakoni, Celeste, Commerce, Campbell, Lone Oak, Caddo Mills
Jack
Decatur
No ineligible areas in the county. Cities include Bryson, Jacksboro, Antelope, Postoak.
Kaufman McKinney
Combine, Cottonwood, Crandall, Forney, Kaufman, Oak Grove, Oak Ridge, Talty, Mabank, Kemp, Grays
Prarie, Rosser, outside the city limits of Terrell
Montague
Decatur
No ineligible areas in the county. Cities include Montague, Nocona, Bowie, St Jo, Forestburg.
Palo Pinto
McKinney
No ineligible areas in the county. Cities include Mineral Wells, Graford, Strawn, Santo, New
Salem, Palo Pinto, Gordon, Mingus
Parker
McKinney
Cities includes, Aledo, Springtown, Willow Park, Sanctuary
Rockwall McKinney
The entire county east of Lake Ray Hubbard is eligible, Rockwall, Royse City, Fate, Heath
Tarrant McKinney
Cities include Avondale, Azle, Blue Mound, Briar, Center Point, Crowley, Haslet, Lakeview, Oak Grove,
Pelican Bay, Saginaw, Wheatland
Wichita Decatur
Cities of Wichita Falls and Burkburnett are not eligible. Cities include Electra, Iowa Park, Lakeside City,
Kamay
WilbargerDecatur
No ineligible areas in the county. Cities include Vernon.
Wise
Decatur
Cities include Bridgeport, Decatur, Alvord, Aurora, Chico, Rhome, Boyd
Young
Decatur
Cities include Graham, Olney, Newcastle, Jean, Loving
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Traditional Mortgages
Traditional Mortgages
 Fixed Rate Mortgages
 – Same interest rate throughout life of
loan
 – Monthly payments never change
 – Key choice: term of loan
 (15 years & 30 years are most common)
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Traditional Mortgages (2)
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Adjustable Rate Mortgages (ARM)
– Interest rate is fixed for certain number of years
(3, 5, & 7 years most common)
– After fixed time, interest moves up or down to meet national
interest rates
– May have a cap of how high interest rates can go
– Make sure to ask:
o How long does initial interest rate apply?
o How high can the interest rate go?
o Does the loan set a minimum interest rate?
o What is the maximum monthly payment you could pay?
Specialty Mortgages
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Interest Only Mortgages
– You pay only interest first 5-10 years of loan
– After interest-only period, monthly payment increases to include
both interest & principal
Negative Amortization Mortgages
**TOAST**
– Monthly payment is less than interest owed & unpaid interest is
added to principal of loan
– Total amount you owe increases each month
Option Payment ARM Mortgages
**TOAST**
– You have the option of different types of monthly payments
– Options include: interest-only, fixed rate, or minimum payment
40-Year Mortgages (not available on FHA)
– Reduces monthly payment but increases interest paid
SUB PRIME LOANS
Goner!
Assemble your Team of Experts
Your home buying team includes……………….
MORTGAGE PROFESSIONAL/EXPERT
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• Should guide you through entire process
• Should help negotiate on your behalf
• Should have choices, which means more competitive rates
• Will ensure that you’re getting the best rates and terms
• Should have access to available grant assistance programs
• We guide you through the entire process
• We will provide you with expert advice
• No cost to you
• Ongoing support and consultation after the deal closes
Assemble your Team of Experts
Your Home Buying Team Includes………………
Real Estate Agent
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Knows DFW and neighborhood, and understands market
Will listen to your needs and advise
Is an expert at type of property you are buying
Will add you to email lists to send you recent property listings………
MLS – Multiple Listing Service
Book viewing appointments
Show you properties that match your criteria
Prepare Purchase Agreement
Negotiate best possible price for your home
Knows the ins-and-outs of all the available City Grant and Bond Programs!!
Thanks Everyone!
We will all be available following the
presentation if you have specific details you
wish to discuss, or any questions.
HAVE A GREAT WEEKEND!