Becoming A Homeowner

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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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  • Read the information on the slide.
  • Read content on slide.Loan amount is easy to understand. But let's take a closer look at those other four factors.
  • Read content on slide.Are there any questions?
  • Read content on slide.Remember that interest rates only tell part of the story. The total cost of a mortgage includes the interest rate PLUS discount points, the origination charges and third party fees. Many of these fees are included in the annual percentage rate (APR), which is typically higher than the interest rate. The APR enables you to compare mortgages of the same dollar amount by considering their total annual cost.
  • Read content on slide.Are there any questions?
  • You will be responsible for some costs at the time of your closing.Read content on slide.
  • Read slide contents.
  • Anyone want to take a stab at this? Myth or truth?
  • Read slide contents.Any questions before we go on?
  • Read slide contents.
  • Read slide content.Ask if there are questions.
  • Read slide content.Let's talk a little more about your credit report and credit score.
  • Read content on slide.
  • Read content on slide.
  • Anyone want to take a stab at this? Myth or truth?
  • Read slide content.Questions?
  • Read slide content.Clarify by saying:There are two main categories of loans: Conventional andGovernment. Fixed-rate and adjustable-rate mortgage options are available in both categories. Conventional loans may be conforming or nonconforming.Conforming loans have loan amounts and underwriting guidelines that follow a certain set of standards. Nonconforming loans have higher "jumbo" loan amounts or underwriting guidelines that follow a different set of standards. You’ll need to evaluate the features and benefits of each loan type — and other considerations — to help you make informed decisions.
  • This chart compares the features of different loan types.Your home mortgage consultant will listen to your needs and help you understand your options, so you can make informed home financing decisions.
  • Our renovation financing options and specialized renovation lending team can help you finance a home, plus wanted or needed improvements — all with one loan.
  • Anyone want to take a stab at this? Myth or truth?
  • Read slide contents.As a reminder, you will need to pay mortgage insurance when making less than a 20% down payment.Any questions before we go on?
  • Read content on slide.
  • I'll be happy to help you look into getting a PriorityBuyer preapproval before you begin house hunting.
  • Read slide contents.Then add:In addition to experience, the REALTOR you chooseshould be trustworthy and easy to talk to.
  • After you’ve put together your homebuying team and determined the your price range, it’s time to start house hunting.Read steps on the slide.This is a high-level look at the homebuying process. I'll be happy to provide more detailed information. Just let me know and I'll make sure you get it.
  • Knowing what to expect when getting a home loan can make finding and financing your first home an exciting and rewarding experience. Read contents of slide.
  • Becoming A Homeowner

    1. 1. Learn more about becominga homeownerEric HamiltonHome Mortgage ConsultantNMLSR ID 414113
    2. 2. Welcome!By attending this workshop, you aretaking an important step toward yourhomeownership goal.This workshop will help you gain a basicunderstanding of how the homebuying andhome financing process works. So you’llknow what to expect and be better able tomake informed decisions. 1
    3. 3. In today’s workshop, we’ll address: Benefits and costs of homeownership Credit basics Home financing basics Homebuying basics 2
    4. 4. Benefits and costs ofhomeownership 3
    5. 5. 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. 4
    6. 6. 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 historically low mortgage interest rates and ―buyers market‖ home sale prices. 5
    7. 7. What are the costs of homeownership?If you use a mortgage to help buy a home, you willrepay more than the loan amount you borrow.How much you repay is determined by severalfactors, including:  Loan amount  Interest rate  Loan term  Discount points  Origination charge 6
    8. 8. 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. 7
    9. 9. 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. 8
    10. 10. What makes up a mortgage payment?After buying a home, you will be responsible for making a monthly mortgagepayment. 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 and your loan balance. 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’sspecifications and the size of your down payment. 9
    11. 11. 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 10
    12. 12. 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. 11
    13. 13. 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 12
    14. 14. Myth or truth?As a rule of thumb, it isrecommended that you keepyour housing expense level ator below 28% of your grossmonthly income. 13
    15. 15. TruthBut even if you fall within thisrule of thumb, be sure you feelcomfortable about makingmonthly mortgage paymentsand still keeping up with allyour other monthly financialobligations. 14
    16. 16. Credit basics 15
    17. 17. 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. 16
    18. 18. 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 17
    19. 19. 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 upto two free hours of personalized financial coaching to help customers preparefor homeownership — conveniently, right over the phone.11. The My Home RoadmapSM service provides up to four sessions (an estimated 2 hours) of free financial coaching with aNational Foundation for Credit Counseling (NFCC) certified counselor from a NFCC member organization that will be paid for byWells Fargo Home Mortgage. At your option, you may purchase additional coaching sessions or services or decide to participatein another NFCC member agency program. Program may change or be discontinued at any time. 18
    20. 20. 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 creditYou can order a free credit report from each of the three main credit bureaus onetime per year. Go to annualcreditreport.com, or call 877-322-8228. 19
    21. 21. How do credit scores work?Lenders use your credit score to determine how much risk they may assume if youborrow 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 ratesThe 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 freecredit report. 20
    22. 22. Myth or truth?Generally, about one third ofyour credit score depends onwhether you consistently payyour bills on time month aftermonth. 21
    23. 23. TruthOne of the most importantthings you can do to maintaingood credit is to make timelybill payments. 22
    24. 24. Home financing basics 23
    25. 25. 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 and flexible qualifying guidelinesFixed-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 timeAdjustable-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 24
    26. 26. How do loan options compare? Fixed-rate Adjustable-rate FHA/VA mortgages mortgages mortgage programsPredictablemonthly payments ✓ ✓Lower monthlypayments in the ✓ ✓loan’s early yearsA low downpayment option ✓A higher loanamount for higher- ✓ ✓priced properties 25
    27. 27. What about renovation financing? With renovation financing, you can buy a home a home in most 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. 26
    28. 28. Myth or truth?You must have a 20% downpayment to buy a home. 27
    29. 29. MythCertain financing options, suchas FHA loans, require as little as3.5% down – and VA loanscould require 0% down. 28
    30. 30. Homebuying basics 29
    31. 31. 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 30
    32. 32. Apply for a PriorityBuyer® preapproval2 Find out how much you may be able to borrow. Let REALTORS® and home sellers know youre a serious homebuyer. Bid with confidence on the home you want.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 requirementsand conditions, and providing an acceptable property, appraisal and title report. Not available on nonconforming products or for certain FHA transactions. 31
    33. 33. Choose a REALTOR®A good REALTOR should have a working knowledge of the area where you’rethinking 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 throughneighborhoods of interest. Ask friends and family members and your homemortgage 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 threeof them. 32
    34. 34. 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 homes 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 thehomebuying process. Your home mortgage consultant will work with you eachstep of the way and provide a step-by-step checklist when you begin the homefinancing process. 33
    35. 35. How can Wells Fargo help?As a fair and responsible lending leader,Wells Fargo is ready to help you find financingthat serves your immediate and long-termhome financing needs. We want to see youchoose a mortgage that will help keep youcomfortably in your home for years to come.Wells Fargo Home Mortgage consultants aretrained to pay attention to your goals, helpyou understand your options, and clearlyexplain 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 34
    36. 36. 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 6/12 35

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