Thank You For Attending! • Presented by Christian Cook • Residential Home Mortgage Lender • Town Square Mortgage & Investments
A LITTLE ABOUT ME • Chris is an experienced mortgage lender • He puts his 8 years experience as a mortgage lender, to use when negotiating and working with Lenders, insurance companies, realtors, and title companies on behalf of his clients. • While not working Chris enjoys DIY projects, spending time with his 3 kids, and oh yeah………
ELVIS TRIBUTE ARTIST Thankya…..Thankyaverymuch!
Topics to be Discussed 1. Are you Financially Ready *Determines how “much” house can you buy *Knowing all the costs *Why your credit rating is important *Mortgage basics 2. Building Your Team of Experts *Your Home-Buying Team
Are you Financially Ready? • Credit *How your score is determined; *Hints & Tips to repairing & maintain • Savings *Down Payment – 3.5% to 5% • What Can you Afford *Household Income *Debt Ratios • Closing Costs *About 5-6% of Purchase Price
Are you Financially Ready? Your Credit Score • With the credit crunch lenders have increased their focus on credit scores when determining lending approval and interest rates charged. • Understand how your credit score is determined. *Payment History 35 *Amounts Owed? 30% *How long is your credit history? 15% *Have you applied for new credit recently? 10% *Type of credit accounts do you have? 10% • Tips on Boosting and Maintaining Your Credit Score *Maintain active accounts; no trades = no score. *Allow increases to credit limits. *Always make your minimum monthly payments on time *Keep your credit inquiries to a minimum *Check your credit once a year to prevent identity theft and/or other inaccuracies
What is a good credit score? • 720 and higher: Excellent Qualify for best rates • 650-719: Good Eligible for good rates on most loans • 600-649: Ok Represents higher risk & borrowing options are limited • 500-599: Not great High risk for lenders = below 600 is “sub-prime” If given a loan, will be higher interest rates & higher mortgage payment • 499 and below: Poor Purchasing on credit not an option at this point
Are you Financially Ready? Down payment Minimum of 3.5% of the purchase price • 1. Savings/Checking • 2. Retirement Plan • 3. Gift • 4. Borrowed from eligible sources • 5. Government/City Grant programs
Are you Financially Ready? There are industry standards as to what is considered “affordable” by mortgage lenders. • Housing ratio = “Top Ratio or Front End Ratio” * PITI / Gross monthly income *Usually 28%-31% • DTI(Debt To Income) = “Back End Ratio or Total DTI” *PITI + monthly debt / Gross monthly Income *(Debts include car payment, credit cards, other loans) *Usually 31%-43% Have a mortgage professional calculate this for you.
Are you Financially Ready? Closing Costs • Appraisal Fee • Attorney Fees • Title Insurance • Title/Closing Fees • Credit Reports • Prepaid Taxes & Homeowner’s Insurance • Lender Fees Closing costs can be estimated at 5-6% of thepurchase price
Arranging Your Mortgage Required Documents Your approval will be based on the information given and the supporting documentation provided by you. Your information will be held in the strictest confidence and will only be used for your financing application. • Written Verification of Employment (Lender to obtain) • Most Recent 30 days of Pay stubs • If Self Employed, Past 2 years of Tax Returns ***all pages and schedules*** • Verification of Down payment • Two Months Bank Statements • Gift Letter • Retirement/401K/IRA Statements 5. Identification – Copy of Drivers License and Social Security Card
WHAT IS A MORTGAGE • A large secured loan used to purchase a home. • Mortgage or Promissory Note • – Promise to repay the loan • – Terms & conditions of loan • – Details about monthly payment • Deed of Trust • – Pledges your home as security for the loan
Where can I go to get a mortgage? • Commercial Banks • State and Federal Savings Banks • Savings & Loan Associations • Mortgage Companies • Credit Unions Remember: These institutions may or may not own your loan They may sell your loan to another company
