Welcome to Welcome A Community Based Development Corporation

Welcome to

A Home Buyers Education Workshop

Welcome

Morningstar Urban Development, Inc.

A Community Based Development Corporation

Instructor:

Carne Mahone, Housing Counselor

You Can Buy a Home Brochure

Down payment & Monthly Budget Worksheets (one completed case study and one blank)

Home Shopping Checklist

Loan Application Checklist

Seminar Evaluation Form

Morningstar Urban Development Inc. A COMMUNITY BASED DEVELOPMENT ORGANIZATION

IN PARTICIPANTS’ FOLDERS

Why Buy A Home?


•Deduct the interest payment and property taxes. •Stable housing costs. No landlord to raise your rent. •Grow your equity and wealth through appreciation on your property. •You control your property. You receive the rights of ownership. •Future equity build up lets you set up retirement investments.

WHY BUY A HOME?

Can you name some of the benefits of homeownership?

Morningstar Urban Development Inc. . A COMMUNITY BASED DEVELOPMENT ORGANIZATION

BENEFITS OF HOMEOWNERSHIP?

Build wealth

Tax savings

Pride of ownership

Security

Build good credit

It’s a Buyers market

Return on Investment


BENEFITS OF HOMEOWNERSHIP

Responsibilities of Homeownership

Can you name some of the responsibilities of homeownership?


On-time mortgage payments

Property taxes

Insurance

Repairs & maintenance Purchase appliances &

equipment


RESPONSIBILITIES OF HOMEOWNERSHIP

Renting• Rental payments often increase

annually

• Limited or no financial gain: Payments benefit the owner or landlord

• No increase in financial status, wealth building does not occur

• No Tax Incentive


RENTING VS.. OWNING

Owning

• Fixed rate mortgage payments usually stay the same for the life of the loan

• Build equity you can borrow against

• Increase value of your home = building wealth

• Tax incentivesMorningstar Urban

Development Inc. . A COMMUNITY BASED DEVELOPMENT ORGANIZATION

RENTING VS.. OWNING

1. Step 1: Credit Pre-Approval

2. Step 2: Choosing a Real Estate Professional

3. Step 3: Buying Your Home

Pre-approval is for credit purposes only and is not

a commitment to lend.

Contact your mortgage representative for details.


HOME BUYING AND FINANCING IN THREE EASY STEPS


STEP 1. CREDIT APPROVAL

Prequalification vs. Pre-approval

As Pre-qualification• An estimate of how much of a

loan you might qualify for. It is not a firm commitment.

Pre-approval:• A firm commitment from a lender

for a specific loan amount. The approval can be valid for as little as 30 days and as much as 120 days or more.


Pre-Qualification

A lender can normally pre-qualify you for a mortgage in a short 15-20 minute phone call. By getting pre-qualified for a mortgage, you will have an idea of the estimated monthly payment and a price range you should be looking for.

This information is a guide for you in the home buying process and does not guarantee mortgage approval. Most Sellers will require a letter stating that you have been pre-qualified before they will accept an offer on their home.

Pre Approval

Being pre-approved for a mortgage may afford you more leverage in negotiation the purchase of a home. It requires completing a formal application to the lender, and submission of all the necessary financial and employment documentation. Once the information has been evaluated, verified by the lender’s underwriting and approved, you will be cleared for a loan of a determined amount. This process has been greatly improved and can be accomplished in less time than in previous years. Your home search is now a much more enjoyable experience. You can make your offer with confidence knowing you’re pre-approved.Morningstar Urban

Development Inc. . A COMMUNITY BASED DEVELOPMENT ORGANIZATION

REMOVING THE FEAR OF THE UNKNOWN BY GETTING PRE-APPROVED

Lender• Lend their Own Money• Have in-house programs• Make final decisions on your loan

Mortgage Broker• Represents many Lenders• Has many loan programs to choose From

Along with shopping the source, shop the total costs of the loan, including interest rate, broker fees, points (each point is one percent of the amount you borrow), prepayment penalties, the loan term, application fees, credit report fee, and appraisal, just to name a few!


CHOOSING A MORTGAGE COMPANY

Two years of W2s and 1 month of pay stubs (if your salaried)

Two years of tax returns and a Year-To-Date Profit & Loss Statement ( if you are self employed)

Three months of bank statements for each bank, mutual fund, and/or investment account

A current Statement from your stock, retirement, and/or 401k statement

Letters of explanation (Credit Inquiries)

A copy of your divorce decree (if applicable)

If you are not a U S Citizen, provide a copy of the front and back of your green card.


LOAN APPLICATION CHECKLIST


Lender consider your gross income, as long as it is steady and Verifiable:

• Income- salary, second job, overtime, Alimony/Child Support, Commissions, Dividends, Social Security Income, Pension

• Employment- (2yrs consistent work history• Assets – Savings and Checking accounts, investments,

equity on your current home, gifts/grants• Debts – installment loans, credit cards, Lines of Credit,

Other mortgages, Other kinds of Debt (Auto Loans)• Credit History• Property – Appraisal factors Property condition, Age,

Comparable Sales Nearby

WHAT LENDERS CONSIDER:

The Amount of Mortgage Payments you CAN AFFORD and the amount of Mortgage

payment you WILL QUALIFY for may be two different amounts and are determined by several factors:

The amount of mortgage payment you will Qualify for is impacted by:

1. Your Credit Score 2. Your Ratios 3. Monthly payments on long-term debts (Debts with more than 12 months before paid off) 4. Loan to Value Ratio (How Much money you put down) 5. Loan Program Type ( Fixed Rate or Arm) 6. Loan Processing Type


HOW MUCH HOME CAN YOU AFFORD


•Housing costs should be less than 29% – 36% of gross monthly income.

