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First Time Buyer Course


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First Time Buyer Course

  1. 1. Presented by: Jonathan Osman, Realtor® The Charlotte House Hunter Group Buying Your First Home Buying Your First Home Sponsored By:
  2. 2. On the Agenda <ul><li>The Real Estate Market </li></ul><ul><li>Current Incentives to Aid in Purchasing Your First Home </li></ul><ul><li>The Home Buying Process </li></ul><ul><ul><li>The Mortgage Approval Process </li></ul></ul><ul><ul><li>The Role of a Real Estate Agent </li></ul></ul><ul><ul><li>Searching For “That” Home </li></ul></ul><ul><ul><li>Contracts & Inspections </li></ul></ul><ul><ul><li>The Final Week </li></ul></ul><ul><ul><li>Closing </li></ul></ul><ul><li>Q&A </li></ul>
  3. 3. Who is this Guy? <ul><li>Jonathan Osman, Realtor® </li></ul><ul><li>Licensed Real Estate Agent since 2002 </li></ul><ul><li>Licensed in NC in 2006 </li></ul><ul><li>Leader: The Charlotte House Hunter Group </li></ul><ul><li>The Charlotte Real Estate Update Blog </li></ul>
  4. 4. The Real Estate Market <ul><li>Home Sales </li></ul><ul><li>Home Prices </li></ul><ul><li>Inventory Levels </li></ul><ul><li>Mortgage Interest Rates </li></ul><ul><li>Homeowner Affordability </li></ul>
  5. 5. Home Sales - Nationally Sales increased 5% in 2009, the first annual sales gain since 2005 and the tenth highest annual activity level on record.
  6. 6. Home Sales - Nationally Sales Increased Sales Decreased Home Sales Direction (Year-Over-Year Change) WY UT CO KS OK TX AR MS AL TN NC SC VA IN MN CA AZ NV FL WA MT OR ID NM ND SD NE IA MO LA GA KY IL WI MI OH WV PA NY VT ME MA AK HI
  7. 7. Home Prices - Nationally The median home price declined by 12% in 2009. $174K $203K
  8. 8. Home Price Appreciation If home prices actually grew by 4% every year from 1989 the median home price would be $203,105, which is approximately 17% above where we are today
  9. 9. Inventory Levels - Nationally Stronger sales activity in the second half of the year helped draw down inventory of existing homes to 8.8 months in 2009
  10. 10. Mortgage Rates Mortgage rates averaged 5.04% in 2009, an all-time low since Freddie Mac started tracking in 1971. Mortgage rate ranged from 4.81% to 5.59% in 2009. At the end of December, rates stood at 4.93%.
  11. 11. Let’s put this in perspective … In 1971: And you still couldn’t get a mortgage as cheap as you today. Mortgage Rate in 1971: 7.48% 890 Dow Jones Average $25,250 Average New Home Price $150 Monthly Rent $1,866 Datsun Sports Coupe 43 cents a pound Turkey 8 cents Stamp 40 cents a gallon Gasoline
  12. 12. Housing Affordability 2009 affordability = most favorable on record 40yr Average = 21.9% 15%
  13. 13. Charlotte Area Single Family Detached New Listings Sold Listings Avg Price Seller Rec’d Area 1 (NE Meck) 3745 1506 $188k (-10%) 90.96% Area 2 (E Meck) 2737 1073 $132k (-13%) 89.95% Area 3 (SE Meck, Matthews, Mint Hill) 1659 626 $160k (-16%) 90.04% Area 4 (S Meck, Matthews) 2244 726 $353k (-11%) 90.53% Area 5 (S Meck) 3346 1054 $475k (-11%) 90.28% Area 6 (S Meck) 1234 454 $246k (-7%) 91.69% Area 7 (SW Meck) 1426 596 $147k (-7%) 91.33% Area 8 (NW Meck) 1374 566 $87k (-14%) 87.10% Area 9 (N Meck) 1986 835 $152k (-9%) 90.33%
  14. 14. Charlotte Area Single Family Detached New Listings Sold Listings Avg Price Seller Rec’d Union County 5647 1979 $264k (-9%) 90% Cabarrus County 3932 1405 $181 (-6%) 90% Lake Norman 3064 769 $465k (-3%) 88%
