Transcript the joy of buying your first home

the joy of buying your first home
Presented by: Victoria Johnson
Luxury Loans
Broker/Owner of
Agenda
• Homeownership Brings....
• What is Homeownership?
• Preparation
• Budgeting, Savings, and Credit
• Qualifying
• Loan Programs
• Are you ready to buy a home?
What is homeownership?
• The American Dream
• An opportunity to provide for family
• A tax deduction
• Property appreciation
• Having the nicest lawn on the block
• Your own backyard
• Your own garage
Homeownership brings...
• Sense of community
• Stability
• Tax benefits (Consult your tax advisor)
• Stable housing costs
• Potential appreciation
the home buying process
The Homebuying Team: Who is Involved?
• Real Estate Agent
•Attorney
• Mortgage Broker
•Escrow/ Title Officer
• Home Inspector Professional
• Appraiser
• Surveyor
• Insurance Agent
rent vs. buy
Why Buy a Home? What are the Benefits of Ownership?
• Personal- a place of your own that reflects your taste
and lifestyle
• Emotional- an accomplishment you can take pride in.
• Generational- a secure future for your family, for
generations to come.
• Financial- the investment of a lifetime
Preparation
Two things have to happen:
• Find a home
• Qualify for a loan
4 C’s of lending
• Captial (savings)
• Do you have enough cash for the down payment and closing
costs?
• Do you have enough cash for emergencies?
• Capacity (income)
• Can you repay the debt?
• Character (credit history)
• Will you repay the debt?
• Collateral (house)
• Will the lender be fully protected if you fail to repay the loan?
•
•
what lenders look for
Debt to Income Ratios
•
Relationship between current consumer debts and current income
•
Is your income high enough?
•
Are your debts low enough?
Down payment
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The higher the down payment, the lower the loan amount
Reserves
•
How much money do you have saved?
•
How much will be left after closing?
Do you pay your bills on time?
•
Credit Reports
•
Non-traditional credit
preparing to buy a home
• Daily Spending Diary
• Financial Worksheets
• Decrease Spending & Credit Card Use
• Entertainment (movies, dinners out)
• Clothes
• Dry Cleaning
• Budgeting Tools
budgeting
• What is a budget?
• A budget is a plan for managing you income and
expenses
make budgeting easier
• Decide who pays the bills
• Know when bills are due
• Open a checking account & savings account
• Check interest rates on all of your loans
• Pay down high cost loans & credit cards
• Involve family saving process
• use coupons
• find bargains
• cut back on eating out
IMPORTANCE OF SAVING
• Pay yourself first
• Consider saving via payroll deduction
• Bank your change at the end of the day
• Bank surprises
• Bonuses and gifts
• If you can save $2.00 a day @ 2% interest you
will have saved over $1,500 in 2 years
• That is one less Starbucks coffee each day
SAVINGS
budgeting tips
• Plan expenses according to current income
• Establish budget for six months to one year
• Keep record-keeping simple
• Set money aside for maintenance &
emergencies
• Get consensus from the entire family - makie it
a family project
• Pay yourself first - SAVE!!
credit
The importance of credit
• What does it mean to be a lender
• Applying for credit
• Managing credit
how lenders use a credit score
• Scores assess past bill paying history
to predict future behavior
• Scores are used to perform a risk
analysis which helps predict the
likelihood of loan repayment
Credit scores
• The credit bureau risk score is a
summary of the information in your
credit file
• Scores range from 300-850
• Scores ranks consumers according
to risk
• The higher the score, the lower the
risk of default
common credit problems
• Multiple credit cards used to their limit
• Obtain new credit when existing debts remain
unpaid
• Pattern of late payments on current debts
• Bankruptcies
• Judgments
• Charge-offs
• Foreclosures
solving credit problems
• Cancel unnecessary credit
• Pay off or pay down debts
• Resolve unpaid debts
• Write letters to credit bureaus for corrections
• Settle with collection agencies
easy steps to build credit
• Open a checking and savings account to pay
bills easily
• Establish credit by:
• Applying for a small loan using savings as
collateral
• Applying for a credit card and using it
minimally
• Applying for a loan with a co-signer
• Establish non-traditional credit
easy steps to build credit
• Rent payments
• Electric and other utility payments, car
insurance
• Child care or child support payments
• Any other recurring expense
• Non-traditional credit sources must be in your
name
know your credit
• Request a copy of your credit report
• Review for accuracy
• Dispute inaccurate information
• Send a letter to the 3 credit bureaus if you
have a dispute
• Pay all past due accounts as soon as you can
• Negotiate with creditors if you can’t pay in full
• If blemishes are severe- consider credit
counseling
credit reporting agencies
Experian (formerly TRW)
P.O. Box 9600
Allen, TX 75013
www.experian.com
(888) 397-3742
Equifax
Transunion
P.O. Box 740241
Atlanta, GA 30374
www.equifax.com
(800) 685-1111
P.O. Box 1000
Springfield, PA 19022
www.transunion.com
(800) 888-4213
qualifying
a house payment
includes:
• PITI
• Principal
• Interests
• Taxes
• Insurances
pre-qualification
• Determines how much mortgage you qualify
for
• Informal, no obligation
• Figure is an estimation - not exact
approval
• Commitment from lender “conditional approval”
for a predetermined amount
• Based on verified information
are you ready to buy a home
• Review your employment
* Have I been employed on a regular basis for 2 years
• Evaluate our sources of income
* Is my income steady?
