Closing Costs - fnistools.com

Report
Thank You For Attending!
 By Akram Tadros
& Ihab Sakla
Realtors®
 Residential Real Estate Agents W/ Long & Foster, Realtors
 Tatiana Ivleva Lopez
 Mortgage Loan Officer with Prosperity Mortgage.
Objectives:
 1- Learn about Different Types of Residences
 2- Learn about Mortgage Options
 3- Find out what you need in order to be ready for your biggest investment
in your life
 4- How to avoid common mistakes that most buyers do
About Long & Foster Real Estate
 Long & Foster, Realtors is the largest real estate company in the Mid-
Atlantic region. We have over 170 real estate sales offices and over 10,000
sales associates covering the region.
Long & Foster History
 Founded in 1968, Long & Foster has grown from a single, 600-square-foot office in
Fairfax, Virginia, to the largest privately-owned real estate company in America.
 Wes Foster began his real estate career in 1963 as a sales manager at Michew
Corporation, a home builder. In 1966, he moved to Nelson Realty as vice-president of
sales. He sold over one million dollars worth of residential real estate each year for six
consecutive years.
 Long & Foster began with Wes Foster handling the residential real estate arm of the
business and Henry Long handling commercial. In July 1979, eleven years after
establishing Long & Foster, Wes Foster became sole owner. Long & Foster Real Estate,
Inc. currently has offices and associates in Virginia, Maryland, Washington, D.C.,
Pennsylvania, New Jersey, West Virginia, Delaware, and North Carolina.
A Little About Us
 As agents who are experts in these local areas, We bring a wealth of knowledge and
expertise about buying and selling real estate here. It's not the same everywhere, so you
need someone you can trust for up-to-date information. We are eager to serve you.
 We are extremely knowledgeable in the Northern Virginia area, working with many
relocation buyers moving to Fairfax, Loudoun, Prince William, Arlington Counties &
Falls Church, Fairfax, Alexandria Cities.
 When you trust in us as your real estate expert, expect a professional partner who values
communication and provides honest answers to your questions and concerns. We will
represent your interests with dedication and commitment and will calmly arrive at your
desired results. We have a strong reputation of professionalism and integrity and
provides a high level of personal attention and customer service.
Topics to be Discussed
1. Are you Financially Ready?
*Determine how “much” house you can buy
*Know all the costs
*Why your credit rating is important
*Mortgage basics
2. Building Your Team of Experts
*Your Home-Buying Team
For All Purchase types*
**(ADU) Program Homes, Regular
Sale, Short Sale, Foreclosure, and Rental.**
Type of Homes
 Rental (Apts/Homes) vs. Sale (Condo/TH/SF)
 Affordable (ADU – FX /LDN County) vs. Regular
 Regular Sale vs. Short Sale vs. Foreclosure vs. Bank Owned
The Affordable Housing Program
 The Affordable Dwelling Unit (ADU) purchase program enables eligible first time
homebuyers with moderate income the opportunity to purchase a newly constructed or
resale ADU townhouse or condominium.
 First-time homebuyers desiring to purchase a home must have a total household
income more than 30% and less than 70% (65% for condominium purchases) of the
area median income based on the Primary Washington Metropolitan Statistical Area).
Prices typically range from approximately $120,000 to $180,000.
 Note: An ADU purchaser can use a Realtor to assist in the home buying process. The
maximum allowable real estate commission is 1 1/2%. The 1 1/2% real estate commission
will be added to the sales price. * The ADU purchaser must provide the Realtor's name,
contact information and a copy of the "buyer's agreement" prior to writing a contract.
Background on ADU Rental Program
 This program enables eligible non-homeowners the opportunity to rent an apartment
from a participating apartment complex, at a rent below that of similar units at the
complex. ADU rental units are located throughout any county. Average rental rates range
from approximately $530 to $1300 depending on the type and size of the unit, not
including the cost of utilities.
 Applicants must meet income eligibility requirements, preliminary eligibility restrictions
apply to the program. If you would like to be self screened for eligibility for the ADU
Rental Program, please select the link below:
ADU Rental Program
www.fairfaxcounty.gov
www.loudoun.gov
www.pwc.gov
Pre-Qualification Steps for the ADU Purchase Program
1- Complete the Self-Screening Questionnaire.
2- If pre-qualified according to the parameters of the Self-Screening Questionnaire, print the questionnaire and
gather all paperwork listed.
3- Complete the Online Application (***Please have all paperwork on the ADU Purchase Checklist (above)
available when you are completing the application. The application form DOES NOT allow you to save the form
and complete at a later time. All information must be available and added at the time of the application.
4- Print the complete Self Screening Questionnaire and print a copy of the Online Application, copy and attach
all supporting documentation requested on the ADU Purchase Checklist and mail to the ADU within 10 days
of submitting the online application.
5- ADU staff will contact you once all the information has been submitted to register you for an ADU Purchase
Intake Session.
Mortgage Basics
What is a Mortgage?
 A large secured loan used to purchase a home.
 Mortgage or Promissory Note
 Promise to repay the loan
 Terms & conditions of loan
 Details about monthly payment
 Deed of Trust
 Pledges your home as security for the loan
Mortgage Terms (1)











