Introduction to Home Mortgages

Outline Process to purchase a home Process to purchase a home Programs Programs What do Lenders look for in a customer? What do Lenders look for in a customer? What should you look for in a lender? What should you look for in a lender? Changes in the Mortgage Industry Changes in the Mortgage Industry

Pre-Approval Application Application –Pull credit report –Learn maximum loan amount approved for –Know payment amount Good Faith Estimate (GFE) Good Faith Estimate (GFE) No Cost for pre-approval No Cost for pre-approval Realtors and sellers usually require a pre- approval letter when you put an offer down on a home. Realtors and sellers usually require a pre- approval letter when you put an offer down on a home.

Basic Process Work with a Realtor Work with a Realtor –Help find lender –Help find home Collect documentation Collect documentation File to Underwriting Department File to Underwriting Department Sign documents at the Title Company Sign documents at the Title Company Time Frame Time Frame

Programs Conventional Loans Conventional Loans –5% + down Non-Conventional Loans Non-Conventional Loans –Jumbo loans Government loans Government loans –3% down –Gifted funds First time homebuyer programs First time homebuyer programs

What Do LENDERS Look For In Customers? Credit Credit –Credit established –Can build non traditional credit –720+ for best interest rate Debt to Income Ratio Debt to Income Ratio –DTI between 38% and 55% –Gross income –Student loans

Example Income: $60,000 a year = $5,000 a month Current monthly debt: Student loans $150 pmt Credit cards $100 pmt Car loan$250 pmt How much do I qualify for? 45% DTI = $2,250 minus current debt $500 current debt per month Approximately $1,750 a month About $270,000 mortgage

What Should YOU Look For In A Lender? Interest Rate Interest Rate –Fixed Rate / Variable Rate Pre-Payment Penalty Pre-Payment Penalty Closing Costs Closing Costs –GFE Local Representative vs Online lenders Local Representative vs Online lenders

Changes Better credit scores needed Better credit scores needed Credit scores reflect on interest rates Credit scores reflect on interest rates No 100% financing No 100% financing 20% down needed with less than 660 credit score 20% down needed with less than 660 credit score More documentation needed More documentation needed