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Redfin's Free Home Buying Class- Austin


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Redfin's Free Home Buying Class- Austin

  1. 1. How to Finance Your Home Cyndy Stewart Redfin Austin Team December 11th 2013 @Redfin Slide 1 of 24
  2. 2. Cyndy Stewart, Greater Austin Agent ● ● ● ● ● Agent for X years Closed X homes Specialize in: XXXX Services: XXXX Lives in= XXXX Slide 2 of 24
  3. 3. Working with Redfin Slide 3 of 24
  4. 4. 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 ► 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 friend Slide 4 of 24
  5. 5. The Redfin Refund The Listing Agent gets 3% commission. You save with Redfin. You buy and pay for your dream home. Slide 5 of 24 The 6% sales commission is split. Your Buyers’ Agent gets 3% commission. Redfin keeps a portion as our fee.
  6. 6. How Our Team Works AGENT Responsible for your success Writes your offer Handles negotiations TRANSACTION COORDINATOR Prepares paperwork Works with escrow Slide 6 of 24 TOUR COORDINATOR Schedules tours Prepares paperwork ASSOCIATE AGENT Takes you to see homes Sees 50+ homes a week
  7. 7. 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 game Slide 7 of 24
  8. 8. 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 commission Slide 8 of 24
  9. 9. Mortgages Slide 9 of 24
  10. 10. Local Recommended Lenders *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders! Slide 10 of 24
  11. 11. How Big of a Mortgage Can I Afford? The following calculation assumes a 28% tax bracket. If your bracket is higher, your savings will be as well. Example: Rent of $1700 x 1.32 = $2244 mortgage payment Because of tax deductions, you can make a mortgage payment – including taxes and insurance – that is approximately one-third larger than your current rent payment and end up with the same amount of income. Slide 11 of 24
  12. 12. Tax Benefits of Homeownership The tax deductions you’re eligible to take for mortgage interest and property taxes greatly increase the financial benefits of homeownership. Here’s how it works: Assume: $9877 = Mortgage interest paid (a loan of $230,000 for 30 years at 4% interest) $5800 = Property taxes (at 2.5% on $230,000 assessed value) _______ $15,677 = Total deduction Then, multiply your total deduction by your tax rate. For example, at a 28% tax rate: $15,677 x 0.28 = $4389.56 = the amount you have lowered your federal income tax (at a 28% tax rate) Slide 12 of 24
  13. 13. Loan Types to Consider ● Mortgage Terms. Mortgages are generally available at 15-, 20-, or 30year terms. In general, the longer the term, the lower the monthly payment. However, you pay more interest overall if you borrow for a longer term. ● Government-backed Loans. These loans are sponsored by agencies such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA) and offer special terms, including lower down payments or reduced interest rates to qualified borrowers. ● Fixed or Adjustable Interest Rates. A fixed rate allows you to lock in a low rate as long as you hold the mortgage and, in general, is a good choice if interest rates are low. ARMs offer a lower introductory rate and have limits as to how much the interest rate can be increased and how frequently they can be raised. Slide 13 of 24
  14. 14. Get Pre-Approved ● A pre-approval letter is a letter from a bank or a lender estimating ● ● ● ● ● ● how much they'll lend a borrower Help you establish how much you can afford and makes offer process go faster Information needed: ► W-2, two pay-stubs, tax returns (get them ready), bank statements The process only takes a few days while banks get everything verified The approval is good for 90 days, depending on lender Ask for a few different amounts Redfin asks that you get pre-approved before your third tour Slide 14 of 24
  15. 15. Facts on Getting Pre-Approved ● Applications are usually free and credit checks should not cost more than $20 ● 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 score ● The application does not bind you to a lender, loan or rate ● 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 ● Your pre-approval stays valid as long as your finances constant (check with your lender to see if they have limits on this) ● Being pre-approved is required by sellers to consider offers Slide 15 of 24
  16. 16. Organize Your Assets ● ● ● ● ● Get ready for the down payment Cash accounts (liquid funds) 401(k), stocks, other investments Gift funds? (Max. allowed varies) Move funds around before you start shopping Slide 16 of 24
  17. 17. Review Your Debt ● Pull credit report, look for errors ● 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 same Slide 17 of 24
  18. 18. Five Factors That Determine Your Credit Score Credit scores range between 300 and 800, and the following factors affect your score: ● Your payment history. Did you pay your credit card obligations on time? If they were late, how late were they? Bankruptcy filings, liens, judgments, and collection activity also impact your history. ● How much you owe. High balances in proportion to credit limits can decrease your credit score. Keep balances of 20% or less than the limit. ● The length of your history. An established history makes you a less risky borrower. Think twice before closing old accounts prior to loan application. ● How much new credit you have. New credit accounts can decrease your score and are considered more risky even if paid on time. ● The types of credit you use. Diversify your credit. Slide 18 of 24
  19. 19. Start Shopping for Lenders Compile a list of 4-6 lenders & brokers Good sources include: ● Redfin's partner lenders ● Referrals from friends, family & co-workers ● Banks or credit unions you have accounts with ● A large, national bank with an advertised rate ● Your real estate agent ● Online review sites, such as Yelp ● BEWARE OF OUT OF STATE LENDERS!!! Slide 19 of 24
  20. 20. Comparing GFE Results ● Gather Good Faith Estimates (loan quotes) ► A minimum of three, more is better ► 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) Slide 20 of 24
  21. 21. Make Your Decision ● When possible, get a loan commitment ● Lock your interest rate (30 - 60 days) ● 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. You’ll have one month of no payments. Slide 21 of 24
  22. 22. Current Average Rates Type of Loan December 5, 2013 November 27, 2013 30-Year Fixed 4.46% 4.29% 15-Year Fixed 3.47% 3.30% 5/1 ARM 2.99% 2.94% 1-Year ARM 2.59% 2.60% Slide 22 of 24
  23. 23. Where Are Rates Headed? Slide 23 of 24
  24. 24. 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: Slide 24 of 24
  25. 25. After Class… Please fill out the survey that was handed out at the beginning of class. We appreciate the feedback! Check out our upcoming classes and events at: Questions? Get in touch: Cyndy Stewart Slide 25 of 24