MAKING HOME

OWNERSHIPAFFORDABLE

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Why You Should Buy a Home

Why Your Credit is so Important

Why You Should Work

with a REALTOR®

The Mortgage Process

Getting Approved

Loan Types & Products

Refinancing

The Home-Buying Process

Today You Will Learn

Pre-Qualification vs. Pre-ApprovalWhy Should You Buy A Home?

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Tightening Rental Market

Average rents for a two bedroom apartment is $1,100 per month or more.

Increasing Rents

Tax Benefits

Good Investment — Particularly in California

The average annual appreciation on real estate since 1975 is over 7.00%

This figure includes the double digit negative appreciation we have experienced over the past three years

Reasons

to Buy

vs. Rent

Renting vs.

Owning

Renting Example

Average Rent Per Month $1,102

Total Rent per Year $13,224

Total Write Off $66.12

Tax Write Off

Renters Tax Credit

(State)

$66.12

No Future Appreciation!

Home Ownership Example

Sale Price of Home $400,000

Loan (96.5%) $386,000

Monthly Payment(includes PITI)

$2,878.02

Total Payment/Year $34, 536.24

Tax Write Off

Mortgage Interest $22, 645

Property Taxes $ 5,000

Total deductions $27, 645

If a home appreciates only 5% per

year, value in 5 years would be:

$510,513.00

Net 5-year gain will be of

$110,512.63

Renting vs.

Owning

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Pre-Qualification

vs. Pre-Approval

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Borrower’s Income $4,333.33 P&I (1st TD): $2,072.00

Borrower’s Income $2,857.17 Insurance: $99.72

Other Income $0.00 Taxes: $416.67

MI: $289.50

Total Income $7,190.50 HOA Dues: $0.00

PITI & PMI: $2878.02

Other Debts: $200.00

Total Payment $3,078.02

Debt Ratio 40/42.8

Estimate on

What You

Can Afford

Proposed Monthly Payment

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Pre-Approval: Mortgage Commitment

pending appraisal of the property

Application

Credit report pulled to verify scores

2 Years Federal Tax Returns with W-2’s

3 Months Bank Statements

2 Months of Current Pay-stubs

Pre-Qualification vs.

Pre-Approval

Pre-Qualification vs. Pre-Approval

Why Work with a REALTOR®?

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Why Work with a REALTOR®?

Have Extensive Information About the Market

MetroList Services Access & Other Agents

Knowledge of Area

Can Help Find Home Best Suited for Your Needs

Good Negotiator

Understands Closing Procedures

Choose by Experience

Pre-Qualification vs. Pre-Approval

The Mortgage Process

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Getting ApprovedIncome

Sufficient Income

Housing Debt to Income Ratio

Total housing payments divided by monthly

gross income

Total Debt to Income Ratio

Total Monthly Payments Divided by

Monthly Gross Income

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LOAN-TO-VALUE (LTV)

Amount of Down Payment Subtracted

from Price is LTV

5% DOWN = 95% LTV

MI - Mortgage Insurance

Required on All Loans with Less

Than 20% Down

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Loan TypesConforming

$50,000 To $417,000

As Low As 3.5% Down

Will Require MI

20% Down = No MI

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Jumbo Loans

Private Investors

$417,000 to $1,000,000

Minimum 20% down

Asset Needed

680 Minimum credit score

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Mortgage Loan ProductsFixed Rate Mortgages

15-Year

20-Year

30-Year

Adjustable Rate Mortgages (ARM)

3/1 ARM

5/1 ARM

7/1 ARM

10/1 ARM

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Mortgage Jargon

Loan-to-Value — The percentage of what the lien-

holder owns vs. the borrower

Origination or Lender’s Fees — Fee charge by

lender to complete loan

Points — Percent of loan amount

MI - Mortgage Insurance — Insurance written by a

private company to protect lender against loss if

the borrower defaults

Rate Lock — A binding agreement to lock the rate;

points may be applied to change rate

Pre-Qualification vs. Pre-ApprovalThe Home-Buying Process

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Home-Buying Process

Get Pre-Approved Before You Start

Work with a REALTOR®

Tour Homes that Meet Your Needs Criteria

Make an Offer on the Home You Desire

Make an Educated Offer by Reviewing All Comps in the Area with Your Agent

Deal with Counteroffers as They Come

Open Escrow (Your Agent Will Complete This For You)

Pre-Qualification vs. Pre-ApprovalQuestions?