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Welcome to Homebuyer Education Sponsored by the Washington State Housing Finance Commission.

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Presentation on theme: "Welcome to Homebuyer Education Sponsored by the Washington State Housing Finance Commission."— Presentation transcript:

1 Welcome to Homebuyer Education Sponsored by the Washington State Housing Finance Commission

2 Class Instructors Add Your Names Here 3/27/2012

3 What we will cover Steps to Homeownership Owning vs renting How Much Can You Afford? Selecting a Loan Program Down payment and Closing Costs How to Shop for a Lender & Real Estate Professional – Selecting a Home The Importance of a Home Inspection House Key Program Loan Closing Foreclosure Prevention and Early Delinquency Intervention Home Maintenance Consumer Protection Resources Community Resources for Further Counseling or Other Assistance. Fair Housing Predatory Lending How Going Green Saves You Money 23 benchmarks set by WSHFC 6/3/2014

4 Agenda The Home Buying Process Lender Curriculum Assistance Programs Real Estate Curriculum Q & As and Resources 6/3/2014

5 The Home Buying Process –Steps to Homeownership –Owning vs renting –The Players in the Home buying Process –The Benefits of Getting Loan Pre-Qualified & Pre-Approved Before Searching for a Home –Shopping for a Lender 6/3/2014

6 The Steps to Homeownership Education Credit History Budget Research Loan Pre-Approval Your Priorities The Search Youre Home! The eight steps recommended by the Washington Homeownership Center 6/3/2014

7 Owning vs. Renting Benefits of Renting Your Home… Low maintenance costs Freedom to move Lower monthly payments No risk of losing investment Benefits of Owning Your Home… Pets Yard Décor Tax savings Building equity 6/3/2014

8 Owning vs. Renting Things to keep in mind about owning…. Yard work Home improvements/maintenance Larger monthly payments - Property Taxes - Homeowners Insurance 6/3/2014

9 The Players in the Homebuying Process Who are they? What role do they play? 6/3/2014

10 Pre-Approval What is the difference between pre- approval and pre-qualified? Why is it important to get pre-approved before you shop for a home? Good Faith Estimate Truth In Lending (TIL) APR 6/3/2014

11 Shopping for a Lender Get referrals and interview different lenders Questions to ask Difference between broker and loan officer 6/3/2014

12 Lender Curriculum –How Much Can You Afford? –Credit –Budgeting –Selecting a Loan Program –Down payment & Closing Costs 6/3/2014

13 Credit History– Why it is Important Your score and history will: Affect the interest rate you will be offered. Determine what loan program will be offered. 6/3/2014

14 Credit Read your credit report Correct errors on your report How to build your credit Maintain good credit history Check credit at least annually What is a credit score How to increase your credit score 6/3/2014

15 Credit Repair & Counseling The Homeownership Hotline sponsored by WSHFC 1 – HOME (4663) Or for a list of counselors statewide: 6/3/2014

16 Budgeting Basics Set Financial Goals Eliminate debt Six months of expenses saved Set investment goals Treat Your Savings Like An Expense 10% of all income saved or invested Automatic withdrawals 6/3/2014

17 Budgeting Basics Eliminate credit card debt Put your money to work Educate yourself Plan for future expenses Pay yourself first 6/3/2014

18 Budgeting Basics ABC Your Budget – track what you spend for 30 days… A: Expenses you need and can do nothing about today (mortgage, car payment) B: Expenses you need, but CAN do something about today (groceries, clothing) C: Things you want (cable TV, lattes, movies, eating at restaurants) 6/3/2014

19 Budgeting Basics How much do you CURRENTLY spend on housing? How much CAN you spend and how much do you WANT to spend on housing? 6/3/2014

20 Documents You Will Need 2-3 years tax returns 2 years of W-2s 2 most recent pay stub Last 3 months of bank statements Credit card information Information on any other loans Landlord information 6/3/2014