Principal
– Amount of original loan
Interest
– Fee you pay to borrow money
Term
– Length of loan (period of time)
Escrow
– Account opened by lender
– Holds money for taxes & insurance
Equity
– Amount of principal you’ve paid = portion of home you own
Mortgage Terms (2)











Loan-to-Value Ratio (LTV)
– Ratio that determines your down payment
– 80% LTV means you put 20% down
– Some first-time home buyer loans allow 95%, 97% or even 100% LTV
Points
– Loan Origination Fee
– Discount Points: 1% of loan, used to lower interest rate
Annual Percentage Rate
– Total cost of loan
– Interest + loan fees + mortgage insurance + points
– Good way to compare options (includes all fees)
Mortgage Terms (3)
 Amortization Schedule
 Timetable that shows each payment.
 Indicates how much paid towards principal & how much to





Interest.
Insurance
Hazard Insurance
Private Mortgage Insurance (PMI)
Qualifying Ratios
Used by lenders to determine how much you can afford
Your Monthly Payment
 P = Principal
 I = Interest
 T = Taxes
 I = Insurance
Financial Resources
 Credit
*How your score is determined;
*Hints & Tips to repairing & maintain
 Savings
*Down Payment – 3.5% to 5%
 What Can you Afford
*Household Income
*Debt Ratios
 Closing Costs
*About 3-4% of Purchase Price
Your Credit Score (1)
 With the credit crunch lenders have increased their focus on credit scores when determining lending approval and
interest rates charged.
 Understand how your credit score is determined.
 Tips on Boosting and Maintaining Your Credit Score
*Maintain active accounts; no trades = no score.
*Allow increases to credit limits.
*Always make your minimum monthly payments on time
*Keep your credit inquiries to a minimum
*Check your credit once a year to prevent identity theft
and/or other inaccuracies
Length
of
Debt
15%
Credit
Types
10%
Amounts Owed
30%
New
Credit
10%
Payment History
35%
Your Credit Score (2)
 With the credit crunch lenders have increased their focus on credit scores when determining lending
approval and interest rates charged.
 Understand how your credit score is determined.
*Payment History 35
*Amounts Owed? 30%
*How long is your credit history? 15%
*Have you applied for new credit recently? 10%
*Type of credit accounts do you have? 10%
 Tips on Boosting and Maintaining Your Credit Score
*Maintain active accounts; no trades = no score.
*Allow increases to credit limits.
*Always make your minimum monthly payments on time
*Keep your credit inquiries to a minimum
*Check your credit once a year to prevent identity
theft and/or other inaccuracies
What is a good credit score?
 720 and higher: Excellent




Qualify for best rates
650-719: Good
Eligible for good rates on most loans
600-649: Ok
Represents higher risk & borrowing options are limited
500-599: Not great
High risk for lenders = below 600 is “sub-prime”
If given a loan, will be higher interest rates & higher mortgage
payment
499 and below: Poor
Purchasing on credit not an option at this point
Down Payment

Minimum of 3.5% of the purchase price
1. Savings/Checking
2. Retirement Plan
3. Gift
4. Borrowed from eligible sources
5. Government/City Grant programs
Are you Financially Ready?
There are industry standards as to what is considered “affordable” by mortgage lenders.
 Housing ratio = “Top Ratio or Front End Ratio”
* PITI / Gross monthly income
*Usually 28%-31%
 DTI (Debt To Income) = “Back End Ratio or Total DTI”
*PITI + monthly debt / Gross monthly Income
*(Debts include car payment, credit cards, other loans)
*Usually 31%-43%
* Have a mortgage professional calculate this for you.*
Costs
Closing Costs







