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New Homebuyer Presentation
 

New Homebuyer Presentation

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  • You may be wondering why Bank of America Home Loans is putting on this workshop. This workshop demonstrates our brand promise: We will always be a responsible lender and we will help create successful homeowners. Knowledge is power and the information you receive today will help you make more informed decisions about the homebuying process. In addition to information about the homebuying process, you will also receive information on how to protect your home, which in most cases is our biggest investment. We will also provide information about various affordable loan programs.
  • Since homeownership is a huge investment, before taking that step, you want to make sure that you understand your responsibilities as a homeowner and ensure that you have the tools in place that will help you be a successful homeowner. The information you will learn today will help you assess whether you are ready for homeownership. Let’s begin with the Advantages and Disadvantages of Homeownership. Who can tell me what some of the advantages are of homeownership? What about the disadvantages?
  • Those are all good comments. Here are some additional Advantages and Disadvantages you may want to consider: Advantages Tax benefit : you may typically be able to deduct mortgage interest, along with property taxes, from your taxable income. Please consult with a tax professional for more information Stability : Being a homeowner can give you a sense of stability and permanence. Gives you flexibility to make home improvements, you don’t have periodic rent increase, you establish relationship within your neighborhood Equity: equity is the difference between the value of your home and the amount you still owe on the mortgage. As you pay down your balance, you may build equity in your home. You may also gain equity as the market value of your home increases. You may use your equity to borrow money for home improvements, a new car, or school tuition Disadvantages: Maintenance and Repairs: you are responsible for your home maintenance Increased responsibility: home maintenance, mortgage payment
  • Besides weighing the pros and cons of homeownership, here are some otther questions to ask yourself: Are you ready to make a long term commitment to being a homeowner? Being a homeowner is usually a long term commitment, and should not be taken lightly. Are you prepared to maintain your home? And are you willing to make repairs yourself or hire someone to make repairs? Unlike a rental property where you can call your landlord to fix a problem, if something needs repair in your home, you are responsible for the repair. Are you able to establish and pay for all monthly utilities? Again, there is no land lord to pay for utilities and you need to be sure that you are prepared to pay for the usual telephone, gas, electricity, water and also trash and perhaps a gardener. Are you able to pay for the monthly taxes and insurance on a home? Besides property taxes, you are responsible for homeowner’s insurance which covers the home in case of fire, etc. Are you willing to make a long-term commitment to live in this home? Homeownership is a long term commitment, so if you plan to relocate in the near future you may want to reconsider buying a home at this time.
  • We have talked a little about prequalification, now let’s review the definition of a pre-approval. A pre-approval is a formal commitment to lend based on verification of income and assets. Because a pre-approval is a commitment to lend you money to buy a home the lender will order a credit report. Although not required it is wise to get a pre-approved before looking for a house because having the bank/lender’s commitment is like having “money in the bank” and it gives you more bargaining power with the seller.
  • Your Credit Report provides a lender a level of confidence in your willingness to pay back the money you wish to borrow How is good and poor credit history defined? Good credit history : a record of paying what you owe in a timely fashion and using credit responsibly Poor credit history : a record of not paying bills on times and allowing debt to build up. Poor credit doesn't make is impossible to obtain loan approval, but it does make it difficult, and approval usually comes with higher interest rates. No credit history : no record of borrowing money or using a credit card, so a lending institution is unable to evaluate your spending or repayment behavior. In this case, the first step is to establish a credit history Types of Credit (Traditional Credit) Installment : you sign a contract to repay a fixed amount of credit in equal payments over a period of time. For example loans to pay mortgages, automobiles, furniture, and major appliances Revolving : you have the option of paying the balance in full each month, making a minimum payment based on the outstanding credit balance, or making any payment amount as long as it exceeds the minimum payment requirements. For example credit cards such as bank or department store issued Open 30-day : you promise to repay the full amount owed each month. For example American Express, travel and entertainment charge cards, and accounts with local businesses
  • Think of your Credit Report like your Financial Report Card and your Credit Score as your Grade. Credit score changes as your credit information changes Fair Isaac initiated the standardization of credit scores for consumers, and ever since, credit scores have been known as FICO Scores. FICO Score Generally the higher FICO score, the less risk there is for a lender, and the more creditworthy a consumer is considered to be What is in a FICO Score: 35% Payment History – Advise: pay your bills on time. 30% Amount Owed – Advise: decrease your balance in order to increase your limit-to value ratio (amount of available credit currently being used) 15% Length of Credit History – Advise: Keep old accounts open and don’t swap accounts constantly 10% New Credit – Advise: Apply for new credit only when you really need it 10% Types of Credit – Advise: have a sensible mix of credit VantageScore: is a scoring method initiated by the 3 major credit reporting agencies, with the purpose of ultimately utilize just one method to measure credit risk.
