Presentation on theme: "Presented by: Murfreesboromortgage.com Home Buying 101 The Home Buying Guide NMLS # 2914 | www.murfreesboromortgage.com."— Presentation transcript:
Presented by: Murfreesboromortgage.com Home Buying 101 The Home Buying Guide NMLS # 2914 |
2 Home Buying 101Home Buying 101 What you need to know Rent vs. Buy: What’s best for you? Save for a down payment Pre-approval/application process Search for your dream home You’re in escrow Congratulations! You’re a home owner Knowledge. Experience. Commitment.
3 Home Buying 101 Home Buying Reasons to Buy a Home Interest rates are at historic lows Recovering economy Housing prices Financial benefits of home ownership Pride of home ownership Knowledge. Experience. Commitment.
4 Home Buying 101Home Buying 101 Getting a loan is easier than you think Qualification standards * Credit availability is increasing Many loans options Down payment requirements Not everyone needs perfect credit *All loans are subject to underwriter approval Knowledge. Experience. Commitment.
5 Home Buying 101Home Buying 101 Advantages of Homeownership Mortgage Interest Deduction = lower tax bill* Build equity in your home = savings for retirement A sense of ownership A sense of community *iServe Residential Lending, LLC is not a tax advisor and does not offer tax advice. We recommend consumers consult with licensed tax professionals regarding potential tax deductions related to mortgages. Knowledge. Experience. Commitment.
6 Home Buying 101Home Buying 101 #1#2#3#4#5#6 Buy vs. Rent: What’s best for you Save for a down payment Get pre-approved for a mortgage Search for your dream home You’re in escrow Life as a homeowner Knowledge. Experience. Commitment.
7 Home Buying 101Home Buying 101 Professionals in the Home Buying Process Loan Officer—Assists borrowers in acquiring a loan by reviewing asset, credit, income and employment information to help determine the best home financing option available. Real Estate Agent—Helps find a desired home in a particular neighborhood or area. Based on needs and price range, an agent will look at the housing inventory to see what is available. Loan Processor - Collects all documentation to support the information provided on an application so it can be reviewed by an underwriter. Mortgage Underwriter — Reviews the entire loan file to determine eligibility and qualification for a loan. Appraiser—Assesses the desired home and determines the worth or market value by comparing price and value of similar homes in the neighborhood. Home Inspector—Evaluates the condition of the home at the time of purchase and determines if there are any defects or repairs which need to be made. Closing Agent—Records all final documents, facilitates signatures and serves as the middleman in exchanging funds between parties. Knowledge. Experience. Commitment.
8 Home Buying 101Home Buying 101 Rent vs. Buy?Rent vs. Buy? What’s best for youWhat’s best for you Knowledge. Experience. Commitment.
9 Home Buying 101Home Buying 101 What is renting? When you rent, you sign a lease that requires you to pay a fixed amount of money per month What are the benefits of renting? Utilities are paid for Free access to amenities such as a pool, fitness center and garage Repairs or replacement of fixtures (at no cost to you) No expenses associated with homeownership (down payment, mortgage insurance, property taxes) No long term commitment Knowledge. Experience. Commitment.
10 Home Buying 101Home Buying 101 What are the benefits of home ownership? Pride in living under your own roof Increase in home value over time which builds equity Control over monthly payment Customize your home Tax benefits When is it a smart decision to buy instead of rent? When your monthly rent payment is nearly equal to the cost of a mortgage payment. Planning to stay in the neighborhood? Short-term: Rent. Long-term: Buy. Knowledge. Experience. Commitment.
11 Home Buying 101Home Buying 101 Important questions to ask yourself: Do I feel comfortable about my job security? Do I expect my current pay to increase or stay relatively the same? Am I on time with monthly payments for debts/liabilities (car loan, student loan, credit cards etc.)? What is my credit score? Do I have enough for a down payment and associated costs? Knowledge. Experience. Commitment.
