purchasing a new house€¦ · why pre-approval? • pre-approval provides you with the clout and...

PURCHASING A NEW HOUSE

BLESSING TO OTHER, INC.LIFE SKILLS PROGRAM WORKSHOP

PURCHASING A NEW HOUSECONTENT

• Why agents?

• First Steps Towards Homeownership

• How much Home Can You Afford?

• Down Payment Assistant Programs

• Payment Options

• Case study

• Closing Costs Associated With Your Purchase / Cash To Close

WHY USE A REAL ESTATE AGENT?

• Access to all houses in the multiple listing service, from every realestate company in St. Louis.

• You enjoy the same client-agent status that the seller has had foryears.

• You interest are fairly represented. Your needs and motivation are notdisclosed to the seller or his agent during negotiations.

WHY USE A REAL ESTATE AGENT? (CON’T)

• You get a strong and experience negotiating partner.

• You get to purchase the home you want with the feeling that you got thebest deal the market could offer.

• This service is FREE to buyers! The buyer’s agent is paid from the seller’sfunds at closing.

QUESTIONS TO QUALIFY YOUR BUYER’S AGENT

• Are you a full-time agent?

• How many homes have you sold in the past year?

• Where does your business come from?

• May I contact past or current clients for references?

• What can I do to be best prepared for the home buying process?

QUESTIONS TO QUALIFY YOUR BUYER’S AGENT

• How and how often will I hear from you once we start looking at houses?

• What is your work schedule?

• Will you email and / or fax new listings to me?

• Will you provide me with a written guarantee allowing me to cancel theexclusive buyer agency agreement at any time if I am dissatisfied with yourservice?

FIRST STEPS TOWARDS HOMEOWNERSHIP

STEP 1Pre-Approval

STEP 2Information

STEP 3Look &

Compare

STEP 4Negotiation

STEP 5Completing

Inspections &MortgageApproval

STEP 6CELEBRATION

DAY!!!

STEP 1 PRE-APPROVAL

Why Pre-Approval?

• Pre-Approval provides you with the clout and leverage you needto negotiate and secure the very best price and terms.

Pre-Qualify vs. Pre-Approval

• Pre-Qualification determines approximately how much of a homeyou can afford based on your financial resources.

• Pre-Approval is a guaranteed commitment for an exact dollaramount from a financial institution. It’s like “CASH IN HAND!”

STEP 2 INFORMATION

The Home Finder Service:

• We serve as your “direct-link” to the MultipleListing Service

• Our computers will tell you about all of thehomes for sale meeting your specifications,regardless of which company has the listing.

• You select the neighborhoods and homes that youlike the best

STEP 2 INFORMATION (CON’T)

The Home Finder Service:

• You tell us which ones you would like to see

• Our Home Finder computers will help you learn about thebest homes… often BEFORE the competition!

• Our Home Finder computers will automatically deliver thatinformation to you as often as you wish be e-mail, fax, orregular mail

• We’ll show you the homes you like… at your convenience

STEP 3 LOOK & COMPARE

• We’ll set-up viewing appointments

• Evaluate condition and value

• Review property and lead-paint disclosures

• Decide which home is right for your and dig fordetails

STEP 4 NEGOTIATION

• When you find the right home, we will…

• Help you plan your strategy

• Prepare your offer with your best interest at heart

• Prepare C.M.A. to determine value

• Present the offer to the owner on your behalf

• Negotiate all the terms of the offer in your best interest.

STEP 5 COMPLETING INSPECTIONS & MORTGAGEAPPROVAL

• Scheduling of whole house, termite, radon inspections (contract states within 10 days ofaccepted contract – can ask for more time when the contract is written)

• Seller is responsible for Laclede Gas and municipal inspections

• Timing of repairs and document, contingencies resolved (after buyer submits request forrepairs to the seller , you have 10 more days to negotiate an acceptable solution)

STEP 5 COMPLETING INSPECTIONS & MORTGAGEAPPROVAL (CONT.)

• Homeowner’s insurance policy coverage

• Title insurance

• Walk-through (to make sure the house is in the same condition and that repairs weremade)

STEP 6 CELEBRATION DAY!!!

• Your hard work is over and you’re getting a new home!

• Meet at the title company to review and sign mortgagedocuments

• Bring homeowners insurance policy, photo ID, andcashiers check

• Get the keys and celebrate your new home!

FIRST-TIME HOME BUYER PROGRAM

• First Steps Towards Homeownership• Call our office and get PRE-QAULIFIED and schedule an appointment to get PRE-APPROVED.

• Give your social security number(s) and current address for all buyers

• You and your mortgage loan officer will review your credit report.

• We will start to clear up any discrepancies and address any adverse credit.

FIRST-TIME HOMEBUYER PROGRAM

• Qualifying For A Mortgage Loan1. Your Credit History

2. What Is Your Credit Score?

3. What Is Adverse Credit?

HOW MUCH HOME CAN YOU AFFORD TO BUY?

