Financial Education & Homeownership Workshop

 Liabilities ◦ Home mortgage ◦ Credit card balances ◦ Vehicle loan ◦ Hospital and other medical bills ◦ Student loans 2 2

3 A Five Step Financial Plan 1. Set goals 2. Analyze information 3. Create plan 4. Implement plan 5. Monitor and modify 3

◦ Needs vs. Wants  Needs – needed to survive  Wants – improve quality of life 4 4

5 2. SMART Goals  Specific  Measurable  Attainable  Realistic  Time-bound 5

6 3.Create a Plan  Making Decisions ◦ Examine your options ◦ Weigh the pros and cons ◦ Make your decision ◦ Write it all down 6

 Put it into action ◦ Discipline  Stick to the plan ◦ Responsible spending  Continue tracking expenses 7 7

8 Preventive Measures  Do not give out personal information  Keep confidential information secure  Shred documents with personal information  Review credit report annually  Use a firewall program on computer 8

What is credit?  Financial trustworthiness Why do you need good credit?  Improves your ability to ◦ Get a job ◦ Borrow ◦ Secure lower rates ◦ Purchase a home ◦ Rent ◦ Get lower rates on insurance 9 9

 Flexibility and peace of mind for  Big purchases  Services that require a credit card  Emergencies  Lower cost of living 10 Approved

 Unable to obtain future credit or loans  Higher interest rates  Too much debt  Starting over – rebuilding credit 11 DENIED

 Revolving Credit ◦ Most credit cards  Charge Cards  Installment Credit ◦ Car or mortgage loans  Services Credit ◦ Utilities or apartment rental 12

Annual Percentage Rate (APR) – Total cost to use credit in a given year Over-the-limit Fee – Credit card fee for going above your credit limit. 13

Annual Fee – Yearly fee for the privilege of using credit. Finance Charge – Cost of credit, including interest and additional charges, applied under the terms of a contract. 14

Transaction fees – Fees charged for certain uses of your credit line – i.e., ATM cash advance. Grace Period – Time period for paying bill to avoid charges. 15

Fixed Rate – An annual percentage rate that does not change during the term of the loan. Variable Rate – An annual percentage rate that may change over time. 16

No credit history? Blemished history?  Open a small credit line  Apply for a fully secured loan  Get a co-signer 17

 Shop around for credit  Ask if account is reported to a credit bureau  Make payments on time  Read the credit agreement before signing 18

 Review credit report once a year  Treat credit cards like cash  Set up a budget and stick to it 19

 Payment history  Balances owed  Length of credit history  New credit opened  Types of credit used Source: myFICO.com 20

 Account payment information  Delinquencies, charge-offs, liens, judgments, bankruptcy  Severity of delinquency  Amounts past due  Recent past due accounts  Number of past due accounts  Number of accounts paid as agreed 21

 Number of accounts with recently reported balances  Average balance across all trade lines  Relationship between total balances and total credit limits on revolving trade lines 22

Payment history:  Pay your bills on time  Get current and stay current  If you are having trouble, contact your creditors or a credit counselor Be aware – collections, even if paid, stay on your report for 7 years 23

Outstanding debt:  Keep balances low  Payoff debt - don't balance transfer  Don’t close unused credit cards to raise your score  Don’t open new cards to increase your available credit 24

Credit history:  Don’t open new accounts rapidly  Keep the card you’ve had the longest time 25

Inquiries and new account openings:  Rate shop for a loan within a 30 day period  Re-establish your credit history if you have had problems  Check your own credit report and scores at least once a year 26

Types of credit in use:  Open new credit accounts only as needed  Have credit cards, but manage them responsibly 27

 Annualcreditreport.com  Experian Consumer Relations 701 Experian Parkway/ POB 2002 Allen, TX  Equifax Consumer Relations P O Box Atlanta, GA

 TransUnion Consumer Relations P O Box 1000 Chester, PA  Federal Trade Commission

 Cannot discriminate due to: ◦ Age ◦ Sex ◦ Marital status ◦ Race ◦ National origin ◦ Public assistance 30

