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  • Welcome Housekeeping Rules Review Session 2 Preview Session 3 9:00 – 9:15 15 Minutes
  • Slides 2 – 5 9:15 – 10:00 am Don’t over complicate it – Document major short term and long term goals (i.e. to pay 50% on Sears and Providian instead of “get out of debt” Monitor spending habits to determine where adjustments can be made Develop a family spending plan with flexibility – allow for adjustments for unexpected expenses A documented plan is better than mental plans, road maps are a great starting point to get where you want to go
  • Slides 2 – 5 9:15 – 10:00 am Misers tend to be savers Conservatives while more cautious do not lean toward savings Carefree, Big Spenders and Over Spenders are do not save and throw caution to the wind, but can change with documented planning
  • Slides 2 – 5 9:15 – 10:00 am Monitor your normal spending habits w/o budget Keeping every receipt will help categorize spending Review spending to see where largest expendatures and possible cuts can be made Create a ‘spending improvement plan’ to concentrate on previously identifid areas Review every 30 days at minimum – can be more frequently if necessary. This will allow for adjustments to meet documented goals
  • 10 am – 11am Budgeting including exercises and participation Ask participants what they spend on a monthly basis for the above areas If they cannot tell you, emphasize the need for tracking This is a sample of successful money management expenditures
  • 10 am – 11am 15 min break 11:00 – 11:15am Actual average expenditures
  • 11:15 – 12:30 35% Credit History 30% Balance to limit ratio 15% History 10% Inquiry 10% Credit Mix 4 C’s of Credit Credit Capital Capacity Collateral Obtaining credit scores – see resource guide www.experian.com www.transunion.com www.equifax.com Tips for maintaining a good score: Pull credit on your own (1 to 2 times per year) Subscription to credit monitoring service Fraud alerts and “Do Not Extend” Statements Use reputable agencies such as CCCS for debt management and repair
  • 12:30 – 1:45 Loss Mitigation Game, Flowchart, Explanations Statistics/handout 1:45 – 2:00 break Review foreclosure process – (see flow chart) 30 days – letter 90 days – Notice of Default (NOD) recorded – this gives borrower an additional 90 days to cure delinquency Trustees sale must be advertised in minimum of three publications (Public Notice) 21 days after expiration of NOD Trustees Sale may take place After NOD expires, property can be redeemed by paying the total amount of past due including attorneys fees, publications fees, etc Alternatives Modification includes changing terms of original mortgage Interest rate reduction Extension of term (i.e. adding 10 yrs to mortgage term) Adding past due amount to end of mortgage and re-amortizing loan Deed in Lieu – Signing property over to bank or mortgage company Repayment Plan – taking past due payments and dividing them up, then adding them to future payments Selling property prior to Trustees sale
  • 1 hour left – 2pm – 3pm cover remaining topics!!! 3:00 pm start prep for departure/closeout after quick break – 10 minutes or less Slide 10 – 10 minutes Notice of default publications – newspapers and F/C services (this also includes contacting buyers via letter, phone or even door to door) At the auction – usually requires cash at the day of trustees sale After the auction – REO properties are forwarded to Brokers for final disposition on the open market, including MLS
  • Explain difference between fire and homeowners insurance (see word doc as handout and flip chart) Explain the fact of being under insured can be as detrimental as no insurance at all Replacement cost at current cost building materials and labor – these costs increase with inflation and should be updated annually Develop relationship with Police and Fire Departments (may include free evaluation by firefighters and officers at your home) FIRE Smoke alarms and ladders Fire-proof your home (brush clearance) Fire Sprinklers and extinguishers POLICE Burglar proof your home Windows, Doors and external lighting Eliminate obvious invitations Slides 2 – 5 9:15 – 10:00 am

Global wealthhbe2011 Global wealthhbe2011 Presentation Transcript

  • 1The Global Wealth Homeownership and WealthEducation Initiative
  • 2
  • Credit Building Steps1 Order creditreport2 Correct errors3 Be on time!4 Use credit wisely5 Createnontraditionalcredit6 Manage money
  • MORTGAGE BASICSBASIC MORTGAGE MATH
  • BASIC MORTGAGE MATHPITIDEBT RATIO =__________________TOTAL MONTHLY INCOME
  • BASIC MORTGAGE MATHCash RequiredFunds required at closing.Total Closing Costs+ Down Payment___________________CASH REQUIRED
  • BASIC MORTGAGE MATHDown PaymentHome Sales Price- Loan Amount__________________Down Payment
  • BASIC MORTGAGE MATHThe maximum amount a lender willloan based on constraints includingincome, debt and available cash.Home Sales Pricex Loan to Value(LTV)%______________________Maximum Loan Amount
  • 9
  • WHAT IS THEMORTGAGELANGUAGE?
