1. Renting vs. Buying a Home

2. Who is CDCU?
Making Homeownership A Reality
Our Mission
Community Development Corporation of Utah empowers residents to become and remain successful homeowners, creating vibrant, sustainable communities.

3. Programs and Services $ Home Buyer Preparation Down Payment Assistance
Budgeting & Credit Classes
Home Buyer Education
Homeownership Advising $
Down Payment Assistance
HomeFit Mortgage & Refinancing
Low interest loans for home repair
Homes for sale
Real estate representation
Foreclosure Prevention Counseling

4. Rent or Buy: My Neighborhood
Rent for $1695/mo
Buy for $250,000
Payment $1450/mo

5. Assume you need to move after 3 years
Rent or Buy: My Neighborhood
Rent for $1695/mo
Buy for $1450/mo
Assume you need to move after 3 years
Deposit: $1,695
Total rent year 1: $20,340
Total rent year 2: $20,940
Total rent year 3: $21,540
Total cost: $64,515
*assumes $50 increase in rent each year
Down Payment: $12,500 (5%)
Closing Costs: $9,500 (4%)
Maintenance costs: $3,000
Total mortgage year 1: $17,400
Total mortgage year 2: $17,600
Total mortgage year 3: $17,800
Cost to sell home for $265,000: $21,500 (8%)
Total cost: $99,100
*assumes annual increases in taxes and insurance of $200
Difference of $34,585
Net cash upon sale: -$3,900

6. Assume you need to move after 10 years
Rent or Buy: My Neighborhood
Rent for $1695/mo
Buy for $1450/mo
Assume you need to move after 10 years
Deposit: $1,695
Total rent over 10 years: $230,400
Total cost: $232,095
*assumes $50 increase in rent each year
Down Payment: $12,500 (5%)
Closing Costs: $9,500 (4%)
Maintenance costs: $10,000
Total mortgage over 10 years: $183,000
Cost to sell home for $337,000: $26,960 (8%)
Total cost: $241,960
*assumes annual increases in taxes and insurance
Difference of $9,865
Net gain upon sale: $110,955

7. Renting vs. Buying Rent Own Short-term Long-term Easy to move
Lower up-front cost
No maintenance cost
Monthly rent may be less $ than mortgage payment
No asset, no appreciation
Cannot change: paint, etc
Cannot predict landlord decisions such as rent, attention to maintenance, option to sell, etc.
Own
Long-term
Difficult to move, costly to sell
High up-front cost
Regular maintenance costs
Mortgage payment may be higher to start, but is fixed*
Potential for appreciation of asset
Ability to remodel, paint, etc.
Must refinance or sell to access equity
Can eventually pay off mortgage

8. Rent vs Buy Tools

9. https://www. nytimes. com/interactive/2014/upshot/buy-rent-calculator

10. Rent vs Buy Tools
The CFPB offers several tools and educational materials about many financial topics, including buying and owning a home. Check out this website:
Find a Home Buyer Education class and/or one-on-one pre-purchase counseling with a HUD-Approved Housing Counselor by visiting HUD’s website or the CFPB Counselor Search site:
Let Nerd Wallet check your credit and simulate different scenarios for you like paying down debt or open new account:

11. Current Market Challenges
Buying in a Seller’s Market
Well-Prepared
Savvy – get educated
Savings – down payment, closing costs,
Understand programs available to help
Work with highly experienced professionals
Shop around for the best mortgage
Get pre-approved and possibly pre-underwritten before looking
Utilize technology
Act quickly and decisively
Emotionally prepared
Low Inventory
Rising Rates
High Prices
Fast Pace

12. Preparing for Homeownership: Building Your Financial Foundation
Credit
Saving
Budgeting
Credit
Budgeting

13. Qualifying for a Mortgage
Stable Income
2 years of stable employment history
Documentation of income: paystubs, W-2’s, tax returns, bank statements
Employment History
Lender will verify that you have the funds needed to purchase the home, plus reserves. Anywhere from 3-20% of purchase.
Down Payment & Savings
Detailed history of how you have borrowed and repaid money in the past .
Positive Credit (History & Score)
Qualifying for a Mortgage
In order to qualify for a mortgage, you need to show that you can afford to pay a monthly house payment!

