Free Home Buying Class - Everett, WA


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Free Home Buying Class - Everett, WA

  1. 1. Redfin Home Buying Class Brian Shields Redfin Agent, North End Team June 11, 2014 Everett, WA @Redfin
  2. 2. Brian Shields: Redfin Agent ● Agent for 12 years ● Closed A LOT of homes ● Specialize in: First Time Home Buyers, Condos, town houses, Single Family, REO’s, Short Sales and Multi-Family. ● Services: N. King and Snohomish ● Lives in Everett
  3. 3. Agenda ● Buying process overview ● Getting ready to buy ● Searching for homes ● Mortgages ● Making an offer ● Acceptance to closing ● Short sales & REO ● Q&A
  4. 4. A Little Bit About Redfin Redfin is a real estate brokerage that has helped over 20,000 people buy or sell a home; 97% would refer us to a friend. ● Customers, not commissions ● Informed decisions ● Right home for the right price  No obligation  Commission credit
  5. 5. Buying Process Overview
  6. 6. Steps in Buying a Home Research Neighborhoods Real Estate Agents Mortgage Options Preapproval Consider your needs Search Define Preferences Saved Search Home Tours Open Houses Offer Comparables Draft Offer Docs Negotiate Mutual Acceptance Closing Earnest Money Inspection Loan application Title Review Appraisal Financing Approval Closing
  7. 7. Understanding the Market
  8. 8. Shwag Slide! What does the number 2.7 represent?
  9. 9. Story of 2013: Low Inventory
  10. 10. Story of 2013: Rising Prices
  11. 11. Everett: Trends & Insights
  12. 12. Seattle Market Trends – March 2014 ● Prices up 12.5% YoY, down 2.3% MoM ● # homes sold down 6.7% YoY, up 28.2% MoM ● # homes for sale down 7.0% YoY, down 3.7% MoM ● 62.1% homes faced competition ● 44.1% of homes went pending in 2 weeks ● Winning Offers: ► 41.9% sold over asking ► 37.2% included a cover letter ► 11.6% waved financing ► 23.3% waved inspection
  13. 13. Find it on Redfin
  14. 14. Where Is the Market Headed? ● Supply of homes is at a five-year low and won’t increase much more this year. ● Foreclosures have been driving price declines, and years of inventory remain. Investment groups might have impact. ● Rents have been rising, making buying more attractive. ● Market stabilizing, though likely 2-3 years before significant appreciation. ● Rate increases — biggest potential issue for buyers
  15. 15. Choosing the Right Agent
  16. 16. Traditional vs. Redfin
  17. 17. Redfin Agent Reviews
  18. 18. Partners in the Process AGENT Responsible for your success Writes your offer Handles negotiations TRANSACTION COORDINATOR Prepares paperwork Works with escrow TOUR COORDINATOR Schedules tours Prepares paperwork ASSOCIATE AGENT Takes you to see homes Sees 50+ homes a week
  19. 19. Your Redfin Credit
  20. 20. Redfin Partner Program Partner agents are employed by other brokerages, but have teamed up with us to provide Redfin-certified service to a wider range of customers. We’ll refer you to a partner agent when: ►A home is outside of our direct service area ►If it’s in your financial advantage to work with a partner ►We’re experiencing an unusually high customer demand We survey all partner agent clients ►All surveys are published on their Redfin page ►97% of customers would recommend Redfin partners
  21. 21. Finding Your Home
  22. 22. Benefits of a MLS-Powered Site ● See all the homes for sale: 20+% more than national portals ● See newly listed homes faster by 7-9 days ● Over 1/3 of the homes on a portal site are no longer for sale ● You see what the agent sees plus data from other sources ● Real-time market data: photos, details of just-sold homes
  23. 23. Redfin Highlights ● Search by zip code, neighborhood, school district ● Instant alerts – save your search to get a jump on new listings ● Tour Insights – get the scoop before you see a home ● Download results – crunch your own spreadsheets ● Price your home – look at sold listings and ask for help ● Forums – get advice from the Redfin community ● Resources – Home buying guide & home inspection guide Any questions about the site?
  24. 24. Touring
  25. 25. Shwag Slide! Where did the deadliest avalanche in American History take place?
  26. 26. How Touring with Redfin Works ● Up to six homes per tour in two hour blocks ● See as many homes as you need ● One home tours are okay ● Led by a member of your team – Agent or Associate Agent ● No obligation Tip: Consider starting off with fewer homes per tour so you don’t feel rushed.
