Transcript No Slide Title

TheJoy
of Buying
Your First
Home
{Your Company Information Here}
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
 Mortgage Broker
 Home Inspector Professional
 Appraiser
 Surveyor
 Insurance Agent
 Attorney
 Escrow/Title Officer
Rent vs. Buy

See handout for comparison
Preparation
Preparation
Two things have to happen:


Find a home
Qualify for a loan
4 C’s of Lending
 Capital (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




Down payment


The higher the down payment, the lower the loan amount
Reserves



Relationship between current consumer debts and current
income
Is your income high enough?
Are your debts low enough?
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 (examples)

Financial Worksheets (examples)

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 your
income and expenses
Make Budgeting Easier

Decide who pays 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 in saving process
 use
coupons
 find
bargains
 cut
back on eating out
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 entire family – make it a
family project

Pay yourself first - SAVE!
SAVINGS
Importance of Saving

Pay yourself first

Consider savings 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
CREDIT
The Importance of Credit
What does it mean to 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
 Score

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) Transunion
P.O. Box 9600
Allen, TX 75013
www.experian.com
(888) 397-3742
Equifax
P.O. Box 740241
Atlanta, GA 30374-0241
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

Interest

Taxes

Insurance
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?
First Steps:

Review your employment


Evaluate your sources of income



Do I have a budget?
Can I handle a monthly mortgage payment, taxes, insurance, repairs
Can I handle unexpected events?
Determine the status of your credit history



Is my income steady?
Do I have money saved for a down payment & closing costs?
Analyze your current expenses




Have I been employed on a regular basis for 2 years
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
 What

is it?
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
Sales Price
vs. MC100
$110,000.00
$110,000.00
$3300.00
$500.00
3% Minimum Inv.
$500 or 1%=lesser of
$0.00
$0.00
$105,788.00
$110,000.00
30 Yr. Rate
6.125%
6.125%
1st Mtg. P& I
$642.78
$668.37
0.000416667
0.000866667
MI Monthly Pymt
$44.08
$95.33
Total Payment
$686.86
$763.70
Down Payment
Req. Borr. Funds
Disc./Prem
Loan Amount
MI Pymt Factor
Sample Product Comparison
30 Year vs. MC100
Sales Price
$110,000.00
$110,000.00
$5500.00
$500.00
5% Minimum Inv.
$500 or 1%=lesser of
$0.00
$0.00
$104,500.00
$110,000.00
30 Yr. Rate
6.250%
6.125%
1st Mtg. P& I
$643.42
$668.37
MI Pymt Factor
0.00065
0.000866667
MI Monthly Pymt
$67.93
$95.33
Total Payment
$711.35
$763.70
Down Payment
Req. Borr. Funds
Disc./Prem
Loan Amount
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 difficulties -
CONTACT THE LENDER IMMEDIATELY

Use cost-effective energy savings measures

Hire a reputable contractor for major repairs

Have an emergency maintenance fund
Enjoy
Your New
Home!
Thanks for attending!