•Housing costs include mortgage payment, taxes, homeowners insurance, condo fees, other association fees.

•Mortgage payment is based on the lender's "qualifying rate".

•Housing costs plus long-term debt not to exceed 40% to 55% of gross monthly income.

•Long term debt includes car payments, credit card payments, other loan payments

HOW MUCH HOME CAN YOU AFFORD CONT:

Debt-to-Income Ratio: Case study

Lee & Shawna earn $60,000 per year, or $5,000 per month

They can carry a maximum debt load of $1,800 ($5,000 x .36 = $1,800)

Their only debt is a monthly car payment of $275

Lee & Shawna can qualify for a $1,525 mortgage payment ($1,800 - $275 = $1,525)


First Session Wrap-Up At the next session, we’ll:

• Shop for a home• Make an offer• Get a mortgage

• Close the purchase!Please return in 20

minutes.


How will you find your home?

• Shop Online listing sites

• “For Sale” signs

• “Open house” events

• Word-of-mouth

• Real estate agent


SHOPPING FOR A HOME


CHOOSING A REAL ESTATE PROFESSIONAL

STEP 2:

• Pledged to a strict Code of Ethics (www.realtor.orq)• Have to maintain continuing education (24 hr/4 yrs)• Promote and protect your interests• Knowledge of the local area and pulse of the market• Can direct you to all the people/services you'll need• Act as an additional set of eyes and ears• Can look beyond the "pretty" and get down to the "nitty gritty"• Negotiate price and terms on your behalf• Assist you through the mortgage process• Coordinate the closing and address last minute issues


THEY WORK FOR FREE!

WHY WORK WITH A REALTOR ®


Seller's Agentseller's agent represents the home seller. They may assist the buyer,but do not represent the buyer and must place the interest of the homeSeller first. The buyer should not tell the owner's agent anything theBuyer would not want the owner to know because an owner's agentmust disclose to the owner any material information known to the agent.Dual Agentdual agent represents both the buyer and the seller ethically andhonestly and must safeguard the confidentiality of both parties

Agency OptionsBuyers AgentA Buyers agent represents you, the Buyer, during the home buying process.The agent has a fiduciary responsibility to represent only the home buyer’s best interest in all aspects of the home buying transaction

Step 3:

THE HOME BUYING PROCESS

THE SKY IS THE LIMIT!

• Preview homes• Make an offer• Accept contract• Conduct home inspection• Obtain appraisal• Mortgage is approved• HoId pre-closing walk-through• Make closing or settlement• Move In


Morningstar Mud Development Inc.A COMMUNITY BASED DEVELOPMENT ORGANIZATION

Morningstar Urban Development Inc. .


• Meet with your Realtor after you have been pre-approved

• Agent will use several resources available to locate the best suitable property for you and your family.

• Property Search

Your real tor will provide information and develop a strategy to view and evaluate as many relevant properties as possible

• Property Showing Set up appointment to meet with your agent to view selected properties. Limit properties to 3-5 homes in 1 appointment day (does not include multiple floor plans new home subdivision.

• Property Evaluation Your realtor will give His/her expert opinion and advice on each property viewed and disclose any defects known including any information that might affect your purchase decision.


First Decide what type of home is right for you an best fits your lifestyle

Condo or House Primary Residence, investment,

second home Number of bedrooms & baths Do you need an office or bonus

room Is a garage necessary Amenities What other features are important

to you


FEATURES

Things to consider when choosing Location:

• Commuting distances• Nearby schools, shopping, places of

worship and medical facilities• County sales tax and property taxes• Homeowner association fees, if any


LOCATION

Property address Offer price Earnest money (good faith)

deposit Downpayment Financing terms Closing costs Personal property to be

conveyed Closing date & possession date Expiration of offer Contingencies


MAKING AN OFFER

Common contingencies include:• Financing: Loan funding• Appraisal• Insurance• Title (clear & marketable)• Inspections

− Building/structural− Pest/termite− Well/water− Environmental hazards/lead

paint− Soil− Flood

Morningstar Urban Development Inc. A COMMUNITY BASED DEVELOPMENT

ORGANIZATION

CONTINGENCIES

After considering your offer, the seller may:

• Accept

• Reject

• Counteroffer


NEGOTIATIONS

Good Faith Estimate

Truth-in-Lending Statement

Commitment letter


WHAT TO EXPECT FROM THE LENDER

Within 3 days of application

Discloses all loan costs

States interest rate and points

Lists closing & other fees

Helps you compare loans

Is only an estimate!


GOOD FAITH ESTIMATE

States your APR (annual percentage rate)

Lists finance charges, total payments, due dates and more

Pre-payment penalty or not

Is not a guarantee!


TRUTH-IN-LENDING STATEMENT

One or two days before closing:• Do a final “walk-through”• Examine the HUD-1 Settlement

Statement

Day of closing:• Attend closing/settlement

meeting• Review & sign all documents• Write a check for any

outstanding costs


CLOSING/SETTLEMENT

Do you have any questions about this training?


QUESTIONS?

Morningstar Urban Development Inc.

A COMMUNITY BASED DEVELOPMENT ORGANIZATION

IF YOU NEED US…….

…………CALL US

Morningstar Urban Development Inc.

A COMMUNITY BASED DEVELOPMENT ORGANIZATION

• Homebuyer Workshops • Pre-Purchase Counseling (More Detailed One on One Counseling Preparing you

To Purchase)

• Post Purchase Counseling & Workshop (What to Expect & The Do’s & Don’ts after you purchase)

• Financial Literacy Counseling & Workshops

• Foreclosure & Default Counseling

Please fill out the evaluation form and leave it on your way out.

Thank you!


CLASS EVALUATION

Documents

Welcome to Welcome A Community Based Development Corporation