Transcript Title set in Georgia 50pt - Georgia Institute of Technology

Learn more about becoming
a homeowner
Kimberly Guider
Home Mortgage Consultant
NMLSR ID 561110
Georgia Institute of Technology
Tuesday, July 9
Welcome!
By attending this workshop, you are
taking an important step toward your
homeownership goal.
This workshop will help you gain a basic
understanding of how the homebuying and
home financing process works. So you’ll
know what to expect and be better able to
make informed decisions.
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In today’s workshop, we’ll address:
 Benefits and costs of
homeownership
 Credit basics
 Home financing basics
 Homebuying basics
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Benefits and costs of
homeownership
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What are the benefits of homeownership?
 Opportunity to build home equity
 The principal portion of every mortgage payment you make has the
potential to grow your home like an asset.
 Predictable monthly payments
 Unlike rent, the principal and interest portions of your monthly payment
cannot increase, if you have a fixed rate mortgage.
 Potential tax advantages
 Your mortgage interest and real estate property taxes are usually tax
deductible when you file your income tax returns. Consult your tax advisor
for details.
 More control over space
 You can decorate and renovate to reflect your personal style.
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Is now a good time to buy a home?
Owning a home is both an opportunity
and a responsibility. Being ready to
buy a home depends on many factors,
including your own personal situation.
Overall, now may be a good time to buy
for financially qualified customers with
low mortgage interest rates and “buyers
market” home sale prices.
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What are the costs of homeownership?
If you use a mortgage to help buy a home, you will
repay more than the loan amount you borrow.
How much you repay is determined by several
factors, including:
 Loan amount
 Interest rate
 Loan term
 Discount points
 Origination charge
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What are the costs of homeownership?
Interest rate
 The interest rate is the percentage of your loan amount a lender charges
you to borrow money to buy your home.
 Interest rates are based on current market conditions, your credit score,
the down payment you make, and the type of mortgage you choose.
Loan term
 Your loan term is the amount of time you have to pay off your mortgage
balance.
 Shorter loan terms typically mean higher monthly mortgage payments, but
often have lower interest rates. And because you pay off your mortgage
within a shorter period, you may pay less in total interest than with a
longer-term mortgage.
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What are the costs of homeownership?
Discount points
 One point equals 1% of your mortgage amount.
 If you qualify, you may be able to pay one or more points to lower your
interest rate. A lower interest rate means lower monthly mortgage
payments.
 Points are usually tax deductible. Consult a tax advisor on the deductibility
of interest.
Origination charge
 Includes fees charged by the lender (other than discount points) for items
such as underwriting, loan processing and other expenses.
 In addition to the origination charge are fees charged by third parties such
as a credit report fee, appraisal fee and county fees.
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What makes up a mortgage payment?
After buying a home, you will be responsible for making a monthly mortgage
payment. A mortgage payment is typically made up of four parts: principal,
interest, taxes, and insurance.

Principal is the amount of money you borrow to buy a home.

Interest is the cost of borrowing money. The amount of interest you pay is
determined by your interest rate, loan balance and loan term.

Taxes are the property charges collected by your local government. Lenders or
mortgage servicers typically collect a portion of these taxes in every mortgage
payment and hold the funds in an account (called an escrow account) to make tax
payments on your behalf as they become due.

