Redfin's Free Mortgage Class - Bellevue, WA

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  • [REQUIRED – to be updated by the presenter to suit their strong points]
  • http://www.freddiemac.com/pmms/
  • Chart:http://www.mortgagenewsdaily.com/mortgage_rates/charts.aspPrediction:http://www.bankrate.com/finance/mortgages/mortgage-rate-trend-index.aspxWill rates rise or remain relatively unchanged? Experts and Bankrate analysts predict where mortgage rates are headed over the next week.This week (July 5-11), 31 percent of the panelists believe mortgage rates will rise over the next week or so; 38 percent think rates will fall; and 31 percent believe rates will remain relatively unchanged (plus or minus 2 basis points). Read more: Rate Trend Index - Mortgage Rate Trends - Bankrate.com http://www.bankrate.com/news/rate-trends/mortgage.aspx#ixzz2097YRlM8
  • Chart:http://www.mortgagenewsdaily.com/mortgage_rates/charts.aspPrediction:http://www.bankrate.com/finance/mortgages/mortgage-rate-trend-index.aspx
  • Redfin's Free Mortgage Class - Bellevue, WA

    1. 1. How to Finance Your Home Michael Fleming Redfin’s Bellevue -Mercer Island Team February 27, 2014, Bellevue, WA Brian Thielcke Cobalt Mortgage @Redfin www.facebook.com/Redfin
    2. 2. Michael Fleming: Redfin Agent ● Agent for 4 years, Closed 80+ ● Specialize in: Mercer Island, Bellevue, and east, including Issaquah, Sammamish, and Newcastle ● Lives in Newcastle Enough about me! Meet my team…
    3. 3. Working with Redfin
    4. 4. A Little Bit About Redfin Redfin is a real estate brokerage 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
    5. 5. Save $4,000 on Average
    6. 6. When you ready to tour a home Click here when you decide See all deals & reviews
    7. 7. Partners in the Process AGENT Responsible for your success Writes your offer Handles negotiations TRANSACTION COORDINATOR Prepares paperwork Works with escrow TOUR COORDINATOR Schedules tours Prepares paperwork ASSOCIATE AGENT Takes you to see homes Sees 50+ homes a week
    8. 8. Understanding the Buying Process
    9. 9. Are You Ready to Buy? ● ● ● ● Do you have a family and need room to grow? Do you expect to own the home for 5 or more years? Have you saved up a down payment? Can you rent for less?
    10. 10. Overview of a Purchase Research Search Offer Closing Neighborhoods Define Preferences Comparables Earnest Money Real Estate Agents Saved Search Draft Offer Docs Inspection Mortgage Options Home Tours Negotiate Loan application Preapproval Open Houses Mutual Acceptance Title Review Consider your needs Appraisal Financing Approval Closing
    11. 11. Mortgages
    12. 12. Local Recommended Lenders *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!
    13. 13. Review Your Financial Situation ● Pull credit report, look for errors ● Establish comfort level for monthly payment ● Figure out how much monthly income goes towards debt typically 28 – 40% healthy ● Pay down credit balances to 1/3rd of high limit ● Don’t open any new lines of credit ● Don’t buy any big ticket items ● Determine source of funds ● Current employment status
    14. 14. Pre-qualification vs. Pre-approval Loan pre-qualification is a BEST GUESS at your housing affordability. Prequalification is typically based upon a verbal conversation with potential borrowers and a lender and does not include formal underwriting or proof of documentation to support the borrower’s loan request. A loan pre-qualification is not a commitment to lend. Loan pre-approval is a COMMITMENT TO LEND. It comes after a formal underwriting of a borrower’s loan request. Loan preapproval is achieved with a complete mortgage loan application. Documentation, such as pay stubs, bank statements, and/or IRS tax returns, are typically required to support the loan request.
    15. 15. Get Pre-Approved • Factors of Pre-Approval • Gross Income • • Net income if self-employed borrower • • Income before taxes and any other deductions 2 year employment history in similar field, may include education Debt • • • Loans listed on your credit report Child support or alimony Credit • • • Minimum of 12-24 months “clean” credit with no new adverse activity Minimum of 3-4 tradelines maintained for at least 12-24 months Cash • Total funds available for the purchase (downpayment, closing costs, etc) • Reserves • Final Loan Approval • Collateral (review and approval of appraisal)
    16. 16. Facts on Getting Pre-Approved ● Applications are usually free and credit checks should not cost more than $20 ● You will get a better idea of any other action items you need to complete before you can buy ● Gives you a chance to discuss different financing options ● For every $100 you decrease your other debt, and are therefore able to increase your house payment, you can afford up to $20,000 more in sales price on a 30 year amortization loan. ● Your pre-approval stays valid as long as your income, debts, credit history, and assets remain the same or better ● The application does not bind you to a lender, loan or rate ● Being pre-approved is required by sellers to consider offers
