Mortgage project

Finding the Way Home

The number of tools, websites and schemes promising the path to

a new home are as numerous as the stars

Needs:BedroomsBathroomsKitchenGarageYardClose to WorkQuality of SchoolsNeighborhoodEtc…..

Wants:Open ConceptMaster SuiteFireplacePoolGated CommunityEtc…….

You Decide

How much can you afford?

www.google.com

http://www.google.com/

Use Your Financial Prequalification to Find Your Needs, Wants and Desires!!

www.zillow.com

http://www.zillow.com/

www.zillow.com


Multiple Listing Service identifies each property with a unique number

Many Services allow you to research listings (This is

www.Zillow.com)

www.zillow.com


It is critical to do price research, not only for the home you like, but for the homes around it also. The value of neighboring homes

affects your potential investment.

www.zillow.com


So, you found a home, great!!!! Now it’s time to bring in the

professionals!!

You should like your Realtor, so conduct some interviews! You will potentially be spending

many hours with this person and you need to communicate with them very well!

This was my last Realtor (Just an example)

Most reputable Realtors will have a website with listings and facts.

http://www.cbbain.com/Pages/AgentDetail.aspx?AID=3253


Money Matters

The most confusing part of buying a home is also the most important part.

Loan Options

Courtesy Of: http://www.imortgageguide.com/mortgageresources/home-financing-options.aspx

http://www.imortgageguide.com/mortgageresources/home-financing-options.aspx

Courtesy of: http://www.homebuyinginstitute.com/mortgagetypes.php

Fixed-rate mortgage: This type of home loan carries the same interest rate for the entire term (length) of the loan. The interest rate makes up part of your monthly payment. It's also the only component that has the potential to change over time. So if you get a mortgage with a guaranteed fixed rate, your monthly payment is guaranteed to stay the same -- for the entire life of the loan. more: http://www.homebuyinginstitute.com/mortgagetypes.php#ixzz2DrQiAIa1

Most Common Types of Loans

Adjustable-rate mortgage: These are also referred to as ARM loans for short. Unlike the previous option, this type of mortgage has an interest rate that changes over time. This also means that the size of your monthly payment will change over time. It might adjust up or down, depending on market conditions at the time of adjustment. But they usually adjust upward, resulting in a larger monthly payment.

http://www.homebuyinginstitute.com/mortgagetypes.php#ixzz2DrRFaH8K

http://www.homebuyinginstitute.com/mortgagetypes.php

http://www.homebuyinginstitute.com/mortgagetypes_article2.php


http://www.homebuyinginstitute.com/mortgage-types-24.php


Fixed Rate Loan

The Fixed Rate Loan is the most common home loan issued due to the ability of the home buyer to budget monthly expenses on a long term basis. This loan is issued as a 30 year or 15 year loan.

Payments on this type of loan stay the same over the length of the loan regardless if federal interest rates change.

At the beginning of the loan, a large portion of the monthly payment will pay interest, and a much smaller portion of the payment will apply to the principal.

Example: Fixed Rate 30 Year loan $200,000 4% Interest Rate Month 1 Payment $954.83 Interest = $666.67 Principal = $288.16Month 180 Payment $954.83 Interest = $432.03 Principal = $522.80Month 360 Payment $955.46 Interest = $3.17 Principal = $952.29

Total Money Paid: $343,739.43 - $200,000 Loan Amount = Total Interest $143,739.43

Adjustable Rate Loan (ARM)

The Adjustable Rate Loan is one of the least common home loan issued. This loan is a dangerous tool and is only for the financially disciplined buyer. The loan interest rate typically starts out lower than a fixed rate loan. If the payment on a fixed rate loan is $1500.00, then it is possible for the ARM monthly payment to be $1100.00 initially. This allows some buyers to purchase a more expensive home initially, however many neglect to consider the increasing interest over the life of the loan. This loan is issued as a 30 year or 15 year loan.

Payments on this type of loan change over the length of the loan. The Interest amount paid will change with interest rate changes.

Example: Fixed Rate 30 Year loan $200,000 3% Initial Interest Rate Month 1 Payment $843.21 Interest = $500.00 Principal = $343.21Month 180 Payment $1,197.81 Interest = $771.08 Principal = $426.73Month 360 Payment $1,365.54 Interest = $11.84 Principal = $1353.68

Total Money Paid: $421,230.10 - $200,000 Loan Amount = Total Interest $221,230.10http://www.bankingmyway.com/real-estate/mortgages/smart-way-use-adjustable-r

ate-mortgages

http://www.bankingmyway.com/real-estate/mortgages/smart-way-use-adjustable-rate-mortgages


Down Payment

Down Payment Amounts vary significantly with numerous variables:• Credit Score• Type of Loan• Value of the Home•Etc…

Although the amount necessary for down payment is affected by outside influences, the most important factor to consider is the effect on your monthly house payment.

The rule of thumb that has been passed down from generation to generation is that a down payment for a home should be 20%. So, for a $200,000 home, the down payment would need to be $40,000.

In the current economy, most families have a very difficult time saving for a down payment that could amount to a full year salary.

