First Time Home Buyer Presentation
- 1. Heading Home A Seminar for First-time Homebuyers PRESENTED BY: Vartkes Hovsepian Lentegra Mortgage Group
- 2. On Your Way to Your First Home Buying a home is a big step. Choose a home and a financing program that’s right for you. Select a home and a loan program that fits your budget, lifestyle and goals.
- 3. Why Buy Instead of Rent? Buying a home can be a wise investment. Typically homes increase in value over time. You can build ownership interest – known as equity . Interest paid on a home mortgage is typically tax deductible*. *Consult Your Tax Advisor Regarding Deductibility of Interest
- 4. How to Begin? It’s as Easy as 1, 2, 3. Apply for mortgage pre-approval. Put together a “home team” of experts: An experienced real estate agent or builder A knowledgeable loan officer Learn more about the home buying process.
- 5. THE BASICS THE BASICS The Basics
- 6. How Much Home Can I Afford? To determine your maximum mortgage amount, lenders look at: Your credit history Available cash for down payment and closing costs Your income Your existing debt and financial obligations Max mortgage amount + down payment = your home-purchase price range.
- 7. How Important Is My Credit? Your credit score will be a key factor in the kind of mortgage program for which you may qualify. Your credit history can also affect: The amount required for a down payment The amount of money you can borrow in relation to your income The interest rate you are offered Obtain a copy of your credit report.
- 8. Why is My Credit History So Important? A history of paying monthly payments on time indicates you are likely to make mortgage payments on time. A history of not over-borrowing on revolving accounts indicates you are good at managing the credit that is extended to you. A credit history that is free of “derogatory” events, such as bankruptcies and collections indicates responsible handling of debt. There are loan programs available for those with less than perfect credit, but they cost more.
- 9. To Establish or Improve Your Credit Rating Use credit to purchase low priced items. Make a few, prompt minimum payments. Always pay bills on time. Don’t use more than 50% per account of your available credit. (Don’t “max out”.) Don’t necessarily close unused accounts. Be patient. Some credit blemishes can only be repaired with time. If you have no established credit history, or less-than-perfect credit, there are loan programs that can help you buy a home.
- 10. How Much Do I Need for a Down Payment? Today’s flexible programs make down payments less challenging. Some homebuyers are eligible for assistance. You may be able to buy with little or no down payment. Loans with down payments less than 20% typically require mortgage insurance. Most programs require funds equal to 1-3 month’s housing payments “in reserve” after closing.
- 11. What About Closing Costs? Closing costs typically run between 3% and 7% of the purchase price. “ Prepaids” must be collected at closing to cover the current month’s interest and future month’s taxes and insurance. Some loan programs allow you to finance your closing costs. Some programs allow all or partial closing costs to be paid by home sellers or other sources.
- 12. How Large a Loan Can I Be Approved For? Lenders use a debt-to-income ratio to determine the loan amount for which you may qualify. The anticipated housing payment is compared to gross earnings and debt. Many programs offer expanded guidelines that qualify applicants for higher amounts. Once you know your maximum loan amount, it’s up to you to decide if it’s right for you.
- 13. What Does My Housing Payment Include? Your monthly “housing payment” is made up of four amounts – often referred to as “PITI”: P rincipal I nterest T axes I nsurance* Funds to pay your tax and insurance bills, as they come due, are held in escrow. * For condos, replace the insurance amount with your condo fee
- 14. Are There Special Programs for Me? Many lenders offer special programs for first time buyers* Often these are programs targeted at low income borrowers and/or for properties in low-income areas. You may not qualify for these. Some programs do not allow first time buyers or require you to attend a home-buying class. * You are a “first time buyer” if you have not owned a property for at least three (3) years.
- 15. MAKING CHOICES MAKING CHOICES Making Choices
- 16. Government Loans Government loans are backed by federal or state agencies. In general, they answer the needs of first-time homebuyers by offering: More flexible credit guidelines Allowance for smaller or no down payments Types of government loans include FHA, VA and State Bond Programs.