  • You are entitle to a free Credit report once per year, or if you have been turned down for credit. Usually you will pay a small fee to get your credit score All three bureaus may not all have the same information Tips for maintaining a high credit score: Don’t “max out” your credit limit Reduce your credit card debt to below 25% of the limit Don’t open new accounts unnecessarily Strive for combination of different types of credit If there are mistake on your report contact the credit bureau reporting the mistake If you suspect identity theft contact all three credit bureaus immediately
  • How long does the process take? With the proper documentation, the standard process of applying for a mortgage loan should take between 30 and 45 days from Prequalification to Loan Closing. This slide outlines the proper documentation needed with your loan application that will help expedite the application process.
  • BAC is also proud to introduce the Clarity Commitment available on many products. In response to “Voice of Customer” we developed this simple one-[age home loan summary of key loan terms. It highlights important information about your loan in easy-to-read formant: loan details, payment information, rate, and estimated escrow charges.
  • The It’s Great to be Home workbook has a variety of tools that will help you prepare for homeownership, including the Home Features Checklist. You are also not alone when it comes to selecting a home. Some of the people on your “Home Buying Team” include: Real Estate Professional – an expert who knows exactly which homes are for sale, and which ones can meet your requirements and desires. Show them your pre-qualification letter to select homes in your price range The Real Estate Attorney – in some states you need a real estate attorney to make certain that all legal documents that bind you during the process are correct The Mortgage Lender – lenders can be banks, mortgage companies, savings and loans, credit unions, government agencies, or private individuals. Choose a lender that you trust and offers the best loan programs for your current finical situation. It’s also important to familiarize yourself with the types of dwellings you may want to purchase. Other types of homes include: 2-4 family Dwelling Co-operative apartments Townhouse Planed Unit Developments Manufactured Homes Modular Housing Land Lease **For detailed description of the different types reference “It’s Great to Be Home” book pg 41-43** Location: consider proximity to work, proximity to family and friends, neighborhoods Neighborhood: consider schools, shopping district, recreation, crime statistics It’s Time to Make an offer Have your Real Estate agent prepare a Purchase Contract You can negotiate the price and ultimately it is your decision as to the amount you are willing to pay for the home. A Real Estate Agent can guide you in the negotiation process
  • Making your monthly Payment is very important. The easiest method is to have the payment automatically deducted from your bank account each month. Other items to be prepared for include: Be prepared for additional costs such as utility bills, home maintenance, and repairs Adjust your budget according to your new obligations as a homeowner and do not take unnecessary debt that could jeopardize your financial future. Avoid Foreclosure The earlier you contact the lender the more options you may have Be honest with your lender
  • Maintaining your home is crucial in preserving its value. It is also one of your obligations as a homeowner. Make sure to use licensed contractors, do your homework, get recommendations from past customers.
  • BAC is a responsible lender and committed to helping create successful homeowners, this is our brand promise. We also promise Personal and reliable service by a mortgage loan expert Free homebuyer consultation and estimates Affordable loan programs and products for qualified borrowers And homebuyer education resources
  • This workshop was designed as a general overview of the loan process. We have a variety of resources available on line where you can obtain more detailed information, including a copy of the It’s Great to Be Home workbook.
  • We’ve also included an appendix of common mortgage terms, and your workbook has a more extensive list.

