DST H.O.M.E.

H ome O wnership M aintenance and E ducation H

ome

O

wnership: Your First Step In Building Wealth

Agenda

           The Wealth Divide / What is Wealth?

Building Wealth Closing The Wealth Gap Myths and Challenges Mortgage Insurance Down Payment Assistance Types of Mortgages Are You Credit Ready?

10 Step Countdown to Home Ownership What if I Already Own a Home?

Questions / Comments

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The Wealth Divide

  Did You Know?

 Over time, the homeownership gap becomes an equity gap  Closing the gap by 10% means 1.2 million new African American home owners We Must Close The Gap One Community, One Family At A Time

80 70 60 50 40 30 20 10 0 2003

White Hispanic

2004 2005

Asian

2006

African American

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What is Wealth?

“… having enough money to cool for a generation.”

-Earl G. Graves,Jr.

Chairman/CEO Black Enterprise

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Building Wealth

 Wealth is Accumulated by:  Inheritance  Real estate ownership  Business ownership  Winning the lottery (1 in 10 million)  Other?

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Closing the Gap



Make Real Estate Ownership Part Of Your Wealth Accumulation Strategy. Advantages Include…

 Income tax benefits    Interest, taxes are deductible  Property improvements are deductible Alternate source of funds   Property builds equity Personal equity lines of credit available to fund other interests / needs Income generation  Investment properties  Access to money to help make personal entrepreneur interests come true…

Become Your Own Boss

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Myths and Challenges

 “I’m not ready to buy a home because I don’t have the required 20% down payment.”

Myth

 “I heard that Mortgage Insurance is a Government program for low income / low wealth individuals.”

Myth

 “Wealth accumulation is too far away…Start with small steps today.”

Challenge

 “I heard that Mortgage Insurance is required for the duration of the mortgage loan.” 

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What Is Mortgage Insurance?

 

There are three types of Mortgage Insurance

  FHA and VA are both government sponsored PMI = Private mortgage insurance

Mortgage Insurance is Used In Lieu Of A 20% Down Payment

    A product that allows you to put as little as 3% down and in some cases nothing down People who use mortgage insurance get into a home 10 years sooner than those who do not 10 year earlier start on wealth accumulation with real estate No geographic or income restrictions

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Down Payment Assistance Programs

 Down payment assistance and community redevelopment programs offer affordable housing opportunities to first-time homebuyers, low-income and moderate-income individuals and families who wish to achieve homeownership.

 In some cases individuals as eligible to receive up to 20% in down payment assistance  To locate an approved down payment assistance provider in your state go to

http://www.ncsha.org

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Types of Mortgages

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Major Types of Home Loans (Mortgages)



Fixed-rate

your interest rate will never change, regardless of what the economy does

.



Adjustable-Rate Mortgages

"variable rate." (ARMs) have interest rates that adjust periodically during the life of the loan.

Terminology note:

Adjustable-rate mortgage are also referred to as having a 

Balloon Loan

(also referred to as a "reset mortgage") starts with a fixed interest rate for a certain number of years.) The problem with balloon loans is the term. The initial fixed-rate period of a balloon is usually 7 to 10 years. After that, you have to pay off the loan's remaining balance in full.

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The 4 C’s Of Credit

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Do You Have Sufficient Capital?

 Capital is the amount of money you have available to make a down payment, pay closing costs and unexpected related expenses.

What Is Your Capacity?

 Capacity refers to your ability to make monthly mortgage payments as well as all other bills.

What Is Your Credit History?

 How often you use credit, how much money you owe creditors and if you pay your bills on time is important to lenders. This information is contained in a credit report, which your lender uses it to make a decision on your mortgage loan.

What Is Collateral?

 In a home loan, the property is the collateral, or security pledged for repayment of the loan. You risk losing that collateral (your home) if don’t repay the loan according to the terms of the mortgage.

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What’s On A Credit Report?

   Personal Identification Information (name, address, SSN, birth date, employment, etc.) Credit Account Information (date opened, credit limit, company, acct. number, activity, balance, etc.) Public Record Information (bankruptcy, liens, foreclosures, judgments, unpaid taxes,child support, monetary judgments, etc.)     Collection Agency Account Information Additional Information (checking acct. closings, etc.) Inquiries: requests for your credit file, number of times you have applied for credit in the past 24 months “Pre-approved” offers appear only on consumer reports.

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What’s NOT On A Credit Report?

 Race  Religion  Medical History  Personal Lifestyle  Marital Status  Nationality  Political Preferences  Criminal Record  Gender

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How do creditors determine credit value or worthiness?

CREDIT SCORE

What Is A Credit Score?

 A numerical tool used to quickly access creditworthiness  Snapshot of your credit risk at a particular point  Helps lenders predict future credit performance of a borrower  Changes as new information is added to your file  Calculated by a computer

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Credit Scoring

 

Ranges from 300 – 900 (average score 720)

A “Good Score” Depends On The Scoring Model and Lender… the higher the better  Categories of Credit:  Payment history - 35% of score  Outstanding debt - 30% of score  Length of credit history - 15% of score  Inquiries - 10% of score  Types of credit - 10% of score

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Important Factors Affecting Credit

 Past Payment Performance whether you’ve made payments on time…fewer late payments, better the score   Credit Use - over-extended or conservative?

How Long You Have Been Using Credit…the longer the better

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Know What’s On Your Credit Report

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Before You Apply For A Loan…Be Proactive!

 Conduct your own credit report check-up      Equifax 1-800-695-1111 Experian 1-888-Experian www.equifax.com

www.experian.com

TransUnion 1-800-916-8800 www.transunion.com

FICO 1-800-319-4433

www.myfico.com

Annual Credit report www.annualcreditreport.com

   Consolidate Debt – Based On Interest Rates Develop A Debt Repayment Plan…Who, What, When Be Methodical…Track Progress…Stay Focused!

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Action Plan

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Your 10 Step Countdown To Homeownership

10.

Complete a personal homeownership plan and familiarize yourself with the mortgage lending language. Attend a homebuyer education workshop in your community to locate one got to

www.hud.gov

9. Get a copy of your credit report. This will enable you to address and clear up any reported errors.

8.

Get pre-Approved for a mortgage before you find a house.

will enable you to determine your affordability and what loan program is best for you. This 7.

Find a house (Often a Realtor is your best resource).

6.

Make an offer on the home.

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Action Plan

5.

4.

3.

2.

1.

Agree on the offer with the Seller (Your realtor can help) . Document your agreement; sign and date ALL pages.

Do home inspections, appraisal, title search and other pre closing requirements. Seek professional support as needed.

Resolve or negotiate any issues identified during inspections, searches or appraisals. Concessions may be considered in some cases.

Hire a Real Estate Attorney or Title company. Complete legal paperwork (usually on closing day). to the disclosures. Make sure you understand what you are signing, and pay particular attention Ask questions when necessary.

Prepare to move and Celebrate!.

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Current Homeowners

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What If I Already Own A Home…What Else Can I Consider?

 Investment properties for income generation   A personal home equity line of credit to self-fund interest or needs A “Kiddie Condo” instead of dormitory living for your college-aged children  An investment in stocks or bonds  Renovating or making additions to your current home

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Questions or Comments

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