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Buying Your First Buying Your First HomeHome
Presented by:Presented by:Jonathan Osman, Realtor®Jonathan Osman, Realtor®
The Charlotte House Hunter GroupThe Charlotte House Hunter Group
Sponsored By:
Buying Your First Buying Your First HomeHome
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
On the AgendaOn the Agenda
• The Real Estate Market• Current Incentives to Aid in Purchasing Your
First Home• The Home Buying Process
– The Mortgage Approval Process– The Role of a Real Estate Agent– Searching For “That” Home– Contracts & Inspections– The Final Week– Closing
• Q&A
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Who is this Guy?Who is this Guy?
Jonathan Osman, Realtor®
• Licensed Real Estate Agent since 2002
• Licensed in NC in 2006
• Leader: The Charlotte House Hunter Group
• The Charlotte Real Estate Update Blog
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
The Real Estate The Real Estate MarketMarket
1. Home Sales
2. Home Prices
3. Inventory Levels
4. Mortgage Interest Rates
5. Homeowner Affordability
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Home Sales Home Sales - - NationallyNationally
Sales increased 5% in 2009, the first annual sales gain since 2005 and the tenth highest
annual activity level on record.
5.2
7.1
5.0 4.9
1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Home Sales Home Sales - - NationallyNationally
CA
AZ
NV
FL
WAMT
ORID
NM
ND
SD
NE IA
MO
LA
GA
KY
IL
WIMI
OH WV
PA
NY
VT ME
MA
AK
HI
Sales Increased
Sales Decreased
Home Sales Direction
(Year-Over-Year Change)WY
UT COKS
OK
TX
ARMS AL
TNNC
SC
VA
IN
MN
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Home Prices Home Prices - - NationallyNationally
The median home price declined by 12% in 2009.
$198K$222K
$165K
0
50
100
150
200
250
1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009
$174K
$203K
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Home Price Home Price AppreciationAppreciation
If home prices actually grew by 4% every year from 1989
the median home price would be $203,105, which is approximately 17% above where we are
today
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Inventory Levels Inventory Levels - - NationallyNationally
4.3
10.5
8.8
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Stronger sales activity in the second half of the year helped draw down inventory of existing homes to
8.8 months in 2009
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Mortgage RatesMortgage Rates
Mortgage rates averaged 5.04% in 2009, an all-time low since Freddie Mac started tracking in 1971.
Mortgage rate ranged from 4.81% to 5.59% in 2009. At the end of December, rates stood at 4.93%.
5%
10%
6%
4%
8%
12%
1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Let’s put this in Let’s put this in perspective …perspective …
In 1971: Gasoline 40 cents a gallon
Stamp 8 cents
Turkey 43 cents a pound
Datsun Sports Coupe $1,866
Monthly Rent $150
Average New Home Price $25,250
Dow Jones Average 890
And you still couldn’t get a mortgage as cheap as you today.
Mortgage Rate in 1971: 7.48%
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Housing AffordabilityHousing Affordability
2009 affordability = 2009 affordability = most favorable on most favorable on recordrecord 40yr 40yr
AveragAverage = e =
21.9%21.9%
15%15%
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Charlotte AreaCharlotte AreaSingle Family DetachedSingle Family Detached
New Listings
Sold Listings
Avg Price Seller Rec’d
Area 1 (NE Meck) 3745 1506 $188k (-10%) 90.96%
Area 2 (E Meck) 2737 1073 $132k (-13%) 89.95%
Area 3 (SE Meck, Matthews, Mint Hill) 1659 626 $160k (-16%) 90.04%
Area 4 (S Meck, Matthews) 2244 726 $353k (-11%) 90.53%
Area 5 (S Meck) 3346 1054 $475k (-11%) 90.28%
Area 6 (S Meck) 1234 454 $246k (-7%) 91.69%
Area 7 (SW Meck) 1426 596 $147k (-7%) 91.33%
Area 8 (NW Meck) 1374 566 $87k (-14%) 87.10%
Area 9 (N Meck) 1986 835 $152k (-9%) 90.33%
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Charlotte AreaCharlotte AreaSingle Family DetachedSingle Family Detached
New Listings
Sold Listings
Avg Price
Seller Rec’d
Union County 5647 1979 $264k (-9%) 90%
Cabarrus County 3932 1405 $181 (-6%) 90%
Lake Norman 3064 769 $465k (-3%) 88%
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
The Home Buying The Home Buying ProcessProcess
– Incentives to Buy– The Mortgage Approval Process– The Role of a Real Estate Agent– Searching For “That” Home– Contracts & Inspections– The Final Week– Closing
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