Appraisal Fee
Attorney Fees/Notary Fee
Title Insurance
Title/Closing Fees
Credit Reports
Prepaid Taxes & Homeowner’s Insurance
Lender Fees/Escrow Fee
Settlement Costs
Closing costs can be estimated at 3-4% of the purchase price
Arranging Your Mortgage
Required Documents
 Your approval will be based on the information given and the supporting documentation
provided by you.
 Your information will be held in the strictest confidence and will only be used for your financing
1.
2.
3.
4.
5.
6.
application.
Written Verification of Employment (Lender to obtain)
Most Recent 30 days of Pay stubs
W-2 for past 2 years
If Self Employed, Past 2 years of Tax Returns ***all pages and schedules***
Identification – Copy of Drivers License and Social Security Card
Verification of Down payment
• Two Months Bank Statements
• Gift Letter
• Retirement/401K/IRA Statements
Types of Mortgage
 1) FHA (This is most common loan now, and most likely what you will be using
to buy your home)
 2) Conventional (Traditional Mortgage)
 3) VA (Veteran’s Administration)
 4) USDA (United States Dept. of Agriculture)
Federal Housing Administration Loan
 The Federal Housing Administration (FHA) insures a wide variety of mortgages




that we provide. These loans are designed to meet the needs of homebuyers with
low or moderate incomes and feature:
Low down payment requirements 3.5%
Loan limits based on geographic locations
Generally more liberal qualifying guidelines
Use of gift funds for down payment and/or closing costs
Veteran’s Administration Loan
 The Department of Veterans Affairs (formerly the Veterans administration)




guarantees mortgages for qualified veterans and active duty military personnel
and their spouses who are first- or second-time homebuyers. Our VA loans
feature:
• Low or no down payment requirements
• A wide range of rate, term, and cost options
• Flexible qualifying guidelines
• Use of gift funds for closing costs
USDA Rural Housing
 Primarily used to help low-income individuals or households purchase
homes in rural areas.
 100% Financing
Traditional Mortgages (1)
 Traditional Mortgages
 Fixed Rate Mortgages
 Same interest rate throughout life of loan
 Monthly payments never change
 Key choice: term of loan
 (15 years & 30 years are most common)
Traditional Mortgages (2)










Adjustable Rate Mortgages (ARM)
Interest rate is fixed for certain number of years
(3, 5, & 7 years most common)
After fixed time, interest moves up or down to meet national interest rates
May have a cap of how high interest rates can go
Make sure to ask:
o How long does initial interest rate apply?
o How high can the interest rate go?
o Does the loan set a minimum interest rate?
o What is the maximum monthly payment you could pay?
Specialty Mortgages
 Interest Only Mortgages
 You pay only interest first 5-10 years of loan
 After interest-only period, monthly payment increases to include both interest &








