First Time Home Buyer Seminar


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Step by step process to buying a home. Everything you need to know from making the offer, to getting the proper inspections, the paperwork, and closing process.
Mike Hall

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First Time Home Buyer Seminar

  1. 1. First Time Home Buyer Seminar Presented By: Mike Hall 614-937-4162
  2. 2. First Time Home Buyer Seminar <ul><li>Everything you need to know to make buying your first home easy and affordable. </li></ul><ul><li>Learn some of the financial reasons to buy a home. </li></ul><ul><li>Learn about your mortgage finance options and how to improve your credit. </li></ul><ul><li>Learn how to evaluate a home and make an offer. </li></ul>
  3. 3. Why buy now? <ul><li>$7,500 interest free loan that may turn into a grant that does not need to be repaid </li></ul><ul><li>Interest rates are near record lows </li></ul><ul><li>Huge selection to choose from means prices are lower </li></ul><ul><li>No money down options still available </li></ul><ul><li>There is no fee to use a Realtor to buy a home. </li></ul>
  4. 4. Why Buy A Home? <ul><li>Deduct the interest payment and property taxes </li></ul><ul><li>Stable housing costs. No landlord to raise your rent. </li></ul><ul><li>Grow your equity and wealth through appreciation of the property. </li></ul><ul><li>Future equity build up lets you set up retirement investments. </li></ul>
  5. 5. Renting Vs. Buying a Home <ul><li>$700 per month in rent </li></ul><ul><li>5% annual rent increase </li></ul><ul><li>After 5 years you have spent $46,415 in rent. </li></ul><ul><li>Net equity gain: $ 0 </li></ul><ul><li>You have nothing to show after spending all this money. </li></ul>
  6. 6. Renting Vs. Buying a Home <ul><li>$700 rent buys you a $972 mortgage payment (if you are in a 28% tax bracket). </li></ul><ul><li>Subtract $ 150 per month for month for taxes / insurance. Leaves 822 for an interest only payment </li></ul><ul><li>At 7% this buys you a 141,000 mortgage </li></ul><ul><li>Assume the house price is $150,000. 5% appreciation per year give you an extra $41,150 in equity. </li></ul><ul><li>$43,150 vs. $ 0? You do the math! </li></ul>
  7. 7. How to Afford a Higher Payments <ul><li>Mortgage interest and property taxes are tax deductible. </li></ul><ul><li>Change your withholding with your employer. </li></ul><ul><li>You can pay this extra money to the IRS, or pay it to yourself. </li></ul><ul><li> website has a withholding calculator. </li></ul><ul><li>You use the extra money to make the higher mortgage payment. </li></ul>
  8. 8. Are You Ready To Buy? <ul><li>Do you have a steady income? </li></ul><ul><li>Do you pay bills, including your rent, on time? </li></ul><ul><li>Do you have low to medium debt? </li></ul><ul><li>Do you have cash for closing costs or down payment? </li></ul><ul><li>Do you have 2 month’s reserves of PITI in the bank? </li></ul><ul><li>Do you have the ability to make the mortgage payments? </li></ul>
  9. 9. How Much Home Can You Afford? <ul><li>Housing costs should be less than 29% – 36% of gross monthly income. </li></ul><ul><li>Housing costs include mortgage payment, taxes, homeowners insurance, condo fees, other association fees. </li></ul><ul><li>Mortgage payment is based on the lender's &quot;qualifying rate&quot;. </li></ul><ul><li>Housing costs plus long-term debt not to exceed 40% to 55% of gross monthly income. </li></ul><ul><li>Long term debt includes car payments, credit card payments, other loan payments. </li></ul>
  10. 10. Why be Pre-Approved? <ul><li>You know what you can afford to pay before you look for a house. </li></ul><ul><li>You know if you are in a position to buy a home in your target neighborhood. </li></ul><ul><li>It tells sellers that you are a qualified buyer. </li></ul><ul><li>It lets you make an offer right away, before someone else does. </li></ul><ul><li>It makes it easier to get the service of a Realtor. </li></ul>
  11. 11. Approval Documents <ul><li>Provide 2-3 months of pay stubs. </li></ul><ul><li>2 years worth of tax returns or W2 forms. </li></ul><ul><li>Provide 6 to 12 months bank statements. </li></ul><ul><li>Proof of any additional qualifying income such as alimony and child support. </li></ul><ul><li>Show a 2 year employment history. </li></ul><ul><li>580 credit score needed for 100% financing. </li></ul>
