Introduction. Purpose. Student Introductions. Objectives (Continued) Objectives. Instructor and student introductions. Module overview. Your name.

Transcription

1 Introduction Instructor and student introductions. Module overview. Your Own Home 2 Your name. Student Introductions Your expectations, questions, and concerns about buying a home. Purpose Your Own Home: Gives you information on the home buying process. Describes several mortgage options that you can use to buy a home. Provides ways to stay in your home by avoiding mortgage foreclosure scams. Your Own Home 3 Your Own Home 4 Objectives By the end of this course, you will be able to: Describe the benefits and pitfalls of renting versus owning a home. Identify the steps required to buy a home. Identify questions to ask to determine your readiness to buy a home. Objectives (Continued) Identify basic terms used in a mortgage transaction. Describe the advantages and disadvantages of different mortgage options. Identify ways homeowners can prevent mortgage foreclosure scams. Your Own Home 5 Your Own Home 6 1

2 Agenda and Ground Rules 90 minutes long One 10-minute break Training methods Classroom participation Benefits of Renting No property maintenance One year (or less) rental contract No property taxes or homeowner s insurance Your Own Home 7 Your Own Home 8 Benefits of Owning a Home Steps Involved in Buying a Home You can build equity in your home and borrow against it. A home generally increases in value. The home is yours. Your mortgage interest is tax deductible. You can pass your home on to family members. Step 1 Step 2: Step 3: Determine if you are ready to buy a house. Determine how much mortgage you can afford. Determine which mortgage option is best for you. Your Own Home 9 Your Own Home 10 Steps Involved in Buying a Home (Continued) Homebuyer Assistance Programs Step 4: Qualify for a loan. Individual Development Account (IDA) Step 5: Go through settlement. Programs offered by cities or local government offices. Financial institutions Your Own Home 11 Your Own Home 12 2

3 Characteristics of Government Programs Zero or low down payments Flexible underwriting standards Longer payment terms Requirement for homeowner education Some restrictions Components of a Mortgage Payment P = Principal I = Interest T = Taxes I = Insurance Your Own Home 13 Your Own Home 14 How Taxes and Insurance are Paid In an escrow account, along with the mortgage principal and interest. Separately - Quarterly or semi-annual property tax Annual insurance premium Four Cs of Loan Decision-Making Capacity Capital Character Collateral Your Own Home 15 Your Own Home 16 Pre-qualification The pre-qualification process: Lets you know how much mortgage you can afford. Is informal, involving no paperwork. Gives you a ballpark estimate. Pre-approval The pre-approval process: Is a commitment from the lender to lend you money. Lets you know how much money you can obtain. Tells sellers you are prepared to buy a house. Your Own Home 17 Your Own Home 18 3

4 Mortgage Options Traditional mortgage Interest-only mortgage Biweekly payment mortgage Shop, Compare, Negotiate! Check newspapers and the Internet for terms and rates. Negotiate the best price you can get. Let lenders compete for your business. Get costs in writing. Your Own Home 19 Your Own Home 20 Good Faith Estimate An estimate of the cost of settlement services that the lender should give you when you apply for the loan. When Debt-to-Income Exceeds Recommended Ratios You must: Have a demonstrated ability to pay more toward housing expenses. Show evidence of acceptable credit history or limited credit use. Make a larger down payment. Have cash reserves. Your Own Home 21 Your Own Home 22 Settlement Settlement occurs when the borrower meets with the seller and other representatives to sign the documents that will finalize the sale of the house and any mortgage financing. Also called closing. HUD-1 or HUD-1a Settlement Statement. Tapping Into Your Home s Equity Home equity loans Home equity lines of credit Cash-out refinancing Reverse mortgage Your Own Home 23 Your Own Home 24 4

5 Mortgage Foreclosure Scams Unethical Mortgage Foreclosure Operators Foreclosure Scams Protect Yourself FDIC Foreclosure Prevention Website (877) ASK-FDIC or (877) Your Own Home 25 5