12 Home Buying 101Home Buying 101 What your credit score means A snapshot of your current financial situation. Your credit score factors in your payment patterns, available credit lines, and number of credit inquiries. Your credit report once pulled will contain three scores, each from one of the three credit agencies. Credit scores range from 350 to 850. A higher credit score improves your chances for being approved for a mortgage. Knowledge. Experience. Commitment.
13 Home Buying 101Home Buying 101 Tips for improving your credit score Pay your bills on time and pay at least the minimum payment. Do not make large purchases that will take over six months to pay off. Do not max out any or all credit cards. If you have an open credit card account with a zero balance, don’t close it. Correct any error(s) you find on your credit report. Limit opening new lines of credit. Knowledge. Experience. Commitment.
14 Home Buying 101Home Buying 101 Home Buying CostsDescription Down Payment Amount given by borrower to initially close a mortgage Sales Price – Home Mortgage Loan = Down Payment Home Mortgage Loan Loan used to finance a new loan home; monthly payments are made towards principal and interest of loan Home Inspection Reflects condition of home in relation to property’s value Loan Origination Fees Charged by mortgage lender associated with documentation, preparing and processing a mortgage application Closing costs Fees charged by mortgage lender expected to be paid at closing Homeowner’s Insurance An insurance policy covering a private residence as well as personal property paid monthly Property Taxes Paid on the property to the city or county annually or semiannually Utilities Electricity, gas, water, etc. Repairs/Maintenance Misc. interior and exterior repairs/maintenance to the property. Knowledge. Experience. Commitment.
15 Home Buying 101Home Buying 101 Save for a Down Payment Knowledge. Experience. Commitment.
16 Home Buying 101Home Buying 101 Understanding the down payment Think of the down payment as your initial payment and investment when purchasing a new home. The down payment is expressed as a percentage of the purchase price of the home. For example, if you’re looking to purchase a home with a sales price of $100,000 and you put 5% down, the down payment amount would be $5,000. Knowledge. Experience. Commitment.
17 Home Buying 101Home Buying 101 $100,000X5%=$5,000 (Sales Price)x(Percentage Down)=(Down Payment) In this example. the loan amount you would need to borrow is the sales price minus the down payment amount, which would be $95,000. $100,000-$5,000=$95,000 (Sales Price)-(Down Payment)=(Loan Amount) Knowledge. Experience. Commitment.
18 Home Buying 101Home Buying 101 What are my down payment options? The are several down payment options available. The down payment you make is dependent on the type of loan used to finance your new home. Below is a chart of the most common loan types and down payment requirements: Loan TypeDescriptionDown Payment Conventional When you want to buy a home with the lowest possible rate.5% - 20% FHA Great for a first time homebuyer Great for someone who can only afford a small down payment. 3.5% VA Gives Veterans the ability to own a home with a zero down payment0% USDA Perfect for those looking for homes in rural area.0% Knowledge. Experience. Commitment.
19 Home Buying 101Home Buying 101 How to make the down payment Personal Savings Making a down payment can take months, even years of planning and saving. This means reducing your daily and monthly expenses, taking a second job, or downsizing your current car or apartment in order to save where you can. Gift Funds Direct family members can contribute funds towards a down payment as a gift. The gift funds can be used for the full amount of the down payment. A lender will request in writing from the family member(s) that the funds given are a gift and not a loan. Down Payment Assistance Programs State and local housing agencies as well as non-profit organizations can provide down payment assistance for those that qualify. Knowledge. Experience. Commitment.
20 Home Buying 101Home Buying 101 Getting Pre-Approved and the Application Process Knowledge. Experience. Commitment.
21 Home Buying 101Home Buying 101 What is a Pre-Approval Letter A pre-approval letter is a conditional commitment in writing for the exact loan amount, allowing a buyer to look for a home at or below that price level. Benefits of a Pre-Approval Can speed up the home buying process. You’ll know the maximum amount you can borrow so you can find the right house for you in the right price range. Piece of mind that you can receive financing for a home purchase. Gives a seller confidence that you qualify for a home mortgage. Knowledge. Experience. Commitment.