21 Types of Loans Conventional (or Conforming) FHA VA USDA Sub Prime & Non-Conforming Portfolio Jumbo 6/3/2014

22 Types of Loan Terms Fixed Rate Adjustable Rate Interest Only 15 / 20 / 30 / 40 years Balloon 6/3/2014

23 How Much Can You Afford What the bank is looking at: Debt-to income ratios The 3 Cs – Credit, Capacity & Collateral Down payment What the bank is looking at: Debt-to income ratios The 3 Cs – Credit, Capacity & Collateral Down payment How Much Can You Afford? 6/3/2014

24 How Much Can You Afford Calculating how much house payment you can afford depends on your income and current debt Gross monthly income $_3,000__ x.41 = $1,230 Minus total monthly minimum debt payments - $300 Total housing payment you can afford = $930 PITI (Principle, Interest, Tax, Insurance) Calculating how much house payment you can afford depends on your income and current debt Gross monthly income $ 3,000 x.41 =$1,230 Minus total monthly minimum debt payments - $ 300 Total housing payment you can afford = $ 930 PITI (Principle, Interest, Tax, Insurance) How Much Can You Afford? 6/3/2014

25 How Much Can You Afford Housing Expense-to-Income Ratio Principle and Interest: $ 690 Hazard Insurance:$ 73* Real Estate Taxes:$ 117* Mortgage Insurance:$ 73 Homeowners Association: $ 0 Subordinate Financing: $ 0 _______ $ Housing Expense-to-Income Ratio Principle and Interest: $ Hazard Insurance: $ 73.00* Real Estate Taxes: $ * Mortgage Insurance: $ Homeowners Association: $ 0.00 Subordinate Financing: $ 0.00 ___________ $ How Much Can You Afford? 6/3/2014

26 How Much Can You Afford To calculate total payment/income Take your monthly housing debt and divide by your monthly income $930 divided by $3,000 =.31 which is the same as 31% To calculate total payment to income ratio: Take your monthly housing debt ($930) and divide by your monthly income ($3000) Example:$930 / $3,000 =.31 which is the same as 31% How Much Can You Afford? 6/3/2014

27 How Much Can You Afford Total Expense-to-Income Ratio: total house payment plus total monthly minimum debt payments divided by gross monthly income Example: $930 + $300 = $1200 divided by $3,000 =.41 or 41% Total Expense-to-Income Ratio = total house payment plus total monthly minimum debt payments divided by gross monthly income Example: $930 + $300 = $1230 divided by $3,000 =.41 or 41% How Much Can You Afford? 6/3/2014

28 How Much Cash Will You Need? Down payment: Percentage of the value of the house Private mortgage insurance (PMI) Closing costs Items to be paid before closing (pre- paids): –Appraisal (also considered Closing cost) –Inspection (also considered Closing cost) –Homeowners insurance –Taxes 6/3/2014

29 Assistance Programs WSHFC Home Advantage Program WSHFC Down Payment Assistance Programs USDA, HUD Community Land Trusts Other DPA Programs statewide 6/3/2014

30 Washington State Housing Finance Commission Home Advantage First Mortgage Competitive interest rate DO NOT need to be 1 st time homebuyer $97,000 statewide income limit No acquisition limit, no recapture tax Automatically eligible for up to 4% of loan amount in DPA -0% interest 2 nd mortgage 6/3/2014

31 Washington State Housing Finance Commission Down Payment Assistance Programs Home Advantage 2 nd mortgage (up to 4% of loan amount)** Home Advantage Rebound ** HomeChoice House Key Schools House Key Veterans Home Advantage Built New House Key Plus Seattle (Subject to funding) House Key Plus ARCH (Subject to funding) **Down payment assistance program must be used in conjunction with Home Advantage 1 st mortgage. These are All Second Mortgages – These are not grants Only one WSHFC DPA program can be used. 6/3/2014

32 Washington State Housing Finance Commission Home Advantage Second Mortgage Loan 0% interest –deferred, NO Payment Up to 4% of first mortgage loan amount Statewide Statewide Income Limit $97,000 (based on household income determined by lender) Balloon loan – comes due in full 30 years, or if sell, refinance 6/3/2014

