The document summarizes a presentation given at a home ownership fair about mortgages and refinancing. It discusses the speakers and organization hosting the event, provides an overview of current mortgage options and challenges, and offers tips for home buyers and those seeking to refinance. Key points covered include understanding conventional, FHA, VA, and USDA loan programs, the role of mortgage-backed securities, factors affecting credit approval like income, assets, credit history, and debt-to-income ratios, and why current market conditions make it a good time to buy a home.

1. Mortgage 101 & Refinancing Snohomish County Home Ownership Fair November 12,13,14, 2008

2. Your Speakers Wednesday – Marge Bearman, Rick Robertson Thursday – Kevin Rickels, Chris Callier Friday – Kim Colucci, Rick Robertson

3. Washington Association of Mortgage Professionals Non Profit Organization Mission: To promote high standards of business practices & ethics among members To providing educational programs to public, other real estate professionals and members To protect the interests of the real estate industry and the public via legislative actions

4. What is a Mortgage Professional? Specializes in mortgage loans Access to many investors resources Responsible for representing consumers with knowledge and expertise Licensed Loan Originators WAMP – Code of Ethics

5. Objectives of Workshop Essentials of mortgage loans Understanding Mortgage best practices Washington local housing market today Overview of Housing Legislation impact on you

6. Times Have Changed Non-Conforming Loan Options Limited Jumbo Loan Options Limited and More Expensive Best Options: Conventional and Gov’t Programs Conventional Fannie Mae/Freddie Mac Fixed Rate Mortgages Adjustable Rate Mortgages FHA & VA USDA There are still a variety of good programs available…

7. Modern Mortgage Banking Your grandfather got his mortgage loan from his banker. Now...

8. The Role of Mortgage-Backed Securities Most mortgages are packaged and re-sold as securities A security is not a bond, its only value is the underlying asset Investors accept risk with reward Very similar to a corporate bond Some delinquencies are expected Risk implied by the rating of the package (Moodys, S&P, etc) MBS packages typically bought by investors Institutions buying for their stable, low-risk portfolio Retirement funds – like your 401k 

9. If You Need to Refinance… Plan of Action Risk analysis meeting involving mortgage professional What financing do you have now? Credit review & credit repair Goals for your future – a mortgage is a financial tool Prepare Now Financial strategy – Integrated choices, timing Current home? Second home? Investment property? Get financial documents in order

10. If you need help….. Recovery Alternatives Speak to your current lender Speak to a mortgage broker about possible options HR 3221 – lender set back of loans to 90% current value. Details being developed. Contact: www.homenow.com or 888-995-HOPE This resource is supported by FNMA offers counselors and grant money to aid homeowners struggling

11. Back to Core Lending 4 C’s Documented information a must Capacity - Income: stability and ability to repay long term debt Capital - Down payment: must be sourced, where is it from and is it enough, sometimes reserves Credit: what is your score and how is it generated how much credit and how long established Collateral - Property: today’s value and only a percent of value is financed

12. Demystify Pre Approval By providing your lender with information By allowing your lender to pull your credit By having an underwriter review the above and agree to make a loan is a loan pre approval By speaking to a person on the telephone By allowing them to pull your credit By receiving a verbal or written pre approval is really just a pre qualify or opinion without weight

13. Why is this important? It is how buyers generally make a decision to buy a home. It is how sellers generally make a decision to accept an offer from a buyer.

14. Be Prepared & Be Patient Gather your documentation Prepare to explain any unusual circumstances If you have any credit history with late payments, bankruptcy or foreclosure, then be prepared with documentation and explanation. Allow ample time and try not to take the questions personally. Every loan is being scrutinized today.

15. What Paperwork Do I Need? Income – W2 for 2 years & Current Month Pay Stub If self Employed – 2 years full tax returns Assets – bank accounts, stock accounts, retirement 2 months statements If refinancing – current mortgage statements & original note This is a Full Document environment! For good results be prepared with your financial data.

16. IT’S ALL ABOUT RISK

17. If You Want to Borrow… Rates and availability are governed by your credit score Credit repair can save you lots of money 100 points could be worth $100,000 Optoutprescreen.com Routine credit monitoring – annual review Start credit review process 3-6 months in advance Many lenders have killed Stated/No Doc IF available, it’s more expensive You need good credit, provable income and manageable debt

18. Guidance to Buyers Get your credit and financial documents order Make your pre approval letter clean & strong Make sure you lender can deliver Have significant earnest money in hand Have down payment ready Be selective, look for quality Do not assume you can resell short term Research and prepare first!

19. DTI – Ratios? DTI is Debt to Income Front Ratio – Projected house payment to Monthly Gross Income Back Ratio - All debt monthly to Monthly Gross Income This gauge assists in determining ability to repay loan

20. Calculating Ratios Gross Monthly Income = $7,500.00 Monthly House Cost =$2,200.00 All other Monthly Costs = $500.00 2,200 divided by 7,500 = 29.3% front ratio 2,200 + 500 divided by 7,500 = 36% back ratio Ratio guides vary based on down payment, credit score, program: See a WAMP Mortgage Professional

21. What is good about today? IT’S A GREAT TIME TO BUY!

22. Local Economy Strengths that help our local economy Strong Job Growth Diverse Industries Gateway to the Pacific Regulation – Growth Management Act

23. New Legislation: Economic Stimulus Act 2/08 FNMA loan limits temporary increase and January 2009 there will be a permanent increase King, Snohomish, Pierce : $506,000.00 San Juan: $483,000.00 All others capped: $417,000.00 This provides better interest rates for higher loan amounts

24. Housing & Economic Recovery Act: HR 3221 Highlights: First time home buyer - $7,500.00 tax credit Purchases made from April 9, 2008 to June 1, 2009

25. Buying Today – It is a good idea! Purchase Price Today $475,000.00 Loan amount with 20% down $380,000.00 Rate 30 year fixed 6.25% (6.397APR) Principal & Interest (P&I) Payment $ 2,339.73 Wait 6 months? Interest rates rise 7% (7.157APR) Home price drops 5% to $451,250.00 Loan amount with 20% down $361,000.00 Principal & Interest (P&I) Payment $ 2,401.74 Rates based on specific date and time and are subject to change \

26. Buying Today Same Scenario – Today Principal & Interest (P&I) Payment $ 2,339.73 Waiting 6 months & Home price same: Interest rate 7% (7.157APR) Principal & Interest (P&I) Payment $2,528.15 Waiting 6 months & Home prices rise 5% Interest rate 7% (7.157APR) Principal & Interest (P&I) Payment $2,654.56 Qualifying based payment to income ratio. With a higher monthly payment, you may not qualify for the home. Rate based on par price for 8/12/08. Rates subject to change daily. Down payment options available: 5% for FNMA loans, 3% for FHA loans, 0% down for VA loans. Other program options may be available.

28. Move Up Buyer Why is it OK to move up now if I have to drop my price by 5%? Assume sellers are all negotiating down 5% Selling home for $450,000.00 - 5% ($22,500.00) = $427,500.00 Buying home for $800,000.00 - 5% ($40,000.00) = $760,000.00 Are you really loosing $22,500.00 $40,000.00 saved on new home $22,500.00 given on past home NET SAVED $17,500.00

29. Summary A return to proven financial capability and prudent lending A reduction in speculative buying A house is a home, not an ATM A more balanced market Longer market time or more aggressive pricing for sellers An opportunity for buyers to be more selective An opportunity for investors to buy well It Isn’t All Bad, But It Definitely is Different !

30. Thank You For Attending!