- 17. Conventional Loans Conventional* loans, which are not backed by the government, suit the needs of both first-time and move-up homebuyers. Types of conventional loans include: Conforming (loan amounts up to $417,000 for a single family) Jumbo (higher amounts) *Conventional loan limits in Hawaii and Alaska are higher.
- 18. New, More Flexible Loan Programs New programs and enhanced features are continuously developed to help make home ownership more accessible. For example, one new program features: Low or no down payment requirements Flexible credit terms Allowance for less-than-perfect credit, including bankruptcies Secondary, stated income may be eligible to qualify Reserves not required
- 19. Which Type of Loan is Right for Me? Each home loan category offers a range of financing options. Work together with your mortgage specialist to select a program that best suits your budget needs and financial goals.
- 20. Make it a Point to Ask About Points One point equals 1% of the loan amount. Often you can lower your interest rate by paying points. Your mortgage specialist can help you determine whether it is truly beneficial to you to pay points. Sometimes paying points is the only way to qualify for the financing you need.
- 21. Know When to Lock and When to Float Lenders allow borrowers to lock in their interest rate for periods of 30-120 days. Often you can wait to lock up to five days before closing. While you are waiting for your loan to close, rates may come down … or they may go up. Think about your risk tolerance. The decision about when to lock a rate is yours. Simply inform your mortgage specialist.
- 22. THE PROCESS THE PROCESS The Process From A Buyer’s Perspective
- 23. Get Pre-Approved Give yourself the advantage: apply for a loan pre-approval early in the process, even before you begin looking at homes. Determine your price range so you can narrow down your home search Complete the application and credit review stages of the mortgage process
- 24. Gather Your Documentation You may be asked to provide: Paystubs/W2’s to verify your income* Bank account or other asset statements Documentation to help resolve errors on your credit report Verification of debts not listed on your credit report * For self-employed borrowers, a letter from your accountant replaces paystubs.
- 25. Offer Accepted? Apply for Your Loan! Once you have an accepted offer on a property, you can formally begin the loan application. Discuss options with your loan specialist. Sign the application and disclosures and be prepared to provide necessary documents. Your loan specialist will need a copy of your signed Purchase & Sale Agreement (P&S) and copies of your deposit check(s).
- 26. Can Somebody Please Make the Mortgage Process Go Faster? We Can! And we do it every day! You may be eligible for our time saving, streamlined documentation program. You can look forward to personal attention and a rapid and affordable loan process.
- 27. So What Happens Next Take a four-step walk through to closing. Processing (gathering documents and submitting to a lender) Decisioning (underwriting) Pre-closing (tying up loose ends; preparing documents) Closing (sign, sign, sign!) You become the proud owner of your new home!
- 28. HELPING HANDS HELPING HANDS Helping Hands
- 29. Let’s Get YOU There Together Now that you’re on your way to a home of your own, you can count on your real estate agent or builder and your Lentegra mortgage specialist to be your personal “home team”. We’re ready to work with you through each step of the process as you realize your very own American dream!
- 30. Do You Need an Attorney? The lender will assign an attorney to handle the closing on their behalf. The attorney makes sure you will have clean title to the property and that your purchase is properly recorded, among other things. You are not required to hire one, but you may want to have an attorney review your purchase documents and answer questions. Buyers can use the same attorney as the lender. Attorneys typically discount their fee to you when they are doing both.
- 31. Who Else is Involved? An appraiser will formally evaluate the property to assure the lender that the price makes sense. You may wish to hire a building inspector to determine if the building is in good shape. Some buyers choose to have a pest inspector check the property for insect damage.
- 32. The Seminar Is Done But You’ve Just Begun You can now approach your first home purchase as an educated consumer. Remember these key points: Build your “homebuying team” Check your credit report Assemble your documents Get preapproved and determine your price range Discuss financing options with your mortgage specialist (Pay points? Rate lock period? Type of mortgage program?)