First Time Home Buyer Seminar

Step by step process to buying a home. Everything you need to know from making the offer, to getting the proper inspections, the paperwork, and closing process.
Mike Hall
Http://www.myohiohouse.com
614-937-4162

1. First Time Home Buyer SeminarFirst Time Home Buyer Seminar
Presented By:Presented By:
Mike Hall http://wwwmyohiohouse.com 614-937-4162

2. First Time Home Buyer SeminarFirst Time 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.

3. Why buy now?
$7,500 interest free loan that may turn
into a grant that does not need to be
repaid
Interest rates are near record lows
Huge selection to choose from means
prices are lower
No money down options still available
There is no fee to use a Realtor to buy a
home.

4. Why Buy A Home?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 HomeRenting 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
You have nothing to show after spending
all this money.

6. Renting Vs. Buying a HomeRenting Vs. Buying a Home
$700 rent buys you a $972 mortgage payment (if
you are in a 28% tax bracket).
Subtract $ 150 per month for month for taxes /
insurance. Leaves 822 for an interest only
payment
At 7% this buys you a 141,000 mortgage
Assume the house price is $150,000. 5%
appreciation per year give you an extra $41,150 in
equity.
$43,150 vs. $ 0? You do the math!

7. How to Afford a Higher PaymentsHow to Afford a 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.

8. Are You Ready To Buy?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 cash for
closing costs or down
payment?
Do you have 2 month’s
reserves of PITI in the
bank?
Do you have the ability
to make the mortgage
payments?

9. How Much Home Can You Afford?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.

10. Why be Pre-Approved?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.

11. Approval DocumentsApproval Documents
Provide 2-3 months of
pay stubs.
2 years worth of tax
returns or W2 forms.
Provide 6 to 12
months bank
statements.
Proof of any
additional qualifying
income such as
alimony and child
support.
Show a 2 year
employment history.
580 credit score
needed for 100%
financing.

12. Types of Loan ProgramsTypes of Loan Programs
30,40,50 year fixed rate.
Interest-only
mortgages.
Option ARM
Mortgages.
2/1 Rate buy-downs
give you lower
payments the first 2
years.
2/28 ARM stays fixed
for the first two years,
then adjusts annually.
80/20 Combo loan
avoids the need for PMI
(Private Mortgage
Insurance).
A seller-held second
mortgage lets buyers
conserve cash.

13. 100% Financing & PMI100% Financing & PMI
100% financing can be done as a single loan
or a combo loan (80/20) with NO PMI.
Some 100% financing loans also require PMI,
while others don't.
PMI can be as much as 4% annually on the
loan amount.
On a $100,000 loan, this can exceed $333 per
month.
PMI can be removed when the LTV drops
below 80%.
Property appreciation can eliminate PMI in a
few years.

14. Credit Scoring OverviewCredit 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 is an indication of the
probability of going 90
days late on any account
within the next 24
months.
It has the greatest
effect on your interest
rate.

15. The Three Credit BureausThe 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 UsedHow 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 580 or
higher is required to go
100% LTV.
A mid-score of 700 gets
you access to prime
lenders.

17. How to Improve Your Credit ScoreHow 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 RealtorWorking 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 OfferDetermining 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 PurchaseMaking 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 AcceptedWhen 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 NeedInspections 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 ProgramsHome 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. Golden Gate will
negotiate so the sellers pay for this.

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

26. Settlement DaySettlement 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!

27. Take The Next StepTake 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.
Michael Hall
Golden Gate Real Estate
Cell: 614.937.4162
Office: 614.888.3600
Fax: [phone]
Email:
[email protected]
Web: www.myohiohouse.com