33 Washington State Housing Finance Commission Home Advantage Rebound Second Mortgage Loan 0% interest –deferred, NO Payment Up to $10,000 Statewide Statewide Income Limit $97,000 (based on household income determined by lender) Balloon loan – comes due in full 30 years, or if sell, refinance Must purchase a foreclosed, bank owned or short sale 6/3/2014

34 Washington State Housing Finance Commission HomeChoice Person with a disability or a family member with a disability (ADA) Up to $15,000 1% simple interest, Deferred, No payments One on One Counseling required Income Limits: King & Snohomish Counties: $88,200 Kitsap County: $74,000 Thurston County: $74,200 Island County $73,000 All Other Counties: $71,400 6/3/2014

35 Washington State Housing Finance Commission House Key Schools Up to $10,000 3% interest on a 10 year term Any Employee of Private or Public School K -12, Community Colleges or Technical Colleges. Income Limits: King & Snohomish Counties: $88,200 Kitsap County: $74,000 Thurston County: $74,200 Island County $73,000 All Other Counties: $71,400 6/3/2014

36 Washington State Housing Finance Commission House Key Veterans Second Mortgage Up to $10,000 3% interest on a 10 year term Veterans honorably discharged Income Limits: King & Snohomish Counties: $88,200 Kitsap County: $74,000 Thurston County: $74,200 Island County $73,000 All Other Counties: $71,400 6/3/2014

37 Washington State Housing Finance Commission Home Advantage Built New Second Mortgage Up to $10,000 3% interest on a 10 year term Newly Constructed, Never Occupied Income Limits: King & Snohomish Counties: $88,200 Kitsap County: $74,000 Thurston County: $74,200 Island County $73,000 All Other Counties: $71,400 6/3/2014

38 House Key Plus Seattle Up to $45,000 3% interest rate - Deferred, No Payments Borrower must contribute 1% or $2500 whichever is greater City limits of Seattle 80% Area Median Income & below (lower than House Key first mortgage income limits) Shared Appreciation Extra Inspection and Forms Washington State Housing Finance Commission 6/3/2014

39 Washington State Housing Finance Commission House Key Plus ARCH Up to $30,000 4% simple interest – Deferred, No Payments, Borrower must contribute 2% of own funds One on One Counseling required 80% Area Median Income & below (same as HK + Seattle) Extra Inspection and Forms Available in 15 Eastside Cities 6/3/2014

40 Washington State Housing Finance Commission Closing Cost Grant For homebuyers in the State of Washington Up to $500 grant towards closing costs Must work with a FHLB & WSHFC Participating lender. 6/3/2014 Subject to Funding

41 Mortgage Credit Certificate MCCs are not mortgages... It is a tax credit which means fewer tax dollars can be withheld from your regular paycheck, increasing your take-home pay. The lender can use the credit to help increase your buying power. It is strongly recommended that you contact a tax professional before applying for an MCC in order to determine the potential benefits an MCC may provide for your specific tax situation. 6/3/2014

42 Mortgage Credit Certificate MCC eligibility requirements include: The MCC is available with new purchase loans Must be a first time homebuyer, unless purchasing in a targeted area. Recapture Tax Applies Income and Acquisition Limits Owner Occupied Home Buyer Education is required Must work with a WSHFC MCC participating lender 6/3/2014

43 Recapture Tax ** Applies to the WSHFC Mortgage Credit Certificate program only Recapture only applies if all 3 of the following occur: Your home is sold or disposed of within 9 years of being purchased, for reasons other than your death; There is a capital gain on the sale of your home, AND Your household income for the year in which you sell your home exceeds federal recapture tax limits. See your lender for current limits. 6/3/2014

44 Rural USDA Programs 502 Direct Loan (work directly to USDA) Income limits: up to 80% of area median income Location: rural community with less than 10,000 population Loan amount: may be up to 100% of appraised market value Down Payment: not required (Please Note: WSHFC DPA Programs CAN NOT be used with USDA direct) 502 Guarantee (work with a lender that offers USDA) Income limits: up the 115% of area median income Location: rural community with less than 10,000 population Down payment: not required (ALL WSHFC DPA Programs CAN be used with USDA 502 Guaranteed) 6/3/2014 Subject to Funding