14. Credit: Explained The score Credit as a tool Negative Credit
Detailed history of how you have borrowed and repaid money in the past. Typically need at least a 640 to qualify for a mortgage.
What is a credit score?
Credit as a tool
Credit is required for a mortgage. Being credit wise is the first step to a good financial future.
Do you need credit?
Negative Credit
Bankruptcy
Judgments & Liens
Collections
Charge-offs & Settlements
Late payments
Examples of Negative Credit
Perfect Concept
Building your score
2-3 positive lines of credit that are at least 12 months old
Diversification of accounts installment & revolving
Keep old lines open
Building Your Score

15. Credit Scoring Model Utilization Payment History 30% 35%
Length of History
New Credit
Payment History
15%
35%
30%
10%
Types of Credit

16. How does debt affect your ability to buy a home?
$165,000
$1,015
Income:
$45,000/year
Debt:
$600/month
$210,000
$1,315
Debt:
$300/month
Income:
$45,000/year VS
So these factors are pretty important, right! So how do we get in a better position to buy a home or just be more financially stable?
As your debt level increases, your purchasing power decreases
Assuming 43% max debt ratio and 4.25% interest rate

17. How does debt affect your ability to buy a home?1
Gross Monthly Income for all eligible borrowers with eligible income sources. Other income from non-borrowers in household are not considered.
Gross Monthly Income
All minimum payments from your credit report are considered. Be sure to tell lender if you have any new debts not yet included on the report.
Minimum Monthly Debt Payments 2 3
If you are in repayment, can use income based payment on many loans. If deferred, lender must use 1% of the loan balance as your monthly debt obligation.
Student Loans
Details available in other classes. Example on the next slide
Gross monthly income x allowed debt ration. Minus debt = maximum mortgage payment.
Mortgage Payment 4

18. Student Loans Calculating Student Loans for a Mortgage
For all loans, whether deferred, in forbearance, or in repayment, the lender must include a monthly payment in the borrower’s recurring monthly debt obligation.
If the loans are deferred or in forbearance 1% of the total balance will be used as the monthly payment for the calculation.
For student loans in repayment the lender can use the payment reported on your credit report – either a fully amortized payment or income based payment.
When preparing to buy a home it will typically be beneficial to get onto an income-based payment plan early enough to have made a few payments by the time you want to get pre-approved.
Be credit wise: Keep all other debts as low as possible to help with qualifying. Borrow as little as possible in student loans.

19. Inspection & Appraisal
Down Payment & Savings
Earnest Money
Moving expenses
Inspection & Appraisal
Emergency Savings
Down Payment
Closing Costs

20. Programs to assist with the purchase
Further Education
Budgeting, Credit, Home Buyer Education classes
Homeownership Advising
100% Financing Mortgages
CDCU and many banks offer no down payment loans for low income home buyers
Down Payment Assistance
For those under 80% of AMI
Available in many areas
Local Affordability Programs
Homes for sale and affordable mortgage products for low-income buyers provided by local non-profits or local government
HomeChoice Loan
The State of Utah offers a special mortgage program for borrowers with a disabled household member
Real Estate Representation
Available through agent at CDCU or get referrals from friends

21. “Before taking the Home Buyer Education class, I had no idea how I was supposed to look at any of the houses on the market. I felt out of my comfort zone, and I didn’t like that feeling of not knowing what I was talking about. This class really helped me with that.” After learning about mortgages, the home buying process, preapproval, and how much home he could realistically afford, Jeremy (a school teacher) was empowered to start the home buying process with confidence and was able to purchase a home through CDCU!

22. Contact Us
Like us on Facebook
@CDC_Utah