Mortgage Terms • Principal • – Amount of original loan • Interest • – Fee you pay to borrow money • Term • – Length of loan (period of time) • Escrow • – Account opened by lender • – Holds money for taxes & insurance • Equity • – Amount of principal you’ve paid = portion of home you own
Mortgage Terms (2) • Loan-to-Value Ratio (LTV) • – Ratio that determines your down payment • – 80% LTV means you put 20% down • – Some first-time home buyer loans allow 95%, 97% or even 100% LTV • Points • – Loan Origination Fee • – Discount Points: 1% of loan, used to lower interest rate • Annual Percentage Rate • – Total cost of loan • – Interest + loan fees + mortgage insurance + points • – Good way to compare options (includes all fees)
Mortgage Terms (3) • Amortization Schedule • – Timetable that shows each payment • – Indicates how much paid towards principal & how much to • interest • Insurance • – Hazard Insurance • – Private Mortgage Insurance (PMI) • Qualifying Ratios • – Used by lenders to determine how much you can afford
Your Monthly Payment • P = Principal • I = Interest • T = Taxes • I = Insurance
Types of Mortgage • FHA (This is most common loan now, and most likely what you will be using to buy your home) • 2) Conventional (Traditional Mortgage) • 3) VA (Veteran’s Administration) • 4) USDA (United States Dept. of Agriculture) • 5) Sub-prime……..obsolete, see ya, kicked to the curb, scram, beat it, get lost.
Federal Housing Administration Loan • FHA mortgage loan types are insured by the government through mortgage insurance that is funded into the loan. First-time home buyers are ideal candidates for an FHA loan because the down payment requirements are minimal and no FICO requirements**** • Requires only a minimum 3.50% down payment
Veteran’s Administration Loan • A VA loan is a government loan is available to veterans who have served in the U.S. Armed Services and, in certain cases, to spouses of deceased veterans. The requirements vary depending on the year of service and whether the discharge was honorable or dishonorable. The main benefit to a VA loan is the borrower does not need a down payment. The loan is guaranteed by the Department of Veteran Affairs, but funded by a conventional lender.
USDARural Housing • Primarily used to help low-income individuals or households purchase homes in rural areas. • 100% Financing
USDA available in rural-outlying areasNo down-payment needed • Eligible North Texas Cities • As of July 20, 2008 • This list is not all inclusive of the eligible areas in North Texas. It only covers the major towns serviced by Area 3. For specific eligible areas, check our eligibility website: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do or contact the local Rural Development Office. You can find all Texas USDA Rural Development offices at www.rurdev.usda.gov. • County Serviced By Cities • Archer Decatur Cities include Archer City, Windthorst, Holiday and Lakeside City • Baylor Decatur No ineligible areas in the County. Cities include Seymour • Clay Decatur No ineligible areas in the county. Cities Henrietta, Byers, Petrolia and Bellevue. • Collin McKinney Cities include Princeton, Farmersville, Nevada, Lavon, Prosper, Celina, Anna, Melissa, Westminster, Blue Ridge, Wylie • Cooke McKinney No ineligible areas in the county. Cities include Muenster, Callisburg, Valley View, Lindsay, Gainesville. • Cottle Decatur No ineligible areas in the county. Cities include Narcisso and Paducah. • Dallas McKinney Eligible cities include Seagoville and Combine • Denton McKinney Cities include Aubrey, Corinth, Little Elm, Justin, Roanoke, Krum, Highland Village, Lake Dallas, Ponder, Sanger, Pilot Point • Foard Decatur No ineligible areas in the county. Cities include Crowell and Thalia • Fannin McKinney No ineligible areas in the county • Grayson McKinney The entire county except the city limits of Sherman and Denison is eligible to include Van Alystine, Gunter, Whitewright, Tioga, Whitesboro, Pottsboro • Hardeman Decatur