Seattle - Free Mortgage Class 1.15.13
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Seattle - Free Mortgage Class 1.15.13






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  • Chart: rates rise or remain relatively unchanged? Experts and Bankrate analysts predict where mortgage rates are headed over the next week.This week (July 5-11), 31 percent of the panelists believe mortgage rates will rise over the next week or so; 38 percent think rates will fall; and 31 percent believe rates will remain relatively unchanged (plus or minus 2 basis points). Read more: Rate Trend Index - Mortgage Rate Trends -
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Seattle - Free Mortgage Class 1.15.13 Presentation Transcript

  • 1. How to Purchase and Finance Your Home Seattle, WA January 15, 2014 Neressa Carr Redfin Allie Howard Redfin Special Guest: Julie Jones Cobalt Mortgage
  • 2. Neressa Carr: Redfin Agent Seattle- King County ● Agent for 10+ years ● Closed 300+ homes ● Specialize in: First Time Home Buyers, Condos, town houses, Single Family, REO’s. ● Services: Central Seattle, North Seattle ● Lives in Green Lake
  • 3. Working with Redfin
  • 4. A Little Bit About Redfin Redfin has refunded more than $100 Million to customers and reaches $8 Billion in home sales; 97% would refer us to a friend. ● Customers, not commissions ● Informed decisions ● Right home for the right price  No obligation  Commission credit
  • 5. Your Redfin Credit
  • 6. When you ready to tour a home Click here when you decide See all deals & reviews
  • 7. 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
  • 8. Mortgages
  • 9. Local Recommended Lenders Julie Jones, Senior Mortgage Consultant MLO- 177001 Trained instructor with Washington State Housing Finance Commission (WSHFC). Taught over 400 first-time homebuyer classes over the past 19 years. Master of Social Work (MSW). Prior to working as a mortgage advisor, Julie counseled homebuyers on getting prepared for bank financing. Julie has advocated for various home ownership initiatives and programs from Habitat for Humanity to downpayment assistance financing initiatives. Past Board President and Board Member of the Washington Home Ownership Center. WHC is a statewide non-profit organization assisting low-to-moderate income first-time homebuyers purchase and preserve their own home. *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!
  • 10. Review Your Financial Situation ● Pull credit report, look for errors ● Establish comfort level for monthly payment ● Figure out how much monthly income goes towards debt typically 28 – 40% healthy ● Pay down credit balances to 1/3rd of high limit ● Don’t open any new lines of credit ● Don’t buy any big ticket items ● Determine source of funds ● Current employment status
  • 11. Pre-qualification vs. Pre-approval Loan pre-qualification is a BEST GUESS at your housing affordability. Prequalification is typically based upon a verbal conversation with potential borrowers and a lender and does not include formal underwriting or proof of documentation to support the borrower’s loan request. A loan pre-qualification is not a commitment to lend. Loan pre-approval is a COMMITMENT TO LEND. It comes after a formal underwriting of a borrower’s loan request. Loan preapproval is achieved with a complete mortgage loan application. Documentation, such as pay stubs, bank statements, and/or IRS tax returns, are typically required to support the loan request.
  • 12. Get Pre-Approved • Factors of Pre-Approval • Gross Income • • Net income if self-employed borrower • • Income before taxes and any other deductions 2 year employment history in similar field, may include education Debt • • • Loans listed on your credit report Child support or alimony Credit • • • Minimum of 12-24 months “clean” credit with no new adverse activity Minimum of 3-4 tradelines maintained for at least 12-24 months Cash • Total funds available for the purchase (downpayment, closing costs, etc) • Reserves • Final Loan Approval • Collateral (review and approval of appraisal)
  • 13. Facts on Getting Pre-Approved ● Applications are usually free and credit checks should not cost more than $20 ● You will get a better idea of any other action items you need to complete before you can buy ● Gives you a chance to discuss different financing options ● For every $100 you decrease your other debt, and are therefore able to increase your house payment, you can afford up to $20,000 more in sales price on a 30 year amortization loan. ● Your pre-approval stays valid as long as your income, debts, credit history, and assets remain the same or better ● The application does not bind you to a lender, loan or rate ● Being pre-approved is required by sellers to consider offers
  • 14. Calculating what you can afford… Monthly income (gross): $4500/month Maximum debt to income ratio (percentage) = 40-43% Calculation Example: $6500 x 43% = $2795 maximum debts allowed - $450 auto loan - $100 minimum payment on credit card(s) = $2245 is the most you may spend on a monthly mortgage payment PITI: Your Monthly House Payment P= Principal (amount of payment going toward original balance of loan) I= Interest (amount of payment going toward interest on the loan) T= Property Taxes I= Insurance Hazard/Homeowner’s Insurance: Replacement value, liability, possessions Mortgage Insurance: Covers lender against loss unless 20% equity/down NOTE: Homeowner’s Dues must be added for a condo or townhome.