45 HUD 184 HUD 184 Indian Home Loan Guarantee Program Funds can be used to purchase and/or rehabilitate an existing home, or construct a home Must be an Alaskan Native or Native American, to participate in program Down payment as low as 1.25% Long term fixed rate financing with loan to value ratios as high as 150% Nontraditional methods may be used to demonstrate borrowers credit and income No income limits 6/3/2014

46 HUD 203k Streamline HUD 203k Streamline Rehab Program Include funds for eligible repairs to the base loan amount. No minimum repair cost – maximum amount up to $35,000 Can be used to purchase and rehabilitate an existing home. Same credit and down payment requirements as an FHA loan. Can be used with the Home Advantage First mortgage program and WSHFC Down Payment Assistance programs. Please note: only selected Home Advantage lenders offer the 203k Streamline product. Visit Hud.gov for a list of eligible repairs and verify with your lender. 6/3/2014

47 Community Lending Funding Note Be aware that specialty financing options have limited funding so you will want to ensure your program is available when you are in the home buying process. Organizations make every attempt to maintain continuous funding but they occasionally exhaust their assistance programs. All Housing Assistance programs are subject to funding availability 6/3/2014 Subject to Funding

48 Down Payment Assistance Programs by Region 6/3/2014

49 Region 1 Clallam, Grays Harbor, Jefferson, Kitsap, Mason, and Thurston Counties 6/3/2014

50 Aberdeen Neighborhood Housing Services –Up to 20% of appraised value –Grays Harbor County –Housing Education (HUD Approved) –Housing Rehab loans City of Bremerton –Housing Rehab Loans Community Frameworks- Bremerton –Built in Bremerton DPA Housing Kitsap (Kitsap County Consolidated Housing Authority) –Up to $20,000 –Must purchase in Kitsap County outside Bremerton City limits 6/3/2014 Region 1

51 Region 2 Island, King, San Juan, Skagit, Snohomish, and Whatcom Counties 6/3/2014

52 City of Seattle Down Payment Assistance –Up to $45,000 –HomeStead CLT, HomeStreet Bank, –HomeSight & Parkview (see below) –Home Repair Program City of Seattle Teacher Homebuyer Program –Up to $45,000 HomeSight –City of Seattle –South King County –Snohomish County –Up to 35,000 - $75,000 –Housing Education 6/3/2014 Region 2

53 Parkview Services –People / families with Developmental Disabilities –Down Payment Assistance –Housing Counseling & Hotline Habitat for Humanity Seattle / South King County –Serves City of Seattle, -South King County, –Finance the mortgage at 0% interest for the buyer –Shared equity and shared appreciation apply –Some projects are land trust model in partnership with Homestead Community Land Trust –Buyer participates in construction of home 6/3/2014 Region 2

54 Region 3 Pierce County 6/3/2014

55 Pierce County Community Services –Up to 3.5% of the sales price –Purchasing in Pierce County outside of Tacoma and Lakewood city limits City of Tacoma –Up to 3.5% of the sales price –Designated neighborhoods, Primarily south of 6 th Ave City of Lakewood –Up to $7000 –Lakewood City Limits Homeownership Center of Tacoma –Up to 22% of purchase price –Below market price homes –Hilltop area –Housing Education 6/3/2014 Region 3

56 Region 4 Benton, Chelan, Douglas, Franklin, Grant, Kittitas, Walla Walla, and Yakima Counties 6/3/2014

57 City of Yakima –Up to $4000 –Purchasing in City of Yakima targeted area –City acquired property purchase program also, up to $30,000 in assistance City of Richland –Up to $5000 City of Kennewick –Up to $5000 –Purchasing in City of Kennewick targeted area City of Pasco –Up to $5000 –Priority given to property within the Museum and Longfellow districts Columbia Valley Housing Association (Housing Authority of Chelan & City of Wenatchee) –DPA/ Self help –Housing Counseling & education 6/3/2014 Region 4