Lenders have recognized the need for alternatives to a large down payment and have developed programs and products to assist with buying a home.

Down Payment

Assistance Links

http://www.fha.com/fha_programs.cfm

http://www.makinghomeaffordable.gov/programs/Pages/default.aspx

http://www.cityoftacoma.org/page.aspx?nid=454

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/np/sfhdap01

http://www.guidetolenders.com/new_home_loan/articles/fha-mortgage-down-payment-assistance.jsp

http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/affordablehousing/programs/home/addi

http://homebuying.about.com/cs/downpaymentgift/p/gift_money.htm











Paper Work

The home buying process comes with virtual mountains of paperwork.

It is critical to understand that you have a team to help with paperwork and you do NOT have to accomplish this alone.

RealtorLender Your TeamTitle Company

It is imperative that during the home buying process every piece of paperwork must be understood completely.

If any part of the process is not completely crystal clear, a subject matter expert must be consulted.

Good Faith Estimate

The Good Faith Estimate is supplied by the Lender to keep the home buyer informed of all estimated costs associated with the home purchase.

It is considered a “Best Practice”, to sit down in person with a subject matter expert to have this document explained in great detail.

The Good Faith Estimate is an “Estimate”. The numbers on the estimate are a best guess by the lender, based on lending experience.

http://www.saintlouiscity.com/media/global/Sample_Good_Faith_Estimate.pdf



Good Faith EstimateThe Good Faith Estimate is a summary

of ALL estimated costs associated with a home purchase. This document comes in many different formats, but the information it contains is very close to the same between different versions.

In addition to the loan summary. You should see Escrow information, a summary of Settlement charges, Origination charges, and Miscellaneous charges that will include Taxes, Filing Fees, Title Fees, etc.

This document is not to be taken lightly. You will need assistance understanding all of the associated charges.




Good Faith Estimate

The Initial portion of a Good Faith Estimate will contain the contact information and address for both the Originator (lender) and the Borrower.

On the HUD version of the Good Faith Estimate, the purpose statement provides more helpful information resources.

www.hud.gov/respa

It is very important to note, that this is a time sensitive document. The terms of time are stated in this portion of the document, so that all parties understand the deadlines that must be met in order to prevent a change to the estimated cost.

http://www.hud.gov/offices/hsg/rmra/res/gfestimate.pdf

http://www.hud.gov/respa


Good Faith Estimate

The Loan Summary portion of a Good Faith Estimate will contain the terms of the loan:

•Initial Loan Amount Term (Length) of the Loan•Initial Interest Rate Initial Monthly Mortgage (Payment)

Important Questions and Answers follow the initial summary :

•Can your interest rate rise? Can your loan balance rise?•Can your monthly payment rise?•Does your loan have a prepayment penalty?•Does your loan have a Balloon Payment?



Good Faith Estimate

The Loan Summary portion of a Good Faith Estimate will also contain the terms of Escrow:

What is Escrow in understandable terms?

Escrow is a process that designates a neutral third party (Usually a title company employee, or escrow company) to collect all terms of the loan, all documentation, and all money to pay for the terms.

Essentially, the Escrow Officer (neutral third party) makes sure all parties meet the obligations stated in the contract for the home transaction.

It is possible that the terms of the loan will require a portion of the monthly payment to be deposited into an “Escrow” account. This will usually be used for property taxes, homeowners insurance, etc.

This monthly deposit will be transparent to the homeowner. Simply making the monthly payment to the Loan Servicer is the homeowner’s responsibility.

For More Information see: http://www.realtor.com/Basics/Buy/ClosePossess/Escrow.asp?source=web


http://www.realtor.com/Basics/Buy/ClosePossess/Escrow.asp?source=web


Good Faith Estimate

The Settlement Charges portion of a Good Faith Estimate will contain the terms that the homebuyer will owe the lender for the loan:

Origination Charge is very self explanatory. The homebuyer pays this amount for the services and using the lender’s money.

Many people are involved in the loan process. This is a way for the Lender to pay their employees for working with the homebuyer to get the best servicing possible.



Good Faith Estimate

The second area in the Settlement Charges portion of a Good Faith Estimate will contain the information about interest rate and points:

Many times a lender will allow the home buyer the opportunity to “purchase” or “sell” points.

To purchase 1 point, typically costs 1% of the mortgage amount. For example the loan amount will be $200,000. For $2,000.00 you can purchase 1 point. This will lower the interest rate about ¼ percent. The original loan was 4% interest, purchasing 1 point will drop the interest rate to approximately 3.75%.

Considerations:If the homebuyer plans to live in the home for the life of the loan, buying down points can be significantly beneficial in terms of amount paid for the loan. A home buyer planning to live in the home for a short time (5 years or less) will not see the significant benefits.

The money to buy points is paid at closing, NOT built into the loan. It is part of closing costs.

For More Information: http://www.ehow.com/about_6565090_explanation-mortgage-points.html


http://www.ehow.com/about_6565090_explanation-mortgage-points.html


Good Faith EstimateThe third area in the Settlement

Charges portion of a Good Faith Estimate will contain the information about miscellaneous charges:

•Appraisal Fee•Credit Report•Notary•Title Insurance•Recording Fees•Mortgage Insurance•Home Inspection•Pest Inspection•City, County and State Taxes•Etc.

