First Time Home Buyer Seminar Presented By... &
First Time Home Buyer Seminar Objective & Payoff To educate the first time home buyer so that they can confidently move forward in the home buying process. Topics Covered: Prequalifying for a mortgage Credit reports and scores Applying for a mortgage Gift Funds Good Faith Estimate
The first step in the home buying process is to.... <ul><li>Prequalify </li></ul><ul><li>Prequalifying is best considered a tool to use during your search for a new home. </li></ul>Here’s how prequalifying can help.....
Affordability & Price Range When you prequalify for a loan your credit report will be pulled. You will be asked to provide some basic information such as monthly income and debts. This information is then used to determine how much you can afford to pay monthly on your mortgage loan. Knowing this allows you to focus your house hunting efforts on a particular price range of homes thus saving you time!
More Benefits.... <ul><li>Being prequalified for a mortgage loan demonstrates to sellers and real estate professionals that you are serious and ready to buy. In addition it can give you an advantage when it comes to making an offer. </li></ul><ul><li>Prequalifying will make your final mortgage loan application go faster since you have already provided much of your information </li></ul>
What is needed to prequalify? <ul><li>A complete list of all debts (a credit report will be pulled to obtain detailed information and credit scores) </li></ul><ul><li>Employment information </li></ul><ul><li>Annual Income </li></ul><ul><li>A list of all bank and investment assets </li></ul><ul><li>How much money are you planning to put down? </li></ul>It is important to remember that prequalifying does not mean that you have been approved for a loan. To obtain loan approval a full application and underwriter review is required.
Credit Score A credit score is a number that represents the likelihood that a person will repay a debt. It is used as a tool by lenders to evaluate risk.
There are three Credit Bureaus that collect and report credit history information on consumers. They are.... Equifax Experian TransUnion Mortgage lenders pull a tri-merged credit report which combines the information from all three of the bureaus. Each Bureau generates a credit score based on the information found in their particular database. The median score from the three bureaus is the one that is used for qualifying for the mortgage loan.
1. Payment History 35% Impact Paying debt on time and in full has the greatest positive impact on your credit score. 2. Outstanding Balance 30% Impact The ratio between the outstanding balance and available credit 3. Credit History 15% Impact A longer credit history will increase your score 4. Type of Credit 10% Impact A mix of auto loans, credit cards and mortgages is more positive than credit cards only 5. Inquiries 10% Impact Shopping for new loans and credit cards in a short amount of time is negative
<ul><li>Loan Amount </li></ul><ul><li>Loan to Value (LTV) </li></ul><ul><li>Level of Documentation </li></ul><ul><li>Available Loan Programs </li></ul><ul><li>Interest Rate </li></ul>Credit Scores Impact
Preparing to Apply for a Mortgage Loan Begin to Gather these items.... Income * Earnings Statements: W-2 forms, recent pay stubs * If self-employed, 2 years tax returns and P&L statement * Additional income: social security, overtime, bonus, interest veteran’s benefits, child support, etc.... Assets * 2-3 months statements for checking & savings accounts (all pages) * Most recent statements for all stock or investment accounts (all pages) * Most recent statements for any retirement accounts (all pages) Debts * A credit report will be pulled and the loan officer will notify you if any additional documentation is needed * Documentation if alimony or child support payments are made
Continued... Property * Copy of purchase contract * Copy of cancelled deposit check Other * Drivers license or valid state ID * Employment information for the past 2 years (including contact info) * Residential street address for the past 2 years * Contact info for landlord if applicable * Complete copy of signed divorce decree and related documents * Documents regarding child support if paying or receiving * Any court documents relating to any bankruptcy action * Gift Letter statement if any gift funds are used for the transaction
Gift Funds Both FHA and Conventional loans allow for gift funds. Requirements for FHA Loans No Limit – All of the down payment and closing costs can be from a gift Acceptable Donor – Family, employer, charitable organization, etc... Donor cannot be anyone involved in the transaction Document the Transfer – provide documents from each step of the transfer Proof of Source – evidence the funds came from an account the donor owns Signed Gift letter – must state the gift amount, repayment is not required, the donor’s information and that the money is not from any person that is a party to this transaction
<ul><li>Borrower must contribute a minimum of 5% towards the down payment unless the gift amount is greater than or equal to 20% of the loan amount. </li></ul><ul><li>Acceptable Donors : relative, domestic partner, fiancé / fiancée, church, employer, non-profit organization </li></ul><ul><li>Gift Letter – must state the gift amount, that repayment is not required and the donors information </li></ul><ul><li>Receipt of gift funds – must show proof that the funds have been deposited into the borrowers accounts or is being held by the closing agent </li></ul>Gift Funds Requirements for Conventional Loans
FHA Property Requirements The Basic rule FHA abides by is that the property must be habitable and safe for the occupants
FHA will permit “as-is” appraisals on properties when minor property deficiencies exist. Repairs for minor cosmetic items is not mandatory . Examples of items NOT requiring repair Missing Handrails Cracked window glass Cracked or damaged exit doors Minor plumbing leaks Defective floor covering Insect / organism damage Worn-out countertops Damaged wall and ceiling materials Poor workmanship Crawl space with debris Lack of all-weather driveway surface Examples of items REQUIRING repair Leaking or worn out roofs Evidence of structural problems Defective paint surfaces in homes built before 1978 Repairs
Additional FHA Property Requirements Appliances If Appliances are present, they must be in working order and meet all local codes. If they have been removed they must either be replaced or the appraiser must adjust the value of the property to reflect the missing items. Heating and Cooling FHA does not require a property to have a cooling system. They do require that properties above the freezing line (Lee County) have a heating system. Regardless, if either are present they must be fully operational and in good condition. Pool FHA requires any home with a pool to have a working pump that is able to circulate water. They also require that the water level be high enough that the pump can work. Water clarity is not a requirement, but FHA does state that the quality of the water must not pose a health or safety risk.