  12. 12. Types of Loan Programs <ul><li>30,40,50 year fixed rate. </li></ul><ul><li>Interest-only mortgages. Option ARM Mortgages. </li></ul><ul><li>2/1 Rate buy-downs give you lower payments the first 2 years. </li></ul><ul><li>2/28 ARM stays fixed for the first two years, then adjusts annually. </li></ul><ul><li>80/20 Combo loan avoids the need for PMI (Private Mortgage Insurance). </li></ul><ul><li>A seller-held second mortgage lets buyers conserve cash. </li></ul>
  13. 13. 100% Financing & PMI <ul><li>100% financing can be done as a single loan or a combo loan (80/20) with NO PMI. </li></ul><ul><li>Some 100% financing loans also require PMI, while others don't. </li></ul><ul><li>PMI can be as much as 4% annually on the loan amount. </li></ul><ul><li>On a $100,000 loan, this can exceed $333 per month. </li></ul><ul><li>PMI can be removed when the LTV drops below 80%. </li></ul><ul><li>Property appreciation can eliminate PMI in a few years. </li></ul>
  14. 14. Credit Scoring Overview <ul><li>A credit report is an accounting of your credit history. </li></ul><ul><li>It records payment histories, amount of time accounts are open, credit inquiries, and results of legal proceedings. </li></ul><ul><li>A credit score can be between 350 and 800. </li></ul><ul><li>It is an indication of the probability of going 90 days late on any account within the next 24 months. </li></ul><ul><li>It has the greatest effect on your interest rate. </li></ul>
  15. 15. The Three Credit Bureaus <ul><li>Experian - FICO score (888-397-3742). </li></ul><ul><li>Equifax - Beacon score (800-685-1111). </li></ul><ul><li>TransUnion - Emperica score (800-916-8800). </li></ul><ul><li>Each bureau has its own scoring model and not all accounts report to all three bureaus. </li></ul><ul><li>You are entitled to a free annual credit report. </li></ul><ul><li>Credit reports can have errors and help you spot identity theft. </li></ul>
  16. 16. How Your Score is Used <ul><li>Your score is used to determine the maximum loan-to-value. </li></ul><ul><li>Your score is used to determine your base interest rate. </li></ul><ul><li>Your score is used to determine which mortgage programs you qualify for. </li></ul><ul><li>A mid-score below 500 limits you to 70% LTV and very high rates. </li></ul><ul><li>A mid-score of 580 or higher is required to go 100% LTV. </li></ul><ul><li>A mid-score of 700 gets you access to prime lenders. </li></ul>
  17. 17. How to Improve Your Credit Score <ul><li>Pay all bills on time. </li></ul><ul><li>Keep balances below 50% of available limit, and below 30% if possible. </li></ul><ul><li>Don't close unused accounts. The zero balance can help your score. </li></ul><ul><li>Pay off recent collection accounts or charge-offs. </li></ul><ul><li>Let old items over 2 years remain unpaid. </li></ul><ul><li>Become an authorized user on someone's credit card with a good payment history. </li></ul>
  18. 18. Working With Your Realtor <ul><li>Your Realtor is your agent. He or she provides the expertise you need to buy a home safely. </li></ul><ul><li>Your Realtor abides by a Code of Ethics and takes continuing education courses every year. </li></ul><ul><li>Your Realtor knows the community. </li></ul><ul><li>Your Realtor can provide you with lists of homes that meet your criteria and price range. </li></ul><ul><li>Your Realtor will prepare your offer and assist with negotiations. </li></ul><ul><li>Your Realtor will guide you through the home buying process. </li></ul>
  19. 19. Determining How Much to Offer <ul><li>Know what the comps are for similar homes. </li></ul><ul><li>Know the home's condition and short-term repair expenses. </li></ul><ul><li>Know how long the home has been on the market and how fast homes are selling. </li></ul><ul><li>Know your financing options. Get pre-qualified by your mortgage consultant. </li></ul><ul><li>Know the seller's situation and motivation. </li></ul><ul><li>Be prepared to negotiate. </li></ul>
