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Crawford And Associates Mortgage 101Seminar


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Crawford And Associates Mortgage 101Seminar

  1. 1. Crawford & Associates Presents Mortgage 101
  2. 2. SEMINAR AGENDA <ul><li>How to find a lender and a mortgage that is right for you </li></ul><ul><li>Conforming vs. Alternative lenders </li></ul><ul><li>The rights of the borrower and the lender </li></ul><ul><li>Importance of good credit </li></ul><ul><li>Income and employment </li></ul><ul><li>Appraisal / loan to value (LTV) </li></ul>
  3. 3. RENT <ul><li>Monthly 1,440 </li></ul><ul><li>Insurance 30 </li></ul><ul><li>Total 1,470 </li></ul><ul><li>Yearly Cost 17,640 </li></ul><ul><li>Tax Benefits 0 </li></ul><ul><li>Net Cost 17,640 </li></ul><ul><li>Net Cost / Month $1,470 </li></ul><ul><li>Total Cash Needed to Rent </li></ul><ul><li>$ 1,440 X 4 = $5,880 </li></ul><ul><ul><li>2 Months Security </li></ul></ul><ul><ul><li>Realtor Fee </li></ul></ul><ul><ul><li>1 st Month’s Payment </li></ul></ul>OWN Monthly 1,220 Taxes 133 Hazard Insurance 80 Total 1,433 Yearly Cost 17,196 Tax Benefits (approx) 5,441 Net Cost 11,755 Net Cost / Month $979 Total Cash Needed to Own 5,400 Down Payment 12,000 Closing Costs (typically 6-7%) 9,000 Contribution $8,400 Needed to Own
  4. 4. Mortgage Types and Terms <ul><li>Mortgage Types: </li></ul><ul><li>Fixed Rate </li></ul><ul><li>Adjustable Rate </li></ul><ul><li>Balloon Mortgage </li></ul><ul><li>Interest Only </li></ul><ul><li>Two popular terms are: </li></ul><ul><li>15 Year Mortgage (builds equity and pays off quicker, has a higher monthly payment) </li></ul><ul><li>30 Year Mortgage (lower monthly payment with longer commitment) </li></ul>
  5. 5. WHAT IS CREDIT WORTHINESS? <ul><li>Mortgage/Rent Payment History </li></ul><ul><li>Debt Payment History </li></ul><ul><li>Total Debt </li></ul><ul><li>Debt Balance Vs. Credit Limit </li></ul><ul><li>Collections </li></ul><ul><li>Bankruptcies & Judgments </li></ul>
  6. 6. CREDIT REPORT <ul><li>Reporting Agencies </li></ul><ul><ul><li>Equifax </li></ul></ul><ul><ul><li>Experian </li></ul></ul><ul><ul><li>Trans union </li></ul></ul><ul><li>Scores range from 400-850 </li></ul><ul><li>Factors affecting scores are listed on report </li></ul><ul><li>Available online for nominal fee </li></ul><ul><li>Verify that paid debts report accurately </li></ul>
  7. 7. Credit scores are compiled using models based on your credit history. Your score directly affects the rate you receive. If you have a higher credit score, you will generally receive lower rates. Scores generally range 400-850. Credit Scores 30 year loans based on credit scores are: 720-850 Payment on $100K loan: $626.55 700-719 675-699 620-674 560-619 500-559 Payment on $100K loan: $863.71 . Over $235 more per month!!!! In compiling credit scores credit bureaus look at the following items: 1) What is your track record ? ( Approx 35% of your score) 2) How much credit is too much credit (Approx. 30% of your score) 3) How established is your credit (Approx. 15% of your score) 4) Are you taking on new debt (Approx 10% of your score) 5) Is your credit a “healthy mix”? (Approx 10% of your score) More information is located on your credit score handout and
  8. 8. Principal and Interest Taxes and Insurance <ul><li>Front End Debt to Income Ratio (DTI) </li></ul><ul><li>Included in the ratio are : </li></ul><ul><li>Mortgage Principal and Interest Payments </li></ul><ul><li>Tax and Insurance payments on your property </li></ul><ul><li>Conforming Lenders (banks, credit unions) look at this ratio to determine how much of a loan you can afford. They allow up to 28% of your gross (pretax) income. </li></ul><ul><li>Alternative lenders do not look at this ratio. </li></ul><ul><li>Back End Debt to Income Ratio (DTI) </li></ul><ul><li>Included in this ratio are your: </li></ul><ul><li>Mortgage Principal and Interest Payments </li></ul><ul><li>Tax and Insurance payments on your property </li></ul><ul><li>Auto Loans </li></ul><ul><li>Credit Card Debts </li></ul><ul><li>Student Loans, etc </li></ul><ul><li>Conforming Lenders allow up to 36% of your income for this ratio. </li></ul><ul><li>Alternative lenders typically can go higher depending on your qualifications. </li></ul>
  9. 9. INCOME AND EMPLOYMENT <ul><li>Ability To Pay </li></ul><ul><li>Time At Job </li></ul><ul><li>Time In Your Field </li></ul><ul><li>Additional Income </li></ul>
  10. 10. APPRAISAL WHAT IS MY HOME WORTH? <ul><li>Appraiser compares your home to other properties </li></ul><ul><li>Makes adjustments (for example, comparable property has a garage and you do not) </li></ul><ul><li>Small variances </li></ul><ul><li>Obtain a copy (once you pay for it) </li></ul><ul><li>Verify accuracy based on your knowledge </li></ul><ul><li>Loan to value is based on appraised value, if inflated it could jeopardize your selling the house in the future </li></ul>
  11. 11. LOAN TO VALUE (LTV) <ul><li>Loan amount as A percentage Of home value </li></ul><ul><li>LTV takes into consideration all mortgages or liens on the property. It could include home improvement loans, tax liens and 1st & 2nd mortgages </li></ul>LOAN $IZE
  12. 12. What is Home Equity and Loan to Value? (LTV). The value of your home divided by the loan amount is LTV. The area in color is home equity $100K purchase price $97K mortgage, $3K down 97% LTV (3% Equity ( $3K)) Private Mortgage Insurance (PMI) required by conforming lenders PMI not required by many alternative lenders. 5 yrs later: Home appreciated to $120K $90K mortgage balance 90/120= 75% LTV ( 25% Equity ($30K). No PMI required (LTV in excess of 80%) 18 yrs later: Home appreciated to $175K $50K mortgage balance 50/175= 28%LTV (72% Equity. ($126K) 30 yrs later: Home appreciated to $275K $0K mortgage balance 0/275= 0%LTV (100% Equity. ($275,000)
  13. 13. Responsibilities of the Borrower <ul><li>Escrow Accounts (Paying your Taxes and Insurance) </li></ul><ul><li>Making payments on time </li></ul><ul><li>What is a “Grace Period”? </li></ul><ul><li>Payment Options (Internet, Phone Payments, Automatic Payments) </li></ul><ul><li>When Emergencies Occur </li></ul>
  14. 14. The Crawford & Associates Dwight Crawford, C.M.C. LLO 704-542-7937 [email_address]
  15. 15. BROUGHT TO YOU BY <ul><li>Crawford & Associates </li></ul>