Snohomish County 2003 Final


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  • Snohomish County 2003 Final

    1. 1. Mortgage 101 & Refinancing Snohomish County Home Ownership Fair November 12,13,14, 2008
    2. 2. Your Speakers <ul><ul><ul><li>Wednesday – Marge Bearman, Rick Robertson </li></ul></ul></ul><ul><ul><ul><li>Thursday – Kevin Rickels, Chris Callier </li></ul></ul></ul><ul><ul><ul><li>Friday – Kim Colucci, Rick Robertson </li></ul></ul></ul>
    3. 3. <ul><li>Washington Association of Mortgage Professionals </li></ul><ul><li>Non Profit Organization </li></ul><ul><li>Mission: </li></ul><ul><li>To promote high standards of business practices & ethics among members </li></ul><ul><li>To providing educational programs to public, other real estate professionals and members </li></ul><ul><li>To protect the interests of the real estate industry and the public via legislative actions </li></ul>
    4. 4. What is a Mortgage Professional? <ul><li>Specializes in mortgage loans </li></ul><ul><li>Access to many investors resources </li></ul><ul><li>Responsible for representing consumers with knowledge and expertise </li></ul><ul><li>Licensed Loan Originators </li></ul><ul><li>WAMP – Code of Ethics </li></ul>
    5. 5. Objectives of Workshop <ul><li>Essentials of mortgage loans </li></ul><ul><li>Understanding Mortgage best practices </li></ul><ul><li>Washington local housing market today </li></ul><ul><li>Overview of Housing Legislation impact on you </li></ul>
    6. 6. Times Have Changed <ul><li>Non-Conforming Loan Options Limited </li></ul><ul><li>Jumbo Loan Options Limited and More Expensive </li></ul><ul><li>Best Options: Conventional and Gov’t Programs </li></ul><ul><ul><li>Conventional Fannie Mae/Freddie Mac </li></ul></ul><ul><ul><ul><li>Fixed Rate Mortgages </li></ul></ul></ul><ul><ul><ul><li>Adjustable Rate Mortgages </li></ul></ul></ul><ul><ul><li>FHA & VA </li></ul></ul><ul><ul><li>USDA </li></ul></ul><ul><ul><li>There are still a variety of good programs available… </li></ul></ul>
    7. 7. Modern Mortgage Banking <ul><li>Your grandfather got his mortgage loan from his banker. Now... </li></ul>
    8. 8. The Role of Mortgage-Backed Securities <ul><li>Most mortgages are packaged and re-sold as securities </li></ul><ul><ul><li>A security is not a bond, its only value is the underlying asset </li></ul></ul><ul><li>Investors accept risk with reward </li></ul><ul><ul><li>Very similar to a corporate bond </li></ul></ul><ul><ul><li>Some delinquencies are expected </li></ul></ul><ul><ul><li>Risk implied by the rating of the package (Moodys, S&P, etc) </li></ul></ul><ul><li>MBS packages typically bought by investors </li></ul><ul><ul><li>Institutions buying for their stable, low-risk portfolio </li></ul></ul><ul><ul><li>Retirement funds – like your 401k  </li></ul></ul>
    9. 9. If You Need to Refinance… <ul><li>Plan of Action </li></ul><ul><li>Risk analysis meeting involving mortgage professional </li></ul><ul><li>What financing do you have now? </li></ul><ul><li>Credit review & credit repair </li></ul><ul><li>Goals for your future – a mortgage is a financial tool </li></ul><ul><li>Prepare Now </li></ul><ul><li>Financial strategy – Integrated choices, timing </li></ul><ul><li>Current home? Second home? Investment property? </li></ul><ul><li>Get financial documents in order </li></ul>
    10. 10. If you need help….. <ul><li>Recovery Alternatives </li></ul><ul><li>Speak to your current lender </li></ul><ul><li>Speak to a mortgage broker about possible options </li></ul><ul><li>HR 3221 – lender set back of loans to 90% current value. Details being developed. </li></ul><ul><li>Contact: or 888-995-HOPE </li></ul><ul><ul><li>This resource is supported by FNMA offers counselors and grant money to aid homeowners struggling </li></ul></ul>