Insurance is referred to as homeowners or hazard insurance and provides protection
against property damage due to certain risks such as wind or fire. Like property taxes,
homeowners insurance payments are typically collected by the lender, held in an
escrow account, and then paid on your behalf to the insurance company.
Also plan to pay mortgage insurance with less than a 20% down payment.
Mortgage insurance protects your lender in case you fail to repay your mortgage.
Whether or not mortgage insurance is required usually depends on the lender’s
specifications and the size of your down payment.
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What are closing costs?
Closing costs pay for the services of various real estate and lending
related professionals who assist you with your home purchase — plus
anticipated costs that will occur before you make your first mortgage
payment. Closing costs vary based on lender, type of mortgage and
location of the home, but may include:
 Loan origination fees
 Home appraisal fees
 Escrow reserves
 Property taxes
 Title insurance
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What is a Good Faith Estimate?
A Good Faith Estimate will be
provided by your lender and will
detail the approximate costs you will
pay on or before your loan closing.
You may be able to add your closing
costs to your loan amount to limit
how much out-of-pocket cash you’ll
need to close.
Your down payment, if applicable,
will also be due at closing.
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What additional costs should I consider?
The costs of homeownership go beyond the monthly mortgage payments.
Added financial responsibilities to consider include:
 Utility bills
 Furnishings
 Landscaping
 Home maintenance/repairs
 Appliances
 Lawn mower/snow blower
 Homeowner Association Dues
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Myth or truth?
As a rule of thumb, it is
recommended that you keep
your housing expense level at
or below 28% of your gross
monthly income.
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Truth
But even if you fall within this
rule of thumb, be sure you feel
comfortable about making
monthly mortgage payments
and still keeping up with all
your other monthly financial
obligations.
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Credit basics
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What role does my credit play in financing a home?
Lenders consider your credit history
and credit score when making decisions
about loan approval, interest rate, loan
amount, and the type of loan you may
qualify for.
They also consider the cash you have
available for a down payment and
closing costs, your income, and your
existing debt and financial obligations.
Requirements vary based on the type of mortgage, so work with your home
mortgage consultant to determine options based on your specific situation.
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What credit qualifying guidelines do lenders consider?
 The housing expense-to-income ratio (or
front-end ratio) compares your anticipated
monthly mortgage payment (principal,
interest, taxes and insurance) to your total
household gross monthly income (pre-taxed).
 The debt-to-income ratio (or back-end ratio)
compares your anticipated monthly mortgage
payment (principal, interest, taxes and insurance),
plus your other monthly debt obligations to your
gross (pre-taxed) monthly earnings.
 Monthly debt includes:
 Credit cards
 Car loans
 Student loans
 Consumer loans
 Other financial obligations such as child
support and alimony
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Do you know where you stand?
It’s a good idea to review your credit reports and
know your credit score — especially if you plan to
apply for a home mortgage.
 Do I pay my bills, loans, credit cards and other debt on time?
 Do I have a lot of other outstanding debit?
 What’s my credit history and credit score?
Help is available - The Wells Fargo My Home RoadmapSM service provides up
to two free hours of personalized financial coaching to help customers prepare
for homeownership — conveniently, right over the phone.1
1. The My Home RoadmapSM service provides up to four sessions (an estimated 2 hours) of free financial coaching with a
National Foundation for Credit Counseling (NFCC) certified counselor from a NFCC member organization that will be paid for by
Wells Fargo Home Mortgage. At your option, you may purchase additional coaching sessions or services or decide to participate
in another NFCC member agency program. Program may change or be discontinued at any time.
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How can I find out what’s in my credit report?
It’s a good idea to review your credit reports
regularly to keep track of your credit history,
especially if you plan to apply for a home mortgage.
Your credit report captures key data about you and your finances:
 Personal information — Variations of your name (if any), addresses where
you’ve lived, phone number(s) and employment history
 Potentially negative items — Public records of bankruptcy, liens and court
judgments. Also credit accounts with defaults and late payments in the last seven
years
 Accounts in good standing — All current revolving and installment accounts,
with balances and payment histories
 Requests for your credit report — Including requests for credit you initiate and
information about creditors who are monitoring your credit
You can order a free credit report from each of the three main credit bureaus one
time per year. Go to annualcreditreport.com, or call 877-322-8228.
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How do credit scores work?
Lenders use your credit score to determine how much risk they may assume if you
borrow money from them.
 The higher your credit score, the lower your credit risk
 Customers with low credit scores may face higher down payment requirements
and higher interest rates
The three main credit bureaus generally calculate your credit score based on:
 Payment history (about 35% of the score)
 Amounts owed (about 30%)
 Length of credit history (about 15%)
 Recently opened credit accounts (about 10%)
 Types of credit in use, such as credit cards and consumer loans (about 10%)
For a small fee, you can learn your credit score when you order your free
credit report.
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Myth or truth?
Generally, about one third of
your credit score depends on
whether you consistently pay
your bills on time month after
month.
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Truth
One of the most important
things you can do to maintain
good credit is to make timely
bill payments.
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Home financing basics
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What types of loans should I consider?
Conventional loan
 A mortgage not obtained under a government program (such as FHA or VA).
Either conforming or non-conforming.
Government loan
 A mortgage obtained under a government program, such as FHA or VA
(for qualified military personnel), often featuring low or no down payment
options
Fixed-rate mortgage
 The interest rate and principal and interest payments remain the same for the
life of the loan
 Often chosen by buyers who plan to stay in their home for a long period of time
Adjustable-rate mortgage (ARM)
 The interest rate may go up or down on pre-determined dates to reflect market
conditions
 Often chosen by buyers who think they might sell, move or refinance within a
few years
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How do loan options compare?
Fixed-rate
mortgages
Predictable
monthly payments
Adjustable-rate
mortgages
✓
✓
✓
Lower monthly
payments in the
loan’s early years
✓
✓
A low down
payment option
A higher loan
amount for higherpriced properties
FHA/VA
mortgage
programs
✓
✓
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What about renovation financing?