New Homebuyer Presentation New Homebuyer Presentation Presentation Transcript

  • It’s Great to be Home™ Homebuyer Workshop Presented by XX <Date>
  • It’s Great to be Home™ Homebuyer Workshop
    • Introduction
    • Bank of America Home Loans promise:
    • We will always be a responsible lender.
    • We will help create successful homeowners.
    • The purpose of this seminar is to empower you with the knowledge to make wise financial decisions throughout the home buying process.
    • From this session you will learn:
      • The steps you can take to be a responsible homeowner and preserve your biggest lifetime investment.
      • Information about affordable mortgage programs and services designed to help borrowers become successful homeowners.
  • Before You Start Looking for a Home
    • Owning a home is not for everyone:
      • Some people do not want the responsibility.
      • Others do not want to change their spending habits in order to keep up with monthly payments and maintenance on a home.
    • By the end of this session, you will have a better idea if homeownership is in your best interest.
  • Homeownership Advantages and Disadvantages *Consult your tax advisor Advantages Disadvantages Tax benefits* Maintenance and repairs Equity in property ownership over the long-term No guarantees that the property will appreciate in value Pride of owning a home Decreased mobility
  • Should I Buy a Home or Not?
    • Knowing how homeownership fits into your larger financial plan is important.
    • Ask yourself if owning a home is an achievable goal given your current situation, and prioritize it among any other financial goals you may have.
    • Also ask yourself:
      • Would buying a home mean stretching to my financial limits?
      • If so, where can I make changes in my budget to keep it more balanced?
      • Will I still be able to save enough for other opportunities or unexpected emergencies?
  • Managing Your Money
    • Now that you have decided you want to become a homeowner, you need to create a savings and spending plan that is realistic to your lifestyle. Visit www.bankofamerica.com/homebuyereducation to download the following helpful tools:
      • Monthly spending and saving plan
      • Daily spending worksheet
    • Bankofamerica.com/homebuyereducation also provides helpful tips on managing your money.
  • How Much Should I Borrow?
    • Now that you have established a budget and savings plan
    • Ask yourself, “How much should I borrow?” instead of, “How much could I borrow?” This is an important distinction.
      • Having a full understanding of your current and future financial goals is an important factor to help understand how homeownership will fit into this scenario.
    • When you think of buying a home, ensure that your expectations are realistic.
      • Keep in mind how much you can comfortably afford to spend on a home without putting the rest of your financial plans on hold, so you can enjoy the benefits of homeownership more fully.
        • A rough estimation for how much home you can possibly qualify for is to multiply your gross annual income by 2.5 to 3.
        • You also need to consider other monthly obligations like, homeowners insurance, homeowners association fees and home maintenance.
      • Also consider whether you have sufficient cash available for a down payment and closing costs.
  • How Much Should I Borrow?
    • Once you determine a monthly housing payment you can comfortably afford, including other costs of home ownership, such as insurance, homeowner association fees, etc., the next step is to get an estimate of how much you can comfortably borrow.
      • One of the easiest ways to do this is to prequalify for a loan.
      • Prequalification is a good first step to seeing what your lender could offer you in terms of loan amount and the type of loans available to you. (Please note that prequalification is not a loan approval or commitment to lend.)
  • Getting Prequalified Before Applying for a Mortgage Loan
    • Prequalification
      • Prequalification is a process that provides an estimate of your borrowing power.
        • The process estimates how much money a prospective home buyer might be eligible to borrow before they apply for a loan.
        • You will need to provide information about your credit, assets and debts.
    • Preapproval 1
      • Preapproval is a formal commitment by the lender to lend you the money to buy a house based on the verification of your income, assets, employment and debt. It is subject to an appraisal and title review of the property after you sign the contract to purchase, and no change in your financial condition before final loan approval.
    1 If the interest rate is not locked or the rate protection expires, any rate increase may lower the amount for which you have been preapproved.
  • What Is Credit and Why Is It Important?
    • Credit is the act of borrowing money with the promise to pay it back in the future.
    • When you apply for credit, the lender reviews your credit history to help them make a decision to approve or deny your credit request.
      • This history comes from a credit report.