58 Region 5 Adams, Asotin, Columbia, Ferry, Garfield, Lincoln, Okanogan, Pend Orielle, Spokane, Stevens, and Whitman 6/3/2014

59 Community Action Center of Whitman County Homeowner Resource Center of Whitman County: –Self Help –Rehab –Weatherization –Housing Education and Counseling Spokane Neighborhood Action Program –City of Spokane & Spokane County –Rehab, Weatherization & Energy Efficiency –Minor Home Repairs –Housing Education and Counseling (HUD Approved) The ARC of Spokane –Down Payment Assistance –People with Disabilities –Housing Education and Counseling 6/3/2014 Region 5

60 Region 6 Clark, Cowlitz, Klickitat, Lewis, Pacific, Skamania, and Wahkiakum Counties 6/3/2014

61 Community Housing & Resource Center Vancouver –Housing Education & Counseling –Credit Repair/Debt Management/ Budget Counseling –Mortgage Default Counseling –Reverse Mortgage Counseling –Pre-Purchase Services –Tax Preparation Assistance –City of Vancouver Rehab program Family Finance Resource Center (Longview Housing Authority) –Housing Education & Counseling –Credit Repair/Debt Management/ Budget Counseling –Mortgage Default Counseling –SHARE / Self Help 6/3/2014 Region 6

62 Community Land Trusts City of Seattle –Homestead Community Land Trust San Juan Islands –Opal Community Land Trust –Lopez Island Community Land Trust Whatcom –Kulshan Community Land Trust Clallam –Homeward Bound Community Land Trust Kitsap /Bainbridge Island –Housing Resource Board Kittitas County (Yakima Valley) > –Kittitas Yakima Valley Community Land Trust 6/3/2014

63 Self-Help Housing Opportunities Self Help Clients participate in the construction of their home Low interest mortgage loan Sweat Equity Low Income (up to 80% AMI) Habitat for Humanity Clients participate in the construction of their home Zero interest loans Very Low- Low Income (30-60% AMI) To find an affiliate near you 6/3/2014

64 Additional Self Help Housing Opportunities Self-Help Programs Statewide Vashon Household Self Help, Northwest Housing Development, Housing Hope, Homes for Islanders, Whatcom Skagit Housing, Northwest Housing Development, Port Gamble S'Klallam Housing Authority/ Southern Puget Sound Intertribal Housing Authority, Kitsap County Consolidated Housing Authority, Clallam County Housing Authority, Community Frameworks Spokane, SHARE Longview 6/3/2014

65 Matching Programs HomeStart Clients are matched $3 for every $1 of their own up to $5,000 Must be first-time homebuyer Individual Development Accounts (IDAs) Clients are matched $2 for every $1 of their own up to $8,000 Money can be used for: buying a home, education or starting a small business United Way of King County (YMCA) offers IDA program 6/3/2014

66 Housing Authorities Section 8 for Homeownership Family Self Sufficiency Classes and Counseling 6/3/2014

67 Real Estate Curriculum –How to Shop for a Real Estate Professional – Understanding Agency Representation –Selecting a Home and Negotiating a Purchase Price –The Importance of a Home Inspection –The Loan Closing – What to Expect, Review Sample Loan Documents 6/3/2014

68 Your Priorities Size of home Number of bedrooms Number of bathrooms Neighborhood State of home (new vs fixer) Garage 6/3/2014

69 How to Shop for a Real Estate Professional Why use a Real Estate Agent? Interview several people Questions to ask Buyers agent vs. sellers agent 6/3/2014

70 Selecting a Home Dream Home vs. Starter home Where do you want to live? What is important to you? Do research – explore neighborhoods 6/3/2014

71 Negotiating a Purchase Price Know the market What are you willing to pay Be prepared for a counter offer Keep your priorities in mind Be prepared to put up earnest money 6/3/2014

72 Making the Offer Purchase and sale agreement Sellers disclosure Neighborhood review Financial contingency Inspection contingency 6/3/2014