  15. 15. The Home Buying Process <ul><ul><li>Incentives to Buy </li></ul></ul><ul><ul><li>The Mortgage Approval Process </li></ul></ul><ul><ul><li>The Role of a Real Estate Agent </li></ul></ul><ul><ul><li>Searching For “That” Home </li></ul></ul><ul><ul><li>Contracts & Inspections </li></ul></ul><ul><ul><li>The Final Week </li></ul></ul><ul><ul><li>Closing </li></ul></ul>
  16. 16. Incentives <ul><li>$8,000 Home Buyer Tax Credit </li></ul><ul><li>$14,900 NCHFA NSP Program </li></ul><ul><li>House Charlotte </li></ul><ul><li>VA Vendee Program </li></ul><ul><li>USDA Rural Development Financing </li></ul>
  17. 17. The Home Buyer Tax Credit <ul><li>For Sales 11/4/2009 – April 30, 2010 </li></ul><ul><li>Must close by June 30, 2010 </li></ul><ul><li>Credit = 10% of the sales price up to $8,000 </li></ul><ul><li>Must be repaid if claimed and the home is sold within 36 months </li></ul><ul><li>May not have owned a home in the last 3 years </li></ul>
  18. 18. The Home Buyer Tax Credit <ul><li>Single </li></ul><ul><li>Up to $125,000 for $8,000 </li></ul><ul><li>$125,000 - $145,000 for $4,000 </li></ul><ul><li>Married </li></ul><ul><li>Up to $225,000 for $8,000 </li></ul><ul><li>$225,000 - $245,000 for $4,000 </li></ul>
  19. 19. Neighborhood Stabilization Program <ul><li>Bank-Owned Properties Only </li></ul><ul><li>Only available in 23 counties in North Carolina </li></ul><ul><li>Sales price cannot exceed $210,000 </li></ul><ul><li>Property age may not exceed 1978 </li></ul><ul><li>Must be purchased at least 1% below appraised value </li></ul><ul><li>Income may not exceed $55,850 Single, $63,850 2 Persons, $71,800 3 Persons </li></ul>
  20. 20. NSP - continued <ul><li>Must remain in the home for 5 years to avoid repayment </li></ul><ul><li>Must be used in conjunction with the NCHFA’s 30-year Fixed FirstHome Mortgage </li></ul><ul><li>Must contribute $1,000 of your own funds </li></ul>
  21. 21. NSP Example - $175,000 <ul><li>Traditional FHA </li></ul><ul><li>$6,125 Down </li></ul><ul><li>5% 30 Yr Interest Rate </li></ul><ul><li>$906.56 Mo. </li></ul><ul><li>$155,075.57 at 5 Yrs </li></ul><ul><li>NCHFA </li></ul><ul><li>$14,900 Down </li></ul><ul><li>5.5% 30 Yr Interest Rate </li></ul><ul><li>$909.03 Mo. </li></ul><ul><li>$148,029.25 at 5 Yrs </li></ul>
  22. 22. House Charlotte <ul><li>$7,500 for “transitioning” neighborhoods, $10,000 for “challenged” neighborhoods, $15,000 for police officers </li></ul><ul><li>Requires 8 hours of pre-purchase home buyer education </li></ul><ul><li>Maximum incomes that are 110% or less of median income </li></ul><ul><ul><li>$51,200 single, $73,150 family of 4 </li></ul></ul><ul><li>Purchase price must be less than $147,000 </li></ul>
  23. 23. House Charlotte - continued <ul><li>Forgivable after 10 years of homeownership </li></ul><ul><li>Home must pass House Charlotte Inspection </li></ul><ul><li>Map </li></ul>
  24. 24. VA Vendee Program <ul><li>Purchase a V.A. Foreclosed Home </li></ul><ul><li>100% V.A. Financing Available for owner-occupants </li></ul><ul><li>2.25% VA Funding Fee Required </li></ul><ul><li>Up to 6% of the Sales Price </li></ul><ul><li>Search for Homes: </li></ul>
  25. 25. USDA Rural Dev <ul><li>Up to 100% Financing Available </li></ul><ul><li>Limited to “Rural” Locations </li></ul><ul><li>Restrictions based on income and family size </li></ul>
  26. 26. 100% Financing does not equal no money down!