    • A strong credit history can open up opportunities, making it easier for you to get:
      • A mortgage loan
      • Lower interest rates and/or closing costs
  • What Is a Credit Report and a Credit Score?
    • Lenders report your credit history to a credit reporting agency (also known as credit bureau) who creates a credit report that contains your payment history, personal information, collection accounts, lender credit inquiries and public records information.
      • It also shows whether you have paid your debts on time, if you have ever been late in making payments, or if you have ever failed to make payments.
    • A credit score is a single number that summarizes your traditional credit history on your report.
      • FICO score is a proprietary (privately owned) model used extensively in the mortgage industry.
        • Score range: 350 – 850
      • Vantage Score is developed jointly by the three major national credit reporting companies. It is a consistent, generic way for the agencies to provide a credit score.
        • Score range: 501 – 990
  • Ordering a Credit Report and a Credit Score
    • You should obtain your own credit report to verify that all information is accurate, and to get a sense of how others view your credit.
    • You can request a free credit report once a year from each credit bureau:
      • Experian
        • 1.888.397.3742
        • www.experian.com
      • TransUnion
        • 1.800.888.4213
        • www.transunion.com
      • Equifax
        • 1.800.685.1111
        • www.equifax.com
    • You can also obtain your free credit report online at www.annualcreditreport.com .
  • Loan Application
    • The application provides information about a prospective borrower's employment, income, assets, debts, the purpose of the home loan and about the property itself.
    • Items usually required for submission with the loan application include:
      • W-2s and federal income tax returns for the last two years
      • Paycheck stubs covering the past 30 days showing current and year-to-date income (if self-employed, different documents are required)
      • Three most recent monthly statements for any checking, savings or other financial accounts to show the source for down payment and closing costs funds
      • Documents verifying other income sources or assets (such as Social Security, alimony, child support, pension, stocks, IRAs, 401k, etc.)
  • Affordable Mortgage Products and Programs
    • Our products and programs offer a wide variety of solutions that can increase homeownership opportunities for people who might have difficulty qualifying for a traditional mortgage.
    • We have a wide range of loan products and programs that fit different financial situations.
    • By learning more about the different types of home loans and their advantages, you’ll have the knowledge and confidence to choose the home loan that’s right for you.
    • Our new interactive Bank of America Home Loan Guide located at bankofamerica.com/homeloans can walk you through the homeownership process.
  • Affordable Mortgage Products and Programs
    • Our affordable loan programs offer a number of ways to open doors to homeownership for low-to-moderate income (LMI) borrowers and first-time homebuyers.
      • An LMI borrower is a borrower whose income is less than 80% of the median income for the area they live in.
      • LMI borrowers may apply for the following:
        • FHA-insured loans
        • VA fixed and adjustable-rate loans for veterans
        • Affordable Loan Programs
        • Rural Housing Service Loans
        • Mortgage Revenue Bonds
        • Down Payment Assistance Programs
    • The American Recovery and Reinvestment Act of 2009 offers a Federal Government tax credit of up to $8,000 for first-time homebuyers until December 1, 2009. Ask your tax advisor for details.
      • Certain states are also offering state tax credits for first- time homebuyers through December 2009.
  • Bank of America’s Clarity Commitment™
    • It’s a one-page loan summary of key loan terms given to you in conjunction with the official documents received in your loan package.
    • It is intended to be a clear and simple description of your loan terms.
    • It’s very important that you read and understand all your loan documents
      • Don’t hesitate to ask questions if you don’t understand something before signing any document .
      • The summary is provided as a convenience, does not serve as a substitute for a borrower's actual loan
      • documents, and is not a commitment to lend. Borrowers should become fully informed by reviewing all of
      • the loan and disclosure documentation provided.
    Note: Clarity Commitment™ not available on all products.
  • Finding a Home
    • Home features checklist
      • Before you start looking for a home, write down the desired characteristics and evaluate how the homes you look at meet your desires.
    • Who is on your “home buying team”?
    • When looking for a home, consider:
      • Different types of homes
        • Single-family
        • Duplex
        • Condominium
        • Other
      • Location
      • Neighborhood
      • Space needs
    • It’s time to make an offer!
