welcome to homebuyer education sponsored by the washington state housing finance commission

Welcome to

Homebuyer Education

Sponsored by the Washington State Housing Finance Commission

Class Instructors

• Add Your Names Here

• Add Your Names Here

3/27/2012

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• How Going Green Saves You Money

23 benchmarks set by WSHFC04/10/23

Agenda

• The Home Buying Process

• Lender Curriculum

• Assistance Programs

• Real Estate Curriculum

• Q & A’s and Resources

04/10/23

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

04/10/23

The Steps to Homeownership

EducationCredit History

BudgetResearch

Loan Pre-ApprovalYour PrioritiesThe Search

You’re Home!

The eight steps recommended by the Washington Homeownership Center04/10/23

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

04/10/23

Owning vs. Renting

Things to keep in mind about owning….

• Yard work

• Home improvements/maintenance

• Larger monthly payments- Property Taxes

- Homeowners Insurance

04/10/23

The Players in the Homebuying Process

• Who are they?

• What role do they play?

04/10/23

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

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Shopping for a Lender

• Get referrals and interview different lenders

• Questions to ask• Difference between broker and loan

officer

04/10/23

Lender Curriculum

– How Much Can You Afford?

– Credit

– Budgeting

– Selecting a Loan Program

– Down payment & Closing Costs

04/10/23

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.

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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

04/10/23

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

04/10/23

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 withdrawals04/10/23

Budgeting Basics

• Eliminate credit card debt

• Put your money to work

• Educate yourself

• Plan for future expenses

• Pay yourself first

04/10/23

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)

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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?

04/10/23

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

04/10/23

Types of Loans

• Conventional (or Conforming)

• FHA

• VA

• USDA

• Sub Prime & Non-Conforming

• Portfolio

• Jumbo

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Types of Loan Terms

• Fixed Rate

• Adjustable Rate

• Interest Only

• 15 / 20 / 30 / 40 years

• Balloon

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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

How Much Can You Afford?

04/10/23

How Much Can You AffordCalculating how much house payment you can afford

depends on your income and current debt

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 current debt

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)

How Much Can You Afford?

04/10/23

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: $ 690.00Hazard Insurance: $ 73.00*Real Estate Taxes: $ 117.00*Mortgage Insurance: $ 73.00

Homeowner’s Association: $ 0.00Subordinate Financing: $ 0.00

___________ $ 930.00

How Much Can You Afford?

04/10/23

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%

How Much Can You Afford?

04/10/23

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%

How Much Can You Afford?

04/10/23

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

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Assistance Programs

• WSHFC Home Advantage Program

• WSHFC Down Payment Assistance Programs

• USDA, HUD

• Community Land Trusts

• Other DPA Programs statewide

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Washington State Housing Finance Commission

Home Advantage First Mortgage Competitive interest rate

• DO NOT need to be 1st time homebuyer• $97,000 statewide income limit • No acquisition limit, no recapture tax• Automatically eligible for up to 4% of loan amount

in DPA -0% interest 2nd mortgage

04/10/23

Washington State Housing Finance Commission

Down Payment Assistance Programs • Home Advantage 2nd mortgage (up to 4% of loan

amount)**• Home Advantage Rebound **• HomeChoice• House Key Schools• House Key Veterans• Home Advantage Built New• House Key Plus Seattle (Subject to funding)• House Key Plus ARCH (Subject to funding)

**Down payment assistance program must be used in conjunction with Home Advantage 1st mortgage.

These are All Second Mortgages – These are not grantsOnly one WSHFC DPA program can be used.

04/10/23

Washington State Housing Finance Commission

Home Advantage

Second Mortgage Loan

• 0% interest –deferred, NO Payment

• Up to 4% of first mortgage loan amount Statewide

• Statewide Income Limit $97,000 (based on household income determined by lender)

• Balloon loan – comes due in full 30 years, or if sell, refinance

04/10/23

Washington State Housing Finance Commission

Home Advantage Rebound

Second Mortgage Loan

• 0% interest –deferred, NO Payment

• Up to $10,000 Statewide• Statewide Income Limit $97,000 (based on household income

determined by lender)• Balloon loan – comes due in full 30 years, or if sell, refinance• Must purchase a foreclosed, bank owned or short sale

04/10/23

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, No payments

• One on One Counseling requiredIncome Limits:

• King & Snohomish Counties: $88,200

• Kitsap County: $74,000

• Thurston County:  $74,200

• Island County $73,000

• All Other Counties: $71,400 04/10/23

Washington State Housing Finance Commission

House Key Schools

• Up to $10,000

• 3% interest on a 10 year termAny Employee of Private or Public

School K -12, Community Colleges or Technical Colleges. Income Limits:

