1. How Much House Can You Afford? 1 Source: Keys to Home Ownership: National Foundation for Credit Counseling

2. Be A Financial Trainer or Tamer 2

3. How Much House Can You Afford? 2 ½ times your yearly income (or maybe 3) 3

4. $ 40,000.00 annual income x 2.5 $100,000.00 house 4

5. YOUR BUYING POWER Your income Your existing debt Your down payment The interest rate Your credit record Mortgage term (length) 5

6. How Much is A Lender Willing to Lend You? Your monthly housing costs should total no more than 28% of your gross monthly income (approximately ¼) 1. 6 Income

7. $ 40,000.00 annual income  12 months $3,333.33 monthly income X.28 $ 933.00 house payment 7 Income

8. Increase Your Income and You Increase The Amount of House You Can Afford Income 8

9. How Much is A Lender Willing to Lend You? Your total debt should total no more than 36% of your gross monthly income (approximately 1/3) (A lender may finance at 42%) 2. 9 Debt

10. $ 40,000.00 annual income  12 months $3,333.33 monthly income X.36 $1,200.00 TOTAL DEBT -- 933.00 house payment $ 267.00 in other debts 10 Debt

11. Decrease Your Debt and You Increase The Amount of House You Can Afford Debt 11

12. Your Down Payment 20% Traditional Conventional 5% Today’s Conventional 3-5% Federal Government Insured 2-3% State Government Program 0% Veterans Administration 0% Builder Finance 12 Down Payment

13. On a non-insured mortgage, if you do not have a 20% down payment you will have to pay PMI (personal mortgage insurance) Personal Mortgage Insurance 13 Down Payment

14. Increase Your Down Payment and You Increase The Amount of House You Can Afford Down Payment 14

15. A Decrease In The Interest Rate and You Increase The Amount of House You Can Afford Interest Rate 15

16. Credit Worthiness Is Determined By Your FICO Score Payment History (35%) Indebtedness (30%) Length of Credit (15%) New Credit Initiated (10%) Types of Credit in Use (10%) Interest Rate 16

17. An Improvement In Your Credit Record and You Increase The Amount of House You Can Afford Interest Rate 17

18. A Decrease In The Term of Your Mortgage and You Decrease The Amount You Pay For Your House Mortgage Term 18

19. 30 Year Mortgage 3 times the price of your house 15 Year Mortgage 2 times the price of your house Mortgage + Interest + Interest + Interest Mortgage Term 19

20. 20 Monthly Mortgage Payment P&I =? PITI = ? PITI + PMI = ? T&I = ?

21. Purchase Price = $ 200,000.00 Down Payment (5%) = $ 10,000.00 Loan Amount = $ 190,000.00 Est. Closing Costs = $ 5,700.00 (Total cash required at closing 15,700.00) Principle & Interest (7%) = $ 1,256.75 Est. Taxes and Insurance = $ 290.00 Est. PMI = $ 80.00 Total Monthly Payment = $ 1,626.75 Monthly Income Required $ 5,000.00 Yearly Income Required $ 60,000.00 Debt Allowed Per Month $ 400.00 21

22. Upfront costs down payment closing costs points settling in costs Terminology 22

23. Ongoing costs Monthly Mortgage Payment P & I equity T& I escrow PMI Maintenance & repairs Terminology 23

24. Terminology 24 Mortgages Conventional ARM Prepayment Penalty Rehabilitation Loans - Community Home Improvement Mortgage Loans Seller take-back Lease-purchase Fannie Mae and Freddie Mac Community Lending

25. Terminology 25 Government Insured Mortgages Federal HUD FHA VA USDA RHS State and local loan programs

26. How Much House Can You Afford? 26