  27. 27. Mortgage Pre-Approval <ul><li>Is your Credit Good Enough? </li></ul><ul><ul><li>It’s a fact: qualifying criteria have gotten somewhat tighter than in previous years. </li></ul></ul><ul><ul><li>Homebuyers need to pay more attention to their credit scores than they did before . </li></ul></ul><ul><ul><ul><li>Credit history reflects your record of paying obligations on time. </li></ul></ul></ul><ul><ul><ul><li>Your credit score may impact your interest rate. </li></ul></ul></ul><ul><ul><ul><li>Your credit score may impact your down payment requirements. </li></ul></ul></ul><ul><ul><ul><li>Your credit score may impact the amount of documentation you provide . </li></ul></ul></ul><ul><ul><li>But you don’t need perfect credit to buy a home. </li></ul></ul>
  28. 28. Mortgage Pre-Approval <ul><li>What makes credit less-than-perfect? </li></ul><ul><ul><li>Some causes can be solved relatively quickly. </li></ul></ul><ul><ul><li>Others take more time. </li></ul></ul><ul><ul><li>If you credit is less-than-perfect, take the necessary steps to improve your score your score. </li></ul></ul><ul><li>Past foreclosure or bankruptcy </li></ul><ul><li>Frequency of new accounts opened </li></ul><ul><li>Many new credit applications </li></ul><ul><li>Errors </li></ul><ul><li>Limited history </li></ul><ul><li>Excessive debt </li></ul><ul><li>Slow payments </li></ul><ul><li>Legal judgments </li></ul>
  29. 29. Mortgage Pre-Approval <ul><li>How much money will you need? </li></ul><ul><ul><li>For a down payment? </li></ul></ul><ul><ul><li>For closing costs? </li></ul></ul><ul><ul><li>For my monthly payments? </li></ul></ul>
  30. 30. Mortgage Pre-Approval <ul><li>Down Payment Options : </li></ul><ul><li>Low down payment programs are still available in some markets and may help you buy a home sooner. </li></ul><ul><li>A larger down payment can help you get lower monthly mortgage payments. </li></ul><ul><li>How much of a down payment is required may be impacted by factors such as: </li></ul><ul><ul><li>Your credit score. </li></ul></ul><ul><ul><li>The type of property. </li></ul></ul><ul><ul><li>Whether the home will be your primary residence, second home or investment property. </li></ul></ul>
  31. 31. Mortgage Pre-Approval <ul><li>Example of a $150,000 purchase </li></ul><ul><li>5% Interest Rate </li></ul><ul><li>Mortgage Insurance is required for less than 20% down </li></ul><ul><li>Does not include Taxes & Insurance </li></ul>5% 15% 20% % Down Payment $764.97 $142,500 $7,500 $684.45 $127,500 $22,500 $644.19 $120,000 $30,000 Monthly Principal and Interest 8 Mortgage Amount Down Payment in Dollars
  32. 32. Mortgage Pre-Approval <ul><li>Monthly Payment Expenses: </li></ul><ul><li>Your monthly payments include: </li></ul><ul><ul><li>Principal & Interest. </li></ul></ul><ul><ul><li>Taxes (real estate) and Insurance (homeowner’s). </li></ul></ul><ul><ul><li>Mortgage insurance - if your down payment is less than 20%. </li></ul></ul><ul><ul><li>Association fees - if applicable. </li></ul></ul><ul><li>Your maximum monthly payment is calculated using: </li></ul><ul><ul><li>The parameters of the mortgage product you select. </li></ul></ul><ul><ul><li>Your qualifying monthly income. </li></ul></ul><ul><ul><li>Your total monthly debt. </li></ul></ul><ul><li>Be comfortable with the calculated monthly payment: </li></ul><ul><ul><li>Repairs and maintenance costs are part of homeownership. </li></ul></ul>
  33. 33. Closing Costs <ul><li>Closing Costs are Fees Associated With the Purchase of Your Home. </li></ul><ul><li>Homeowners Insurance </li></ul><ul><li>Lender Fees (Appraisals, Application Fees) </li></ul><ul><li>Inspections </li></ul><ul><li>Attorneys Fees </li></ul><ul><li>Taxes & Recording Fees </li></ul>
  34. 34. Mortgage Pre-Approval <ul><li>Closing Cost Information : </li></ul><ul><li>Typical closing costs: </li></ul><ul><ul><li>$1,800 plus any discount, origination and pre-paids </li></ul></ul><ul><ul><li>Total closing cost is approximately 4% of average home price of $150,000 or approximately $4,500. </li></ul></ul><ul><li>What are the fees? </li></ul><ul><ul><li>Discount </li></ul></ul><ul><ul><li>Origination </li></ul></ul><ul><ul><li>Survey </li></ul></ul><ul><ul><li>Appraisal </li></ul></ul><ul><ul><li>Title </li></ul></ul><ul><li>What are Pre-Paids? </li></ul><ul><ul><li>Interim interest </li></ul></ul><ul><ul><li>Escrow account for taxes, homeowners insurance, private mortgage insurance </li></ul></ul>
  35. 35. Mortgage Pre-Approval <ul><li>What Type of Mortgage </li></ul><ul><li>What type of product? </li></ul><ul><li>What kind of rate? </li></ul><ul><li>How long a term? </li></ul><ul><li>What kind of payments? </li></ul><ul><li>What type of documentation? </li></ul>
  36. 36. Mortgage Pre-Approval <ul><li>A Lender will help you select the product type that meets your needs: </li></ul><ul><ul><li>Conforming loans up to $417,000* for a single-family. </li></ul></ul><ul><ul><li>Jumbo loans greater than $417,000. </li></ul></ul><ul><ul><li>Combination loans: conforming first + a second mortgage. </li></ul></ul><ul><ul><li>Government loans: FHA & VA. </li></ul></ul>
  37. 37. Mortgage Pre-Approval <ul><li>Usually starts with a rate that is lower than an FRM but higher than an ARM. </li></ul><ul><li>Rate & payments are fixed for 3, 5, 7, or 10 years. </li></ul><ul><li>After that period, the rate may adjust annually changing the monthly payment. </li></ul><ul><li>Usually starts with a lower rate than an FRM or hybrid. </li></ul><ul><li>The rate may adjust every year, changing the monthly payment. </li></ul><ul><li>Rate may eventually be higher than the rate for a fixed-rate loan. </li></ul><ul><li>Rate is usually higher than an ARM rate or a Hybrid. </li></ul><ul><li>The principal and interest portion of the mortgage payment stays the same through the entire term. </li></ul><ul><li>Stable, easy to budget. </li></ul><ul><li>May want to refinance if rates go lower. </li></ul>Hybrid ARM Adjustable-Rate (ARM) Fixed-Rate (FRM)
  38. 38. Mortgage Pre-Approval <ul><li>30 Year Fixed Rate </li></ul><ul><li>$150,000 Mortgage </li></ul><ul><li>5% Interest Rate </li></ul><ul><li>Payment (P&I): $805.23 </li></ul><ul><li>5 Year ARM </li></ul><ul><li>$150,000 Mortgage </li></ul><ul><li>3.75% Interest Rate </li></ul><ul><li>Payment (P&I): $695 </li></ul>Payment Difference: $110 / Month Apply the difference to your Principal every month After 5 years: $6,588.11 more in equity
  39. 39. Mortgage Pre-Approval <ul><li>Rate is lower. </li></ul><ul><li>Payments are higher. </li></ul><ul><li>Pay the least amount of interest over the life of the loan. </li></ul><ul><li>Rate is lower than a 40-year, higher than 15-year. </li></ul><ul><li>Payments are higher than a 40-year, but lower than a 15-year. </li></ul><ul><li>Pay less interest than a 40-year, but more than 15-year. </li></ul><ul><li>Rate is higher. </li></ul><ul><li>Payments are lower because they are spread out for a longer period. </li></ul><ul><li>Easier to qualify for a larger loan amount. </li></ul><ul><li>Pay more interest and it takes longer to build equity. </li></ul>15-Year 30-Year 40-Year
