{Your Company Information Here} TheJoy of Buying Your First Home {Your Company Information Here}

Agenda Homeownership brings….. What is Homeownership? Preparation Budgeting, Savings, and Credit Qualifying Loan Programs Are you ready to buy a home?

What is Homeownership? The American dream An opportunity to provide for family A tax deduction Property appreciation Having the nicest lawn on the block Your own backyard Your own garage

Homeownership brings……. Sense of community Stability Tax benefits (Consult your tax advisor) Stable housing costs Potential appreciation

The Home Buying Process The Homebuying Team: Who is Involved? Real Estate Agent Mortgage Broker Home Inspector Professional Appraiser Surveyor Insurance Agent Attorney Escrow/Title Officer

Rent vs. Buy See handout for comparison

Preparation

Preparation Two things have to happen: Find a home Qualify for a loan

4 C’s of Lending Capital (savings) Capacity (income) Do you have enough cash for the down payment and closing costs? Do you have enough cash for emergencies? Capacity (income) Can you repay the debt? Character (credit history) Will you repay the debt? Collateral (house) Will the lender be fully protected if you fail to repay the loan?

What Lenders Look For Debt to Income Ratios Down payment Reserves Relationship between current consumer debts and current income Is your income high enough? Are your debts low enough? Down payment The higher the down payment, the lower the loan amount Reserves How much money do you have saved? How much will be left after closing? Do you pay your bills on time? Credit reports Non-traditional credit Credit Reports Include: General Information about you (name, address, etc.) Current and previous employers Bill-paying history (banks, stores, finance companies, mortgage, etc) Names of creditors Maximum credit amount granted by one creditor Maximum credit amount in total Remaining balance due each of your creditors Past due remaining balances Garnishments Foreclosures Poor legal credit decisions Dispute statements Tax liens Court judgments Bankruptcies Other public records Non-Traditional Credit Rent Utility bill payments Other recurring expenses

Preparing to Buy a Home Daily Spending Diary (examples) Financial Worksheets (examples) Decrease Spending & credit card use Entertainment (movies, dinners out) Clothes Dry cleaning Budgeting Tools

Budgeting What is a budget? A budget is a plan for managing your income and expenses

Make Budgeting Easier Decide who pays bills Know when bills are due Open a checking account & savings account Check interest rates on all of your loans Pay down high cost loans & credit cards Involve family in saving process use coupons find bargains cut back on eating out

Budgeting Tips Plan expenses according to current income Establish budget for six months to one year Keep record-keeping simple Set money aside for maintenance & emergencies Get consensus from entire family – make it a family project Pay yourself first - SAVE!

SAVINGS

Importance of Saving Pay yourself first Consider savings via payroll deduction Bank your change at the end of the day Bank surprises Bonuses and gifts If you can save $2.00 a day @ 2% interest you will have saved over $1,500 in 2 years That is one less Starbucks coffee each day

CREDIT

The Importance of Credit What does it mean to a lender Applying for credit Managing credit

How Lenders Use A Credit Score Scores assess past bill paying history to predict future behavior Scores are used to perform a risk analysis which helps predict the likelihood of loan repayment

Credit Scores The credit bureau risk score is a summary of the information in your credit file Scores range from 300-850 Score ranks consumers according to risk The higher the score, the lower the risk of default

Common Credit Problems Multiple credit cards used to their limit Obtain new credit when existing debts remain unpaid Pattern of late payments on current debts Bankruptcies Judgments Charge-offs Foreclosures

Solving Credit Problems Cancel unnecessary credit Pay off or pay down debts Resolve unpaid debts Write letters to credit bureaus for corrections Settle with collection agencies

Easy Steps to Build Credit Open a checking and savings account to pay bills easily Establish credit by Applying for a small loan using savings as collateral Applying for a credit card and using it minimally Applying for a loan with a co-signer Establish non-traditional credit

Easy Steps to Build Credit Rent payments Electric and other utility payments, car insurance Child care or child support payments Any other recurring expense Non-traditional credit sources must be in your name

Know Your Credit Request a copy of your credit report Review for accuracy Dispute inaccurate information Send a letter to the 3 credit bureaus if you have a dispute Pay all past due accounts as soon as you can Negotiate with creditors if you can’t pay in full If blemishes are severe - consider credit counseling

Credit Reporting Agencies Experian (formerly TRW) P.O. Box 9600 Allen, TX 75013 www.experian.com (888) 397-3742 Transunion P.O. Box 1000 Springfield, PA 19022 www.transunion.com (800) 888-4213 Equifax P.O. Box 740241 Atlanta, GA 30374-0241 www.equifax.com (800) 685-1111

QUALIFYING

A House Payment Includes PITI Principal Interest Taxes Insurance

Pre-Qualification Determines how much mortgage you qualify for Informal, no obligation Figure is an estimation - not exact

Approval Commitment from lender: “conditional approval” for a predetermined amount Based on verified information

Are You Ready to Buy a Home? First Steps: Review your employment Have I been employed on a regular basis for 2 years Evaluate your sources of income Is my income steady? Do I have money saved for a down payment & closing costs? Analyze your current expenses Do I have a budget? Can I handle a monthly mortgage payment, taxes, insurance, repairs Can I handle unexpected events? Determine the status of your credit history Do I have established credit? Have I paid my bills on time? Yes - I want to own a home Am I familiar with what is required to qualify for a home loan? Am I willing to work towards preparing myself to become a homeowner?

Paperwork Good Faith Estimate Truth in Lending What is it? What fees are included? Truth in Lending

LOAN PROGRAMS & LOAN TYPES

Loan Programs Government insured loans Conventional mortgage loans FHA Loans VA Loans Conventional mortgage loans Affordable loan programs – 0-5% down payment Special loan programs Bond programs Down payment assistance programs

Loan Types Fixed-rate loans Adjustable rate loans

Sample Programs Standard Conforming 30 Yr. Fixed My Community 97 (Conforming) My Community 100 (Conforming) Flex 97 (Conforming) Flex 100 (Conforming) FHA ARM’s/Hybrids

Sample Product Comparison FHA vs. MC100 Sales Price $110,000.00 Down Payment $3300.00 $500.00 Req. Borr. Funds 3% Minimum Inv. $500 or 1%=lesser of Disc./Prem $0.00 Loan Amount $105,788.00 30 Yr. Rate 6.125% 1st Mtg. P& I $642.78 $668.37 MI Pymt Factor 0.000416667 0.000866667 MI Monthly Pymt $44.08 $95.33 Total Payment $686.86 $763.70

Sample Product Comparison 30 Year vs. MC100 Sales Price $110,000.00 Down Payment $5500.00 $500.00 Req. Borr. Funds 5% Minimum Inv. $500 or 1%=lesser of Disc./Prem $0.00 Loan Amount $104,500.00 30 Yr. Rate 6.250% 6.125% 1st Mtg. P& I $643.42 $668.37 MI Pymt Factor 0.00065 0.000866667 MI Monthly Pymt $67.93 $95.33 Total Payment $711.35 $763.70

R E A D Y ?

The Closing Process Is this something you want to do???!!! Sign mortgage or deed of trust Sign your mortgage note & other loan documents Bring funds to close on your home Verify insurance policies GET THE KEYS TO YOUR HOME! Is this something you want to do???!!!

Life As A Homeowner Stay within your budget Make your mortgage payment top priority Any mortgage payment difficulties - CONTACT THE LENDER IMMEDIATELY Use cost-effective energy savings measures Hire a reputable contractor for major repairs Have an emergency maintenance fund

Enjoy Your New Home! Thanks for attending!