With renovation financing, you can a home in almost any condition, make
improvements right away, and roll the cost of the improvements into your mortgage.

Today’s real estate market features a variety of properties – including foreclosures
and short sale properties – that may be attractively priced, but need minor or major
improvements.

Renovation financing lets you consider more homes for sale, knowing you’ll be able
to bring out the best in a home by making improvements you want or need.

A Purchase & Renovate loan allows you to get financing based on the appraised
value of the home after improvements are made, so your improvement costs are
included in your purchase loan amount.

Improvements can range from basic repairs and upgrades like floor replacement or
new appliances, to more extensive renovations like room additions or complete
rebuilding on an existing foundation.

A Purchase & Renovate loan fulfills two needs with just one application, one loan
approval, one closing and one monthly mortgage payment.

Plus, the improvements you make may also increase the value of your home.

A certified renovation lending specialist can help you understand your renovation
financing options and work with you every step of the way.
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Myth or truth?
You must have a 20% down
payment to buy a home.
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Myth
Certain financing options, such
as FHA loans, require as little as
3.5% down – and VA loans
could require 0% down.
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Homebuying basics
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Speak with a home mortgage consultant
Your home mortgage consultant can:
 Help you review your income, assets and debts
and help you explore loan options that may fit
your financial situation
 Be your contact throughout the home financing
process:
• Helping you understand the information and
documentation you may need to provide for
your loan application
• Letting you know what to expect and when
• Answering your questions and working with
you every step of the way
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Apply for a PriorityBuyer® preapproval2
 Find out how much you may be
borrow.
 Let REALTORS® and home sellers
you're a serious homebuyer.
 Bid with confidence on the home
want.
able to
know
you
2. A PriorityBuyer® preapproval is based on our preliminary review of credit information only and is not a commitment to lend. We will be able to offer
a loan commitment upon verification of application information, satisfying all underwriting requirements and conditions, and providing an
acceptable property, appraisal, and title report. Preapprovals are subject to change or cancellation if a requested loan no longer meets applicable
regulatory requirements. Preapprovals are not available on all products. See a home mortgage consultant for details.
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Choose a REALTOR®
A good REALTOR should have a working knowledge of the area where you’re
thinking of buying and can help you:
 Decide what you want in a home
 Search the Multiple Listing Service (MLS) and other resources for homes in
your price range that match your needs
 Show you potential homes, listed by any agency
 Provide valuable information on communities, comparable values of
neighboring homes, tax rates and building code regulations.
 Help you make an appropriate bid on a home you want to buy and act as an
intermediary between you and the seller, during the negotiating process.
Tip: Note the names of REALTORS on “For Sale” signs as you drive through
neighborhoods of interest. Ask friends and family members and your home
mortgage consultant for referrals. Check the websites of local realty companies,
too. When you’ve got a list of potential REALTORS, interview at least two or three
of them.
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What happens next?
 Work with your REALTOR® to find a neighborhood and home that’s right for you
 Once you’ve found the home, make an offer to the seller, who will accept,
counter or reject it
 When the price is settled, you may want to consider ordering a home inspection
 Your lender will order an appraisal to assess the home's market value
 Get homeowner’s insurance
 Close your mortgage and purchase transactions and become a homeowner!
Please note: This is a high level overview of what happens during the
homebuying process. Your home mortgage consultant will work with you each
step of the way and provide a step-by-step checklist when you begin the home
financing process.
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How can Wells Fargo help?
As a fair and responsible lending leader,
Wells Fargo is ready to help you find financing
that serves your immediate and long-term
home financing needs. We want to see you
choose a mortgage that will help keep you
comfortably in your home for years to come.
Wells Fargo Home Mortgage consultants are
trained to pay attention to your goals, help
you understand your options, and clearly
explain how different loan programs work.
So you can make informed decisions.
Learn more about buying a home.
Visit our My FirstHomeSM learning experience today!
wellsfargo.com/myfirsthome
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Thank you for attending
We look
forward to
helping you
achieve your
homeownership
goals.
Information is accurate as of date of printing and is subject to change without notice.
Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. © 2012 Wells Fargo Bank, N.A. All rights
reserved. NMLSR ID 399801. #102824
REV 5/13
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