• King & Snohomish Counties: $88,200 • Kitsap County: $74,000

• Thurston County:  $74,200• Island County $73,000

• All Other Counties: $71,400

04/10/23

Washington State Housing Finance Commission

House Key Veterans

Second Mortgage

• Up to $10,000

• 3% interest on a 10 year term

• Veterans honorably dischargedIncome Limits:

• King & Snohomish Counties: $88,200 • Kitsap County: $74,000

• Thurston County:  $74,200• Island County $73,000

• All Other Counties: $71,400

04/10/23

Washington State Housing Finance Commission

Home Advantage Built New

Second Mortgage

• Up to $10,000

• 3% interest on a 10 year term

• Newly Constructed, Never OccupiedIncome Limits:

• King & Snohomish Counties: $88,200 • Kitsap County: $74,000

• Thurston County:  $74,200• Island County $73,000

• All Other Counties: $71,400

04/10/23

House Key Plus Seattle Up to $45,000• 3% interest rate - Deferred, No Payments• 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• Extra Inspection and Forms

Washington State Housing Finance Commission

04/10/23

Washington State Housing Finance Commission

House Key Plus ARCH • Up to $30,000• 4% simple interest – Deferred, No Payments, • Borrower must contribute 2% of own funds• One on One Counseling required• 80% Area Median Income & below

(same as HK + Seattle)

• Extra Inspection and Forms

• Available in 15 Eastside Cities

04/10/23

Washington State Housing Finance Commission

Closing Cost Grant

• For homebuyers in the State of Washington

• Up to $500 grant towards closing costs• Must work with a FHLB & WSHFC Participating

lender.

04/10/23Subject

to Funding

Subject to Funding

Mortgage Credit Certificate

MCCs are not mortgages...  It is a tax credit which means fewer tax dollars can be withheld from your regular paycheck, increasing your take-home pay.  The lender can use the credit to help increase your

buying power.

It is strongly recommended that you contact a tax professional before applying for an MCC in order to determine the potential benefits an MCC may provide for your specific tax situation.

http://www.wshfc.org/buyers/MCCprogram.htm

04/10/23

Mortgage Credit Certificate

MCC eligibility requirements include:•The MCC is available with new purchase loans•Must be a first time homebuyer, unless purchasing in a targeted area.•Recapture Tax Applies•Income and Acquisition Limits •Owner Occupied•Home Buyer Education is required•Must work with a WSHFC MCC participating lender

04/10/23

Recapture Tax

** Applies to the WSHFC Mortgage Credit Certificate program only

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.

04/10/23

Rural USDA Programs502 Direct Loan (work directly to USDA)Income limits: up to 80% of area median incomeLocation: rural community with less than 10,000 populationLoan amount: may be up to 100% of appraised market valueDown Payment: not required (Please Note: WSHFC DPA Programs CAN NOT be used with USDA direct)

www.rurdev.usda.gov/wa/

502 Guarantee (work with a lender that offers USDA)Income limits: up the 115% of area median incomeLocation: rural community with less than 10,000 populationDown payment: not required (ALL WSHFC DPA Programs CAN be used with USDA 502 Guaranteed)

04/10/23Subject

to Funding

Subject to Funding

HUD 184

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

04/10/23

HUD 203k Streamline

HUD 203k Streamline Rehab Program• Include funds for eligible repairs to the base loan amount.• No minimum repair cost – maximum amount up to $35,000• Can be used to purchase and rehabilitate an existing home.• Same credit and down payment requirements as an FHA

loan.• Can be used with the Home Advantage First mortgage

program and WSHFC Down Payment Assistance programs.• Please note: only selected Home Advantage lenders offer

the 203k Streamline product.• Visit Hud.gov for a list of eligible repairs and verify with your

lender.

04/10/23

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

04/10/23

Subject to Funding

Subject to Funding

Down Payment Assistance Programs by

Region

04/10/23

Region 1

Clallam, Grays Harbor, Jefferson, Kitsap, Mason, and

Thurston Counties

04/10/23

Aberdeen Neighborhood Housing Services– Up to 20% of appraised value – Grays Harbor County– Housing Education (HUD Approved)– Housing Rehab loans

City of Bremerton – Housing Rehab Loans

Community Frameworks- Bremerton – Built in Bremerton DPA

Housing Kitsap (Kitsap County Consolidated Housing Authority)– Up to $20,000– Must purchase in Kitsap County outside Bremerton City limits

04/10/23 Region 1

Region 2

Island, King, San Juan, Skagit, Snohomish, and

Whatcom Counties

04/10/23

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

04/10/23 Region 2

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

04/10/23 Region 2

Region 3

Pierce County

04/10/23

Pierce County Community Services– Up to 3.5% of the sales price– Purchasing in Pierce County outside of Tacoma and Lakewood

city limits

City of Tacoma– Up to 3.5% of the sales price– Designated neighborhoods, Primarily south of 6th Ave

