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Redfin's Free Mortgage Class - San Diego, CA

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Redfin's Free Mortgage Class - San Diego, CA

  1. 1. Slide 1 of 30 Financing Your Home Presented by: Redfin’s San Diego City Team September 24, 2013 San Diego, CA Follow: @Redfin Like: http://www.facebook.com/Redfin
  2. 2. Slide 2 of 30 A Little Bit About Who We Are Redfin is a real estate brokerage that has helped over 20,000 people buy or sell a home; 97% would refer us to a friend. ● Customers, not commissions ● Informed decisions ● Right home for the right price  No obligation  Commission credit
  3. 3. Slide 3 of 30 Overview of a Purchase Research Neighborhoods Real Estate Agents Mortgage Options Preapproval Consider your needs Search Define Preferences Saved Search Home Tours Open Houses Offer Comparables Draft Offer Docs Negotiate Mutual Acceptance Closing Earnest Money Inspection Loan application Title Review Appraisal Financing Approval Closing
  4. 4. Slide 4 of 30 Understanding the Market
  5. 5. Slide 5 of 30 San Diego Market Stats
  6. 6. Slide 6 of 30 San Diego Home for Sale
  7. 7. Slide 7 of 30 Mortgages
  8. 8. Slide 8 of 30 Review Your Financial Situation To Buy or Not to Buy ● Pull credit report, look for errors ● Establish comfort level for monthly payment ● Figure out how much monthly income goes towards debt: 28 – 33% healthy ● Pay down credit balances to 1/3rd ● Don’t open any new lines of credit ● Don’t buy any big ticket items ● Source of money ● Current employment status
  9. 9. Slide 9 of 30 Getting Pre-Approved A pre-approval letter is a letter from a bank or a lender estimating how much they'll lend you ● Establishes what you can afford & makes offer process go faster ● What’s the difference between Pre-Approval and Pre- Qualification ● Good for 90 days, depending on lender ● Ask for a few different amounts ● Redfin asks that you get pre-approved before your third tour ● Are gift funds involved? ● How much do you have for a down payment? Information needed: ● W-2, two pay-stubs, tax returns, bank statements
  10. 10. Slide 10 of 30 Getting Pre-Approved Income oSalary—Past 30 days oHourly—Consistency and history oSelf-employed—Two year average Assets o Down Payment o Closing Costs o Cash Reserves Credit o640 for FHA o680 for Conventional o720 for Rate Improvement
  11. 11. Slide 11 of 30 Who Applies for the Loan? ● Joint Applicants: All for one, one for all ● No ―co-signors‖ allowed today ● Parents can be non-occupant co-borrowers ● Married people do not have to both be on the loan ● Once on the loan, always on the loan unless you refinance ● It is okay to be on ―‖title only‖
  12. 12. Slide 12 of 30 Loan Amount Impact Criteria ● $417,000 -- Conforming Loan – Fannie/Freddie ► Lowest Rate for 30 fixed ► Desktop Approval Available – instant ● $625,500 – High Balance Conforming Loan – ► For High Cost Areas ► Higher Rate ► Credit Score sensitive ● $625,501 and up – Jumbo Loan ► Highest Rate ► Portfolio Approval, guidelines vary ► Lots of review ► ARMs very popular
  13. 13. Slide 13 of 30 Show Stable Employment Salaried Employee  W2’s are historic – 2 year history  Most recent paystubs – one month  Salary increases count immediately Self-Employed (most affected by lending changes)  Two Year History (Tax Years)  Same line of work (strategic) Hourly Wage Earner  Consistent hours over 1-2 year period  Verification of employment important
  14. 14. Slide 14 of 30 Comparing Loan Estimates ● Gather loan estimates ► A minimum of three, more is better ► These aren’t final numbers, but within a few thousand dollars ► Compare similar loans  Program (FHA, conventional)  Timeframe (same day) ● Compare costs side-by-side ► Discount & origination points ► Interest rates ► Insurance premiums (FHA, PMI) ► APR (interest rates + fees + points + PMI)
  15. 15. Slide 15 of 30 Types of Loans ● Conventional: ► As low as 5% down ► Fixed or adjustable rates, conforming or non-conforming ● Federal Housing Administration Loan (FHA): ► Always have mortgage insurance ► Buyers need only a 3.5% down payment ● VA Guaranteed Loan: ► Veterans, active duty personnel, reservists/national guard, surviving spouses ► No down payment ● Ask your lender if they have special loan programs ► Example: BB&T Chips Program
  16. 16. Slide 16 of 30 Loan for your Down Payment  Conventional – 20% down payment  Conventional – 5% for loans over $417,000  Conventional – 10% down, up to 625,500  FHA – 3.5% down, up to 729,750  VA – 0-3% down, lenders vary as to loan limit Size of down payment affects seller perception
