Welcome to
Homebuyer Education
Sponsored by the Washington State Housing Finance Commission
Class Instructors
• Add Your Names Here
• Add Your Names Here
04/11/23
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
22 benchmarks set by WSHFC04/11/23
Agenda
• The Home Buying Process
• Lender Curriculum
• Assistance Programs
• Real Estate Curriculum
• Q & A’s and Resources
04/11/23
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
04/11/23
The Steps to Homeownership
EducationCredit History
BudgetResearch
Loan Pre-ApprovalYour PrioritiesThe Search
You’re Home!
The eight steps recommended by the Washington Homeownership Center04/11/23
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
04/11/23
Owning vs. Renting
Things to keep in mind about owning….
• Yard work
• Home improvements/maintenance
• Larger monthly payments- Property Taxes
- Homeowners Insurance
04/11/23
The Players in the Homebuying Process
• Who are they?
• What role do they play?
04/11/23
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
04/11/23
Shopping for a Lender
• Get referrals and interview different lenders
• Questions to ask• Difference between broker and loan
officer
04/11/23
Lender Curriculum
– How Much Can You Afford?
– Credit
– Budgeting
– Selecting a Loan Program
– Down payment & Closing Costs
04/11/23
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.
04/11/23
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
04/11/23
Credit Repair & Counseling
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.dfi.wa.gov/consumers/homeownership/pre_purchase_counselors.htm
04/11/23
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 withdrawals04/11/23
Budgeting Basics
• Eliminate credit card debt
• Put your money to work
• Educate yourself
• Plan for future expenses
• Pay yourself first
04/11/23
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?
04/11/23
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
04/11/23
Types of Loans
• Conventional (or Conforming)
• FHA
• VA
• USDA
• Sub Prime & Non-Conforming
• Portfolio
• Jumbo
04/11/23
Types of Loan Terms
• Fixed Rate
• Adjustable Rate
• Interest Only
• 15 / 20 / 30 / 40 years
• Balloon
04/11/23
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?
04/11/23
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?
04/11/23
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?
04/11/23
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?
04/11/23
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?
04/11/23
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
04/11/23
Assistance Programs
• House Key Program – Recapture Tax– Occupancy and Property Restrictions
• WSHFC Down Payment Assistance Programs
• USDA, HUD
• Community Land Trusts
• Other DPA Programs statewide04/11/23
Washington State Housing Finance Commission
House Key & Express Loan Programs
• Lower interest rate
• First-time homebuyers
• Under income limits
• Under acquisition limits
04/11/23
Recapture Tax
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.
04/11/23
Washington State Housing Finance Commission
Down Payment Assistance Programs • House Key Plus• HomeChoice• House Key Schools• House Key Veterans• House Key Plus Seattle• House Key Plus ARCH• House Key King County• House Key Rural• House Key Bremerton
Down payment assistance program must be used in conjunction with House Key State Bond 1st mortgage.
These are All Second Mortgages – These are not grantsOnly one WSHFC DPA program can be used.
04/11/23
Washington State Housing Finance Commission
House Key Plus
Second Mortgage Loan
• 5% interest with a 10 year term
• Up to $10,000 StatewideIncome Limits:• Clark/Skamania/Thurston Counties $70,000 • Island County $77,900• King/Snohomish Counties $84,300 • Kitsap Counties $70,900 • All Other Counties $66,300
04/11/23
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 payment
• One on One Counseling requiredIncome Limits:
• Clark/Skamania/Thurston Counties $70,000 • Island County $77,900
• King/Snohomish Counties $84,300 • Kitsap Counties $70,900
• All Other Counties $66,300
04/11/23
Washington State Housing Finance Commission
House Key Schools • Up to $10,000• 3% interest on a 10 year term
Any Employee of Private or Public School K -12, Community Colleges or Technical Colleges.