  27. 27. Making the Most of Your Tour The Redfin agent for your tour will help you evaluate homes – pointing out both positive and negative features. Considering bringing a camera, notebook and tape measure. Wear shoes that are easy to take off/put on.
  28. 28. Making an Offer
  29. 29. Crafting Your Offer ● Evaluate – Your agent will provide you with information about market conditions and recent sales in the area ● Consider the situation – The seller’s preferences, days on the market, and other interest will influence the process. ● Decide on price & strategy with your agent ● Common contingencies & terms: ►Earnest Money ►Inspection ►Financing ►Appraisal ►Title Review
  30. 30. Multiple Offer Situations Tips for Winning in a Bidding War: 1. Just Win, Baby! Simply have the best offer. • Cash is King. • Escalate your price? • Tighten your timelines. • Remove some contingencies? 2. Get pre-approved with a local lender. 3. What’s important to the seller? 4. Write a letter & appeal to the seller.
  31. 31. Acceptance to Closing
  32. 32. Steps After Mutual Acceptance ● Earnest money deposit – usually 1-3%+ ● Inspection – approximately $500 ● Other inspections – sewer scope, septic, etc. ● Loan application – 5 days or less ● Title review ● Appraisal ● Loan approval ● Document signing ● Walk through ● Closing ● Receive your keys!
  33. 33. What is Escrow? Escrow is a third party intermediary that represents neither the buyer nor the seller. What do they do? • Hold the earnest money • Arrange for payoff of any liens (seller’s mortgage, utilities, etc.) • Coordinate the signing appointments for all parties • Receive and disburse funds for closing • Arrange to notify county offices to change ownership
  34. 34. Signing and Closing A few days before closing you will sign your closing documents and have a walk through. On closing day, you’ll probably get your keys at about 5pm.
  35. 35. Short Sales and Bank-Owned
  36. 36. What is a Short Sale?
  37. 37. What is a Short Sale? The owner owes more on the mortgage than the home is worth ● Usually pre-foreclosure, but not always ● Listed for less than what’s owed to the bank ● Requires 1 - 2 banks’ approval (usually 2) ● May have other liens (taxes, utilities, HOA) We Can Help With a Short Sale! ● See short sales with a Redfin agent ● If you want to buy, work with a Redfin agent or a short sale partner agent ● Redfin partner agents work for other brokerages but share Redfin’s commitment to customer service ● Get a 15% commission refund
  38. 38. What is a Bank-Owned Property? ● A foreclosed home owned by a bank or lender ● Standard sale but: ►Verbal negotiations ►Long response times ►Repairs unlikely ►Legal addenda may require an attorney ►Limited or no disclosures ►Banks demand use of their own contracts ►Bank can back out any time until they’ve signed ►Contract often requires early release of earnest money
  39. 39. So… Where’s the Best Deal? ● Sellers who own their home outright ● Sellers who are relocating ● Estate Sales ● REO & Short Sales if “Best Deal” means lowest price
  40. 40. Shwag Slide! Puget Sound is home to the largest species of what animal?
  41. 41. The giant Pacific octopus grows bigger and lives longer than any other octopus species. The size record is held by a specimen that was 30 feet across and weighed more than 600 pounds! Averages are more like 16 feet and 110 lbs
  42. 42. Mortgages
  43. 43. Local Recommended Lenders *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders! DJ Caple Bay Equity LLC Phone: (425) 319-7734
  45. 45. What Do I Need To Do? First Steps… Step #1 ~SELECT YOUR LENDER ~Interview Potential Lenders  What causes rates to move?  How will I know when to lock my rate in?  Are you a mortgage broker or banker?  Does your company sell directly to Fannie, Freddie & Ginnie Mae?  Are you available if I have questions in the evening or on weekends?
  46. 46. Types of Lenders: ~ Mortgage Broker (sends file out) ~ Mortgage Banker (file stays in-house) ~ Mortgage Broker/Banker (can do either) ~ Loan Officer (at a brick & mortar) Good sources include: ~ Redfin's partner lenders ~ Referrals from friends, family & co-workers ~ Banks or credit unions you have accounts with ~ A large, national bank with an advertised rate ~ Your real estate agent ~ Online review sites, such as Yelp ~ BEWARE OF OUT OF STATE LENDERS! What Do I Need To Do? First Steps…Step #1 continued
  47. 47. Interest Rates What makes them move?
  48. 48. Interest Rates - How are they priced? Compare a rate of 4.375 with a cost of 1.848% to a rate of 4.750 with a credit of .345%. Which one will save you more money? Which one would you take?
  49. 49. Loan Amount $299,995, 4.375% save $67.09/month & cost $6,500 more. • In 5 years, you save $1,011 with 4.750%. • In 20 years, you will have saved almost $20,000 by taking the lower rate. Important Factors: How long you are going to stay in the house What is most important – how much cash you have at closing or lowest monthly payment possible? 4.375% 4.750% LOAN AMOUNT $299,995 $,299.995 INTEREST RATE / APR 4.375% / 4.582% 4.750% / 4.778% TERMS (MOS) 360 360 PAYMENT $1,497.83 $1,564.92 CASH TO CLOSE $11,548.91 $4,970.02 diff of $6,578.89 MONTHLY SAVINGS $67.09 SAVINGS (5 YEARS) $1,011 SAVINGS (20 YEARS) $20,000 5 YEAR SAVINGS $1,011 4.750% 20 YEAR SAVINGS $20,000 4.375%
  50. 50. What Do I Need To Do? First Steps…Step #2 ~CHECK YOUR CREDIT Before starting the application process, you should pay off all collection accounts that appear on your credit report T / F FALSE: Paying off old collection debts will bring the “date of last activity” to the current date, causing a negative effect on your credit score.
  51. 51. What Do I Need To Do? First Steps…Step #2 continued ~ If you want to look at your credit first: o  Experian, Transunion, Equifax • Pull report from each bureau - one per quarter o Review accounts, derogatory accounts (late payments, collections); public records (judgments, tax liens) o Do NOT try and repair your credit on your own o Work with a mortgage advisor who can help you  They work with borrower’s credit issues every day and know what steps to take  “What If” simulator
  52. 52. Credit Score… What You Need To Know To improve score: o Pay down credit balances to 30% of available limit o Don’t pay off old collection accounts o Don’t open or close any credit accounts  Unless opening new accounts to establish credit o Don’t buy any big ticket items (no new cars or furniture shopping!)
  53. 53. Credit Score… What You Need To Know o Paying debt on time and in full has the greatest positive impact on your credit score. o Late payments, judgments and charge-offs all have a negative impact. o Delinquencies that have occurred in the last two years carry more weight than older items. PAYMENT HISTORY - 35%
  54. 54. Credit Score… What You Need To Know o This factor marks the ratio between the outstanding balance and available credit. o Ideally, the consumer should make an effort to keep balances as close to zero as possible, and definitely below 30% of the available credit limit at least 2-3 months prior to trying to purchase a home. AMOUNTS OWED - 30%
  55. 55. Credit Score… What You Need To Know o This portion of the credit score indicates the length of time since a particular credit line was established. The longer the credit history, the better. Don’t close accounts you’ve had for a long time! LENGTH OF CREDIT HISTORY - 15%
  56. 56. Credit Score… What You Need To Know Hard Inquiry vs. Soft Inquiry – o Hard Inquiries: 2 -25 points (maximum # of inquiries that will reduce the score is 10 within 6-12mo) o Same type of inquiry within 30 days will count as one inquiry o Soft Inquiries – Yourself, Existing Creditors - No effect on score NEW CREDIT - 10%
  57. 57. Credit Score… What You Need To Know o The ideal combination of credit is 2-3 revolving accounts, 1-2 installment accounts and 1 mortgage. o You should have a minimum of 3 open and active tradelines. TYPE OF CREDIT USED - 10%
  58. 58. What Do I Need To Do? First Steps…Step #3 ~DETERMINE YOUR BUDGET & GET PRE-APPROVED Once you’ve selected a lender to work with, have them pull your credit and advise you on the steps needed to take in order to be able to purchase a home. After they’ve reviewed your income, employment, asset and credit information, they’ll be able to pre-qualify or pre-approve you.
  59. 59. How Much Can I Afford? o Establish comfort level for monthly mortgage payment o Trial period – Try on budget  Put difference between current rent payment and projected mortgage payment in savings each month for 6 months o Budget for future expenses or unexpected emergency  Starting goal: 3 months mortgage payment in savings  Long term goal: 6 months mortgage payment for each property owned in savings
  60. 60. How Much Can I Afford? DTI – DEBT TO INCOME RATIO (Back-End Ratio) Total Expense-to-Income Ratio Varies by Loan Program, (max 45% w/MI or self-employed) Mortgage payment + Monthly minimum debt payments divided by Gross monthly income Example: Monthly mortgage payment ($1,050) + monthly debt payments ($300) = $1,350 divided by your monthly income ($3,000) = .45 (45%) $1,350/$3,000 = 45%
  61. 61. How Much Money Will I Need? ~ Down payment – where is it coming from? ~ Closing costs – o How much are they o Who is paying for them? (Seller / Buyer) o Is there a lender credit? ~ Upfront Costs- o Inspection (approx $500) o Appraisal (approx $500 - $550) o Credit Report ($20-$45)
  62. 62. Organize Your Assets o Review bank statements (liquid funds)  No NSF charges  Large deposits will need to be sourced o 401(k), Stocks, IRAs, CDs etc…  60% of balance will be used for qualifying  Will need terms of withdrawal & paper trail of funds o Gift funds  Family member (will need gift letter)
  63. 63. Pre-Qualification vs. Pre-Approval ● Pre-qualification – Loan Originator will: o Either accept verbal verification or collect income/asset documentation  W-2, two pay-stubs, 2 years tax returns, bank statements, investment account statement o Review income, employment history, available cash for down payment and reserves (#mo of mortgage payment), credit report and determines eligibility o Run “AUS” (Fannie Mae Automated Underwriting) to get approval o Issue “Pre-Qualification Letter” stating what sales price you are pre- qualified for
  64. 64. Pre-Qualification vs. Pre-Approval ● Pre-Approval – Loan Originator will: o Collect income/asset documentation  2 years W-2s, most recent 30 days of pay-stubs, 2 years tax returns (if self-employed), 2 months bank statements, investment account statement o Run “AUS” (Fannie Mae or Freddie Mac Automated Underwriting) to get approval, and submits file to underwriting o Underwriter will review income, employment history, available cash for down payment and reserves (# mo of mortgage payment in bank), credit report and determine eligibility o Underwriter will issue “Pre-Approval Certificate” stating what sales price you are pre-approved for
  65. 65. Pre-Qualification / Pre-Approval o Redfin asks that you get pre-approved before your third tour o Pre-approval is required by sellers to consider offers o Pre-quals and Pre-approvals are typically good for 90 days o If you get multiple credit checks from multiple lenders within a 30 day period, this will only count as one credit check against your credit score o The application does not bind you to a lender, loan or rate o It’s important to do at the beginning of the process, so you can work on any items needed o Important to know your different financing options
  66. 66. Types of Loans o Conventional:  As low as 3% down o FHA:  3.5% down payment  Upfront MIP and monthly MI o VA Loan:  Veterans, active duty personnel, reservists/national guard, surviving spouses  No down payment required  Upfront Funding fee o USDA Loan:  No down payment required  Must be income & property eligible  Upfront Funding Fee o WA Bond Program:  Down Payment Assistance available – must income qualify
  67. 67. Things NOT to do! o Buy large ticket items o Close any credit accounts o Open any credit accounts (Don’t co-sign for anyone!) o Do any credit repair on your own o Plan vacation during process or when you expect to be closing o Change jobs  2 year history needed – don’t make any major changes
  68. 68. o Select Lender and Agent o Get Pre-approved o Find house and make offer (submit a P&S) o Once offer is accepted, order and pay for inspection o Negotiate any inspection issues, as needed o Sign loan application & disclosures, order and pay for appraisal o Loan gets underwritten and approved with conditions o Supply lender with any additional items needed o Underwriter gives final approval o Lender draws up closing documents and sends to escrow company o Escrow company contacts buyers and sellers for signing appointments – collects any funds needed to close o Lender funds loan, usually next day o Agent gives you the keys to your new home! o The Process…
  69. 69. Is Now A Good Time To Buy? (History of Interest Rates)
  70. 70. Is Now A Good Time To Buy? (History of Home Prices) $0 $25,000 $50,000 $75,000 $100,000 $125,000 $150,000 $175,000 $200,000 $225,000 $250,000 $275,000 $300,000 $325,000 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Price Year United States House Prices
  71. 71. Key Takeaways
  72. 72. So What Now? ● Make sure it’s the right time for you ● Start browsing online ● Check out our Home Buying Guide and Events page ● Find the right agent ● Look for a lender and get pre-approved ● Start seeing homes ● Make an offer & close the deal
  73. 73. Thanks for Coming! Questions? Get in touch: Brian Shields Check out our upcoming classes: