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Heading Home A Seminar for First-time Homebuyers PRESENTED BY: Vartkes Hovsepian Lentegra Mortgage Group

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On Your Way to Your First Home <ul><li>Buying a home is a big step. </li></ul><ul><li>Choose a home and a financing program that’s right for you. </li></ul><ul><li>Select a home and a loan program that fits your budget, lifestyle and goals. </li></ul>

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Why Buy Instead of Rent? <ul><li>Buying a home can be a wise investment. </li></ul><ul><li>Typically homes increase in value over time. </li></ul><ul><li>You can build ownership interest – known as equity . </li></ul><ul><li>Interest paid on a home mortgage is typically tax deductible*. *Consult Your Tax Advisor Regarding Deductibility of Interest </li></ul>

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How to Begin? It’s as Easy as 1, 2, 3. <ul><li>Apply for mortgage pre-approval. </li></ul><ul><li>Put together a “home team” of experts: </li></ul><ul><ul><li>An experienced real estate agent or builder </li></ul></ul><ul><ul><li>A knowledgeable loan officer </li></ul></ul><ul><li>Learn more about the home buying process. </li></ul>

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THE BASICS THE BASICS The Basics

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How Much Home Can I Afford? <ul><li>To determine your maximum mortgage amount, lenders look at: </li></ul><ul><ul><li>Your credit history </li></ul></ul><ul><ul><li>Available cash for down payment and closing costs </li></ul></ul><ul><ul><li>Your income </li></ul></ul><ul><ul><li>Your existing debt and financial obligations </li></ul></ul><ul><li>Max mortgage amount + down payment = your home-purchase price range. </li></ul>

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How Important Is My Credit? <ul><li>Your credit score will be a key factor in the kind of mortgage program for which you may qualify. </li></ul><ul><li>Your credit history can also affect: </li></ul><ul><ul><li>The amount required for a down payment </li></ul></ul><ul><ul><li>The amount of money you can borrow in relation to your income </li></ul></ul><ul><ul><li>The interest rate you are offered </li></ul></ul><ul><li>Obtain a copy of your credit report. </li></ul>

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Why is My Credit History So Important? <ul><li>A history of paying monthly payments on time indicates you are likely to make mortgage payments on time. </li></ul><ul><li>A history of not over-borrowing on revolving accounts indicates you are good at managing the credit that is extended to you. </li></ul><ul><li>A credit history that is free of “derogatory” events, such as bankruptcies and collections indicates responsible handling of debt. </li></ul><ul><li>There are loan programs available for those with less than perfect credit, but they cost more. </li></ul>

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To Establish or Improve Your Credit Rating <ul><li>Use credit to purchase low priced items. Make a few, prompt minimum payments. </li></ul><ul><li>Always pay bills on time. </li></ul><ul><li>Don’t use more than 50% per account of your available credit. (Don’t “max out”.) </li></ul><ul><li>Don’t necessarily close unused accounts. </li></ul><ul><li>Be patient. Some credit blemishes can only be repaired with time. </li></ul><ul><li>If you have no established credit history, or less-than-perfect credit, there are loan programs that can help you buy a home. </li></ul>

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How Much Do I Need for a Down Payment? <ul><li>Today’s flexible programs make down payments less challenging. </li></ul><ul><li>Some homebuyers are eligible for assistance. </li></ul><ul><li>You may be able to buy with little or no down payment. </li></ul><ul><li>Loans with down payments less than 20% typically require mortgage insurance. </li></ul><ul><li>Most programs require funds equal to 1-3 month’s housing payments “in reserve” after closing. </li></ul>

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What About Closing Costs? <ul><li>Closing costs typically run between 3% and 7% of the purchase price. </li></ul><ul><li>“ Prepaids” must be collected at closing to cover the current month’s interest and future month’s taxes and insurance. </li></ul><ul><li>Some loan programs allow you to finance your closing costs. </li></ul><ul><li>Some programs allow all or partial closing costs to be paid by home sellers or other sources. </li></ul>

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How Large a Loan Can I Be Approved For? <ul><li>Lenders use a debt-to-income ratio to determine the loan amount for which you may qualify. </li></ul><ul><li>The anticipated housing payment is compared to gross earnings and debt. </li></ul><ul><li>Many programs offer expanded guidelines that qualify applicants for higher amounts. </li></ul><ul><li>Once you know your maximum loan amount, it’s up to you to decide if it’s right for you. </li></ul>

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What Does My Housing Payment Include? <ul><li>Your monthly “housing payment” is made up of four amounts – often referred to as “PITI”: </li></ul><ul><ul><li>P rincipal </li></ul></ul><ul><ul><li>I nterest </li></ul></ul><ul><ul><li>T axes </li></ul></ul><ul><ul><li>I nsurance* </li></ul></ul><ul><li>Funds to pay your tax and insurance bills, as they come due, are held in escrow. </li></ul><ul><li>* For condos, replace the insurance amount with your condo fee </li></ul>

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Are There Special Programs for Me? <ul><li>Many lenders offer special programs for first time buyers* </li></ul><ul><li>Often these are programs targeted at low income borrowers and/or for properties in low-income areas. You may not qualify for these. </li></ul><ul><li>Some programs do not allow first time buyers or require you to attend a home-buying class. </li></ul><ul><li>* You are a “first time buyer” if you have not owned a property for at least three (3) years. </li></ul>

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MAKING CHOICES MAKING CHOICES Making Choices

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Government Loans <ul><li>Government loans are backed by federal or state agencies. In general, they answer the needs of first-time homebuyers by offering: </li></ul><ul><ul><li>More flexible credit guidelines </li></ul></ul><ul><ul><li>Allowance for smaller or no down payments </li></ul></ul><ul><li>Types of government loans include FHA, VA and State Bond Programs. </li></ul>

