Jan ballard mortgage class 1.30.13

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  • Chart:http://www.mortgagenewsdaily.com/mortgage_rates/charts.aspPrediction:http://www.bankrate.com/finance/mortgages/mortgage-rate-trend-index.aspx
  • Jan ballard mortgage class 1.30.13

    1. 1. How to Finance YourHomePresented By:James Redmond. Jr. & Jon Aslin : North Seattle TeamErik Reault: Cobalt MortgageJanuary 30, 2013 Seattle, WASlide 1 of 20
    2. 2. Working with RedfinSlide 2 of 20
    3. 3. Working With Redfin is Different Service ► Advocates: client-satisfaction bonuses, not commissions ► Transparency: informed decisions ► Best Agents: The right home for the right price No obligation ► Switch Redfin agents ► Pause and re-start your search any time ► Tour on your schedule and pace Refund ► We’ll refund a portion of the commission back to you The Best Results ► Service: 97% would recommend us to a friendSlide 3 of 20
    4. 4. We Share Our Commission With You • Applied to closing costs • Refund is tax-freeSlide 4 of 20
    5. 5. How Our Team Works AGENT Responsible for your success Writes your offer Handles negotiations YOU ASSOCIATE AGENT COORDINATOR Takes you to see homes Schedules tours See 50+ homes a week Prepares paperwork Works with escrowSlide 5 of 20
    6. 6. A Little Bit About What We Do Redfin is a brokerage that’s using technology and a customer-service focus to change the real estate game in the consumer’s favor. ● What: a brokerage ● How we are different: ► Technology ► Customer-service ● Why: we want to change the gameSlide 6 of 20
    7. 7. What We Have AccomplishedRedfin is a real estate brokerage that has helped over 20,000people buy or sell a home; 97% would refer us to a friend.● Customers, not commissions● Informed decisions● The right home for the right price No obligation Get back up to 33% of our commissionSlide 7 of 20
    8. 8. MortgagesSlide 8 of 20
    9. 9. Erik Reault MLO-174759 Sr. Mortgage Banker Cell: (206) 852-9964 erik.reault@cobaltmortgage.com www.erikreault.comSlide 9 of 20 9
    10. 10. Before Searching for a Home,obtain pre-approval for a Mortgage!Slide 10 of 20 10
    11. 11. Why Should You Have AMortgage Pre-Approval BEFORESearching For A Home?Slide 11 of 20 11
    12. 12. Narrow Your Home Search ● Obtaining pre-approval helps to more clearly identify your price range Negotiating Power • A Mortgage Pre-Approval can be used in your negotiations to remove any worries about your ability to obtain financing and therefore gives you more power in your negotiations. Timing Is Everything • Unfortunately, the best opportunities don’t always present themselves at the most opportune times (i.e. evenings, weekends, & holidays).Slide 12 of 20 12
    13. 13. The Pre-Approval ProcessAn introduction to borrowing for first time homebuyers 1. Find a professional you’re comfortable with 2. Obtain Loan Pre-Approval 3. Learn about Loan Programs Slide 13 of 20 13
    14. 14. 1. Find professionals you’re comfortable with! Getting a good rate on your loan is very important. But remember, economic markets can and will change. Ensure that you are going with somebody who will be there for you over your loan’s life. From the start, find responsive and responsible professionals to work with that have a proven track record of providing quality, long-term client care.Slide 14 of 20 14
    15. 15. 2. Obtaining Pre-Approval a) Complete a Loan Application b) Undergo a review of your Credit Report c) Submit required documentation, such as: - Verification of income and assets - Current living situation explanation - other documentation as neededSlide 15 of 20 15
    16. 16. a) Complete a Loan ApplicationSlide 16 of 20 16
    17. 17. b) Credit Report Review Credit Standards Three-bureau merged credit report – Experian, TransUnion & Equifax● Credit scoring: low 300 to a high 850 Under 680 = Poor 680 - 699 = Below Average 700 - 739 = Average 740 - 759 = Above Average 760 + = Excellent● Lender uses the FICO score (middle score from all three bureaus)● All borrowers on loan application MUST meet minimum credit scoreSlide 17 of 20 17
    18. 18. Slide 18 of 20 18
    19. 19. Credit Tips ● Credit card balances should be 50% of the available credit line, better is 30% ● Don’t close credit cards older then 2 years – “seasoned” accounts are important ● Pay off collections at closing not before ● Every 1 installment trade-line, to 3 revolving trade-lines Studies show that 79% of all credit reports have violations based on the Fair Credit Reporting Act - That’s almost 8 out of every 10Slide 19 of 20 19
    20. 20. c) Review of Income / Assets Documentation ● Last 2 years Tax Returns & W2s ● 2 Most Recent YTD Paystubs ● 2 Months Bank Statements ● Most Recent 401k or Investment Acct Statements ● * Additional Documents as requestedSlide 20 of 20 20
    21. 21. Ratios and Your Qualifications ● Ratios are guidelines lenders use to determine maximum qualification. ● Debt or back end ratio = 45% ● Do not count rent, phone, electricity, car insurance, doctor’s bills, etc. Only items that show on your credit report (exception: child support or alimony payments) ● Conventional - installment debt with 10 months remaining until they are paid off do NOT count against your qualifying ratios. ● Income is calculated on your gross NOT net.Slide 21 of 20 21
    22. 22. Ratios and Your Qualifications Example: Payment Objective $1,575 Debt: (total minimum monthly payments) $200 Gross Monthly Income $3945 Maximum Payment: Gross Income x 45% - Debt = Maximum Payment ________________________________________________________ Payment Objective: Payment objective + Debt / Gross Income = (should be 45% or less) _______________________________________________________________Slide 22 of 20 22
    23. 23. Ratios and Your Qualifications Debt to Income ratio can be increased base on compensating factors. Compensating Factors: Job stability Credit score Down Payment Reserves No Payment Shock Income Type – not guaranteed / over time, bonus, car allowance, commission, contract employee or self employedSlide 23 of 20 23
    24. 24. Slide 24 of 20 24
    25. 25. 3 . Learn About Loan programs Our number one priority is to make sure that the mortgage loan you select is fully integrated with your short and long-term financial and personal goals, as well as your payment and equity objectives. It’s imperative that you completely understand the product you have chosen and how it will affect other aspects of your finances is always at theSlide 25 of 20 25
    26. 26. a) Rate Types Fixed-Rate Mortgages Features a fixed percentage rate and loan amount, so the monthly payment is the same every month for the entire length of the loan. Adjustable-Rate Mortgages ARMs have a variable interest rate and monthly payments that are recalculated on a regular basis to reflect changes in the market interest rate.Slide 26 of 20 26
    27. 27. b) Loan Programs Conventional Loans Also known as a Conforming loan, this mortgage is equal to or less than the loan limit set by Fannie Mae or Freddie Mac. Jumbo Loans These non-conforming loans are designed for homebuyers who need to finance larger purchases. A variety of Jumbo loan options are available.Slide 27 of 20 27
    28. 28. FHA Loans Designed to increase homeownership to low- and moderate- income families and first-time homebuyers. VA Loans Available for veterans, active-duty personnel, reservists/National Guard members and some surviving spouses. USDA Loans Offered in rural areas to help lower-income households gain access to home loans at reasonable interest rates. FHA 203K Loans The costs associated with rehabilitating and improving a home can be included in the financing of a purchase.Slide 28 of 20 28
    29. 29. Mortgage Payment Breakdown (PITI) Principal and Interest – Mortgage Loan Property Taxes – 1 – 1.75% of purchase price Home Owners Insurance - .15 - .25% of purchase price Mortgage Insurance (MI or PMI) - Less then 20% down payment Options – Monthly, Buy Out, or Lender PaySlide 29 of 20 29
    30. 30. Payment Comparison● FHA lowest rate, highest payment Mortgage insurance removal – 78% loan balance based on original price● Conventional highest rate, lowest payment Monthly PMI removal – 78% loan balance based on current market value Buy out PMI - $120 monthly savings and increased buying power $30kSlide 30 of 20 30
    31. 31. Cash Needed ● Down Payment: 0 - 3.5% Down Payment ● Closing Costs: 2 – 2.5% of the purchase price 1% Loan Fee, Appraisal, Escrow, Title, Credit, Tax Service Fee, Flood Check, Administrated Fee ● Pre-paids account: 1 – 1.5% of the purchase price Per day interest, reserves for property taxes and insurance ● Total: Down Payment + 3.5% for closing costs and pre-paids ● Seller contribution: 3% to 6% of purchase price depending on loanSlide 31 of 20 31
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    33. 33. Slide 33 of 20
    34. 34. Mortgage Insurance Options● Monthly● Buy Out / Financed or Cash Upfront● Lender Pay Risk based pricing will provide lower premiums; Credit score, property location, debt to income ratio, property type, loan purpose, occupancy, loan to value, number of income borrowersSlide 34 of 20 34
    35. 35. Loan Guidelines – FHA vs. Conventional FHA Conventional Down Payment: 3.5% 5% Credit Score: 640 680 Debt Ratio: 49% + 45% MI or PMI: No choice Options Reserves: None 2 months PITI Gift Funds: All Allowed After down pmt. Seller Contribution: 6% 3-6% Non-purchasing spouse: Debt used Debt not used Qualifying: Easier HarderSlide 35 of 20 35
    36. 36. Slide 36 of 20 36
    37. 37. Thank You Please call or email me with any questions! (206) 852-9964 erik.reault@cobaltmortgage.com www.ErikReault.comSlide 37 of 20 37
    38. 38. After Class…Please fill out the survey handed out at the beginningof class. We’d love to get your feedback on how theclass could improve.To get even more info on the home buying process,check out our home buying guide:http://redfin.com/home-buying-guideSlide 38 of 20
    39. 39. Our next class! Contract Class February 19, 2013 6:00pm – 7:30pm Redfin’s Seattle Office (Same Location)http://www.redfin.com/buy-a-home/classes-and-eventsSlide 39 of 20

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