Income Limits:• Clark/Skamania/Thurston Counties $70,000 • Island County $77,900• King/Snohomish Counties $84,300 • Kitsap Counties $70,900 • All Other Counties $66,300
04/11/23
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:• Clark/Skamania/Thurston Counties $70,000 • Island County $77,900• King/Snohomish Counties $84,300 • Kitsap Counties $70,900 • All Other Counties $66,300
04/11/23
House Key Plus Seattle Up to $60,000• 3% interest rate - Deferred payment• 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
Washington State Housing Finance Commission
04/11/23
Washington State Housing Finance Commission
House Key Plus ARCH • Up to $30,000• 4% simple interest - Deferred Payments, • Borrower must contribute 2% of own funds• One on One Counseling required• 80% Area Median Income & below
(lower than House Key first mortgage income limits)
• Available in 15 Eastside Cities
04/11/23
Washington State Housing Finance Commission
House Key Plus King County• Up to $30,000• 4% simple interest - Deferred Payments, • Borrower must contribute 2% of own funds• One on One Counseling required• 80% Area Median Income & below
(lower than House Key first mortgage income limits)
• Available in the rest of King County(City of Seattle & ARCH Cities excluded)
04/11/23
Washington State Housing Finance Commission
House Key Rural
• $10,000 or 6% of purchase price, whichever is greater
• Deferred payment
• 3% simple interest
• Buying in a rural area (see web site)• 80% Area Median Income & below
(lower than House Key first mortgage income limits
04/11/23
Washington State Housing Finance Commission
House Key Bremerton
• Up to $20,000
• 3% interest on a 10 year Term
• Buying in Bremerton city limits
• One-on-one Counseling Required
• 80% Area Median Income & below(lower than House Key first mortgage income limits)
04/11/23
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 No Mortgage Insurancewww.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 No Mortgage Insurance
04/11/23
HUD
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
04/11/23
Down Payment Assistance Programs by
Region
04/11/23
Region 1
Clallam, Grays Harbor, Jefferson, Kitsap, Mason, and
Thurston Counties
04/11/23
Aberdeen Neighborhood Housing Services– Up to $15,000– Grays Harbor County– Housing Education (HUD Approved)
City of Bremerton – Up to $15,000– (also See House Key Bremerton)
Kitsap County Consolidated Housing Authority – Up to $20,000 (currently only available for Self help clients)– Must purchase in Kitsap County outside Bremerton City limits
04/11/23 Region 1
Region 2
Island, King, San Juan, Skagit, Snohomish, and
Whatcom Counties
04/11/23
City of Seattle Hope for Homes – Up to $45,000– International District Housing Alliance or The Urban League
City of Seattle Teacher Homebuyer Program – Up to $45,000
ACORN– Low Interest Rate First Mortgage– No Mortgage Insurance– Stated Income– Housing Education
HomeSight – City of Seattle– South King County – Snohomish County– Up to 35,000 - $75,000– Housing Education
Parkview Services– People / families with Developmental Disabilities– Up to $127,000– Housing Counseling
04/11/23 Region 2
Region 3
Pierce County
04/11/23
Pierce County Community Services– Up to 6% of the sales price– Purchasing in Pierce County outside of Tacoma and Lakewood
city limits
City of Tacoma– Up to 6% of the sales price or $20,000– 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
Martin Luther King Housing Development Association– Homebuyer Education & Counseling (HUD Approved)– Below market rate homes & rentals
04/11/23 Region 3
Region 4
Benton, Chelan, Douglas, Franklin, Grant, Kittitas, Walla Walla, and Yakima
Counties
04/11/23
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
04/11/23 Region 4
Region 5
Adams, Asotin, Columbia, Ferry, Garfield, Lincoln, Okanogan, Pend Orielle, Spokane, Stevens, and
Whitman
04/11/23
Community Action Center of Whitman County– Up to 15,000 - $20,000 Available– Single Family homes – Manufactured homes ok with approval– Housing Education & Counseling
Spokane Neighborhood Action Program– Up to $15000– City of Spokane & Spokane County– Housing Education and Counseling (HUD Approved)
The ARC of Spokane– Up to $20,000– People with Disabilities– Housing Education and Counseling
04/11/23 Region 5
Region 6
Clark, Cowlitz, Klickitat, Lewis, Pacific, Skamania, and Wahkiakum Counties
04/11/23
Columbia Non-Profit (Vancouver Housing Authority)
– Up to $35,000– Must have lived or worked in Clark or Cowlitz County for one
year prior to closing– Housing Education & Counseling– Must be at or below 80% AMI– Loan term up to 30 years at 0% interest
04/11/23 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
04/11/23
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)
04/11/23
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
04/11/23
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
04/11/23
Community Lending Funding NoteWashington State Housing Finance Commission, City of Seattle, Hopelink,
Parkview, Homestead, Home Choice, House Key, Mortgage Credit Certificate, Home Sight, Individual Development Accounts
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.
04/11/23
Housing Authorities
• Section 8 for Homeownership
• Family Self Sufficiency
04/11/23
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
04/11/23
Your Priorities
• Size of home
• Number of bedrooms
• Number of bathrooms
• Neighborhood
• State of home (new vs fixer)
• Garage
04/11/23
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
04/11/23
Selecting a Home
• Dream Home vs. Starter home
• Where do you want to live?
• What is important to you?
• Do research – explore neighborhoods
04/11/23
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
04/11/23
Making the Offer
• Purchase and sale agreement
• Sellers disclosure
• Neighborhood review
• Financial contingency
• Inspection contingency
04/11/23
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
04/11/23
The Loan Closing – What to Expect
Signing papers
• Deed-of-trust
• Promissory note
• HUD-1
• Truth in Lending
When do you get the keys?
04/11/23
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
04/11/23
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.dfi.wa.gov/consumers/homeownership/
04/11/23
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 repairs04/11/23
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
04/11/23
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.
04/11/23
Fair Housing
• Who is protected
• What is prohibited in the sale & loan
• How to file a complaint
04/11/23
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.dfi.wa.gov/consumers/homeownership/pre_purchase_counselors.htm
04/11/23
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
04/11/23
Research
• Housing counseling agencies
• Down payment assistance programs
• Low-interest loan programs
• Affordable homeownership opportunities
04/11/23
Now What?
Call the Homeownership Hotline:
1 – 877- 894- HOME (4663)
04/11/23
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