City of Lakewood– Up to $7000– Lakewood City Limits

Homeownership Center of Tacoma– Up to 22% of purchase price– Below market price homes– Hilltop area– Housing Education

04/10/23 Region 3

Region 4

Benton, Chelan, Douglas, Franklin, Grant, Kittitas, Walla Walla, and Yakima

Counties

04/10/23

City of Yakima– Up to $4000– Purchasing in City of Yakima targeted area– City acquired property purchase program also, up to $30,000 in assistance

City of Richland– Up to $5000

City of Kennewick– Up to $5000– Purchasing in City of Kennewick targeted area

City of Pasco– Up to $5000– Priority given to property within the Museum and Longfellow districts

Columbia Valley Housing Association (Housing Authority of Chelan & City of Wenatchee)– DPA/ Self help – Housing Counseling & education

04/10/23 Region 4

Region 5

Adams, Asotin, Columbia, Ferry, Garfield, Lincoln, Okanogan, Pend Orielle, Spokane, Stevens, and

Whitman

04/10/23

Community Action Center of Whitman CountyHomeowner Resource Center of Whitman County:– Self Help– Rehab– Weatherization– Housing Education and Counseling

Spokane Neighborhood Action Program– City of Spokane & Spokane County– Rehab, Weatherization & Energy Efficiency– Minor Home Repairs– Housing Education and Counseling (HUD Approved)

The ARC of Spokane– Down Payment Assistance– People with Disabilities– Housing Education and Counseling

04/10/23 Region 5

Region 6

Clark, Cowlitz, Klickitat, Lewis, Pacific, Skamania, and Wahkiakum Counties

04/10/23

Community Housing & Resource Center Vancouver– Housing Education & Counseling – Credit Repair/Debt Management/ Budget Counseling – Mortgage Default Counseling – Reverse Mortgage Counseling– Pre-Purchase Services – Tax Preparation Assistance– City of Vancouver Rehab program

Family Finance Resource Center (Longview Housing Authority)– Housing Education & Counseling – Credit Repair/Debt Management/ Budget Counseling – Mortgage Default Counseling – SHARE / Self Help

04/10/23 Region 6

Community Land Trusts• City of Seattle

– Homestead Community Land Trust• San Juan Islands

– Opal Community Land Trust– Lopez Island Community Land Trust

• Whatcom– Kulshan Community Land Trust

• Clallam– Homeward Bound Community Land Trust

• Kitsap /Bainbridge Island– Housing Resource Board

• Kittitas County (Yakima Valley) <<new>>– Kittitas Yakima Valley Community Land Trust

04/10/23

Self-Help Housing Opportunities

Self Help Clients participate in the construction of their home Low interest mortgage loan

Sweat Equity Low Income (up to 80% AMI)

• Habitat for HumanityClients participate in the construction of their home Zero interest loans

Very Low- Low Income (30-60% AMI)To find an affiliate near you

http://www.habitat.org/

04/10/23

Additional Self Help Housing Opportunities

Self-Help Programs Statewide

Vashon Household Self Help,Northwest Housing Development, Housing Hope, Homes for Islanders, Whatcom Skagit Housing, Northwest Housing Development,Port Gamble S'Klallam Housing Authority/ Southern Puget Sound Intertribal Housing Authority, Kitsap County Consolidated Housing Authority, Clallam County Housing Authority, Community Frameworks Spokane, SHARE Longview

04/10/23

Matching Programs

• HomeStartClients are matched $3 for every $1 of their own up to $5,000

Must be first-time homebuyer

• Individual Development Accounts (IDA’s)Clients are matched $2 for every $1 of their own up to $8,000

Money can be used for: buying a home, education or starting a small business

United Way of King County (YMCA) offers IDA program

04/10/23

Housing Authorities

• Section 8 for Homeownership

• Family Self Sufficiency

• Classes and Counseling

04/10/23

Real Estate Curriculum

– How to Shop for a Real Estate Professional – Understanding Agency Representation

– Selecting a Home and Negotiating a Purchase Price

– The Importance of a Home Inspection– The Loan Closing – What to Expect, Review

Sample Loan Documents

04/10/23

Your Priorities

• Size of home

• Number of bedrooms

• Number of bathrooms

• Neighborhood

• State of home (new vs fixer)

• Garage

04/10/23

How to Shop for a Real Estate Professional

• Why use a Real Estate Agent?

• Interview several people

• Questions to ask

• Buyers agent vs. sellers agent

04/10/23

Selecting a Home

• Dream Home vs. Starter home

• Where do you want to live?

• What is important to you?