22 Home Buying 101Home Buying 101 What is the Pre-Approval Process? Completing an application for a mortgage with a lender Provide information regarding: Personal assets Income Current debts and liabilities Your loan officer will pull and review your credit Based on your financial situation the loan officer, with Underwriter approval, will make a determination of pre-approving you for a mortgage and issuing a pre-approval letter Knowledge. Experience. Commitment.
23 Home Buying 101Home Buying 101 What is the Application Process? Information gathering on the following: Types of mortgage and terms of loans Property information and purpose of loan Borrower information Employment information Monthly information and housing expense information Assets and liabilities Details of transactions Declarations Acknowledgement and agreements Information for government monitoring properties Knowledge. Experience. Commitment.
24 Home Buying 101Home Buying 101 Documentation required for all loans Paystubs - Copies from the last 30 days. W-2’s - Copies of the two most recent years. Tax Returns - Copies of the two most recent years’ federal tax returns with all schedules attached. Bank/Asset Statements -Two months of statements for all assets claimed on your loan application, including checking, savings, 401K, stocks, bonds, mutual funds, etc. Please include ALL pages of your statements. Divorce Decree - If you have been divorced or legally separated, a copy of the final decree or agreement to verify child support, alimony, etc. Knowledge. Experience. Commitment.
25 Home Buying 101Home Buying 101 Documentation required for all loans cont. Bankruptcy Papers - If you filed for bankruptcy in the past seven years, full BK papers with discharge and a letter of explanation regarding the circumstances. Insurance Information - A policy upon acceptance of your purchase contract. Mortgage Statement(s) - A copy of your current mortgage statement(s), including any 2nd liens or Home Equity Lines. Identification - A copy of your driver’s license and/or Social Security Card is required to comply with the Patriot Act. If you are a non-citizen, a copy of your “green card” or visa. Purchase Contract- Fully executed with all addendums. Knowledge. Experience. Commitment.
26 Home Buying 101Home Buying 101 What happens next? Once you have submitted a loan application, it will be reviewed by the lender. Your loan officer will provide you loan disclosures which are a series of forms and documents that pertain to the cost of your loan. By law, lenders are required to provide these disclosures within three business days from when you’ve submitted a full application. Knowledge. Experience. Commitment.
27 Home Buying 101Home Buying 101 Important loan disclosures Good Faith Estimate—The Good Faith Estimate provides a summary of your mortgage loan, as well as all estimated costs and fees associated with it. The Good Faith Estimate allows you to compares the costs of a mortgage between different lenders. Truth-in-Lending Disclosure Statement— This disclosures will provide the total cost of money you are borrowing from the lender for your mortgage, the annual percentage rate (APR) and payment schedule. Appraisal Disclosure—This disclosure states that you’re entitled to a copy of the appraisal repot for the home you’re looking to purchase. Knowledge. Experience. Commitment.
28 Home Buying 101Home Buying 101 Search for Your Dream HomeSearch for Your Dream Home Knowledge. Experience. Commitment.
29 Home Buying 101Home Buying 101 Call in the professional It’s highly recommended for homebuyers to find a realtor or real estate agent who understands the market and neighborhood of interest for your house hunting efforts. You’ll want to use an agent who looks out for your best interests by finding a home that meets your needs and price range, and will be by your side during the negotiation process. Tips for picking the right real estate agent Ask friends, family, co-workers for referrals. Pick an agent that is familiar and has a good track record in the town/city you’re looking to live in. Find an agent who will show listings that fit you and your needs, not just their own listings. Knowledge. Experience. Commitment.
30 Home Buying 101Home Buying 101 Things to consider when searching for a home Type of home # of bedrooms & bathrooms School district Safety Traffic Neighbors External features Knowledge. Experience. Commitment.
31 Home Buying 101Home Buying 101 Things to consider when selecting your home When choosing a home, think about how long you plan to live in it and your future needs. Will you be having children or having a family member live with you in the future? Will you need to work out of your home or conduct business there on occasion? Create a list of your “must-haves” and your “like-to-haves”. This will help the real estate agent narrow down the best choices for you. Many times one house doesn’t have everything on your list. Knowing what the non-negotiables are upfront will make your decision between homes easier. Knowledge. Experience. Commitment.