    11. 11. Back to Core Lending 4 C’s <ul><li>Documented information a must </li></ul><ul><li>Capacity - Income: stability and ability to repay long term debt </li></ul><ul><li>Capital - Down payment: must be sourced, where is it from and is it enough, sometimes reserves </li></ul><ul><li>Credit: what is your score and how is it generated </li></ul><ul><li>how much credit and how long established </li></ul><ul><li>Collateral - Property: today’s value and only a percent of value is financed </li></ul>
    12. 12. Demystify Pre Approval <ul><li>By providing your lender with information </li></ul><ul><li>By allowing your lender to pull your credit </li></ul><ul><li>By having an underwriter review the above and agree to make a loan is a loan pre approval </li></ul><ul><li>By speaking to a person on the telephone </li></ul><ul><li>By allowing them to pull your credit </li></ul><ul><li>By receiving a verbal or written pre approval is really just a pre qualify or opinion without weight </li></ul>
    13. 13. Why is this important? <ul><li>It is how buyers generally make a decision to buy a home. </li></ul><ul><li>It is how sellers generally make a decision to accept an offer from a buyer. </li></ul>
    14. 14. Be Prepared & Be Patient <ul><li>Gather your documentation </li></ul><ul><li>Prepare to explain any unusual circumstances </li></ul><ul><li>If you have any credit history with late payments, bankruptcy or foreclosure, then be prepared with documentation and explanation. </li></ul><ul><li>Allow ample time and try not to take the questions personally. Every loan is being scrutinized today. </li></ul>
    15. 15. What Paperwork Do I Need? <ul><li>Income – W2 for 2 years & Current Month Pay Stub </li></ul><ul><li>If self Employed – 2 years full tax returns </li></ul><ul><li>Assets – bank accounts, stock accounts, retirement </li></ul><ul><li>2 months statements </li></ul><ul><li>If refinancing – current mortgage statements & original note </li></ul><ul><li>This is a Full Document environment! For good results be prepared with your financial data. </li></ul>
    16. 16. IT’S ALL ABOUT RISK
    17. 17. If You Want to Borrow… <ul><li>Rates and availability are governed by your credit score </li></ul><ul><li>Credit repair can save you lots of money </li></ul><ul><ul><li>100 points could be worth $100,000 </li></ul></ul><ul><ul><li> </li></ul></ul><ul><li>Routine credit monitoring – annual review </li></ul><ul><ul><li>Start credit review process 3-6 months in advance </li></ul></ul><ul><li>Many lenders have killed Stated/No Doc </li></ul><ul><ul><li>IF available, it’s more expensive </li></ul></ul><ul><li>You need good credit, provable income and manageable debt </li></ul>
    18. 18. Guidance to Buyers <ul><li>Get your credit and financial documents order </li></ul><ul><li>Make your pre approval letter clean & strong </li></ul><ul><li>Make sure you lender can deliver </li></ul><ul><li>Have significant earnest money in hand </li></ul><ul><li>Have down payment ready </li></ul><ul><li>Be selective, look for quality </li></ul><ul><li>Do not assume you can resell short term </li></ul><ul><li>Research and prepare first! </li></ul>
    19. 19. DTI – Ratios? <ul><li>DTI is Debt to Income </li></ul><ul><li>Front Ratio – Projected house payment to Monthly Gross Income </li></ul><ul><li>Back Ratio - All debt monthly to Monthly Gross Income </li></ul><ul><li>This gauge assists in determining ability to repay loan </li></ul>
    20. 20. Calculating Ratios <ul><li>Gross Monthly Income = $7,500.00 </li></ul><ul><li>Monthly House Cost =$2,200.00 </li></ul><ul><li>All other Monthly Costs = $500.00 </li></ul><ul><li>2,200 divided by 7,500 = 29.3% front ratio </li></ul><ul><li>2,200 + 500 divided by 7,500 = 36% back ratio </li></ul><ul><li>Ratio guides vary based on down payment, credit score, program: See a WAMP Mortgage Professional </li></ul>