• Do research – explore neighborhoods

04/10/23

Negotiating a Purchase Price

• Know the market

• What are you willing to pay

• Be prepared for a counter offer

• Keep your priorities in mind

• Be prepared to put up earnest money

04/10/23

Making the Offer

• Purchase and sale agreement

• Sellers disclosure

• Neighborhood review

• Financial contingency

• Inspection contingency

04/10/23

Home Inspection

• Why you should have one

• How to find an inspector

• Questions to ask

• How much will it cost

• How long will it take

• What should I receive from the inspector

04/10/23

The Loan Closing – What to Expect

Signing papers

• Deed-of-trust

• Promissory note

• HUD-1

• Truth in Lending

When do you get the keys?

04/10/23

Q & A’s and Resources

• Foreclosure Prevention and Early Delinquency Intervention• Home Maintenance• Consumer Protection Resources• Community Resources for Further Counseling or Other Assistance.• Fair Housing• Predatory Lending

04/10/23

Foreclosure Prevention

• Don’t be late

• Contact your lender as soon as possible

• Contact a local housing counseling agency

• Visit Washington Homeowners & Homebuyers Web Site:

http://www.wshfc.org/buyers/counseling.htm

04/10/23

Home Maintenance

Protect your investment• Test smoke detectors• Clean out gutters• Have regular service on heating system• Change furnace filters• Yard upkeep • Budget for home repairs

Visit http://www.wshfc.org/buyers/guide.htm

Download:

Post Homeownership Guide & Seasonal Newsletter04/10/23

Predatory Lending

Predatory lending can be one or more abusive lending practice:

• Excessive interest rates and/or high fees• Failing to disclose the true terms of the loan• Approving a loan with payments higher than the

borrower can afford to pay• Pressuring a borrower to sign documents

without understanding the terms of the loan• “Flipping” or frequent refinancing of a loan

04/10/23

Predatory LendingPredatory lending vs. sub-prime lending

• Sub-prime loans help borrowers with: - less than perfect credit

- inconsistent employment history - incomplete application documents

• Sub-prime loan has a higher interest rate because the lender is taking a bigger risk in making the loan.

04/10/23

Fair Housing

• Who is protected

• What is prohibited in the sale & loan

• How to file a complaint

04/10/23

How “Going Green” can save you money $$

To get you thinking “green”, here are some tips that will not only help conserve resources but may also save you money:

•If you haven’t already, convert to the compact florescent light bulbs (a bulb at a time…) •Use biodegradable cleaning products.•If you are not already recycling paper, glass and plastic, call your disposal company and ask for recycling bins.•Recycle your yard waste, contact your disposal company or purchase a bin.•Use less water - flush less often, use your dishwasher, wash full loads.

04/10/23

How “Going Green” can save you money $$

• Use less energy – unplug small appliances, turn off computers, use timers on outdoor lights.

• Unfortunately, traditional wood burning fireplaces tend to lose more energy than they produce, pulling heated air out of the house and sending it up the chimney (and burning wood adds to air pollution). If you have natural gas or propane heating, consider gas logs.

• Replace shower heads. Choose a low-flow unit and you'll get virtually the same sensation of water flow while saving money and water.

• Purchase cloth re-useable grocery bags.• Organize closets and donate unused clothing and household items

to charity instead of throwing away.

04/10/23

How “Going Green” can save you money

• As you upgrade:

– Purchase Energy Star appliances, there may even be additional rebates and tax incentives

– Purchase a higher output rated furnace or consider converting that oil tank to gas heating

– Check out Solar Panel options in your area

• Here are some handy links to track Utility Rebate Programs and Energy Usage:

• http://www.dsireusa.org/incentives/

• http://hes.lbl.gov/consumer

Continue to visit the Commission’s Seasonal Newsletter for additional tips http://www.wshfc.org/buyers/newsletter.htm

04/10/23

Housing Counseling Agencies

The Homeownership Hotline sponsored by

The Department of Financial Institutions

& WSHFC:

1 – 877- 894- HOME (4663)

Or for a list of counselors statewide:

http://www.wshfc.org/buyers/counseling.htm

04/10/23

Housing Counseling Agencies

• One on one counseling

• Loan document review

• Budgeting and financial literacy

• Mortgage default counseling

• Predatory lending counseling

• Reverse mortgage counseling

• Run /Check credit report

04/10/23

Research & Resources• Housing counseling agencies• Down payment assistance programs• Low-interest loan programs• Affordable homeownership opportunities

04/10/23

Washington State Housing Finance Commission www.wshfc.org

US Housing & Urban Development www.hud.gov

(look for HUD’s Settlement Cost Booklet)

Or Call the Homeownership Hotline:1 – 877- 894- HOME (4663)

Now What?

Are you pre-approved for a mortgage loan:

If not, meet with a lender

If you know how much you can afford, then you are ready to go house shopping:

Meet with a real estate professional

Want to know more about the home buying process?

Meet with a Housing Counselor

04/10/23