IncentivesIncentives
• $8,000 Home Buyer Tax Credit
• $14,900 NCHFA NSP Program
• House Charlotte
• VA Vendee Program
• USDA Rural Development Financing
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
The Home Buyer Tax The Home Buyer Tax CreditCredit
• For Sales 11/4/2009 – April 30, 2010
• Must close by June 30, 2010
• Credit = 10% of the sales price up to $8,000
• Must be repaid if claimed and the home is sold within 36 months
• May not have owned a home in the last 3 years
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
The Home Buyer Tax The Home Buyer Tax CreditCredit
Single
Up to $125,000 for $8,000
$125,000 - $145,000 for $4,000
Married
Up to $225,000 for $8,000
$225,000 - $245,000 for $4,000
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Neighborhood Neighborhood Stabilization ProgramStabilization Program
• Bank-Owned Properties Only• Only available in 23 counties in North
Carolina• Sales price cannot exceed $210,000• Property age may not exceed 1978• Must be purchased at least 1% below
appraised value• Income may not exceed $55,850 Single,
$63,850 2 Persons, $71,800 3 Persons
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
NSP - continuedNSP - continued
• Must remain in the home for 5 years to avoid repayment
• Must be used in conjunction with the NCHFA’s 30-year Fixed FirstHome Mortgage
• Must contribute $1,000 of your own funds
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
NSP Example - NSP Example - $175,000$175,000
Traditional FHA• $6,125 Down• 5% 30 Yr Interest
Rate• $906.56 Mo.
• $155,075.57 at 5 Yrs
NCHFA• $14,900 Down• 5.5% 30 Yr Interest
Rate• $909.03 Mo.
• $148,029.25 at 5 Yrs
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
House CharlotteHouse Charlotte
• $7,500 for “transitioning” neighborhoods, $10,000 for “challenged” neighborhoods, $15,000 for police officers
• Requires 8 hours of pre-purchase home buyer education
• Maximum incomes that are 110% or less of median income– $51,200 single, $73,150 family of 4
• Purchase price must be less than $147,000
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
House Charlotte - House Charlotte - continuedcontinued
• Forgivable after 10 years of homeownership
• Home must pass House Charlotte Inspection
• Map
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
VA Vendee ProgramVA Vendee Program
• Purchase a V.A. Foreclosed Home
• 100% V.A. Financing Available for owner-occupants
• 2.25% VA Funding Fee Required
• Up to 6% of the Sales Price
Search for Homes: http://va.equator.com
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
USDA Rural DevUSDA Rural Dev
• Up to 100% Financing Available
• Limited to “Rural” Locations
• Restrictions based on income and family size
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
100% Financing does not equal no money down!
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Mortgage Pre-Mortgage Pre-ApprovalApproval
• Is your Credit Good Enough?– It’s a fact: qualifying criteria have gotten somewhat tighter
than in previous years.
– Homebuyers need to pay more attention to their credit scores than they did before.
• Credit history reflects your record of paying obligations on time.• Your credit score may impact your interest rate. • Your credit score may impact your down payment requirements.• Your credit score may impact the amount of documentation you
provide.
– But you don’t need perfect credit to buy a home.
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Mortgage Pre-Mortgage Pre-ApprovalApproval
• What makes credit less-than-perfect?– Some causes can be solved relatively quickly.– Others take more time.
If you credit is less-than-perfect, take the necessary steps to improve your score your score.
• Limited history• Excessive debt• Slow payments• Legal judgments
• Past foreclosure or bankruptcy• Frequency of new accounts opened• Many new credit applications• Errors
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Mortgage Pre-Mortgage Pre-ApprovalApproval
• How much money will you need?– For a down payment?– For closing costs?– For my monthly payments?
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Mortgage Pre-Mortgage Pre-ApprovalApproval
Down Payment Options:• Low down payment programs are still available in some
markets and may help you buy a home sooner.• A larger down payment can help you get lower monthly
mortgage payments.• How much of a down payment is required may be
impacted by factors such as:– Your credit score.
– The type of property.
– Whether the home will be your primary residence, second home or investment property.