  40. 40. The Role of a Real Estate Agent <ul><li>Educate you on process, market conditions </li></ul><ul><li>Point out alternatives when you’re not finding what you want </li></ul><ul><li>Has done this hundreds of times – knows the pitfalls, the process, the potential impacts of decisions </li></ul><ul><li>Can recommend professionals (lenders, inspectors, attorney) </li></ul><ul><li>Mitigates the emotion </li></ul><ul><li>Has previous experience negotiating both price and “intangibles” </li></ul><ul><li>Can structure a contract to provide you with appropriate contingencies and safety nets </li></ul>
  41. 41. The Role of a Real Estate Agent <ul><li>Tips for Choosing an Agent: </li></ul><ul><li>Choose an agent that is: trusted, responsive, and with whom you enjoy working. </li></ul><ul><li>Choose someone with whom you communicate well (in methods you prefer) and who answers all your questions. They should educate you so that you make better decisions, not tell you what to do. </li></ul><ul><li>Be sure you enjoy working with the agent before you sign an agreement for an extended period of time. It’s perfectly acceptable to sign an agreement for a day or a week. </li></ul><ul><li>Choose someone who understands the entire process, including lending – it’s all inter-related. </li></ul>
  42. 42. How a Buyer Agent is Paid <ul><li>Seller contracts with Seller Brokerage to list their home </li></ul><ul><ul><li>Seller Brokerage pays a portion to Seller Agent </li></ul></ul><ul><ul><li>Seller Brokerage agrees to pay a portion to Buyer Brokerage </li></ul></ul><ul><ul><li>Buyer Brokerage pays a portion to Buyer Agent </li></ul></ul><ul><li>If there is no Buyer Brokerage then Seller Brokerage keeps the entire commission </li></ul><ul><li>Choose a buyer agent whom you trust to be in the business as a career and not just for the transaction </li></ul>
  43. 43. Searching For “That” Home It’s All About The Trade-offs LOCATION HOME (SIZE, CONDITION, ETC) PRICE <ul><li>The Search </li></ul><ul><li>Three Decisions - “Pick 2” and find a tradeoff you’re comfortable with </li></ul><ul><li>Start with a price range </li></ul>
  44. 44. Bank Owned, HUD, & Short Sales <ul><li>HUD & VA </li></ul><ul><li>Government-insured loan was foreclosed upon </li></ul><ul><li>Sold As-Is </li></ul><ul><li>Incentives </li></ul><ul><li>Eligible for the $14,900 NSP Program </li></ul><ul><li>HUD: 10 Day Auction for sales </li></ul><ul><li>Owner-Occupant Preference </li></ul><ul><li>Bank Owned (REO) </li></ul><ul><li>Foreclosure Property </li></ul><ul><li>Sold As-Is </li></ul><ul><li>Incentives </li></ul><ul><li>Eligible for the $14,900 NSP Program </li></ul><ul><li>3-5 business day response time </li></ul><ul><li>Short Sale </li></ul><ul><li>Owned by a person </li></ul><ul><li>Selling for less than what is currently owed </li></ul><ul><li>Sold As-Is </li></ul><ul><li>Offer within 10% of market value </li></ul><ul><li>10-60 business day response time </li></ul>
  45. 45. Searching for “That” Home <ul><li>Open Houses </li></ul><ul><li>Builder’s Sales Center </li></ul><ul><li>Searching Online: </li></ul><ul><ul><li>Craigslist – No Standardization Or Regulations </li></ul></ul><ul><li>Best Resource: </li></ul>
