North end mortgage class 3.20.13


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North end mortgage class 3.20.13

  1. 1. How to Finance Your HomePresented By:Tammi Escalle - Redfin’s North End TeamShane Kidwell - Atlas MortgageMarch 20th, 2013 Bothell, WASlide 1 of 45
  2. 2. Working with RedfinSlide 2 of 45
  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 45
  4. 4. We Share Our Commission With You • Applied to closing costs • Refund is tax-freeSlide 4 of 35
  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 45
  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 45
  7. 7. What We Have Accomplished 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 ● The right home for the right price  No obligation  Get back up to 33% of our commissionSlide 7 of 45
  8. 8. MortgagesSlide 8 of 45
  9. 9. Reasons to Buy a Home in 2013 Appreciation– Buying a home now (at the current rates) can almost ensure your home’s appreciation in the future. Mortgage rates are near historic lows and home prices in many parts of the country are down. Tax Deductions – For income tax purposes, yearly interest is fully deductible. Equity Building – A new trend being used by some homeowners is to actually add money to their monthly payment to decrease the principal balance of their loans at a much faster pace. This trend is called equity building. Pride – Homeownership offers many benefits, from playing your music as loud as you want or painting the walls the color of your choice. Homeownership is a purchase, commitment, and journey that’s sure to bring you pride and joy.Slide 9 of 45
  10. 10. Mortgage Terms You Should Know ● Debt to Income Ratio (DTI): How much you make vs. How much you owe in revolving debt monthly. ● Loan to Value Ratio (LTV): The amount of $ financed vs. the appraised value of the home. ● Credit Score: A number determined by the three credit bureaus, used for qualifying. (300-850, anything over 740 is excellent) ● ARM: Adjustable Rate Mortgage (rate is usually fixed for a period of time, and then can adjust, Higher risk) ● APR: Annual Percentage Rate (Interest Rate including closings costs, points and mortgage insurance) ● Underwriting: The detailed credit analysis preceding the loan approval, based on credit information furnished by the borrower and guidelines imposed by the specific bank and government entity.Slide 10 of 45
  11. 11. Knowledge is Power! If something appears to be too good to be true…it probably is. Is it a crocodile or a log?Slide 11 of 45
  12. 12. What are the different loan types and what makes the most sense for me? ● FHA: ● Conventional: ● VA: ● USDA: ● House Key: ● HomePath: ● With so many options which one is right for my financial picture?Slide 12 of 45
  13. 13. VA Loan Benefits and Requirements  Need to show Original Certificate of Eligibility (can now be obtained online)  Need to show Original Statement of Service or copy of DD-214 (if applicable)  Debt to Income Ratio up to 44%  Extremely low interest rates  Minimum 0% Down Payment Required  No Mortgage Insurance  A VA funding fee is normally required (can be >3%)Slide 13 of 45
  14. 14. FHA Loan Benefits and Requirements  The underwriting requirements can be less strict than Conventional guidelines.  Debt to Income Ratios up to 57%  Minimum Down Payment Required = 3.5% (These can be gift funds, not required to be your own $)  Interest rates are generally much lower than conventional rates.  Monthly Mortgage Insurance is required on any FHA loan.  Monthly Mortgage Insurance is currently1.25%  A One-Time Upfront Mortgage Insurance fee is required. This is paid at closing. Currently this fee is 1.75%Slide 14 of 45
  15. 15. FHA 203k Rehab Loan The FHA 203k renovation loan program provides funds for both the purchase and renovation of a home packaged into one mortgage loan. Once the purchase of the home is closed, renovation funds are held in escrow to pay for pre-determined renovation work done by approved renovation contractors.Slide 15 of 45
  16. 16. FHA 203k loans are available in two types: The Standard 203k:  Projects involve structural changes, such as room additions, exterior grading and landscaping, or renovation that would prohibit you from occupying the residence.  Project requires engineering or architectural drawings and inspections.Slide 16 of 45
  17. 17. The Streamlined 203k:  Designed for less extensive improvements and for projects that will not exceed a total of $35,000 in renovation and related expenses.  Does not require the use of a consultant, architect, and engineer or as many inspections as the Standard 203k.  As a result, when applicable, the Streamlined 203k generally becomes the simpler, less costly option.Slide 17 of 45
  18. 18. Conventional Loan Benefits and Requirements  A conventional loan is any loan not issued or guaranteed by a government agency (FHA, VA).  The processing time is usually faster than on VA or FHA loans, and conventional appraisal will traditionally have fewer requirements for repair.  Debt to Income Ratio up to 44%  Minimum Down Payment Required = 5% (minimum 5% from your own funds)  Mortgage Insurance required on any purchase with less than 20% down payment. (Varies, ask me for details)Slide 18 of 45