  • MORTGAGE DEFINITIONS YOUSHOULD KNOW….PRINCIPAL-is the amount of money thatyou actually borrow or the amount of theloan that is still unpaidINTEREST- is the charge for using thelenders money.FIXED-RATE MORTGAGE LOAN- meansyou will always pay the same rate oninterest
  • MORTGAGE TERMS YOUSHOULD KNOWADJUSTABLE RATE MORTGAGE -means your rate will increase ordecrease once or twice a year.TERM- is the amount of time you haveto repay the loan.POINTS - refer to the type of fee thelender may charge.
  • MORTGAGE TERMS YOUSHOULD KNOWDOWNPAYMENT REQUIREMENT- is thelenders lowest allowable down paymentand is part of the purchase price thatthe buyer pays in cash.CLOSING COST-are the expenses buyersand sellers pay to transfer ownership ofa home.
  • Repayment Terms are:30 year fixed-mortgage20 year fixed mortgage15 year fixed mortgage
  • How do you choose the rightMortgage? How many years do you expect tolive in your home? How important it it to be free ofmortgage debt before facing longterm financial commitments? How comfortable are you with thecertainty of a fixed mortgagepayment versus a payment thatcan change over time.?
  • How do you choose the rightMortgage? How many years do you expect tolive in your home? How important it it to be free ofmortgage debt before facing longterm financial commitments? How comfortable are you with thecertainty of a fixed mortgagepayment versus a payment thatcan change over time.?
  • FEATURES OF A FIXED-RATEMORTGAGE Easiest Fixed-rate loan toqualify for Most poplar Best chance to keepmonthly mortgagepayments low
  • Advantages of Fixed-RateMortgages Interest Rate will remain the same for the lifeof the loan. Monthly mortgage payments will be stable Predictable monthly mortgage payments
  • 30 year-Fixed Rate Mortgage Easiest fixed rate loan to qualifyfor Most popular Best chance to keep monthlymortgage payments down
  • 20 year Fixed Rate Mortgage Amortizes over a 20 year period Offers the opportunity to own yourhome debt-free sooner Monthly payments somewhathigher than a 30 year mortgage
  • 15 year Fixed Rate Mortgage Offers lower interest rate than a 20year fixed rate mortgage and a 30year fixed rate mortgage Initial monthly payments will belower Interest rate changes are subjectedto two caps, one for eachadjustment period and one for lifeof your loan
  • ADJUSTABLE RATEMORTGAGES
  • Interest Rate changes arealways tied to a financialindex. Three most popular are:Treasury-Indexed ARMsCD-Indexed ARMsCost of Funds-Indexed ARMs
  • Treasury-Indexed ARMs Indexed to a six-month, oneyear or three year Treasury billsor securities Your interest rate will adjust toone of the terms you choose (6month, 1 year, 3 year)
  • CD-Indexed ARMs Adjust to a Certificate of Deposit(CD) index Rate adjustments typically occurevery six months, with a per capadjustment of 1 percent
  • 26
  • Costs of Funds Indexed ARMs Indexed to actual costs a particulargroup of lending institutions pays toa borrower Lenders using this index can adjustmortgage rates monthly, every sixmonths or annually Most popular: Cost of Funds Indexfor the 11th Federal Home LoanBank District of San Francisco
  • 28
  • Two-Step ARMARM that adjust one timeThe first adjustment wouldhappen at five years and themaintains a fixed ratemortgage for the remaining 23or 25 years of a 30 yearmortgage term.