Although the list above is by no means comprehensive, the items listed are typical of settlement costs.

Depending on the form used for the Good Faith Estimate, this can be the most confusing part of the process. It is critical once you reach this point, to consult your Real Estate Team to have your questions answered. The responsibility of paying the loan and fees falls only on the new homeowner. Understand this document thoroughly or continue to ask questions until you do. http://www.hud.gov/offices/hsg/rmra/res/gfestimate.pdf


Good Faith EstimateGood Faith Shopping Chart:

Many prospective home buyers suffer from fear at some point in this process. Once the “Dream” home is located, the shopper is many times over cautious and becomes dependent on the Lender to “help” them get a home.

It is important to remember that a Lender wants your business.

The home buyer is the consumer.

Shop around for lenders, even if your credit is not great, shop around.

In most cases, the home loan will be sold from company to company many times over the life of the loan, so the original lender that the home owner built a relationship with and depended on, will no longer be the owner of the loan.

The ultimate responsibility for paying for the new home falls

directly and solely on the buyer alone.



http://www.fdic.gov/about/comein/files/foreclosure_statistics.pdf

Interesting Facts

Every three months, 250,000 new families enter into foreclosure. – Mortgage Bankers Association

Six in 10 homeowners wish they understood the terms and details of their mortgage better. – Freddie Mac/Roper poll of 2,031 U.S. homeowners, conducted 2005.

If home foreclosure were likely for you, what best describes how you would feel? 38% Scared 35% Depressed 9% Angry 8% Embarrassed 9% None of these – Harris Interactive poll of 1,334 U.S. homeowners, conducted October 5-7, 2005.

Low- and moderate-income borrowers who enter a repayment plan are 68% less likely to lose their homes. – Dona Dezube, “Heroic Homeownership,” Mortgage Banking, (June 2006) p. 82.


Summary

• The home buying process is a long and difficult process with many questions and stressful situations along the way.

• The home buyer has a team of dedicated professionals standing ready to assist with the process. If the home buyer doesn’t feel the team is helpful, the team must be changed. Do not be held hostage to poor customer service by fear of losing the “perfect” house. The real

estate team only exists because of consumer’s dollars.

• Use the tools available to make the best possible decision. Home Search tools, Mortgage Calculators and Research centers are abundant online. Be well informed before, during and

after this process.

• The choices made in the home buying process are not short term choices. It is critical to take a long hard look in the honesty mirror before embarking on this path. Know your

needs, desires and limits, and above all do not let anyone convince you to do something you will regret later.

• Emotional Choices in this process cost more than you make. Consistently consult with your family, friends and colleagues to keep the dream grounded.

• Communicate with the Lender Before, During and After the Home Purchase!!!!

Welcome Home!!!

References

www.Google.com (2012, December 1). “How much of a home loan can I afford?”. Google search results.

www.zillow.com (2012, December 1). “Homes in 98513”. Zillow search results.

Kimberlee Calabazza. (2012, December 1). “Coldwell Banker Bain Agent Listings”. Retrieved from http://www.cbbain.com/Pages/AgentDetail.aspx?AID=3253 .

Know Your Mortgage Options. (2012). [Graphic Illustration Mortgage Types]. Retrieved from http://www.imortgageguide.com/mortgageresources/home-financing-options.aspx .

Cornett, Brian. (2011). “Home Loans 101 – The Different Mortgage Types Explained”. Retrieved from http://www.homebuyinginstitute.com/mortgagetypes.php .

Staff, www.mybankingway.com. (n.d.). “The Smart Way to Use Adjustable Rate Mortgages”. Retrieved from http://www.bankingmyway.com/real-estate/mortgages/smart-way-use-adjustable-rate-mortgages .

www.saintlouiscity.com/media/global. (n.d.). [Graphic Illustration Good Faith Estimate of Settlement Costs]. Retrieved from http://www.saintlouiscity.com/media/global/Sample_Good_Faith_Estimate.pdf .

http://www.hud.gov/offices/hsg/rmra/res/gfestimate.pdf. (n.d.). [Graphic Illustration Good Faith Estimate (GFE). Retrieved from http://www.hud.gov/offices/hsg/rmra/res/gfestimate.pdf.

Kennan, Mark. (n.d.). “Explanation of Mortgage Points”. Retrieved from http://www.ehow.com/about_6565090_explanation-mortgage-points.html .

www.FDIC.com. (n.d.). “Foreclosure Statistics”. Retrieved from http://www.fdic.gov/about/comein/files/foreclosure_statistics.pdf .

http://www.google.com/



http://www.imortgageguide.com/mortgageresources/home-financing-options.aspx


http://www.mybankingway.com/


http://www.saintlouiscity.com/media/global




http://www.ehow.com/about_6565090_explanation-mortgage-points.html

http://www.fdic.com/










www.hud.gov/respa

References Given , Not Cited In Text













http://www.hud.gov/respa

Mortgage project

Documents

Transcript of Mortgage project