73 Home Inspection Why you should have one How to find an inspector Questions to ask How much will it cost How long will it take What should I receive from the inspector 6/3/2014

74 The Loan Closing – What to Expect Signing papers Deed-of-trust Promissory note HUD-1 Truth in Lending When do you get the keys? 6/3/2014

75 Q & As and Resources Foreclosure Prevention and Early Delinquency Intervention Home Maintenance Consumer Protection Resources Community Resources for Further Counseling or Other Assistance. Fair Housing Predatory Lending 6/3/2014

76 Foreclosure Prevention Dont be late Contact your lender as soon as possible Contact a local housing counseling agency Visit Washington Homeowners & Homebuyers Web Site: 6/3/2014

77 Home Maintenance Protect your investment Test smoke detectors Clean out gutters Have regular service on heating system Change furnace filters Yard upkeep Budget for home repairs Visit Download: Post Homeownership Guide & Seasonal Newsletter 6/3/2014

78 Predatory Lending Predatory lending can be one or more abusive lending practice: Excessive interest rates and/or high fees Failing to disclose the true terms of the loan Approving a loan with payments higher than the borrower can afford to pay Pressuring a borrower to sign documents without understanding the terms of the loan Flipping or frequent refinancing of a loan 6/3/2014

79 Predatory Lending Predatory lending vs. sub-prime lending Sub-prime loans help borrowers with: - less than perfect credit - inconsistent employment history - incomplete application documents Sub-prime loan has a higher interest rate because the lender is taking a bigger risk in making the loan. 6/3/2014

80 Fair Housing Who is protected What is prohibited in the sale & loan How to file a complaint 6/3/2014

81 How Going Green can save you money $$ To get you thinking green, here are some tips that will not only help conserve resources but may also save you money: If you havent already, convert to the compact florescent light bulbs (a bulb at a time…) Use biodegradable cleaning products. If you are not already recycling paper, glass and plastic, call your disposal company and ask for recycling bins. Recycle your yard waste, contact your disposal company or purchase a bin. Use less water - flush less often, use your dishwasher, wash full loads. 6/3/2014

82 How Going Green can save you money $$ Use less energy – unplug small appliances, turn off computers, use timers on outdoor lights. Unfortunately, traditional wood burning fireplaces tend to lose more energy than they produce, pulling heated air out of the house and sending it up the chimney (and burning wood adds to air pollution). If you have natural gas or propane heating, consider gas logs. Replace shower heads. Choose a low-flow unit and you'll get virtually the same sensation of water flow while saving money and water. Purchase cloth re-useable grocery bags. Organize closets and donate unused clothing and household items to charity instead of throwing away. 6/3/2014

83 How Going Green can save you money As you upgrade: –Purchase Energy Star appliances, there may even be additional rebates and tax incentives –Purchase a higher output rated furnace or consider converting that oil tank to gas heating –Check out Solar Panel options in your area Here are some handy links to track Utility Rebate Programs and Energy Usage: Continue to visit the Commissions Seasonal Newsletter for additional tips 6/3/2014

84 Housing Counseling Agencies The Homeownership Hotline sponsored by The Department of Financial Institutions & WSHFC: 1 – HOME (4663) Or for a list of counselors statewide: 6/3/2014

85 Housing Counseling Agencies One on one counseling Loan document review Budgeting and financial literacy Mortgage default counseling Predatory lending counseling Reverse mortgage counseling Run /Check credit report 6/3/2014

86 Research & Resources Housing counseling agencies Down payment assistance programs Low-interest loan programs Affordable homeownership opportunities 6/3/2014 Washington State Housing Finance Commission US Housing & Urban Development (look for HUDs Settlement Cost Booklet) Or Call the Homeownership Hotline: 1 – HOME (4663)

87 Now What? Are you pre-approved for a mortgage loan: If not, meet with a lender If you know how much you can afford, then you are ready to go house shopping: Meet with a real estate professional Want to know more about the home buying process? Meet with a Housing Counselor 6/3/2014


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