  20. 20. Making an Offer to Purchase <ul><li>Your Realtor will fill out a purchase agreement with you. </li></ul><ul><li>The amount of earnest money will be determined. </li></ul><ul><li>Earnest money goes toward the down payment or returned to you if the deal does not go through. </li></ul><ul><li>The down payment and amount financed will be determined. </li></ul><ul><li>Determine a settlement date. </li></ul><ul><li>Understand what is included with the purchase of the home as in fixtures, appliances and even plants. </li></ul>
  21. 21. When the Offer is Accepted <ul><li>Schedule a home inspection. This can be done with your Realtor. </li></ul><ul><li>Schedule a home appraisal. This is done by your mortgage broker. </li></ul><ul><li>Get your mortgage application in process. </li></ul><ul><li>Select a title agency or escrow company. This is done by your Realtor. </li></ul><ul><li>Get a homeowner’s insurance policy. </li></ul><ul><li>Get your documentation together for your mortgage application. </li></ul>
  22. 22. Inspections and Tests You Need <ul><li>Termite inspection will uncover potentially devastating wood damage. </li></ul><ul><li>Home inspection will uncover any problems with your home's structure and systems. </li></ul><ul><li>Radon and mold tests will make sure you have no environmental hazards. </li></ul><ul><li>Municipal inspection lets you know of any code violations and hazards. </li></ul><ul><li>A Certificate of Occupancy may be required by your municipality. </li></ul>
  23. 23. Home Warranty Programs <ul><li>A service contract which helps protect against the expense of repairing or replacing covered home appliances and mechanical systems which breakdown due to normal wear and tear . </li></ul><ul><li>Basic coverage includes: heating system, plumbing system, electrical system, water heater, oven/range/cook-top, dishwasher, built-in microwave oven, garbage disposal, built-in whirlpool motor and pump, exhaust fan, garage door opener, sump pump and other items. </li></ul><ul><li>1-year contract is about $400.00. Golden Gate will negotiate so the sellers pay for this. </li></ul>
  24. 24. Property Appraisal <ul><li>Appraisal determines the estimated market value of the property. </li></ul><ul><li>  </li></ul><ul><li>Mortgage is based on the lower of the sales prices or the appraised value. </li></ul><ul><li>Value is determined by looking at recent sale prices of properties in your area that are similar to yours. </li></ul><ul><li>Adjustments are made for differences in property features and amenities. </li></ul><ul><li>The appraiser also looks at the property value based on its replacement cost. </li></ul><ul><li>An appraisal does not warrant the condition of the property or that it meets local code. </li></ul>
  25. 25. Understanding Closing Costs <ul><li>Property appraisal </li></ul><ul><li>Home inspection </li></ul><ul><li>Processing fee </li></ul><ul><li>Underwriting fee </li></ul><ul><li>Lender fee </li></ul><ul><li>Loan discount fee </li></ul><ul><li>Origination fee </li></ul><ul><li>Recording fees </li></ul><ul><li>Settlement Officer fee </li></ul><ul><li>Title insurance </li></ul><ul><li>Document preparation fees </li></ul><ul><li>Escrow of taxes and insurance </li></ul><ul><li>Prepaid interest </li></ul><ul><li>Credit report </li></ul><ul><li>Transfer taxes </li></ul><ul><li>Attorney / Notary fee </li></ul><ul><li>Survey Fee </li></ul>
  26. 26. Settlement Day <ul><li>Closing agent will prepare and present a HUD-1 form. This lists the money you owe and the credits you get. </li></ul><ul><li>The deed and mortgage will be recorded </li></ul><ul><li>Seller will provide proof of any warranties or inspections. </li></ul><ul><li>You will sign a stack of about 40 forms and documents. </li></ul><ul><li>You and/or the seller will pay the closing costs. </li></ul><ul><li>You get the keys to your new home! </li></ul>
  27. 27. Take The Next Step <ul><li>Work with your mortgage consultant, so he or she can help you find the program that is right for you and get pre-qualified. </li></ul><ul><li>Work with your Realtor ® to find suitable properties. </li></ul><ul><li>Don’t make any major purchases on credit or fill out any credit applications. </li></ul>Michael Hall Golden Gate Real Estate Cell: 614.937.4162 Office: 614.888.3600 Fax: 614.231.4653 Email: [email_address] Web:
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