2. Today You
Will Learn
Why You Should Buy a Home
Why Your Credit is so Important
Why You Should Work
®
with a REALTOR
The Mortgage Process
Getting Approved
Loan Types & Products
Refinancing
The Home-Buying Process
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5. Tightening Rental Market
Reasons Average rents for a two bedroom
apartment is $1,100 per month or more.
to Buy Increasing Rents
vs. Rent Tax Benefits
Good Investment — Particularly in
California
The average annual appreciation on real
estate since 1975 is over 7.00%
This figure includes the double digit
negative appreciation we have
experienced over the past three years
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6. Renting Example
Average Rent Per $1,102
Month
Total Rent per Year
Total Write Off
$13,224
$66.12
Renting
vs.
Tax Write Off
Renters Tax Credit $66.12
Owning
(State)
No Future Appreciation!
7. Home Ownership Example
Sale Price of Home $400,000
Loan (96.5%) $386,000
Monthly Payment $2,878.02
(includes PITI)
Total Payment/Year $34, 536.24 Renting
Tax Write Off
vs.
Owning
Mortgage Interest $22, 645
Property Taxes $ 5,000
Total deductions $27, 645
If a home appreciates only 5% per
year, value in 5 years would be:
$510,513.00
Net 5-year gain will be of
$110,512.63
10. Proposed Monthly Payment
Estimate on Borrower’s Income $4,333.33 P&I (1st TD): $2,072.00
What You Borrower’s Income $2,857.17 Insurance: $99.72
Can Afford Other Income $0.00 Taxes: $416.67
MI: $289.50
Total Income $7,190.50 HOA Dues: $0.00
PITI & PMI: $2878.02
Other Debts: $200.00
Total Payment $3,078.02
Debt Ratio 40/42.8
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11. Pre-Qualification vs.
Pre-Approval
Pre-Approval: Mortgage Commitment
pending appraisal of the property
Application
Credit report pulled to verify scores
2 Years Federal Tax Returns with W-2’s
3 Months Bank Statements
2 Months of Current Pay-stubs
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13. Why Work with a
REALTOR ? ®
Have Extensive Information About the Market
MetroList Services Access & Other Agents
Knowledge of Area
Can Help Find Home Best Suited for Your Needs
Good Negotiator
Understands Closing Procedures
Choose by Experience
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15. Getting Approved
Income
Sufficient Income
Housing Debt to Income Ratio
Total housing payments divided by monthly
gross income
Total Debt to Income Ratio
Total Monthly Payments Divided by
Monthly Gross Income
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16. LOAN-TO-VALUE (LTV)
Amount of Down Payment Subtracted
from Price is LTV
5% DOWN = 95% LTV
MI - Mortgage Insurance
Required on All Loans with Less
Than 20% Down
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17. Loan Types
Conforming
$50,000 To $417,000
As Low As 3.5% Down
Will Require MI
20% Down = No MI
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18. Jumbo Loans
Private Investors
$417,000 to $1,000,000
Minimum 20% down
Asset Needed
680 Minimum credit score
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19. Mortgage Loan Products
Fixed Rate Mortgages
15-Year
20-Year
30-Year
Adjustable Rate Mortgages (ARM)
3/1 ARM
5/1 ARM
7/1 ARM
10/1 ARM
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20. Mortgage Jargon
Loan-to-Value — The percentage of what the lien-
holder owns vs. the borrower
Origination or Lender’s Fees — Fee charge by
lender to complete loan
Points — Percent of loan amount
MI - Mortgage Insurance — Insurance written by a
private company to protect lender against loss if
the borrower defaults
Rate Lock — A binding agreement to lock the rate;
points may be applied to change rate
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22. Home-Buying
Process
Get Pre-Approved Before You Start
Work with a REALTOR®
Tour Homes that Meet Your Needs Criteria
Make an Offer on the Home You Desire
Make an Educated Offer by Reviewing
All Comps in the Area with Your Agent
Deal with Counteroffers as They Come
Open Escrow (Your Agent Will Complete
This For You)
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