  17. 17. Slide 17 of 30 Organize Your Assets Lenders Will Require 2 Months of Statements ●Liquid ► Do not move money around—hard to paper trail ► Large deposits and transfers are sourced ●Retirement Accounts (reserves) ► Consider a 401k Loan ► Provide all accounts to your lender ●Gift Funds ► Family members only
  18. 18. Slide 18 of 30 Review Your Debt | Credit History Know Current Credit Score ●Myfreecreditreport.com: pay to get your score; no affect on scores ●Limit credit checks by lenders ●There are 3 bureaus, middle score counts ●With co-borrowers, lowest middle score counts Fix Errors ●Remove duplicates ●Resolve disputes ●Reduce credit card debt (33% of limit) ●Do not open, close, or change credit lines ●Do not make large purchases
  19. 19. Slide 19 of 30 15-Minute Break 15 mins 7.5 mins End Let’s Get Started!
  20. 20. Slide 20 of 30 How much can you borrow? Lenders tolerate more than most borrowers ● Fannie Mae – 45-47% of gross monthly income ● Freddie Mac – 45-49% ● Jumbo Lenders – 43% ● PMI Carriers – 41% ● FHA – 50-52%
  21. 21. Slide 21 of 30 Debt to Income Scenario oEarns $10,000/month oHas car payment $350 oWants to buy a home for $750,000 oHas 20% down payment o $10,000 x 45% = $4,500 o $4,500 – 350 (other debt) = Allowed $4,150/Month! $600,000 Loan o30/Yr Fixed, 4.125% = $2,908 oProperty Taxes o1.25% on purchase price = $781 ($9,375/yr) oHomeowners Insurance = $125 ($1,500/yr) oTotal: $2,908+781+125 = Qualified $3,814/Month!
  22. 22. Slide 22 of 30 Low Down Payment Scenario oEarns $6,500/month oHas car payment $300 oWants to buy a home for $500,000 oHas 10% down payment o $6,500 x 41% = $2,665 o $2,665 – 300 (other debt) = Limit $2,365/Month! $450,000 Loan o 30/Yr Fixed, 3.875% = $2,116 o Property Taxes o 1.25% on purchase price = $520 ($6,250/yr) PMI = $203 o Homeowners Insurance = $100 ($1,200/yr) o Total: $2,116+520+100 +203 = Too High $2,939/Month!
  23. 23. Slide 23 of 30 Choose a Lender Pre-Approval Letter is Critical ●Part of the offer ●Sellers want accountability, Local lenders preferred Using Referrals to find your lender ●From Redfin’s partner lenders ●From friends who recently financed a home ●From Realtor Research Your Lender ●Check Yelp, Berkeley Parents Network, Google ●Schedule a meeting by phone or in person
  24. 24. Slide 24 of 30 Questions to Ask Any Lender ● Please describe your mortgage banking experience? ● How many transactions do you close each year and what % are purchase transactions? ● What does a "loan pre-approval― with your bank involve? ● Do you pre-underwrite my application, subject to the property address? ● Who handles your appraisals? ● Do you know your underwriter's first name? ● If I provide everything you request, how long will it generally take to get loan approval? ● Are you available on weekends or evenings if needed?
  25. 25. Slide 25 of 30 Rate Shopping ● Within a one hour period, call your top three prospective lenders and ask: ► What is your rate for:  $417,000 and $625,500  Single Family Home  Assume 780 credit  Assume Owner Occupied  Assume 20% down payment (and what if I have 30% down?)  Assume no impounds  No points, no lender credits ● Then ask: ► What are the standard lender fees for this scenario? ► Can you close this in 30 days? ● Did you close your last three transactions on time? ● Did the homes appraise at or above the purchase price? ● Last ask: ● How can I learn more about you? (Realtors, web site, testimonials)
  26. 26. Slide 26 of 30 Understand Your Costs Get a Good Faith Estimate o Itemized List of Fees: o Lender: Appraisal, Credit, Processing, Underwriting, Points o Escrow: Title Insurance, Documents, Notary Public o Government: Recording fee, Transfer Tax o Prepaid Items: Mortgage Interest, Homeowner’s insurance, impounds Good news! Loan payments are made in arrears, so your next loan payment will not be for almost two months!
  27. 27. Slide 27 of 30 Local Recommended Lenders *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!
  28. 28. Slide 28 of 30 Where Are Rates Headed? Type of Loan September 19, 2013 September 12, 2013 30-Year Fixed 4.50% 4.57% 15-Year Fixed 3.54% 3.59% 5/1 ARM 3.11% 3.22 % 1-Year ARM 2.65% 2.67%
  29. 29. Slide 29 of 30 Make Your Decision ● When possible, get a loan commitment ● Make alternative funds liquid (401k, stock) Good news! Loan payments are made in arrears, so your first loan payment won’t be for two months.
  30. 30. Slide 30 of 30 After Class… Please fill out the survey handed out at the beginning of class. We’d love to get your feedback on how the class could improve. To get even more info on the home buying process, check out our home buying guide: http://redfin.com/home-buying-guide

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