* Do I have money saved for a down payment & closing costs?
• Analyze your current expenses
* Do I have a budget?
* Can I handle a monthly mortgage payment, taxes, insurances, repairs
* Can I handle unexpected events?
• Determine the status of your credit history
* Do I have established credit?
* Have I paid my bills on time?
• Yes - I want to own a home
Am I familiar with what is required to qualify for a home loan?
Am I willing to work towards preparing myself to become a homeowner?
PAPERWORK
• Good Faith Estimate
* What is it?
* What fees are included?
• Truth in Lending
* What is it?
Loan programs
&
Loan types
Loan programs
• Government insured loans
* FHA Loans
* VA Loans
• Conventional mortgage loans
* Affordable loan programs - 0-5% down
payment
• Special loan programs
* Bond programs
* Down payment assistance programs
Loan types
• Fixed-rate loans
• Adjustable rate loans
sample programs
• Standard Conforming 30 Yr. fixed
• My community 97 (Conforming)
• My community 100 (Conforming)
• Flex 97 (Conforming)
• Flex 100 (Conforming)
• FHA
• ARM’s/ Hybrids
sample product comparison
FHA vs. MC100
Sales price
Down Payment
$110,000.00
$3,300.00
Req. Borr. Funds
3% Minimum Inv.
Disc. / Prem
Loan Amount
30 Yr. Rate
1st Mtg. P & I
MI Pymt Factor
MI Monthly Pymt
Total Payment
$0.00
$105,788.00
6.125%
$642.78
0.000416667
$44.08
$686.86
$110,000.00
$500.00
$500 or 1% = lesser
of
$0.00
$110,000.00
6.125%
$668.37
0.000866667
$95.33
$763.70
sample product comparison
30 Year vs. MC100
Sales price
Down Payment
$110,000.00
$5,500
Req. Borr. Funds
5% Minimum Inv.
Disc. / Prem
Loan Amount
30 Yr. Rate
1st Mtg. P & I
MI Pymt Factor
MI Monthly Pymt
Total Payment
$0.00
$104,500
6.250%
$643.42
0.00065
$67.93
$686.86
$110,000.00
$500.00
$500 or 1% = lesser
of
$0.00
$110,000.00
6.125%
$668.37
0.000866667
$95.33
$763.70
ready?
The closing process
• Sign mortgage or deed of trust
• Sign your mortgage note & other loan
documents
• Bring funds to close on your home
• Verify insurance policies
• GET THE KEYS TO YOUR HOME!
Is this something you want to do???!!!
life as a homeowner
• Stay within your budget
• Make your mortgage payment top priority
• Any mortgage payment difficultiesCONTACT THE LENDER IMMEDIATELY
• Use cost-effective energy savings measures
• Hire a reputable contractor for major repairs
• Have an emergency maintenance fund
www.namb.org
www.sdnccamb.com
The members of the National Association of Mortgage Brokers, believing that the interests of the
public and private sector are best served through the voluntary observance of ethical standards of
practice, hereby subscribe to the following Code of Ethics.
HONESTY & INTEGRITY
NAMB members shall conduct business in a manner reflecting honesty, honor, and integrity.
PROFESSIONAL CONDUCT
NAMB members shall conduct business activities in a professional manner. Members shall not
pressure any provider of services, goods or facilities to circumvent industry professional standards.
Equally, members shall not respond to any such pressure placed upon them.
HONESTY IN ADVERTISING
NAMB members shall provide accurate information in all advertisements and solicitations.
CONFIDENTIALITY
NAMB members shall not disclose unauthorized confidential information.
COMPLIANCE WITH LAW
NAMB members shall conduct business in compliance with all applicable laws and regulations..
DISCLOSURE OF FINANCIAL INTERESTS
NAMB members shall disclose any equity or financial interest they may have in the collateral being
offered to secure a loan.
enjoy your new home!
Thank you for attending!