• Review income and debts / Calculate Debt To Income Ratios

• Debts were obtained from the credit report. Debts not included on credit report mustbe provided by you verbally (i.e. child support, alimony, or other loans)

• Income and employment history are review. Your income will be calculate by looking atyour W2’s and Federal Tax Returns. We will be looking for 2+ years in the same job orsame line of work. Self-employed borrowers must provide at least 2 full years of taxreturns.

DO YOU HAVE SUFFICIENT CASH TO CLOSE?

• Look at your:

• Cash on hand

• Down Payment Assistance

• Seller / Lender Paid Closing Costs

DOWN PAYMENT ASSISTANT PROGRAMS

• First Place Home Loan Program –Missouri Housing DevelopmentCommission

• CDA – Community DevelopmentProgram

• Other down payment assistanceprograms

PAYMENT OPTIONS - WHICH IS BEST FOR YOU?

• 30-Year Fixed: You don’t plan to move for some time

• 15-Year Fixed: You don’t plan to move and have no other debts

• 10-Year ARM: You plan to move or relocate after 5 or 6 years

• 7-Year ARM

• 5-Year ARM: You plan to move or relocate after 3 or 4 years

• 3-Year ARM: You want to lower payments now because your income will be increasing over the years

• 1-Year ARM: You plan to refinance or relocate soon

• 6-Month ARM

• Bi-Weekly Payment: You want to build equity quickly but avoid the higher 15-year fixed program

DOCUMENTATION TO PROVIDE AT LOAN APPLICATION

1. Last two or three years Federal Tax Returns and W2s

2. Most recent 30 days of paycheck stubs showing year to date income(must be computer generated)

3. Most recent 2 or 3 months asset statements (including bank account, investmentaccount and retirement accounts) all pages

4. Divorce decree, if applicable

5. Bankruptcy discharge, if applicable

6. Valid driver’s license or state identification with photo

CASE EXAMPLE

• A $75,000 home loan based on a downpayment and current mortgage rateaverages as of April, 2017.

• What will be the monthly payments? (Thinkabout down payment first!)

CASE EXAMPLE – MONTHLY PAYMENTS

DOWN PAYMENT(% - AMOUNT)

15 YEAR MORTGAGE(3.34% FIXED RATE)

30 YEAR MORTGAGE(4.08% FIXED RATE)

0% - $0 $530 $362

3% - $2,250 $514 $351

5% - $3,750 $504 $343

7% - $5,250 $493 $336

10% - $7,500 $477 $325

15% - $11,250 $451 $307

20% - $15,000 $424 $289

25% - $18,750 $398 $271

30% - $22,500 $371 $253

CASE EXAMPLE – TOTAL COST

DOWN PAYMENT(% - AMOUNT)

15 YEAR MORTGAGE(3.34% FIXED RATE)

30 YEAR MORTGAGE(4.08% FIXED RATE)

0% - $0 $95,452 $130,151

3% - $2,250 $92,588 $126,246

5% - $3,750 $90,679 $123,643

7% - $5,250 $88,770 $121,040

10% - $7,500 $85,907 $117,135

15% - $11,250 $81,134 $110,628

20% - $15,000 $76,362 $104,120

25% - $18,750 $71,589 $97,613

30% - $22,500 $66,816 $91,105

CASE EXAMPLE

• Financial advisors recommend that your mortgagepayment should be no more than 28% of your monthlyhousehold income.

• Considering that fact, here are the minimum requiredmonthly incomes you need to afford this house basedon your down payment.

CASE EXAMPLE – MINIMUM MONTHLY INCOME

DOWN PAYMENT(% - AMOUNT)

15 YEAR MORTGAGEHOUSEHOLD INCOME

30 YEAR MORTGAGEHOUSEHOLD INCOME

0% - $0 $1,894 $1,291

3% - $2,250 $1,837 $1,252

5% - $3,750 $1,799 $1,227

7% - $5,250 $1,761 $1,201

10% - $7,500 $1,704 $1,162

15% - $11,250 $1,610 $1,097

20% - $15,000 $1,515 $1,033

25% - $18,750 $1,420 $968

30% - $22,500 $1,326 $904

CLOSING COST - THE FOLLOWING ITEMS MATTER

• Appraisal Fee

• Credit Report

• Processing Fee

• Underwriting Fee

• Flood Certification

• Title Insurance Premium

• Closing Fee

• Recording

• Survey

• Termite Inspection

• Home Inspection

• Interest on you new loanfrom date of closing to endof month

• Homeowners InsurancePremium for 1 year

• Escrow for HomeownersInsurance

• Escrow for Real EstateTaxes

• Overnight Express Fees

CLOSING ON THE PURCHASE!

The lender will preparethe closing document

and delivers them to thetitle company

The buyer brings aCASHIER’S CHECKmade payable to the title

company and signs allclosing documents.

You receive your keysand you are a proudnew homeowner!!!

CONGRATULATION!!!