32 Home Buying 101Home Buying 101 Things to consider when making an offer The condition and value of the home through an appraisal. The price of comparable homes on the same street or within the neighborhood. How long the home has been on the market. Be prepared for a counter offer from the seller. Knowledge. Experience. Commitment.
33 Home Buying 101Home Buying 101 What happens after your offer is accepted You’ll sign a purchase agreement between you and the seller outlining the conditions and terms of the sale. Lock in the interest rate for your loan. Your lender will schedule an appraisal for the home. You will need to obtain a homeowner’s insurance policy. Your real estate agent will schedule a home inspection to determine any defects, damages or required maintenance. Knowledge. Experience. Commitment.
34 Home Buying 101Home Buying 101 You’re in escrow! A big step Knowledge. Experience. Commitment.
35 Home Buying 101Home Buying 101 What’s happening with my loan? Your loan officer will make sure your application is completed in full. The loan processor will make sure all necessary documents supporting the information provided on your application and the conditions on your pre-approval are submitted to underwriting for final loan approval. Knowledge. Experience. Commitment.
36 Home Buying 101Home Buying 101 What’s happens at the closing? The processor on your loan will work with a closing agent to schedule a loan closing where you’ll sign closing documents Your lender will transfer funds to the seller on your behalf so you can officially and legally become the new owner of the home. 24 hours before the closing, you’ll receive an itemized list of all final closings costs. You may even do a final walk-through of the house with your real estate agent to make sure there are no imperfections. Knowledge. Experience. Commitment.
37 Home Buying 101Home Buying 101 Who will be at the closing? The closing for your home will usually take place at the office of a title or escrow company who will prepare and record all documents. Present at the closing will be: The borrower and any co-borrower (that’s you!) Your real estate agent The seller’s real estate agent Closing agent Escrow/Title agent Knowledge. Experience. Commitment.
38 Home Buying 101Home Buying 101 What to bring at the closing A certified check or cashier’s check to cover the final costs A copy of your homeowner’s insurance policy for the home Your photo ID Your purchase and sales contract Knowledge. Experience. Commitment.
39 Home Buying 101Home Buying 101 Important documents you will sign HUD-1 Settlement Statement—Itemizes the final closing cost that you’ll be provided at least 24 hours before the closing. Promissory Note—This documents states that you agree to repay the mortgage you have taken out on the home based on the loan amount, the interest rate, term of the loan and payment dates you agreed to. Mortgage or Deed of Trust—States you are accepting a mortgage. It gives the interest of the home to the lender, meaning the lender has the right to take the property through foreclosures if you don’t make your payments in full or on time. Title— The title transfers title ownership of the home from the seller to you, the buyer. Knowledge. Experience. Commitment.
40 Home Buying 101Home Buying 101Congratulations! You’re a HomeownerYou’re a Homeowner Knowledge. Experience. Commitment.
41 Home Buying 101Home Buying 101 Save Money Now that you've moved into your dream, it's time to see how little changes can make a big difference on your mortgage. If you have extra cash left after your home purchase, make a pre-payment Let's say you have a $100,000, 4.5%, 30 year loan on your first mortgage payment. If you put an additional $5000 down on the principal, you would shave off two years and 11 months from your loan saving $12, in interest. Add an extra payment each year. If you can't do one extra payment at once, divide the extra payment over 12 months and add that amount to your principal each month. Reduce your mortgage time by almost half just by adding 30% more a month to the principal on your loan. By paying a little more each month you could pay off your mortgage quicker. Not happy with your mortgage rate? After six months, you may be eligible to refinance your mortgage. You can save hundreds of dollars each month on your mortgage payments if you refinance. Knowledge. Experience. Commitment.
42 Home Buying 101Home Buying 101 THANK YOU FOR ATTENDING!THANK YOU FOR ATTENDING! iServe Residential Lending Murfreesboro Branch| NMLS # B Golden Bear Court Murfreesboro, TN Office: Website: Knowledge. Experience. Commitment.