1. The Joy of Buying Your First Home GN-50-91810

2. Agenda Homeownership brings….. What is Homeownership? Preparation Budgeting, Savings, and Credit Qualifying Loan Programs Are you ready to buy a home? 2

3. What is Homeownership? The American dream An opportunity to provide for family A tax deduction Property appreciation Having the nicest lawn on the block Your own backyard Your own garage 3

4. Homeownership brings……. Sense of community Stability Tax benefits (Consult your tax advisor) Stable housing costs Potential appreciation 4

6. Mortgage Broker

7. Home Inspector Professional

8. Appraiser

9. Surveyor

10. Insurance Agent

11. Attorney

12. Escrow/Title Officer5

13. Preparation

14. Preparation Two things have to happen: Find a home Qualify for a loan 7

15. 4 C’s of Lending Capital (savings) Do you have enough cash for the down payment and closing costs? Do you have enough cash for emergencies? Capacity (income) Can you repay the debt? Character (credit history) Will you repay the debt? Collateral (house) Will the lender be fully protected if you fail to repay the loan? 8

16. What Lenders Look For Debt to Income Ratios Relationship between current consumer debts and current income Is your income high enough? Are your debts low enough? Down payment The higher the down payment, the lower the loan amount Reserves How much money do you have saved? How much will be left after closing? Do you pay your bills on time? Credit reports Non-traditional credit 9

17. Preparing to Buy a Home Daily Spending Diary Decrease Spending & credit card use Entertainment (movies, dinners out) Clothes Dry cleaning Budgeting Tools 10

18. Budgeting What is a budget? A budget is a plan for managing your income and expenses 11

19. Make Budgeting Easier Decide who pays bills Know when bills are due Open a checking account & savings account Check interest rates on all of your loans Pay down high cost loans & credit cards Involve family in saving process use coupons find bargains cut back on eating out 12

20. Budgeting Tips Plan expenses according to current income Establish budget for six months to one year Keep record-keeping simple Set money aside for maintenance & emergencies Get consensus from entire family – make it a family project Pay yourself first - SAVE! 13

21. SAVINGS 14

22. Importance of Saving Pay yourself first Consider savings via payroll deduction Bank your change at the end of the day Bank surprises Bonuses and gifts If you can save $2.00 a day @ 2% interest you will have saved over $1,500 in 2 years That is one less Starbucks coffee each day 15

23. CREDIT 16

24. The Importance of Credit What does it mean to a lender Applying for credit Managing credit 17

25. How Lenders Use A Credit Score Scores assess past bill paying history to predict future behavior Scores are used to perform a risk analysis which helps predict the likelihood of loan repayment 18

26. Credit Scores The credit bureau risk score is a summary of the information in your credit file Scores range from 300-850 Score ranks consumers according to risk The higher the score, the lower the risk of default 19

27. Common Credit Problems Multiple credit cards used to their limit Obtain new credit when existing debts remain unpaid Pattern of late payments on current debts Bankruptcies Judgments Charge-offs Foreclosures 20

28. Solving Credit Problems Cancel unnecessary credit Pay off or pay down debts Resolve unpaid debts Write letters to credit bureaus for corrections Settle with collection agencies 21

29. Easy Steps to Build Credit Open a checking and savings account to pay bills easily Establish credit by Applying for a small loan using savings as collateral Applying for a credit card and using it minimally Applying for a loan with a co-signer Establish non-traditional credit 22

30. Easy Steps to Build Credit Rent payments Electric and other utility payments, car insurance Child care or child support payments Any other recurring expense Non-traditional credit sources must be in your name 23

31. Know Your Credit Request a copy of your credit report Review for accuracy Dispute inaccurate information Send a letter to the 3 credit bureaus if you have a dispute Pay all past due accounts as soon as you can Negotiate with creditors if you can’t pay in full If blemishes are severe - consider credit counseling 24

32. Credit Reporting Agencies 25

33. QUALIFYING 26

34. A House Payment Includes PITI Principal Interest Taxes Insurance 27

35. Pre-Qualification Determines how much mortgage you qualify for Informal, no obligation Figure is an estimation - not exact 28

36. Approval Commitment from lender: “conditional approval” for a predetermined amount Based on verified information 29

37. Are You Ready to Buy a Home? First Steps: Review your employment Have I been employed on a regular basis for 2 years? Evaluate your sources of income Is my income steady? Do I have money saved for a down payment & closing costs? Analyze your current expenses Do I have a budget? Can I handle a monthly mortgage payment, taxes, insurance, repairs? Can I handle unexpected events? Determine the status of your credit history Do I have established credit? Have I paid my bills on time? Yes - I want to own a home Am I familiar with what is required to qualify for a home loan? Am I willing to work towards preparing myself to become a homeowner? 30

38. Now’s The Time To Buy First Time Home Buyer Tax Credit $8,000 Interest Rates all time lows Home prices bottomed out Get more home for your money 31

39. Rent vs. Buy See handout for comparison 32

40. LOAN PROGRAMS& LOAN TYPES 33

41. Loan Programs Government insured loans FHA Loans VA Loans Conventional mortgage loans Affordable loan programs – 0-5% down payment Special loan programs - IHFA (Tax Credit 2nd) Down payment assistance programs 34

42. Loan Types Fixed-rate loans Adjustable rate loans 35

43. Sample Programs Standard Conforming 30 Yr. Fixed Conforming 20 Yr. & 15 Yr. FHA ARM’s/Hybrids 36

44. READY?

45. The Closing Process Sign mortgage or deed of trust Sign your mortgage note & other loan documents Bring funds to close on your home Verify insurance policies GET THE KEYS TO YOUR HOME! Is this something you want to do???!!! 38

46. Life As A Homeowner Stay within your budget Make your mortgage payment top priority Any mortgage payment difficulties - CONTACT THE LENDER IMMEDIATELY Use cost-effective energy savings measures Hire a reputable contractor for major repairs Have an emergency maintenance fund 39

47. Enjoy Your New Home! Thanks for attending!