  • 15. Credit History and Credit Scores • 3 credit bureaus: Equifax, Experian, TransUnion • Credit score range: 350- 850 • Most lenders use the middle score numerically: • Primary wage earner’s mid score or lowest of both/all mid scores • Minimum credit score for most loan programs is 660 • “Best” credit score for most loan programs is 740 • Factors of credit scoring • Credit Rating Past delinquencies 15% 10% 10% Past Delinquencies • Revolving debt ratio Revolving Debt Ratio • Age of credit file Age of Credit File Debt Diversity 30% • Debt diversity • Inquiries Inquiries 35%
  • 16. Cash to close: Your Good Faith Estimate Down payment Non-recurring costs Prepaid Items Title insurance Per diem interest Escrow Insurance Appraisal Property Taxes Credit Report HOA/Condo Dues 3.5-5.0% minimum down Important! A Good Faith Estimate is a breakdown of your total cash-toclose. The estimate will include downpayment, non-recurring costs, and prepaid items. Make sure you understand the total cash required of you to close! Flood Certification Tax Service Fee Underwriting Fee Discount Points
  • 17. Organize Your Assets ● Plan for your cash to close • Cash accounts • 401(k), stocks, other investments. Note: Find out how long it will take to liquidate funds and have funds available to you for closing. Some processes can take up to 2 weeks. ● Gift funds ● Have plan in place before you start shopping
  • 18. Choose a Loan Program Conventional FHA • Min 3.5% down, can be gifted ● Min 5% down, can be gifted • Minimum credit score 640, most lenders ● Higher credit standards (680+) ● Mortgage insurance can be paid up •Up front and monthly mortgage front, monthly, or a combination ● Up to $417,000 loan amount** **Up to $506,000 in Seattle SMSA insurance required • If condo, must be FHA approved. Verify at • Up to $417,000 loan amount** **Up to $506,000 in King and Snohomish VA • Active duty or reserves only • No monthly mortgage insurance • Can be 0 down up maximum guarantee JUMBO • Loans over $506,001 • Minimum credit of 700+ • Minimum of 20% down with most investors** **Can do 10% down with a combined loan scenario
  • 19. Key Loan Choices ● Types of Loans: ► Fixed Rate: 15,20,30 year terms ► Adjustable Rate Mortgage (ARM): 3/1;5/1;7/1;10/1. “Hybrid” Fixed Details of ARM: Index; Margin; First, Annual & Lifetime Caps i.e. Index: 1 YR LIBOR; Margin: 2.75%; Caps: 2/2/6 ● Interest Rates ► Points are the price of interest rates, 1 point = 1% of the loan amount ► Points paid buy down an interest rate ► Locking a rate occurs after you have a signed and accepted offer on a home ► What is the Annual Percentage Rate (APR)? Rate Price (points) 4.50% 0.0 (closing costs only, no points) 4.25% 1.0 (closing costs + 1 point) A good lender helps borrowers calculate their break-even to determine if paying points is right for them– doesn’t just focus solely on the interest rate!
  • 20. Interest Rates and Pricing ► Investors use “risk-based” pricing ► Factors include, but are not limited to:    Middle credit score of borrowers (lowest of all borrowers) Loan to Value (LTV) & Combined Loan to Value (CLTV) Loan amount and Loan Program (FHA, VA, Conventional, Jumbo) a) b) c)      Conforming: Up to $417,000 Expanded Conforming: $417,001 - $506,000 (King, Snohomish, Pierce)** Jumbo: $506,001 and higher Loan type: Fixed vs. Adjustable Rate Mortgage (ARM) Loan term: 15, 20, 30 year amortization Type of property: Single family home, townhome, Condo Number of units: 1-4 units Occupancy: Owner occupied, vacation home, investment ** Loan limits set for 2014.
  • 21. Where Are Rates Headed? Type of Loan November 27, 2013 November 21, 2013 30-Year Fixed 4.29% 4.22% 15-Year Fixed 3.30% 3.27% 5/1 ARM 2.94% 2.95% 1-Year ARM 2.60% 2.60%
  • 22. Where Are Rates Headed?
  • 23. After Class… Please fill out the survey that was handed out at the beginning of class. We appreciate the feedback! Check out our upcoming classes and events at: Questions? Get in touch: Neressa Carr206.227.3332 Julie Jones 206.274.5198 Allie Howard 206.859.2827