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Conventional Loans <ul><li>Conventional* loans, which are not backed by the government, suit the needs of both first-time and move-up homebuyers. </li></ul><ul><li>Types of conventional loans include: </li></ul><ul><ul><li>Conforming (loan amounts up to $417,000 for a single family) </li></ul></ul><ul><ul><li>Jumbo (higher amounts) </li></ul></ul><ul><ul><li>*Conventional loan limits in Hawaii and Alaska are higher. </li></ul></ul>

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New, More Flexible Loan Programs <ul><li>New programs and enhanced features are continuously developed to help make home ownership more accessible. </li></ul><ul><li>For example, one new program features: </li></ul><ul><ul><li>Low or no down payment requirements </li></ul></ul><ul><ul><li>Flexible credit terms </li></ul></ul><ul><ul><li>Allowance for less-than-perfect credit, including bankruptcies </li></ul></ul><ul><ul><li>Secondary, stated income may be eligible to qualify </li></ul></ul><ul><ul><li>Reserves not required </li></ul></ul>

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Which Type of Loan is Right for Me? <ul><li>Each home loan category offers a range of financing options. </li></ul><ul><li>Work together with your mortgage specialist to select a program that best suits your budget needs and financial goals. </li></ul>

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Make it a Point to Ask About Points <ul><li>One point equals 1% of the loan amount. </li></ul><ul><li>Often you can lower your interest rate by paying points. </li></ul><ul><li>Your mortgage specialist can help you determine whether it is truly beneficial to you to pay points. </li></ul><ul><li>Sometimes paying points is the only way to qualify for the financing you need. </li></ul>

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Know When to Lock and When to Float <ul><li>Lenders allow borrowers to lock in their interest rate for periods of 30-120 days. </li></ul><ul><li>Often you can wait to lock up to five days before closing. </li></ul><ul><li>While you are waiting for your loan to close, rates may come down … or they may go up. Think about your risk tolerance. </li></ul><ul><li>The decision about when to lock a rate is yours. Simply inform your mortgage specialist. </li></ul>

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THE PROCESS THE PROCESS The Process From A Buyer’s Perspective

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Get Pre-Approved <ul><li>Give yourself the advantage: apply for a loan pre-approval early in the process, even before you begin looking at homes. </li></ul><ul><ul><li>Determine your price range so you can narrow down your home search </li></ul></ul><ul><ul><li>Complete the application and credit review stages of the mortgage process </li></ul></ul>

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Gather Your Documentation <ul><li>You may be asked to provide: </li></ul><ul><li>Paystubs/W2’s to verify your income* </li></ul><ul><li>Bank account or other asset statements </li></ul><ul><li>Documentation to help resolve errors on your credit report </li></ul><ul><li>Verification of debts not listed on your credit report </li></ul><ul><li>* For self-employed borrowers, a letter from your accountant replaces paystubs. </li></ul>

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Offer Accepted? Apply for Your Loan! <ul><li>Once you have an accepted offer on a property, you can formally begin the loan application. </li></ul><ul><li>Discuss options with your loan specialist. </li></ul><ul><li>Sign the application and disclosures and be prepared to provide necessary documents. </li></ul><ul><li>Your loan specialist will need a copy of your signed Purchase & Sale Agreement (P&S) and copies of your deposit check(s). </li></ul>

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Can Somebody Please Make the Mortgage Process Go Faster? <ul><li>We Can! And we do it every day! </li></ul><ul><li>You may be eligible for our time saving, streamlined documentation program. </li></ul><ul><li>You can look forward to personal attention and a rapid and affordable loan process. </li></ul>

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So What Happens Next <ul><li>Take a four-step walk through to closing. </li></ul><ul><ul><li>Processing (gathering documents and submitting to a lender) </li></ul></ul><ul><ul><li>Decisioning (underwriting) </li></ul></ul><ul><ul><li>Pre-closing (tying up loose ends; preparing documents) </li></ul></ul><ul><ul><li>Closing (sign, sign, sign!) </li></ul></ul><ul><li>You become the proud owner of your new home! </li></ul>

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HELPING HANDS HELPING HANDS Helping Hands

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Let’s Get YOU There Together <ul><li>Now that you’re on your way to a home of your own, you can count on your real estate agent or builder and your Lentegra mortgage specialist to be your personal “home team”. </li></ul><ul><li>We’re ready to work with you through each step of the process as you realize your very own American dream! </li></ul>

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Do You Need an Attorney? <ul><li>The lender will assign an attorney to handle the closing on their behalf. </li></ul><ul><li>The attorney makes sure you will have clean title to the property and that your purchase is properly recorded, among other things. </li></ul><ul><li>You are not required to hire one, but you may want to have an attorney review your purchase documents and answer questions. </li></ul><ul><li>Buyers can use the same attorney as the lender. Attorneys typically discount their fee to you when they are doing both. </li></ul>

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Who Else is Involved? <ul><li>An appraiser will formally evaluate the property to assure the lender that the price makes sense. </li></ul><ul><li>You may wish to hire a building inspector to determine if the building is in good shape. </li></ul><ul><li>Some buyers choose to have a pest inspector check the property for insect damage. </li></ul>

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The Seminar Is Done But You’ve Just Begun <ul><li>You can now approach your first home purchase as an educated consumer. </li></ul><ul><li>Remember these key points: </li></ul><ul><ul><li>Build your “homebuying team” </li></ul></ul><ul><ul><li>Check your credit report </li></ul></ul><ul><ul><li>Assemble your documents </li></ul></ul><ul><ul><li>Get preapproved and determine your price range </li></ul></ul><ul><ul><li>Discuss financing options with your mortgage specialist (Pay points? Rate lock period? Type of mortgage program?) </li></ul></ul>