  • It’s Great to be Home
    • Making your monthly payment:
      • The preferred payment method is an automatic draft from your bank account.
      • If mailing, send your payment so that it arrives on or before the due date to avoid late fees.
      • Write down your account number on your check.
      • If necessary, include any appropriate escrow expenses (taxes and/or insurance) in your monthly payment.
    • Avoiding foreclosure:
      • Call your lender if you are having problems making your monthly payment. It is very important that you contact your lender early !
      • In addition to speaking to your lender, there are many nonprofit housing counseling organizations that have expert staff to assist you free of charge.
        • Check the www.HUD.gov website for a list of HUD approved counseling agencies
  • It’s Great to be Home
    • Home damage:
      • If the damage to your home is covered by your homeowner’s insurance policy, contact your insurance agent and fill out a claim.
    • Preserve your home:
      • Your loan requires you to maintain your property in good condition.
      • Always use licensed contactors for repairs you are unable to do yourself.
  • How We Could Help You Achieve Your Homeownership Goals
    • Our dedicated mortgage loan officers are committed to helping you become a successful homeowner.
    • That’s why we’ll begin helping you gather the information you need to decide if the time is right for you to purchase a home.
    • We also promise you:
      • Personal service provided by a reliable mortgage loan officer who will work with you to explain your loan options in clear terms so that you can make the choices that are right for you.
      • Free homebuyer consultation and estimates, so you’ll know how much home you can comfortably afford before you begin looking.
      • Affordable mortgage loan products and programs for qualified borrowers.
      • Convenient ways for you to manage your monthly payments.
      • Homebuyer education to help you decide if the time is right for you to buy a home.
        • Visit www.bankofamerica.com/homebuyereducation for more information.
  • Home Buying Online Resources
    • For Online Homebuyer Education Certification, visit:
      • www.bankofamerica.com/homebuyereducation
    • For Online Homebuyer Education Certification in Spanish, visit:
      • www.bankofamerica.com/mihogar
    • Download a free electronic copy of Bank of America’s It’s Great to be Home ™ Workbook* referenced throughout this presentation ( ) at:
      • www.bankofamerica.com/neighborhoodlending
      • *Workbook is located under the “Counseling, Education, & Grants” section of the Web site.
  • Appendix: Common Mortgage Terms
    • Annual Percentage Rate (APR) — the method used to calculate the total cost of your loan. The calculation includes the mortgage interest cost over the life of the loan and certain out-of-pocket costs you may pay to close your loan.
    • Down Payment — the sum of money needed up front to pay for a home; a mortgage loan covers the rest of the cost.
    • Equity — the difference between the value of your home and the amount you still owe on the mortgage.
    • Gross Monthly Income — the total amount a person earns per month before any taxes or expenses are deducted.
    • Insurance — there are two types of insurance fees typically collected each month as part of your mortgage payment: homeowner’s insurance which protects your property in case of damage, and private mortgage insurance which protects your lender in the event you can’t pay your mortgage.
    • Interest — the cost of borrowing the money.
    • Interest Rate — the actual rate of interest you’ll pay over the life of the loan for the use of the funds. Your monthly mortgage payment (principal and interest) is calculated using the mortgage interest rate — not the APR.
    • Lien — legal claim against a property that must be paid when the property is sold.
    • Mortgage — term to describe the loan used to buy a home. The home is the collateral for the loan, and it acts as a guarantee that the loan will be repaid. A monthly mortgage payment pays off both the principal of your loan and interest as well as insurance and tax.
    • Points — optional one-time fees paid up front by the borrower to the lender to obtain a lower interest rate on the loan. Each point is equivalent to 1% of the loan amount.
    • Principal — the amount borrowed or remaining unpaid; also, that part of the monthly payment that reduces the outstanding balance of a mortgage.
    • Taxes —property taxes assessed by your local government and collected by your lender as part of your monthly payment.
  • Bank of America, N.A., Member FDIC Equal Housing Lender © 2009 Bank of America Corporation. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. 00-62-1471NSB