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Mortgage Pre-Mortgage Pre-ApprovalApproval
Example of a $150,000 purchase5% Interest Rate
Mortgage Insurance is required for less than 20% down
Does not include Taxes & Insurance
% Down Payment Down Payment in Dollars Mortgage Amount Monthly Principal and Interest8
20% $30,000 $120,000 $644.19
15% $22,500 $127,500 $684.45
5% $7,500 $142,500 $764.97
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Mortgage Pre-Mortgage Pre-ApprovalApproval
Monthly Payment Expenses:• Your monthly payments include:
– Principal & Interest.– Taxes (real estate) and Insurance (homeowner’s).– Mortgage insurance - if your down payment is less than 20%.– Association fees - if applicable.
• Your maximum monthly payment is calculated using:– The parameters of the mortgage product you select.
– Your qualifying monthly income.
– Your total monthly debt.
• Be comfortable with the calculated monthly payment:– Repairs and maintenance costs are part of homeownership.
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Closing CostsClosing Costs
Closing Costs are Fees Associated With the Purchase of Your Home.
• Homeowners Insurance
• Lender Fees (Appraisals, Application Fees)
• Inspections
• Attorneys Fees
• Taxes & Recording Fees
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Mortgage Pre-Mortgage Pre-ApprovalApproval
Closing Cost Information:• Typical closing costs:
– $1,800 plus any discount, origination and pre-paids– Total closing cost is approximately 4% of average home price of $150,000 or
approximately $4,500.
• What are the fees?– Discount– Origination– Survey– Appraisal– Title
• What are Pre-Paids?– Interim interest
– Escrow account for taxes, homeowners insurance, private mortgage insurance
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Mortgage Pre-Mortgage Pre-ApprovalApproval
What Type of Mortgage
• What type of product?• What kind of rate?• How long a term?• What kind of payments?• What type of documentation?
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Mortgage Pre-Mortgage Pre-ApprovalApproval
A Lender will help you select the product type that meets your needs:– Conforming loans up to $417,000* for a single-family.
– Jumbo loans greater than $417,000.
– Combination loans: conforming first + a second mortgage.
– Government loans: FHA & VA.
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Mortgage Pre-Mortgage Pre-ApprovalApproval
Fixed-Rate(FRM)
Adjustable-Rate(ARM)
Hybrid ARM
• Rate is usually higher than an ARM rate or a Hybrid.
• The principal and interest portion of the mortgage payment stays the same through the entire term.
• Stable, easy to budget.
• May want to refinance if rates go lower.
• Usually starts with a lower rate than an FRM or hybrid.
• The rate may adjust every year, changing the monthly payment.
• Rate may eventually be higher than the rate for a fixed-rate loan.
• Usually starts with a rate that is lower than an FRM but higher than an ARM.
• Rate & payments are fixed for 3, 5, 7, or 10 years.
• After that period, the rate may adjust annually changing the monthly payment.
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Mortgage Pre-Mortgage Pre-ApprovalApproval
30 Year Fixed Rate
$150,000 Mortgage5% Interest Rate
Payment (P&I): $805.23
5 Year ARM
$150,000 Mortgage3.75% Interest Rate
Payment (P&I): $695
Payment Difference: $110 / Month
Apply the difference to your Principal every month
After 5 years: $6,588.11 more in equity
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Mortgage Pre-Mortgage Pre-ApprovalApproval
40-Year 30-Year 15-Year
• Rate is higher.
• Payments are lower because they are spread out for a longer period.
• Easier to qualify for a larger loan amount.
• Pay more interest and it takes longer to build equity.
• Rate is lower than a 40-year, higher than 15-year.
• Payments are higher than a 40-year, but lower than a 15-year.
• Pay less interest than a 40-year, but more than 15-year.
• Rate is lower.
• Payments are higher.
• Pay the least amount of interest over the life of the loan.
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
The Role of a Real The Role of a Real Estate AgentEstate Agent
• Educate you on process, market conditions• Point out alternatives when you’re not finding what you
want• Has done this hundreds of times – knows the pitfalls, the
process, the potential impacts of decisions• Can recommend professionals (lenders, inspectors,
attorney)• Mitigates the emotion• Has previous experience negotiating both price and
“intangibles”• Can structure a contract to provide you with appropriate
contingencies and safety nets
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
The Role of a Real The Role of a Real Estate AgentEstate Agent
Tips for Choosing an Agent:• Choose an agent that is: trusted, responsive, and with
whom you enjoy working.• Choose someone with whom you communicate well (in
methods you prefer) and who answers all your questions. They should educate you so that you make better decisions, not tell you what to do.
• Be sure you enjoy working with the agent before you sign an agreement for an extended period of time. It’s perfectly acceptable to sign an agreement for a day or a week.