  19. 19. The Basics of a Short Sale Banks grant short sales for 2 reasons: the seller has a hardship, and the seller owes more on the mortgage than the home is worth.  The seller is ineligible to refinance or modify your mortgage  The seller is facing a long-term hardship  The seller is behind on their mortgage payments  The seller owes more on their home than it’s worth  The seller is not able to sell their home at a price that covers what they still owe on their mortgageSlide 19 of 45
  20. 20. Buying a Short Sale: So easy a caveman can do it? THE TRUTH ABOUT SHORT SALES - The sellers bank is really the party you are negotiating with. - The home can be in the process of being foreclosed.  - The process can take 2 to 9 months. - The banks may require a commitment by the buyer $ - Homes can be in less than stellar shape.Slide 20 of 45
  21. 21. Lets Take A Quick BreakSlide 21 of 45
  22. 22. What to do before you get pre- approved and find a lender to work with? ● There are quite a few steps you can take before you begin shopping for a lender that will ensure a smooth closing.Slide 22 of 45
  23. 23. Organize Your Assets  Get ready for the down payment  Cash accounts (liquid funds)  401(k), stocks, other investments  Gift funds? (Max. allowed varies)  Make sure the bank account(s) that you are using for financing the home have no illegitimate deposits in the last 2 months.Slide 23 of 45
  24. 24. Review Your Debt  Pull credit report (A qualified Mortgage Advisor can do this)  Figure out how much monthly income goes towards paying off debt: 28 – 33% healthy  Pay down balances to 1/3rd of credit available  Don’t open any new lines of credit  Don’t buy any big ticket items  Co-borrower will need to do the sameSlide 24 of 45
  25. 25. Start Shopping for a Lender Its Important to have your lender picked out before you begin looking for homes :  Your Real Estate agent can be a great resource.  Don’t just focus on the advertised rates.  Be careful with any bank that doesn’t have a local office.  If it sounds to good to be true, it normally is.  Most mortgage advisors will be glad to provide you with a list of past client testimonials, it’s good to find out from the source.  Ask friends or family if they worked with someone they were impressed with.Slide 25 of 45
  26. 26. The Application The process of financing a new home begins when customers complete an application with a mortgage lender. This should take place before you begin shopping for a home. With so many variables involved in the qualifying process, it is necessary to know what type of financing is most appropriate and have an accurate pre-qualification ready to establish a price range.Slide 26 of 45
  27. 27. Pre-Approval Process A Pre-Approval is helpful in determining how much house and the type of loan a customer can afford. Its also an important piece of your offer.  The borrower’s credit and income are verified and the file is underwritten through Fannie Mae/Freddie Mac  You know in advance that if you find a home to buy that is acceptable, the whole loan approval process will be quicker.  Helps the borrower negotiate better terms and purchase price  The process only takes a few days while banks get everything verified  If you get multiple credit checks from multiple lenders within a 30 day period, this will only count as one credit check against your credit scoreSlide 27 of 45
  28. 28. Pre-Approval Continued The most important thing to remember when financing a new home is to be sure that the customer is purchasing a home they can afford. Please have the following available:  Two recent YTD Pay Stubs  Two Years Complete Tax Returns - W-2’s, 1099’s etc.  If selling a home: Closing Statements  Income Award letters - i.e. Social Security or Retirement Pensions  Two Years of Timeline Histories of Residence and Employers  Child Support Receipt Evidence  Complete Divorce Decree  Bankruptcy DocumentationSlide 28 of 45
  29. 29. For Self Employed Two years completed and signed personal tax returns (1099’s, Schedule C’s, etc.) Two years completed and signed business tax returns Current YTD profit and loss statement and balance sheetSlide 29 of 45
  30. 30. Once your offer is accepted, what next?Slide 30 of 45
  31. 31. Steps in the loan process: 1. Purchase and Sale is accepted/Earnest money is deposited 2. Submit application to my bank (Underwriters in Bellevue begin review) 3. My team gets to work on title/insurance/supporting paperwork 4. Appraisal is ordered to determine value 5. Conditional Approval is sent 6. Clients send in additional paperwork to satisfy conditions of approval 7. Final Approval! 8. Myself and my bank approve the HUD (what is the HUD?) 9. My bank sends docs to Escrow 10. Escrow finalizes docs, updates required prepaid $, schedules signing 11. Clients sign loan documents/bring in remainder of down payment $ 12. Docs sent back to my bank from Escrow signed 13. My bank wires the $ to Escrow to disperse 14. Escrow records the paperwork with the countySlide 31 of 45
