LenderSelect Mortgage Group The Benefits of Buying

10/29/2017 We Believe… OWNING a home is the cornerstone to personal wealth and financial security

The Benefits of Buying a Home Build Equity* through appreciation Build Equity* by paying down the loan Tax Benefits – mortgage interest is usually tax-deductible Stop paying your landlord, start paying yourself! *Equity is the difference between the value of something and the amount owed on it.

Renting vs. Buying $1,145 Rent for 5 Years = $68,700 Vs. 10/29/2017 Renting vs. Buying $1,145 Rent for 5 Years = $68,700 Vs. $1,145 Mortgage for 5 Years ($160,000 Home) 2% increase in house value/year = $176,652 $144,716 balance on mortgage $31,936 in equity $5,500 less in taxes paid For educational purposes only and should not be relied upon by you. All information deemed reliable but not guaranteed. Not an exact quote.

Experience a Smooth Home Buying Process 10/29/2017 Experience a Smooth Home Buying Process There are 3 main components when applying for a home mortgage: Credit Income Savings/Assets

Credit Credit Score – a minimum of 580 BUT… 10/29/2017 Credit Credit Score – a minimum of 580 BUT… Score is NOT the only factor reviewed Bankruptcy Foreclosure Short-sale Judgments Collections Review credit overlays for 580-619 scores (i.e. liquid cash reserves, etc.)

Credit Components Payment History Debt Utilization 10/29/2017 Credit Components Payment History Debt Utilization Length of Credit History Type of Credit Inquiries & New Credit

1. Payment History 35% Impact (297 pts) 10/29/2017 1. Payment History 35% Impact (297 pts) Paying debt on time has the greatest positive impact on your credit score. Late payments, collections, judgments and charge-offs all have a negative impact. One 30-day late can cost you a 30-75 point decrease in your score. Missing a high payment will have a more severe impact than missing a low payment. Delinquencies that have occurred in the last two years carry more weight than older items.

2. Debt Utilization 30% Impact (255 pts) 10/29/2017 2. Debt Utilization 30% Impact (255 pts) This factor marks the ratio between the outstanding balance and available credit. Ideally, the consumer should make an effort to keep each credit card balance below 25% of the available credit limit. Outstanding balances that are higher than the credit limit have a very negative impact to score.

3. Length of Credit History 15% Impact (128 pts) 10/29/2017 3. Length of Credit History 15% Impact (128 pts) This portion of the credit score indicates the length of time since a particular credit line was established. A seasoned borrower will always be stronger in this area.

4. Type of Credit 10% Impact (85 pts) 10/29/2017 4. Type of Credit 10% Impact (85 pts) A mix of auto loans, student loans, credit cards and mortgages are more positive than a concentration of only 1 type of debt.

5. Inquiries & New Credit 10% Impact (85 pts) 10/29/2017 5. Inquiries & New Credit 10% Impact (85 pts) This percentage of the credit score quantifies the number of inquiries made on a consumer’s credit within a 6-month period. Each hard inquiry can cost from 2 to 25 points on a credit score.

Tips to Increase Your Score 10/29/2017 Tips to Increase Your Score Redistribute balances on credit cards. NEVER close out credit cards when you pay them off. Increase limits on credit cards, but don’t increase the balance owed. Open a new credit card to redistribute balances or establish credit history (only if needed). Don’t pay off old collections unless specifically advised to do so by a lender. If/when you need to, negotiate collection payoffs at 50% of amount owned, but insist that if you pay the collection, it will be REMOVED from your credit report. Use a restrictive endorsement verbiage on the back of the check you write to pay the collection. Get added as an Authorized User on a seasoned credit card with a low balance and a high limit. Make sure there are no late payments on this account. Pay off any and all judgments and keep all documentation.

Income Consistent – Documented – Taxed 10/29/2017 Income Consistent – Documented – Taxed Employment stability & likelihood to continue Debt-to-Income Ratio (DTI) < 43% Total monthly debt payments / Total monthly gross income PITI – Principal + Interest + Taxes + Insurance

40 hours/week x $15/hourly rate = $600/week 10/29/2017 43% DTI Example Borrower (Hourly) 40 hours/week x $15/hourly rate = $600/week x 52 weeks = $31,200/year / 12 months = $2,600/month Co-Borrower (Salary) $25,600/year / 12 months = $2,133/month Total Household Income $2,600 + $2,133 = $4,733 x 43% = $2,035/month

$2,035 - $590 = $1,145/mo Maximum PITI payment 10/29/2017 43% DTI Example Current Monthly Debt $2,035 - $590 = $1,145/mo Maximum PITI payment $1,145/mo PITI = $160,000 Home This example does not factor in mortgage insurance, condo dues, HOA fees, etc. Actual payment obligation may be higher.

Savings/Assets Must be documented Down payment 10/29/2017 Savings/Assets Must be documented Down payment Closing Costs & Prepaids/Escrows On average about 3.5 - 4% of the purchase price

Ways to Buy a Home with Limited Funds 10/29/2017 Ways to Buy a Home with Limited Funds VA – no money down HomeReady/Home Possible – 3% down FHA – 3.5% down Conventional – 5% down Gift Funds Down Payment Assistance (DPA) Programs Seller-Paid or Lender-Paid Closing Costs For educational purposes only and should not be relied upon by you. All information deemed reliable but not guaranteed. Not an exact quote. Programs may vary dependent upon individual scenarios.

The Home Buying Process 10/29/2017 The Home Buying Process Pre-Qualify vs. Conditional Approval Find a GOOD Buyer’s Agent – They are free! Select a Home and Write Offer Contract Acceptance (Ratification) Home Inspection & Termite Inspection Appraisal Title & Insurance Final conditions > Final Clear to Close Close and get keys!

Types of Real Estate Agents 10/29/2017 Types of Real Estate Agents Listing Agent (represents seller) Selling Agent (represents buyer)

Multiple Listing Service (MLS) 10/29/2017 Multiple Listing Service (MLS) What is it? Why is it beneficial to you?

How to Find the Perfect Home 10/29/2017 How to Find the Perfect Home Geographical Preferences Special Requirements (“wants” vs. “needs”) Number of Bedrooms Number of Baths Garage Lot Size Old or New How long do you want to live in the home? Price Range

you enjoy the benefits of buying? How can LSMG help you enjoy the benefits of buying?