    17. 17. Calculating what you can afford… Monthly income (gross): $4500/month Maximum debt to income ratio (percentage) = 40-43% Calculation Example: $6500 x 43% = $2795 maximum debts allowed - $450 auto loan - $100 minimum payment on credit card(s) = $2245 is the most you may spend on a monthly mortgage payment PITI: Your Monthly House Payment P= Principal (amount of payment going toward original balance of loan) I= Interest (amount of payment going toward interest on the loan) T= Property Taxes I= Insurance Hazard/Homeowner’s Insurance: Replacement value, liability, possessions Mortgage Insurance: Covers lender against loss unless 20% equity/down NOTE: Homeowner’s Dues must be added for a condo or townhome.
    18. 18. Credit History and Credit Scores • 3 credit bureaus: Equifax, Experian, TransUnion • Credit score range: 350- 850 • Most lenders use the middle score numerically: • Primary wage earner’s mid score or lowest of both/all mid scores • Minimum credit score for most loan programs is 660 • “Best” credit score for most loan programs is 740 • Factors of credit scoring • Credit Rating Past delinquencies 15% 10% 10% Past Delinquencies • Revolving debt ratio Revolving Debt Ratio • Age of credit file Age of Credit File Debt Diversity 30% • Debt diversity • Inquiries Inquiries 35%
    19. 19. Cash to close: Your Good Faith Estimate Non-recurring costs Prepaid Items Title insurance Per diem interest Escrow Insurance Appraisal Property Taxes Important! Credit Report HOA/Condo Dues A Good Faith Estimate is a breakdown of your total cash-toclose. The estimate will include downpayment, non-recurring costs, and prepaid items. Make sure you understand the total cash required of you to close! Flood Certification Down payment 3.5-5.0% minimum down Tax Service Fee Underwriting Fee Discount Points
    20. 20. Organize Your Assets ● ● ● ● ● Get ready for the down payment Cash accounts (liquid funds) 401 (k), stocks, other investment Gift funds? (Max. allow caries) Move funds around before you start shopping
    21. 21. Choose a Loan Program • Conventional: As low as 5% down, can be gifted Higher credit standards (680+) Mortgage insurance can be paid up front, monthly or a combination Up to $417,000 loan amount ** ** Up to $506,000 in Seattle SMSA • Federal Housing Administration Loan (FHA): Min 3.5% down, can be gifted Minimum credit score 640, most lender Up front and monthly mortgage insurance required If condo, must be FHA approved. Verify at www.hud.gov Up to $417,000 loan amount ** Up to $506,000 in King and Snohomish
    22. 22. Choose a Loan Program cont… • VA: Active duty or reserves only No monthly mortgage insurance Can be 0 down up maximum guarantee • Jumbo: Loans over $506,001 Minimum credit of 700+ Minimum of 20% down with most investors ** ** Can do 10% down with a combined loan scenario
    23. 23. Key Loan Choices ● Types of Loans: ► Fixed Rate: 15,20,30 year terms ► Adjustable Rate Mortgage (ARM): 3/1;5/1;7/1;10/1. “Hybrid” Fixed Details of ARM: Index; Margin; First, Annual & Lifetime Caps i.e. Index: 1 YR LIBOR; Margin: 2.75%; Caps: 2/2/6 ● Interest Rates ► Points are the price of interest rates, 1 point = 1% of the loan amount ► Points paid buy down an interest rate ► Locking a rate occurs after you have a signed and accepted offer on a home ► What is the Annual Percentage Rate (APR)? Rate Price (points) 4.50% 0.0 (closing costs only, no points) 4.25% 1.0 (closing costs + 1 point) A good lender helps borrowers calculate their break-even to determine if paying points is right for them– doesn’t just focus solely on the interest rate!
    24. 24. Interest Rates and Pricing ► Investors use “risk-based” pricing ► Factors include, but are not limited to:    Middle credit score of borrowers (lowest of all borrowers) Loan to Value (LTV) & Combined Loan to Value (CLTV) Loan amount and Loan Program (FHA, VA, Conventional, Jumbo) a) b) c)      Conforming: Up to $417,000 Expanded Conforming: $417,001 - $506,000 (King, Snohomish, Pierce)** Jumbo: $506,001 and higher Loan type: Fixed vs. Adjustable Rate Mortgage (ARM) Loan term: 15, 20, 30 year amortization Type of property: Single family home, townhome, Condo Number of units: 1-4 units Occupancy: Owner occupied, vacation home, investment ** Loan limits set for 2014.
    25. 25. Where Are Rates Headed? Type of Loan January 9, 2014 January 20, 2014 30-Year Fixed 4.51% 4.33% 15-Year Fixed 3.56% 3.35% 5/1 ARM 3.15% 3.08% 1-Year ARM 2.56% 2.57%
    26. 26. Where Are Rates Headed?
    27. 27. After Class… Please fill out the survey that was handed out at the beginning of class. We appreciate the feedback! Questions? Get in touch: Michael Fleming 206.450.1313 michael.fleming@redfin.com Brian Thielicke 253.208.6477 brian.thielicke@redfin.com Check out our upcoming classes and events at: www.redfin.com/events

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