  32. 32. The Good Faith Estimate ● Once your mortgage advisor has 6 specific pieces of information they are required to give you a GFE. This normally takes place after you have filled out the application. The GFE must be sent to you within 3 business days. 1. Borrower’s name 2. Borrower’s monthly income 3. Borrower’s Social Security Number 4. Property address 5. Estimate of property value 6. Loan amount *If you haven’t given these items to your lender you can still ask for a Fee Sheet to see a cost breakdown.Slide 32 of 45
  33. 33. What to look for on the GFE: GFE’s historically have been difficult to understand and read. Because of this, the Federal Government stepped in to standardize the GFE. ● Box 1: These are fees from the bank. They can include Origination, Admin, Processing, anything charged by the lender. ● Box 2: Points - $ you are paying for a lower interest rate , or $ you are receiving for a higher interest rate. ● Box 3: Required Items IE Appraisal, Credit Report, etc… ● Box 4: Title/Escrow Fees ● Box 5/6: Owners Title & Required Services you can shop for. ● Box 7: County Recording Fees ● Box 8: Transfer Taxes if any, rarely used. ● Box 9/10/11: Prepaid Items: Taxes, Insurance, Interest, MISlide 33 of 45
  34. 34. Make Your Decision  When possible, get a loan commitment  Lock your interest rate (30 - 60 days)  Make alternative funds liquid (401k, stock) Good news! You’ll have two months of no payments. For example if you sign your documents and move in December your first payment won’t be until February.Slide 34 of 45
  35. 35. Once Your Loan Has Been Submitted: Underwriters Look for Six Key Areas ● Acceptable Credit History ● Acceptable Income/Work History ● Acceptable Ratios ● Adequate Income Assets ● Strong Mortgage Motivation ● Acceptable Real Estate PropertySlide 35 of 45
  36. 36. Acceptable Sources of Income Generally a two year verifiable history for all sources of income is required. Some acceptable sources of income are:  Applicant’s and co-applicant’s base salary  Commission income  Overtime and bonus income  Interest and dividends from investments, stocks, bonds, etc  Rental income  Child support income (must have Five years remaining for FHA and Three years remaining for Conventional or VA)  Permanent part-time income (vs. seasonal or temporary)  Social Security, VA disability, retirement. Etc.Slide 36 of 45
  37. 37. Acceptable Sources of Funds For Down Payment  Your own funds in bank and investment accounts  Gift funds: From immediate family  Personal loan secured by assets other than subject property (any payments on loans must be used in qualifying)  Offer equity in present home, other real property, or tangible assets of comparable value for allowance in trade.  Generally, the borrower must have 3-5% of their own funds depending on the type of program they select.Slide 37 of 45
  38. 38. The Appraisal: What to know o Appraisals are required on all home purchases. o Appraisals are performed by third party contractors that don’t work for the lender or the real estate agents. o Appraisals are paid for by the borrower usually before closing. o Mortgage Advisors are not allowed to talk to the appraiser. o Appraised value is found by researching comparable and similar sold and listed properties nearby. o Purchase Price vs. Appraised Value can be different.Slide 38 of 45
  39. 39. The Appraiser will generally look for the Following o Roof should be in good shape o Gutters and downspouts must be in working condition and cleared of debris o Wiring and plumbing must be safe and functional o Heating systems must heat the entire house evenly o Post and Block foundations must have acceptable termite inspection o No wood should be in contact with the ground o No damage to sheet rock, walls or paintSlide 39 of 45
  40. 40. Sit back and try and enjoy the ride. Stuff will come up, it’s the world we now live in. Be prepared to send in updated documents during the process. And be flexible.Slide 40 of 45
  41. 41. Where Are Rates Headed?Slide 41 of 45
  42. 42. I love what I do, please let me know how I can help. Last year I was voted a 5 Star Mortgage Professional by Seattle Magazine. Im excited to be able Contact Information to offer competitive rates with cutting edge technology to keep you informed and educated 206.200.4409 throughout the process. I am able to shop rates from over a dozen banks to ensure that you are getting a loan that makes sense for you, not the bank. Shane Kidwell MLO-200950 Mortgage Advisor Atlas Mortgages A Division of Pinnacle Capitol Mortgage Corp Equal Housing lenderSlide 42 of 45
  43. 43. Thank You! My team and I are here to help make your purchase successful. Please let us know how we can help. Mortgage Marketing Loan Business Advisor, Coffee Coordinator Processor Development SnobSlide 43 of 45 Atlas Mortgage / Shane Kidwell MLO #200950
  44. 44. 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: For Financing Questions, Interest Rate Quote, or help going over a Fee Sheet/GFE from a bank contact me at… www.Pugetsoundhomebuyers.comSlide 44 of 45
  45. 45. Our next class! Home Buying Class April 10th, 2013 6:00pm – 9:00pm SpringHill Suites (Same Location) 45 of 45