    21. 21. What is good about today? <ul><li>IT’S A GREAT TIME TO BUY! </li></ul>
    22. 22. Local Economy Strengths that help our local economy <ul><li>Strong Job Growth </li></ul><ul><li>Diverse Industries </li></ul><ul><li>Gateway to the Pacific </li></ul><ul><li>Regulation – Growth Management Act </li></ul>
    23. 23. New Legislation: Economic Stimulus Act 2/08 <ul><li>FNMA loan limits temporary increase and January 2009 there will be a permanent increase </li></ul><ul><li>King, Snohomish, Pierce : $506,000.00 </li></ul><ul><li>San Juan: $483,000.00 </li></ul><ul><li>All others capped: $417,000.00 </li></ul><ul><li>This provides better interest rates for higher loan amounts </li></ul>
    24. 24. Housing & Economic Recovery Act: HR 3221 <ul><li>Highlights: </li></ul><ul><li>First time home buyer - $7,500.00 tax credit </li></ul><ul><ul><ul><li>Purchases made from April 9, 2008 to June 1, 2009 </li></ul></ul></ul>
    25. 25. Buying Today – It is a good idea! <ul><li>Purchase Price Today $475,000.00 </li></ul><ul><li>Loan amount with 20% down $380,000.00 </li></ul><ul><li>  </li></ul><ul><li>Rate 30 year fixed 6.25% (6.397APR) </li></ul><ul><li>  </li></ul><ul><li>Principal & Interest (P&I) Payment $ 2,339.73 </li></ul><ul><li>  </li></ul><ul><li>Wait 6 months? </li></ul><ul><li>Interest rates rise 7% (7.157APR) </li></ul><ul><li>Home price drops 5% to $451,250.00 </li></ul><ul><li>Loan amount with 20% down $361,000.00 </li></ul><ul><li>Principal & Interest (P&I) Payment $ 2,401.74 </li></ul><ul><li>Rates based on specific date and time and are subject to change </li></ul><ul><li> </li></ul>
    26. 26. Buying Today <ul><li>Same Scenario – Today </li></ul><ul><li>Principal & Interest (P&I) Payment $ 2,339.73 </li></ul><ul><li>Waiting 6 months & Home price same: </li></ul><ul><li>Interest rate 7% (7.157APR) Principal & Interest (P&I) Payment $2,528.15 </li></ul><ul><li>Waiting 6 months & Home prices rise 5% </li></ul><ul><li>Interest rate 7% (7.157APR) Principal & Interest (P&I) Payment $2,654.56 </li></ul><ul><li>Qualifying based payment to income ratio. With a higher monthly payment, you may not qualify for the home. </li></ul><ul><li>Rate based on par price for 8/12/08. Rates subject to change daily. </li></ul><ul><li>Down payment options available: 5% for FNMA loans, 3% for FHA loans, 0% down for VA loans. Other program options may be available. </li></ul>
    27. 28. Move Up Buyer <ul><li>  </li></ul><ul><li> Why is it OK to move up now if I have to drop my price by 5%? </li></ul><ul><li>  Assume sellers are all negotiating down 5% </li></ul><ul><li>  </li></ul><ul><li>Selling home for $450,000.00 - 5% ($22,500.00) = $427,500.00 </li></ul><ul><li>  </li></ul><ul><li>Buying home for $800,000.00 - 5% ($40,000.00) = $760,000.00 </li></ul><ul><li>  </li></ul><ul><li> Are you really loosing $22,500.00 </li></ul><ul><li> </li></ul><ul><li> $40,000.00 saved on new home </li></ul><ul><li> $22,500.00 given on past home </li></ul><ul><li>  </li></ul><ul><li> NET SAVED $17,500.00 </li></ul>
    28. 29. Summary <ul><li>A return to proven financial capability and prudent lending </li></ul><ul><li>A reduction in speculative buying </li></ul><ul><li>A house is a home, not an ATM </li></ul><ul><li>A more balanced market </li></ul><ul><li>Longer market time or more aggressive pricing for sellers </li></ul><ul><li>An opportunity for buyers to be more selective </li></ul><ul><li>An opportunity for investors to buy well </li></ul>It Isn’t All Bad, But It Definitely is Different !
    29. 30. Thank You For Attending!