Redfin's Free Mortgage Class - San Diego, CA
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  • 5 minute break timer.To begin the timer, when in presentation view on the slide, click advance once and you will see the red appear from left to right. When the entire bar is red your break is up!
  • Point out reviewsUpdating this page: This should be updated based on your Local Rec. Lender. Just go to the page click “Print Screen.” Come back to this page, click on the large image, click delete, and then right click and paste. Size the images so it fits the page. The right click again and click “Send to back.”
  • [REQUIRED – Update each time with latest rate information]
  • Chart:


  • 1. Financing Your Home Kyle Crabb, Redfin Agent, San Diego Inland December 17, 2013 San Diego, CA @Redfin
  • 2. 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
  • 3. Overview of a Purchase Research Search Offer Closing Neighborhoods Define Preferences Comparables Earnest Money Real Estate Agents Saved Search Draft Offer Docs Inspection Mortgage Options Home Tours Negotiate Loan application Preapproval Open Houses Mutual Acceptance Title Review Consider your needs Appraisal Financing Approval Closing
  • 4. Understanding the Market
  • 5. San Diego July Stats
  • 6. San Diego Homes for Sale
  • 7. San Diego Listing vs. Sold Price
  • 8. Mortgages
  • 9. Review Your Financial Situation To Buy or Not to Buy ● Pull credit report, look for errors ● Establish comfort level for monthly payment ● Figure out how much monthly income goes towards debt: 28 – 33% healthy ● Pay down credit balances to 1/3rd ● Don’t open any new lines of credit ● Don’t buy any big ticket items ● Source of money ● Current employment status
  • 10. Getting Pre-Approved A pre-approval letter is a letter from a bank or a lender estimating how much they'll lend you ● Establishes what you can afford & makes offer process go faster ● What’s the difference between Pre-Approval and PreQualification ● Good for 90 days, depending on lender ● Ask for a few different amounts ● Redfin asks that you get pre-approved before your third tour ● Are gift funds involved? ● How much do you have for a down payment? Information needed: ● W-2, two pay-stubs, tax returns, bank statements
  • 11. Getting Pre-Approved Income oSalary—Past 30 days oHourly—Consistency and history oSelf-employed—Two-year average Credit Assets o640 for FHA o680 for Conventional o720 for Rate Improvement o Down Payment o Closing Costs o Cash Reserves
  • 12. Who Applies for the Loan? ● ● ● ● ● ● Joint Applicants: All for one, one for all No ―co-signors‖ allowed today Parents can be non-occupant co-borrowers Married people do not have to both be on the loan Once on the loan, always on the loan unless you refinance It is okay to be on ―‖title only‖
  • 13. Loan Amount Impact Criteria ● $417,000 — Conforming Loan – Fannie/Freddie ► Lowest Rate for 30 fixed ► Desktop Approval Available – instant ● $625,500 – High Balance Conforming Loan ► For High Cost Areas ► Higher Rate ► Credit Score sensitive ● $625,501 and up – Jumbo Loan ► Highest Rate ► Portfolio Approval, guidelines vary ► Lots of review ► ARMs very popular
  • 14. Show Stable Employment Salaried Employee  W2’s are historic – 2 year history  Most recent paystubs – one month  Salary increases count immediately Self-Employed (most affected by lending changes)  Two-Year History (Tax Years)  Same line of work (strategic) Hourly Wage Earner  Consistent hours over 1-2 year period  Verification of employment important
  • 15. Comparing Loan Estimates ● Gather loan estimates ► A minimum of three, more is better ► These aren’t final numbers, but within a few thousand dollars ► Compare similar loans  Program (FHA, conventional)  Timeframe (same day) ● Compare costs side-by-side ► Discount & origination points ► Interest rates ► Insurance premiums (FHA, PMI) ► APR (interest rates + fees + points + PMI)
  • 16. Types of Loans ● Conventional: ► As low as 5% down ► Fixed or adjustable rates, conforming or non-conforming ● Federal Housing Administration Loan (FHA): ► Always have mortgage insurance ► Buyers need only a 3.5% down payment ● VA Guaranteed Loan: ► Veterans, active duty personnel, reservists/national guard, surviving spouses ► No down payment ● Ask your lender if they have special loan programs ► Example: BB&T Chips Program
  • 17. Loan for your Down Payment  Conventional – 20% down payment  Conventional – 5% for loans over $417,000  Conventional – 10% down, up to $625,500  FHA – 3.5% down, up to $729,750  VA – 0-3% down, lenders vary as to loan limit Size of down payment affects seller perception
  • 18. Organize Your Assets Lenders Will Require 2 Months of Statements: Liquid ► Do not move money around—paper trail ► Large deposits and transfers are sourced Retirement Accounts (reserves) ► Consider a 401k Loan ► Provide all accounts to your lender Gift Funds ► Family members only
  • 19. Review Your Debt | Credit History Know Current Credit Score ● pay to get your score; no affect on scores ●Limit credit checks by lenders ●There are 3 bureaus, middle score counts ●With co-borrowers, lowest middle score counts Fix Errors ●Remove duplicates ●Resolve disputes ●Reduce credit card debt (33% of limit) ●Do not open, close, or change credit lines ●Do not make large purchases
  • 20. 15-Minute Break 15 mins 7.5 mins Let’s Get Started! End
  • 21. How much can you borrow? Lenders tolerate more than most borrowers: ● ● ● ● ● Fannie Mae – 45-47% of gross monthly income Freddie Mac – 45-49% Jumbo Lenders – 43% PMI Carriers – 41% FHA – 50-52%
  • 22. Debt to Income Scenario ● Earns $10,000/month ● Has car payment $350 ● Wants to buy a home for $750,000 ● Has 20% down payment ► $10,000 x 45% = $4,500 ► $4,500 – $350 (other debt) $600,000 Loan ● 30/Yr Fixed, 4.125% ►= $2,908/Mo ● Property Taxes ►1.25% on purchase price ►= $781 ($9,375/yr) ● Homeowners Insurance ►= $125 ($1,500/yr) ● Total: $2,908+781+125 = Allowed $4,150/Month! = Qualified $3,814/Month!
  • 23. Low Down Payment Scenario ● Earns $6,500/month ● Has car payment $300 ● Wants to buy a home for $500,000 ● Has 10% down payment ► $6,500 x 41% = $2,665 ► $2,665 – 300 (other debt) = Limit $2,365/Month! $450,000 Loan ● 30/Yr Fixed, 3.875% ► = $2,116/Mo ● Property Taxes ► 1.25% on purchase price ► = $520 ($6,250/yr) ● PMI = $203/Mo ● Homeowners Insurance ► = $100/Mo ($1,200/yr) ● Total: $2,116+520+100 +203 = Too High $2,939/Month!
  • 24. Choose a Lender Pre-Approval Letter is Critical ●Part of the offer ●Sellers want accountability, Local lenders preferred Using Referrals to find your lender ●From Redfin’s partner lenders ●From friends who recently financed a home ●From Realtor Research Your Lender ●Check Yelp, Berkeley Parents Network, Google ●Schedule a meeting by phone or in person
  • 25. Questions to Ask Any Lender ● Please describe your mortgage banking experience? ● How many transactions do you close each year and what % are purchase transactions? ● What does a "loan pre-approval― with your bank involve? ● Do you pre-underwrite my application, subject to the property address? ● Who handles your appraisals? ● Do you know your underwriter's first name? ● If I provide everything you request, how long will it generally take to get loan approval? ● Are you available on weekends or evenings if needed?
  • 26. Rate Shopping ● Within a one hour period, call your top three prospective lenders and ask: ► What is your rate for:  $417,000 and $625,500  Single Family Home  Assume 780 credit  Assume Owner Occupied  Assume 20% down payment (and what if I have 30% down?)  Assume no impounds  No points, no lender credits ● Then ask: ► What are the standard lender fees for this scenario? ► Can you close this in 30 days? ● Did you close your last three transactions on time? ● Did the homes appraise at or above the purchase price? ● Last ask: ● How can I learn more about you? (Realtors, website, testimonials)
  • 27. Understand Your Costs Get a Good Faith Estimate Itemized List of Fees: o Lender: Appraisal, Credit, Processing, Underwriting, Points o Escrow: Title Insurance, Documents, Notary Public o Government: Recording fee, Transfer Tax o Prepaid Items: Mortgage Interest, Homeowner’s insurance, impounds Good news! Loan payments are made in arrears, so your next loan payment will not be for almost two months!
  • 28. Local Recommended Lenders *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!
  • 29. Where Are Rates Headed? Type of Loan December 5, 2013 November 27, 2013 30-Year Fixed 4.46% 4.29% 15-Year Fixed 3.47% 3.30% 5/1 ARM 2.99% 2.94% 1-Year ARM 2.59% 2.60%
  • 30. Make Your Decision ● When possible, get a loan commitment ● Make alternative funds liquid (401k, stock)
  • 31. Putting it all together to find YOUR home
  • 32. Redfin - Benefits of MLS-Powered (Multiple Listing Service) ● All the homes for sale: 30% more listings ● You see what the agent sees: 4x the data ● Real-time market data: photos, details of just-sold homes
  • 33. Highlights of Redfin ● Mobile app ● Search by zip code or neighborhood ● Search by schools ● Saved searches/instant alerts ● Agent notes ● Price your home Any questions?
  • 34. Traditional vs. Redfin
  • 35. Experience With Multiple Offers This occurs when inventory is down and buyer interest is up. ● 5 Tips for Winning in a Bidding War ► Make the competition eat your dust  Stay a step ahead of other buyers  Set up saved searches & instant alerts ► Get pre-approved with a local lender & get underwriter approval ► Start the conversation early ► Write a letter & appeal to the seller ► Know your limits
  • 36. Future Events:
  • 37. After Class… Please fill out the survey handed out at the beginning of class. We’d love to get your feedback on how the class could improve. Questions? Get in touch! Kyle Crab