 If you don’t have a card with an interest rate of 14% or lower, GET ONE! ◦ Make sure the rate is fixed ◦ Read the fine print ◦ Compare *TERMS AND CONDITIONS: Length of your introductory period will be 0.0% for 12 months from the date of cardmembership on purchases and balance transfers or 0.0% for 6 months from the date of cardmembership for balance transfers and purchases depending on our review of your application and credit history. After the promotional period ends, the standard variable purchase APR will be applied to any unpaid purchase and balance transfer balances. As of August 9, 2007, the standard variable APR for purchases is either 10.24% Rate 1, 13.24% Rate 2 or 15.24% Rate 3 in that order based on our review of your application and credit history. The standard APR for cash advances is 23.24%. However, if you default under any Card Agreement that you have with us, we may automatically increase the rate on all balances (including any promotional balances) to a variable default rate of 32.24%. The minimum finance charge is $.50. Foreign purchase transaction fee is 3.0% of the purchase amount after its conversion into U.S. dollars. The transaction fee for cash advances is 3.0% of each cash advance, minimum $5. The transaction fee for balance transfers is 3.0% of the amount of each balance transfer, $5 minimum. 31

 Use your cards for emergencies only ◦ Cut them up if necessary  If you can’t pay for it with cash, and it is not an essential, YOU CAN’T AFFORD IT! 32

 Are you sure you want to buy a house?  Do you have steady income and steady employment?  Do you anticipate remaining in the same location for the next several years?  Have you created a budget so you know how much you can realistically afford to pay for housing? 33

 Do you have established credit?  Can you build a non-traditional credit history with records of payments to landlords and utility companies?  Do you have enough money saved up for a down payment and closing costs?  Have you “pre-qualified” yourself? 34

 Have you been pre-qualified by a lender, real estate professional, or counselor to determine how much you can borrow based on existing income and debt?  Is your existing debt low enough to qualify for a mortgage? 35

 Demand Experience ◦ High turnover industry - many new realtors ◦ Ask for at least 2 years of experience  Consider Education ◦ Consider Graduate REALTOR® Institute (GRI) designation 36

 Look for Commitment ◦ Too many part-time realtors ◦ Consider full-time realtors; shows commitment  Conduct Interviews ◦ Interview at least three realtors ◦ Recommendations from friends and family ◦ Make sure you feel comfortable working with them 37

 Place of your own  Feeling of permanence  Financial incentives ◦ Best form of family asset development ◦ Insurance bundling ◦ Equity 38

 Mortgage may be higher than rent  Repairs and maintenance  Limits mobility 39

 Down payment  Closing costs  Moving expenses  Settling-in costs 40

 Monthly mortgage payments  Taxes and insurance  Homeowner association fees  Utilities  Repairs and maintenance 41

 Good credit  Pay off long-term debts  Hold off buying until income increases  Find a mortgage with a lower down payment 42

 Market value of house  Condition of house  Circumstances of the sale  Affordability  Financing terms 43

 Legal description  Earnest money  Offering price  Down payment  Type of financing 44

 Personal property to be left behind in house  Proposed closing and occupancy dates  Length of time the offer is valid  Other contingencies 45

 Financing  Home inspection  Presence of termites and termite damage  Appraisal  Repairs  Other provisions you want to make 46

Seller May:  Accept the offer  Turn down the offer  Counter offer (come back with another offer) 47 You May:  Accept counter offer  Negotiate another counter offer  Back out 47

 TFCU 48

 Fill out pre-application worksheet  Ask what documentation to bring ◦ Purchase contract ◦ Recent bank statements ◦ Pay stubs and W2 income statements ◦ Debt information 49

 Can debt be repaid?  Is it likely that debt will be repaid?  Is there enough cash for the down payment and closing costs?  Is there some financial cushion left after your home purchase? 50

 Property appraisal  Order a credit report  Verification of information provided  Get approval from a mortgage insurer if required 51

 Type of loan  Loan amount  Loan term  Loan origination fee 52

 Points - if any  Annual Percentage Rate  Amount of the monthly principal and interest payment 53

 Low appraisal of property  Poor credit history  Insufficient funds  Insufficient income  Too much debt 54

 Title search  Title insurance  Survey  Homeowner’s insurance  Termite inspection 55

 HUD-1 Settlement Statement ◦ Down payment ◦ Loan origination fee ◦ Loan discount points ◦ Appraisal fee ◦ Credit report fee  Truth in Lending Statement 56

 Promissory Note  Mortgage/Deed of Trust  Affidavits  Property Deed/Warranty Deed 57

 Escrow items ◦ Mortgage ◦ Hazard insurance premiums  Interest  Down payment 58

 Loan documents signed  Property title transferred  Payment of closing costs and remaining down payment  Keys to new house received 59

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