  • 30
  • BEWARE!Offers lower interest ratesfor shorter term - usuallyfinancing 5,7 or 10 years.At the end of this loan termBalloon mortgages requirerefinancing or paying offthe outstanding balance
  • THE LENDING PROCESS
  • Loan Terms You Should Know:Annual Percentage Rate – shows costs ofloan expressed as a yearly interest rate.Commitment Letter – stating your loan hasbeen approved.Contingency – events that must happenprior to closing.
  • LOAN TERMS YOU SHOULDKNOW:Conventional Mortgage – any mortgage thatis not insured by the Federal GovernmentDebt-to-Income Ratio- Percentage of totaldebt payments to income.Deed- legal document conveying propertyDiscount Point – equivalent to 1% of thepurchase price.
  • LOAN TERMS YOU SHOULDKNOW:Down payment – part of the purchase pricethat the borrower pays in cash.Earnest Money – Money put down by apotential buyer to show that he or she isseriousEquity – owner’s financial interest in aproperty.
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  • 41MoneyManagement
  • 42 Writing down your goals Easily visible Keep it simple 30 Day Challenge Review and adjust Fail to plan – Plan to failKeys to Successful MoneyKeys to Successful MoneyManagementManagement
  • 43What Kind of Spender Are You? The Miser - hoarding, stingy person The Conservative - moderate, cautious The Carefree - spends without care The Big Spender – very generous The Over spender - spending beyond limits
  • 4430 Days to Success Live Normal for 30 days Track each expense – keep every receipt Evaluate after 30 days Create 30 day financial spending plan Can’t Fail – simply adjust!
  • 45Why Manage Your Money? Prepares you for large expenses Identifies wasteful spending Keeps control of financial future Encourages savings Strengthens loan application Helps to accomplish goals
  • 46Three Steps to Planning a Budget1. Write down your income2. Write down your monthly expenses3. Decide what to do with leftovermoney
  • 47What are Some MoneyManagement Tips? Plan according to current income Plan ahead for six months Include spending money for all Keep record-keeping simple Set money aside for emergencies Get consensus from entire family Pay yourself first at least 10% oftake-home pay
  • 48Tips for Savers Pay yourself first Open a savings account Save change at end of day
  • 49Review the Plan Is your budget working? Are all family members able to follow it? Which costs always seem to be overbudget? Are we getting closer to reaching ourgoals?
  • 50What Are Ways to Make MoneyManagement Easier? Carry written reminders of goals with you Carry as little cash as possible Use direct deposit Put items on layaway Buy only what you need
  • 51Spending Pie Chart (1)DesiredLivingEntertainmentSavings/InvestmentRetirement60%15%10%15%
  • 52Spending Pie ChartActualLivingInstallmentEntertainmentSavings/Investment60%18%20%-2%
  • 53CreditManagement
  • 54Why is Good CreditImportant? To rent, buy or purchase things youwant or need To save money by borrowing at alower interest rate To obtain a job To lease rental property
  • 55What is Credit? What is it? Why Should I Care? Who Else Cares?
  • 56Who Can Access Your Report? Creditors Collection agencies Insurance companies Employers Those you give permission You
  • 57Do You Know Your Score? What is a ‘Credit Score’? How do I get one? How do I make it better?