principal
Negative Amortization Mortgages
**TOAST**
Monthly payment is less than interest owed & unpaid interest is added to principal of
loan
Total amount you owe increases each month
Option Payment ARM Mortgages
**TOAST**
You have the option of different types of monthly payments
Options include: interest-only, fixed rate, or minimum payment
40-Year Mortgages (not available on FHA)
Reduces monthly payment but increases interest paid
Tips for smoother transaction
1- ASSETS:
 Gift Funds – Please contact your Mortgage Consultant prior to receiving or depositing
gift funds into your account.
 All Deposits – All large deposits (cash, checks, etc.), all money transfers between
accounts, are required to be documented – we must be able to show where the money
came from and what the money was for.
 A cash advance from a credit card is not an acceptable source of money for your earnest
money deposit or for your closing costs.
 Do not transfer funds between accounts before or during the application process. This
may result if needing additional assets documentation to source the funds in your
account(s).
Tips for smoother transaction
2- CREDIT:
 To process your loan quickly, it’s important that we have an accurate representation of your financial
obligations so we can determine if you qualify for this loan.
 Please disclose all reoccurring monthly payments to your Mortgage Consultant.
 Child support, alimony, retirement account loans, employer loans, etc.
 Continue to make all of your monthly payments on time.
 Do not payoff and close any credit accounts without talking to your Mortgage Consultant. Closing an
account may adversely affect your credit qualification.
 Do not open any new accounts (individual or co-signed) prior to talking with your Mortgage
Consultant. You must qualify with any new accounts opened; therefore your loan approval may be
affected.
 Do not charge any large amounts on your credit cards – wait until after settlement to purchase
household items.
Tips for smoother transaction
3- EMPLOYMENT
 Do not change jobs (or quit) prior to talking to your Mortgage Consultant to
see how this may affect your mortgage approval
 Contact your Mortgage Consultant immediately with any employment
changes:
 Being laid off, furloughs, active duty, taking an extended leave of absence, a
pay increase, pay change – hourly to salary, salary to commission, etc.
Top 10 mistakes of first-time buyers
1. Not knowing how much house you can afford.
Many novice homebuyers spend a lot of time researching homes — comparing
kitchen layouts and backyard square footage — but very little time researching
their financing options. One of the first things buyers should do is talk to a
qualified lender and get preapproved for a mortgage.
**Expert says without first figuring out how much house you can afford,
you risk falling in love with one you can't.**
Top 10 mistakes of first-time buyers
2. Assuming foreclosures are great deals.
Just because the previous owner owed $450,000 on a house before the bank
took it over doesn’t mean it’s worth that much now. Values have slipped
significantly.
**Expert says so you may not be getting the bargain you think with a
foreclosure. Also, most homes owned by lenders or banks have been sitting
vacant for months and may have been vandalized. That could require
extensive renovation or repair. Weigh the costs of fixing up the property
against the savings you’ll likely reap by buying a lower-priced foreclosed
home.**
Top 10 mistakes of first-time buyers
3. Letting your true feelings show.
No matter how much you've fallen in love with a house, don’t let the seller’s agent in on it.
Otherwise, he will gain the upper hand in negotiations.
4. Failing to find a good buyer's agent.
Landing a mortgage is tough these days. So buyers should rely heavily on knowledgeable
agents to help them get their finances in order,
** Expert says; After all, buyer’s agents have a fiduciary responsibility to the buyer
exclusively — and should be looking out for his best interests. Start your search at the
National Association of Exclusive Buyer Agents, a nonprofit representing buyer. Or
consider using an agent recommended by a relative or friend. Interview the candidates
about their experience; ask if they’ve worked with first-time buyers before and what kind of
service you’ll get from them.**
Top 10 mistakes of first-time buyers
5. Underestimating the costs of owning a home.
Whether it’s a rusty pipe or a leaky roof, things go wrong and need to be fixed. Many
homebuyers don't anticipate the additional costs for repair and maintenance, or for an
increase in utility costs.
** Expert; Consider the age of your new home and how well it’s been treated by the previous
owners in your budget. Be prepared to set aside a small percentage (1% at most) of the
home’s purchase price annually for repairs and upkeep.**
6. Failing to budget for property taxes.
Property taxes — and the likelihood that they’ll climb over the course of your time in the
house — should be factored into any home buying budget.
** Expert says; To get an idea of how much you’ll be paying, call the local assessor’s office
or talk to people in the neighborhood.**
Top 10 mistakes of first-time buyers
7. Assuming your first offer will get accepted.
As home prices get even more affordable, competition is bound to heat up. “You can’t
assume you’ll walk in there, make the offer and get it,”
**Expert says. Try not to get discouraged if you lose out on the first — or second — house
you make an offer on.**
8. Skipping the inspection.
Before signing anything, hire a professional inspector.
** Expert says, The seller isn’t likely to tell you there’s mold in the basement or the walls are
poorly insulated. An export advises buyers to find and hire their own inspector —
independently of the real-estate agent — to ensure there’s no conflict of interest. (You can
find inspection companies in the phone book, or by doing a simple Web search with your
ZIP code.**
Top 10 mistakes of first-time buyers
9. Doing too much too fast.
Some buyers want to make the house their own right away.
** Expert says. They overextend themselves on credit to do so, and assume the
improvement will pay for itself by increasing the home's value. But that’s not always the
case — especially in today's market. Instead, buyers need to exhibit patience and make
changes over time.**
10. Failing to include a contingency clause in the contract.
A mortgage financing contingency clause protects you if, say, you lose your job and the loan falls
through or the appraisal price comes in over the purchase price. Should one of these events occur,
**the buyer gets back the money he used to secure the property? Without the clause, he can
lose that money and still be obligated to buy the house, says by export.**
Assemble your Team of Experts
Your home buying team includes……………….
MORTGAGE PROFESSIONAL/EXPERT








Should guide you through entire process
Should help negotiate on your behalf
Should have choices, which means more competitive rates
Will ensure that you’re getting the best rates and terms
Should have access to available grant assistance programs
Will provide you with expert advice
No cost to you
Ongoing support and consultation after the deal closes
Assemble your Team of Experts
Your Home Buying Team Includes………………
REAL ESTATE AGENT










Knows MPA and neighborhood, and understands market
Will listen to your needs and advise
Is an expert at type of property you are buying
Will add you to email lists to send you recent property listings………
MLS – Multiple Listing Service
Book viewing appointments
Show you properties that match your criteria
Prepare Purchase Agreement
Negotiate best possible price for your home
Knows the ins-and-outs of all the available City Grant and Bond Programs
We will all be available following the presentation if you have
specific details you wish to discuss, or any questions.
HAVE A GREAT WEEKEND!

similar documents