Credit, Home Ownership and the Young Adult

1. Credit, Home Ownershipand the Young Adult New Horizon Financial 320 Palisade Ave. Bogota, NJ 07603 201.489.1118 www.newhorizonfinancial.com

2. Topics for Discussion • What is a Credit Score • Credit Reporting • Reporting Agencies • Does my credit score affect other areas of my life? • Consumer Credit Counseling • Types of Mortgages • Pre-Qualified verses Qualified • Conclusions

3. What is a Credit Score? • A credit score is an analysis of an individuals “creditworthiness” based on certain factors • It is typically based on reporting to credit reporting agencies • It is a numerical representation for an individuals ability to fulfill their obligation to satisfying debt incurred

4. What is a Credit Score? • Credit Scores are used by financial organizations to determine the following • Who qualifies for a loan? • What interest rate do they qualify for? • How high is the credit limit for said individual? • How much money can the individual generate for us?

5. Credit Reporting • How does credit reporting affect your chances of home ownership? • Who are the credit reporting agencies? • How many years do “adverse” items stay on your credit report? • How long does it take to repair your credit? • How do I establish credit if I don’t have any?

6. Reporting Agencies • Equifax • www.equifax.com • Experian • www.experian.com • TransUnion • www.transunion.com

7. Does my credit score affect other areas of my life? • Employment • Credit scores could affect the application process/hiring for potential new employees as part of a comprehensive background check • Insurability • Credit scores may be a hindrance to lower rates for life insurance approval, auto insurance rates etc. • Future Credit Approval

8. Consumer Credit Counseling • Normally non-profit agencies • Involved in Debt Consolidation • Negotiate terms with credit card agencies and create one payment • Still have concerns with reporting by credit agencies for a period of time once commenced • If payment default occurs could create bigger problems

9. Historical Mortgage Rates

10. Types of Mortgages • Fixed Rate • Borrower makes equal monthly payments of principle and interest until debt is fully paid. • Home Equity Loan • Loan secured by the owner’s equity in the home. The loan may be a lump sum or a line of credit. • Adjustable Rate • Interest rate can vary over the life of the loan, resulting in changes in the monthly payments, loan term, or principle balance due. Interest is based on an index, with rates being adjusted at specified time intervals. • Balloon • Monthly payments based on fixed interest rate. Payments may cover interest only with the principle due at the end of the term. • Rent with Option • Renter pays and “option fee” for the right to purchase the property at a specified time and price. • Reverse Mortgage • Borrower owns a mortgage free property and needs income. Loans can be a lump sum or monthly payments using the house as collateral. • Interest Only • Borrower pays only the interest due either for an introductory period or for the life of the loan. At the end of the term, the loan must be either refinanced or paid off.

11. Pre-Qualified vs. Pre-Approved • Pre-Qualified • A simple first step in the mortgage process • A lender gives you an idea of the mortgage amount you may qualify for based on your financial profile. This is not a sure thing. • Pre-Approved • The second step is more involved. • You must complete a formal mortgage application and provide the lender documentation to check your financial background and credit rating. • The lender can tell you the specific amount you are approved for. • You can get an idea of what interest rate will be charged on the loan.

12. First Time Homebuyer Statistics • 28% plan to move within 5 years. • Average home listing price in New Jersey: $480,695 • The typical age for a first time homebuyer is 30 • The median square footage of homes bought by first-time buyers is 1,500. • Homes purchased by first-time buyers had a median value of $150,000. • The average first-time buyer household had an income of $64,074.

13. Conclusions • Credit is big business • Good credit can be a major assistant to buying a home, starting your own business, funding lifestyle events or advancing in the employment ranks • Monitoring your credit score makes it easier for you to repair credit issues • Having zero credit maybe more detrimental then having bad credit

14. Appendix • http://www.myhomeuptown.com/foreclosures/smart-moves/43-first-time-home-buyers • http://www.firsthomebuyers.net/local-real-estate/new-jersey-first-time-home-buyer.htm • http://economistsoutlook.blogs.realtor.org/2011/06/02/realtors%C2%AE-age-first-time-home-buyers-age-mind-the-gap/ • http://www.nahb.org/generic.aspx?genericcontentid=88533

15. Disclosure Securities offered through Cadaret, Grant & Co., Inc., member FINRA/SIPC. One Lincoln Center, Syracuse, NY 13202. Telephone number: 315.471.2191 Performance figures displayed herein represent past performance and are not predictive of future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares/units, when redeemed, may be worth more or less than the original cost. Investment securities are not FDIC-insured, nor are they deposits of, or guaranteed by, a bank or any other entity. The information has been gathered from sources believed to be reliable, however, Cadaret, Grant does not guarantee the accuracy or completeness of the information. The cost basis of securities positions is being provided by the account holder and neither the representative not Cadaret, Grant makes any representations as to the accuracy of such cost basis. The cost basis information provided is meant as a general guide and should not be relied upon as tax or legal advice.