  • 58What Is Credit Scoring? Payment history Outstanding debt Credit history Types of credit Credit inquiries
  • 59Components of the ‘Score’ History Debts Age Inquiries Credit Mixture
  • 60Credit Scoring (FICO) 700 Approved 650-699 DU Approval 620-649 Man Review 500-580 Sub Prime
  • 61The 4 C’s of Credit Credit Capacity Collateral Capital
  • 62What Are Common CreditProblems? No credit Negative credit history High debt
  • 63Credit Management Credit Affects: Finance Employment Insurance Know your score Monitor often Limit Access Seek Professional Help
  • 64Protecting Yourself Identity Theft Maintaining Privacy Opting Out Keep Checking
  • 65How Long Does InformationStay? Bankruptcy 10 years Judgments 7 years Tax Lien 7 years Collection, Charge-Off 7 years Most Adverse Info 7 years Inquiries 2 years
  • 66What Are the Main CreditBureaus? Experianwww.experian.com(888) EXPERIAN (397-3742) Trans Unionwww.tuc.com(800) 916-8800 Equifaxwww.equifax.com(800) 685-1111
  • 67Equal Credit Opportunity Act Prevents lender’s discriminationon the basis of age, sex, race,marital status, religion ornational origin Requires written disclosure ofreason for denial within 30days
  • 68Fair Credit Billing Act Provides right to question if youthink your credit card bill iswrong within 60 days Requires creditor to beginresearch within 30 days Requires creditors to supply ananswer within 90 days
  • 69Fair Credit Reporting Act Protects your rights to knowwhat is in your credit reportand to fix mistakes
  • 70Credit Summary Credit is a useful tool Order your report Correct mistakes and fixproblems Protect your credit rating Manage your debts, so theydon’t manage you
  • 71ForeclosureProcess
  • 72Foreclosure Process California Process Judicial Non-judicial Foreclosure Process Flowchart Alternatives Loss Mitigation Modification Deed in Lieu of Foreclosure Repayment Plan Pre-foreclosure Sale
  • 73BUYING FORECLOSURES When to buy foreclosures Before the auction (Pre-foreclosure) At the auction After the auction (REO)
  • 74What Are My Alternatives? Special forbearance Mortgage modification Partial claim Pre-foreclosure sale Deed-in-lieu of foreclosure
  • 75Precautions Don’t sign papers you don’t fully understand Make sure you get all promises in writing Beware of any loans you are not formallyreleased from liability of your mortgage debtand contracts of sale Check with an attorney or your mortgage companybefore entering into any deals involving your home
  • 76Main Points to Remember Make your monthly payments on time. Contact your mortgage lender immediately and behonest about your financial situation. Have a plan to cure delinquency Arrange an appointment with a HUD-approvedhousing counseling agency www.hud.gov
  • 77ProtectingYourInvestment
  • 78Protecting Your Investment Types of Insurance Homeownership TipsYour Community1. Police2. Fire3. Others in your community
  • 79Types of Insurance Hazard Insurance Flood Insurance Special Hazard Insurance Mortgage Insurance
  • 80 Referred to as “Fire”Insurance Required by the Lender Protects against hazards suchas fires or stormsHAZARD INSURANCE
  • 81Liability Protection Legal responsibility for any injuries orproperty damage the owner or a familymember causes to other people Protection of the other structures and thehomes contents Living expenses, if displacedHOMEOWNER’S INSURANCE
  • 82Homeowner’s Insurance Features Dwelling coverage Other structures Personal property Loss of use Personal liability Medical payments coverage Deductible
  • 83FLOOD INSURANCE Required by lender if the property islocated in a flood zone Generally not covered under hazard orhomeowners insurance policy Protects during heavy rain, faileddams and inadequate drainagesystems
  • 84MORTGAGE INSURANCE Protects the lender in case theborrower defaults and the lender mustforeclose Generally required if thedownpayment is less than 20% of thepurchase price.
  • 85TITLE INSURANCEUsually required by the lender protectthe lender against any problemswith legal ownership of the property
  • 86MORTGAGE LIFE INSURANCE Life insurance policy that pays off theborrowers mortgage in the event ofdeath Allows family to continue to live in theproperty Always optional
  • 87HOME WARRANTY POLICY Protects the homeowner in the event ofcostly repairs Covers items such as heating, plumbing,air conditioning Annual Premium (renewable) Flat fee per service Buyer may request seller providepolicy
  • 88Know Your Community Meet your neighbors Read weekly community newspapers Accept the Welcome Wagon Visit city, town hall and library Volunteer for special events Attend neighborhood associationmeetings
  • 89Know Your Community Police DepartmentWhere is the nearest station Fire StationWhich station services your area HospitalWhere is the nearest hospital Elected OfficialsWho are your representatives
  • 90