No ineligible areas in the county. Cities include Chillicothe and Quanah. • Hunt McKinney Cities include Quinlan, West Tawakoni, Celeste, Commerce, Campbell, Lone Oak, Caddo Mills • Jack Decatur No ineligible areas in the county. Cities include Bryson, Jacksboro, Antelope, Postoak. • Kaufman McKinney Combine, Cottonwood, Crandall, Forney, Kaufman, Oak Grove, Oak Ridge, Talty, Mabank, Kemp, Grays Prarie, Rosser, outside the city limits of Terrell • Montague Decatur No ineligible areas in the county. Cities include Montague, Nocona, Bowie, St Jo, Forestburg. • Palo Pinto McKinney No ineligible areas in the county. Cities include Mineral Wells, Graford, Strawn, Santo, New Salem, Palo Pinto, Gordon, Mingus • Parker McKinney Cities includes, Aledo, Springtown, Willow Park, Sanctuary • Rockwall McKinney The entire county east of Lake Ray Hubbard is eligible, Rockwall, Royse City, Fate, Heath • Tarrant McKinney Cities include Avondale, Azle, Blue Mound, Briar, Center Point, Crowley, Haslet, Lakeview, Oak Grove, Pelican Bay, Saginaw, Wheatland • Wichita Decatur Cities of Wichita Falls and Burkburnett are not eligible. Cities include Electra, Iowa Park, Lakeside City, Kamay • Wilbarger Decatur No ineligible areas in the county. Cities include Vernon. • Wise Decatur Cities include Bridgeport, Decatur, Alvord, Aurora, Chico, Rhome, Boyd • Young Decatur Cities include Graham, Olney, Newcastle, Jean, Loving
Traditional Mortgages • Traditional Mortgages • Fixed Rate Mortgages • – Same interest rate throughout life of loan • – Monthly payments never change • – Key choice: term of loan • (15 years & 30 years are most common)
Traditional Mortgages (2) • Adjustable Rate Mortgages (ARM) • – Interest rate is fixed for certain number of years • (3, 5, & 7 years most common) • – After fixed time, interest moves up or down to meet national • interest rates • – May have a cap of how high interest rates can go • – Make sure to ask: • o How long does initial interest rate apply? • o How high can the interest rate go? • o Does the loan set a minimum interest rate? • o What is the maximum monthly payment you could pay?
Specialty Mortgages • Interest Only Mortgages • – You pay only interest first 5-10 years of loan • – After interest-only period, monthly payment increases to include • both interest & principal • Negative Amortization Mortgages **TOAST** • – Monthly payment is less than interest owed & unpaid interest is • added to principal of loan • – Total amount you owe increases each month • Option Payment ARM Mortgages **TOAST** • – You have the option of different types of monthly payments • – Options include: interest-only, fixed rate, or minimum payment • 40-Year Mortgages (not available on FHA) • – Reduces monthly payment but increases interest paid
SUB PRIME LOANS Goner!
Assemble your Team of Experts Your home buying team includes………………. MORTGAGE PROFESSIONAL/EXPERT • • Should guide you through entire process • • Should help negotiate on your behalf • • Should have choices, which means more competitive rates • • Will ensure that you’re getting the best rates and terms • • Should have access to available grant assistance programs • • We guide you through the entire process • • We will provide you with expert advice • • No cost to you • • Ongoing support and consultation after the deal closes
Assemble your Team of Experts Your Home Buying Team Includes……………… Real Estate Agent • Knows DFW and neighborhood, and understands market • Will listen to your needs and advise • Is an expert at type of property you are buying • Will add you to email lists to send you recent property listings……… • MLS – Multiple Listing Service • Book viewing appointments • Show you properties that match your criteria • Prepare Purchase Agreement • Negotiate best possible price for your home • Knows the ins-and-outs of all the available City Grant and Bond Programs!!
Thanks Everyone! We will all be available following the presentation if you have specific details you wish to discuss, or any questions. HAVE A GREAT WEEKEND!