Texas Home Buyer Seminar

1. Texas Home Buyer Seminar Presented By:

2. Texas Home Buyer Seminar • Everything you need to know to make buying your first home easy and affordable. • Learn some of the financial reasons to buy a home. • Learn about your mortgage finance options and how to improve your credit. • Learn how to evaluate a home and make an offer. • And so much more!!!!

3. Why buy now? • Home Affordability is at an all-time high • Mortgage rates are nearrock bottom • Home prices are starting to rise • Sellers are motivated more than ever • Financing is readily available!!! • Owning vs. Renting is increasingly favorable • Homeownership is still at the core of the American Dream!

4. 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 of the property. • Future equity build up lets you set up retirement investments

5. Renting Vs. Buying a Home • $700 per month in rent • 5% annual rent increase • After 5 years you have spent $46,415 in rent. • Net equity gain: $ 0

6. How to Afford Higher Payments • Mortgage interest and property taxes are tax deductible. • Change your withholding with your employer. • You can pay this extra money to the IRS, or pay it to yourself. • IRS.gov website has a withholding calculator. • You use the extra money to make the higher mortgage payment.

7. Are You Ready To Buy? • Do you have a steady income? • Do you pay bills, • including your rent • on time? • Do you have low to • medium debt? • Do you have reserves in the bank for closing costs or down payment? • Do you have the ability to make the mortgage payments?

8. 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.

9. Why be Pre-Approved? • You know what you can afford to pay before you look for a house. • You know if you are in a position to buy a home in your target neighborhood. • It tells sellers that you are a qualified buyer. • It lets you make an offer right away, before someone else does. • It makes it easier to get the service of a Realtor.

10. Discover the power of good credit. Do you need to improve your personal credit profile? America’s Best Credit Repairrecognizes all current credit lawsand offers a comprehensive, yet simple approach to improvecredit ratings withinforty-five (45) to sixty (60) business days.

11. Approval Documents • Provide today’s term 30 days pay stub. • 2 years worth of tax returns or W2 forms. • Provide 2 months bank statements. • Proof of any additional qualifying income. • Show a 2 year employment history. • 620 credit score needed for financing. • Credit repair improvement available.

12. Types of Loan Programs • ADJUSTABLE RATE MORTGAGES : • Typically, ARMs are displayed like this: • 3/1, 5/1, 5/25, 2/28 or 3/27 • The first number is the 'Fixed portion', meaning the interest rate stays fixed for that many years. Thus the borrowers payment is fixed for the set amount of years. • The second number means the rate adjusts every year based on pre - determined financial indexes - see ARM terms. • Example: • On a 2/28 ARM, the rate stays the same for 2 years and a new interest rate for the remaining 28 years is recalculated based on similar indexes.

13. 100% Financing & FHA • PMI (Private Mortgage Insurance) is insurance that protects the lender from a loan default. • 100% financing can be done as a single loan through USDA or VA Only. • FHA requires 3.5% Down Payment while Conventional requires 5%, 10% or more. • PMI can be removed when the LTV drops below 80%. • Property appreciation can eliminate PMI in a few years.

14. Credit Scoring Overview • A credit report is an accounting of your credit history. • It records payment histories, amount of time accounts are open, credit inquiries, and results of legal proceedings. • A credit score can be between 350 and 800. • It has the greatest effect on your interest rate.

15. The Three Credit Bureaus • Experian - FICO score(888-397-3742). • Equifax - Beacon score(800-685-1111). • TransUnion - Emperica score(800-916-8800). • Each bureau has its own scoring model and not all accounts report to all three bureaus. • You are entitled to a free annual credit report. • Credit reports can have errors and help you spot identity theft.

16. How Your Score is Used • Your score is used to determine the maximum loan-to-value. • Your score is used to determine your base interest rate. • Your score is used to determine which mortgage programs you qualify for. • A mid-score below 500 limits you to 70% LTV and very high rates. • A mid-score of 620or higher is required to go FHA. • A mid-score of 660gets you access to prime rates.

17. How to Improve Your Credit Score • Pay all bills on time. • Keep balances below 50% of available limit, and below 30% if possible. • Don't close unused accounts. The zero balance can help your score. • Pay off recent collection accounts or charge-offs. • Let old items over 2 years remain unpaid. • Become an authorized user on someone's credit card with a good payment history.

18. Working With Your Realtor • Your Realtor is your agent. He or she provides the expertise you need to buy a home safely. • Your Realtor abides by a Code of Ethics and takes continuing education courses every year. • Your Realtor knows the community. • Your Realtor can provide you with lists of homes that meet your criteria and price range. • Your Realtor will prepare your offer and assist with negotiations. • Your Realtor will guide you through the home buying process.

19. Determining How Much to Offer • Know what the comps are for similar homes. • Know the home's condition and short-term repair expenses. • Know how long the home has been on the market and how fast homes are selling. • Know your financing options. Get pre-qualified by your mortgage consultant. • Know the seller's situation and motivation. • Be prepared to negotiate.

20. Making an Offer to Purchase • Your Realtor will fill out a purchase agreement with you. • The amount of earnest money will be determined. • Earnest money goes toward the down payment or returned to you if the deal does not go through. • The down payment and amount financed will be determined. • Determine a settlement date. • Understand what is included with the purchase of the home as in fixtures, appliances and even plants.

21. When the Offer is Accepted • Schedule a home inspection. This can be done with your Realtor. • Schedule a home appraisal. This is done by your mortgage broker. • Get your mortgage application in process. • Select a title agency or escrow company. This is done by your Realtor. • Get a homeowner’s insurance policy. • Get your documentation together for your mortgage application.

22. Inspections and Tests You Need • Termite inspection will uncover potentially devastating wood damage. • Home inspection will uncover any problems with your home's structure and systems. • Radon and mold tests will make sure you have no environmental hazards. • Municipal inspection lets you know of any code violations and hazards. • A Certificate of Occupancy may be required by your municipality.

23. Home Warranty Programs • A service contract which helps protect against the expense of repairing or replacing covered home appliances and mechanical systems which breakdown due to normal wear and tear . • Basic coverage includes: heating system, plumbing system, electrical system, water heater, oven/range/cook-top, dishwasher, built-in microwave oven, garbage disposal, built-in whirlpool motor and pump, exhaust fan, garage door opener, sump pump and other items. • 1-year contract is about $400.00

24. Property Appraisal • Appraisal determines the estimated market value of the property. • Mortgage is based on the lower of the sales prices or the appraised value. • Value is determined by looking at recent sale prices of properties in your area that are similar to yours. • Adjustments are made for differences in property features and amenities. • The appraiser also looks at the property value based on its replacement cost. • An appraisal does not warrant the condition of the property or that it meets local code.

25. Understanding Closing Costs • Settlement Officer fee • Title insurance • Document preparation fees • Escrow of taxes and insurance • Prepaid interest • Credit report • Transfer taxes • Attorney / Notary fee • Survey Fee • Property appraisal • Home inspection • Processing fee • Underwriting fee • Lender fee • Loan discount fee • Origination fee • Recording fees

26. Take The Next Step • Work with your mortgage consultant, so he or she can help you find the program that is right for you and get pre-qualified. • Work with your Realtor® to find suitable properties. • Don’t make any major purchases on credit or fill out any credit applications.

27. Settlement Day • Closing agent will prepare and present a HUD-1 form. This lists the money you owe and the credits you get. • The deed and mortgage will be recorded • Seller will provide proof of any warranties or inspections. • You will sign a stack of about 40 forms and documents. • You and/or the seller will pay the closing costs. • You get the keys to your new home!