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Welcome to Homebuyer Education

Welcome to Homebuyer Education Sponsored by the Washington State Housing Finance Commission Class Instructors Add Your Names Here Add Your Names Here What we will cover Steps to Homeownership Owning vs renting How Much Can You Afford? Selecting a Loan Program

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Welcome to Homebuyer Education

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  1. Welcome toHomebuyer Education Sponsored by the Washington State Housing Finance Commission

  2. Class Instructors • Add Your Names Here • Add Your Names Here

  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 22 benchmarks set by WSHFC

  4. Agenda • The Home Buying Process • Lender Curriculum • Assistance Programs • Real Estate Curriculum • Q & A’s and Resources

  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. The Steps to Homeownership Education Credit History Budget Research Loan Pre-Approval Your Priorities The Search You’re Home! The eight steps recommended by the Washington Homeownership Center

  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

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

  9. The Players in the Homebuying Process • Who are they? • What role do they play?

  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

  11. Shopping for a Lender • Get referrals and interview different lenders • Questions to ask • Difference between broker and loan officer

  12. Lender Curriculum • How Much Can You Afford? • Credit • Budgeting • Selecting a Loan Program • Down payment & Closing Costs

  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.

  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

  15. Credit Repair & Counseling The Homeownership Hotline sponsored by WSHFC 1 – 877- 894- HOME (4663) Or for a list of counselors statewide: http://www.wshfc.org/buyers/counseling.htm

  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

  17. Budgeting Basics • Eliminate credit card debt • Put your money to work • Educate yourself • Plan for future expenses • Pay yourself first

  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)

  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?

  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

  21. Types of Loans • Conventional (or Conforming) • FHA • VA • USDA • Sub Prime & Non-Conforming • Portfolio • Jumbo

  22. Types of Loan Terms • Fixed Rate • Adjustable Rate • Interest Only • 15 / 20 / 30 / 40 years • Balloon

  23. How Much Can You Afford How Much Can You Afford? What the bank is looking at: • Debt-to income ratios • The 3 “C”s – Credit, Capacity & Collateral • Down payment • What the bank is looking at: • Debt-to income ratios • The 3 “C”s – Credit, Capacity & Collateral • Down payment

  24. How Much Can You Afford How Much Can You Afford? Calculating how much house payment you can afford depends on your income and currentdebt 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 currentdebt 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)

  25. How Much Can You Afford How Much Can You Afford? Housing Expense-to-Income Ratio Principle and Interest: $ 690 Hazard Insurance: $ 73* Real Estate Taxes: $ 117* Mortgage Insurance: $ 73 Homeowner’s Association: $ 0 Subordinate Financing: $ 0 _______ $ 930.00 • Housing Expense-to-Income Ratio • Principle and Interest: $ 690.00 • Hazard Insurance: $ 73.00* • Real Estate Taxes: $ 117.00* • Mortgage Insurance: $ 73.00 • Homeowner’s Association: $ 0.00 • Subordinate Financing: $ 0.00 ___________ • $ 930.00

  26. How Much Can You Afford 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%

  27. How Much Can You Afford 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%

  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

  29. Assistance Programs • House Key Program • Recapture Tax • Occupancy and Property Restrictions • WSHFC Down Payment Assistance Programs • USDA, HUD • Community Land Trusts • Other DPA Programs statewide

  30. Washington State Housing Finance Commission House Key Loan Programs • Lower interest rate • First-time homebuyers • Under income limits • Under acquisition limits

  31. Recapture Tax 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.

  32. Washington State Housing Finance Commission Down Payment Assistance Programs • House Key Plus • HomeChoice • House Key Schools • House Key Veterans • House Key Plus Seattle (Subject to funding) • House Key Plus ARCH (Subject to funding) • House Key Bremerton Down payment assistance program must be used in conjunction with House Key State Bond 1st mortgage. These are All Second Mortgages – These are not grants Only one WSHFC DPA program can be used.

  33. Washington State Housing Finance Commission House Key Plus Second Mortgage Loan • 5% interest with a 10 year term • Up to $10,000 Statewide Income Limits: • Clark/Skamania Counties: $71,200 • King/Snohomish Counties: $85,600 • Kitsap/Thurston Counties:  $71,900 • All Other Counties: $70,400

  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 payment • One on One Counseling required Income Limits: • Clark/Skamania Counties: $71,200 • King/Snohomish Counties: $85,600 • Kitsap/Thurston Counties:  $71,900 • All Other Counties: $70,400

  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: • Clark/Skamania Counties: $71,200 • King/Snohomish Counties: $85,600 • Kitsap/Thurston Counties:  $71,900 • All Other Counties: $70,400

  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: • Clark/Skamania Counties: $71,200 • King/Snohomish Counties: $85,600 • Kitsap/Thurston Counties:  $71,900 • All Other Counties: $70,400

  37. Washington State Housing Finance Commission • House Key Plus Seattle • Up to $45,000 • 3% interest rate - Deferred payment • 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 Subject to Funding

  38. Washington State Housing Finance Commission House Key Plus ARCH • Up to $30,000 • 4% simple interest - Deferred Payments, • Borrower must contribute 2% of own funds • One on One Counseling required • 80% Area Median Income & below (lower than House Key first mortgage income limits) • Available in 15 Eastside Cities Subject to Funding

  39. Washington State Housing Finance Commission House Key Bremerton • Up to $20,000 • 3% interest on a 15 year Term • Buying in Bremerton city limits • One-on-one Counseling Required • 80% Area Median Income & below (lower than House Key first mortgage income limits)

  40. 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) No Mortgage Insurance www.rurdev.usda.gov/wa/ 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) No Mortgage Insurance Subject to Funding

  41. HUD 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 borrower’s credit and income • No income limits

  42. 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

  43. Down Payment Assistance Programs by Region

  44. Region 1Clallam, Grays Harbor, Jefferson, Kitsap, Mason, and Thurston Counties

  45. Aberdeen Neighborhood Housing Services • Up to 20% of appraised value • Grays Harbor County • Housing Education (HUD Approved) • Housing Rehab loans City of Bremerton • Up to $20,000 (See House Key Bremerton) • Housing Rehab Loans Kitsap County Consolidated Housing Authority • Up to $20,000 (currently only available for Self help clients) • Must purchase in Kitsap County outside Bremerton City limits Region 1

  46. Region 2Island, King, San Juan, Skagit, Snohomish, and Whatcom Counties

  47. 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 Region 2

  48. 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 Region 2

  49. 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 Parkview Services • People / families with Developmental Disabilities • Down Payment Assistance • Housing Counseling & Hotline Region 2

  50. Region 3 Pierce County

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