• Choose someone who understands the entire process, including lending – it’s all inter-related.
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
How a Buyer Agent is How a Buyer Agent is PaidPaid
• Seller contracts with Seller Brokerage to list their home– Seller Brokerage pays a portion to Seller Agent– Seller Brokerage agrees to pay a portion to Buyer
Brokerage– Buyer Brokerage pays a portion to Buyer Agent
• If there is no Buyer Brokerage then Seller Brokerage keeps the entire commission
• Choose a buyer agent whom you trust to be in the business as a career and not just for the transaction
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Searching For “That” Searching For “That” HomeHome
It’s All About The Trade-offs
LOCATION
HOME (SIZE, CONDITION, ETC)
PRICE
The Search
• Three Decisions - “Pick 2” and find a tradeoff you’re comfortable with
• Start with a price range
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Bank Owned, HUD, & Bank Owned, HUD, & Short SalesShort Sales
HUD & VA• Government-
insured loan was foreclosed upon
• Sold As-Is• Incentives• Eligible for the
$14,900 NSP Program
• HUD: 10 Day Auction for sales
• Owner-Occupant Preference
Bank Owned (REO)• Foreclosure
Property• Sold As-Is• Incentives• Eligible for the
$14,900 NSP Program
• 3-5 business day response time
Short Sale• Owned by a person• Selling for less than
what is currently owed
• Sold As-Is• Offer within 10% of
market value• 10-60 business day
response time
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Searching for “That” Searching for “That” HomeHome
• Open Houses• Builder’s Sales Center• Searching Online:
– Craigslist – No Standardization Or Regulations
• Best Resource: CharlotteHouseHunter.com
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Making an OfferMaking an Offer
• Items we will negotiate– Price– Earnest Money– Personal Property– Fixtures in the Home– Inspections– Closing– Financing Terms– Seller Concessions
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Establishing an Establishing an Asking PriceAsking Price
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Price & Closing CostsPrice & Closing Costs
List Price = $400,000
Agreed Upon Contract Price = $380,000, Closing Costs = $12K
Scenario 1: Sales Price = $380KSeller Paid Closing Costs = $0Net to Seller = $380K, Cash From Buyer = $12K + Down Pmt
Scenario 2:Sales Price = $392K (effectively rolling closing costs into the loan)Seller Paid Closing Costs = $12KNet to Seller = $380K, Cash From Buyer = $0 + Down Pmt
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Contracts & Contracts & InspectionsInspections
• Property inspection—exposes any structural or hidden issues.
• Home owner’s insurance policy—protects against loss or damage.
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Contracts & Contracts & InspectionsInspections
• In your inspection, it’s the big stuff that really matters.– Cracks or crumbling in the foundation– Cracks inside the house over windows– Water stains in ceilings, floors, or walls– Faded or worn shingles– Mold issues
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
The Final WeekThe Final Week
• Pre-closing responsibilities include:– Appraisal, survey, title search, and title
insurance.– Keeping yourself mortgage worthy!– Doing a final walk-through of home.
• Countdown to closing includes:– Getting your settlement statement, certified
funds, evidence of insurance, and transfer of clear title.
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
The Final WeekThe Final Week
• DO NOT– Buy furniture– Use your credit cards– Open up new lines of credit– Buy a new car– Change jobs
until after closing!
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Let’s RecapLet’s Recap
• Meet with an Agent• Determine Affordability/Price Range: Meet with Lender• Define And Prioritize Search Criteria• Begin Search: Online, Open Houses, Automated Email Searches; An
Agent Can Help Make The Process Smoother/More Targeted
• Write Offer And Negotiate Terms– Comparable Market Analysis To Determine Fair Price – Price, Settlement, Inspections, Concessions
• Do Inspections, Appraisals, & Address Contingencies• Mortgage Underwriting• Review Closing Cost Estimates• Settlement (“Closing”)
2 weeks +
1 week
2-4 weeks
*Ratification*
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
One Final Tip!One Final Tip!
• Do your homework!
• Know your limits
• Have savings
The Charlotte House Hunter Group All information deemed accurate but not guaranteed. Copyright 2010. All rights reserved.
Contact InfoContact Info
Jonathan Osman & Susan Shirley - Realtors®
The Charlotte House Hunter Group
Licensed in North and South Carolina
Keller Williams Realty
2115 Rexford Road Suite 102
Charlotte NC 28211
Phone: 704-960-1725
http://www.CharlotteHouseHunter.com
facebook.com/charlottehousehunter
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