  46. 46. Making an Offer <ul><li>Items we will negotiate </li></ul><ul><ul><li>Price </li></ul></ul><ul><ul><li>Earnest Money </li></ul></ul><ul><ul><li>Personal Property </li></ul></ul><ul><ul><li>Fixtures in the Home </li></ul></ul><ul><ul><li>Inspections </li></ul></ul><ul><ul><li>Closing </li></ul></ul><ul><ul><li>Financing Terms </li></ul></ul><ul><ul><li>Seller Concessions </li></ul></ul>
  47. 47. Establishing an Asking Price
  48. 48. Price & Closing Costs <ul><li>List Price = $400,000 </li></ul><ul><li>Agreed Upon Contract Price = $380,000, Closing Costs = $12K </li></ul><ul><li>Scenario 1: </li></ul><ul><li>Sales Price = $380K </li></ul><ul><li>Seller Paid Closing Costs = $0 </li></ul><ul><li>Net to Seller = $380K, Cash From Buyer = $12K + Down Pmt </li></ul><ul><li>Scenario 2: </li></ul><ul><li>Sales Price = $392K (effectively rolling closing costs into the loan) </li></ul><ul><li>Seller Paid Closing Costs = $12K </li></ul><ul><li>Net to Seller = $380K, Cash From Buyer = $0 + Down Pmt </li></ul>
  49. 49. Contracts & Inspections <ul><li>Property inspection—exposes any structural or hidden issues. </li></ul><ul><li>Home owner’s insurance policy—protects against loss or damage. </li></ul>
  50. 50. Contracts & Inspections <ul><li>In your inspection, it’s the big stuff that really matters. </li></ul><ul><ul><li>Cracks or crumbling in the foundation </li></ul></ul><ul><ul><li>Cracks inside the house over windows </li></ul></ul><ul><ul><li>Water stains in ceilings, floors, or walls </li></ul></ul><ul><ul><li>Faded or worn shingles </li></ul></ul><ul><ul><li>Mold issues </li></ul></ul>
  51. 51. The Final Week <ul><li>Pre-closing responsibilities include: </li></ul><ul><ul><li>Appraisal, survey, title search, and title insurance. </li></ul></ul><ul><ul><li>Keeping yourself mortgage worthy! </li></ul></ul><ul><ul><li>Doing a final walk-through of home. </li></ul></ul><ul><li>Countdown to closing includes: </li></ul><ul><ul><li>Getting your settlement statement, certified funds, evidence of insurance, and transfer of clear title. </li></ul></ul>
  52. 52. The Final Week <ul><li>DO NOT </li></ul><ul><ul><li>Buy furniture </li></ul></ul><ul><ul><li>Use your credit cards </li></ul></ul><ul><ul><li>Open up new lines of credit </li></ul></ul><ul><ul><li>Buy a new car </li></ul></ul><ul><ul><li>Change jobs </li></ul></ul><ul><li>until after closing! </li></ul>
  53. 53. Let’s Recap <ul><li>Meet with an Agent </li></ul><ul><li>Determine Affordability/Price Range: Meet with Lender </li></ul><ul><li>Define And Prioritize Search Criteria </li></ul><ul><li>Begin Search: Online, Open Houses, Automated Email Searches; An Agent Can Help Make The Process Smoother/More Targeted </li></ul><ul><li>Write Offer And Negotiate Terms </li></ul><ul><ul><li>Comparable Market Analysis To Determine Fair Price </li></ul></ul><ul><ul><li>Price, Settlement, Inspections, Concessions </li></ul></ul><ul><li>Do Inspections, Appraisals, & Address Contingencies </li></ul><ul><li>Mortgage Underwriting </li></ul><ul><li>Review Closing Cost Estimates </li></ul><ul><li>Settlement (“Closing”) </li></ul>2 weeks + 1 week 2-4 weeks *Ratification*
  54. 54. One Final Tip! <ul><li>Do your homework! </li></ul><ul><li>Know your limits </li></ul><ul><li>Have savings </li></ul>
  55. 55. Contact Info <ul><li>Jonathan Osman & Susan Shirley - Realtors® </li></ul><ul><li>The Charlotte House Hunter Group </li></ul><ul><li>Licensed in North and South Carolina </li></ul><ul><li>Keller Williams Realty </li></ul><ul><li>2115 Rexford Road Suite 102 </li></ul><ul><li>Charlotte NC 28211 </li></ul><ul><li>Phone: 704-960-1725 </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul>