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Redfin Mortgage Class - Kirkland, WA

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  • 1. How to Finance Your HomeRedfin Bellevue - Mercer Island TeamKahlil Mathews & Heidi Syltebo KearneyOctober 22, [email protected]/Redfin

2. Meet Kahlil and Heidi!Kahlil MathewsRedfin Agent 40+ Redfin buyers & sellers 4.9 star rating (29 reviews)Heidi Syltebo-KearneyRedfin Agent 72+ Redfin buyers & sellers 4.9 star rating (20 reviews) 3. Working with Redfin 4. A Little Bit About RedfinRedfin is a real estate brokerage has helped over 20,000people buy or sell a home; 97% would refer us to a friend. Customers, not commissions Informed decisions Right home for the right price No obligation Commission credit 5. Save $4,000 on Average 6. When you ready to tour a homeClick herewhen youdecideSee alldeals &reviews 7. Partners in the ProcessAGENTResponsible for your successWrites your offerHandles negotiationsTRANSACTIONCOORDINATORPrepares paperworkWorks with escrowTOURCOORDINATORSchedules toursPrepares paperworkASSOCIATE AGENTTakes you to see homesSees 50+ homes a week 8. Understanding theBuying Process 9. Are You Ready to Buy? Do you have a family and need room to grow? Do you expect to own the home for 5 or more years? Have you saved up a down payment? Can you rent for less? 10. Overview of a PurchaseResearchNeighborhoodsReal Estate AgentsMortgage OptionsPreapprovalConsider your needsSearchDefine PreferencesSaved SearchHome ToursOpen HousesOfferComparablesDraft Offer DocsNegotiateMutual AcceptanceClosingEarnest MoneyInspectionLoan applicationTitle ReviewAppraisalFinancing ApprovalClosing 11. Mortgages 12. Local Recommended Lenders*In no way does Redfinbenefit financially fromrecommending lenders we just think theyre greatlenders! 13. Review Your Financial Situation Pull credit report, look for errors Establish comfort level for monthly payment Figure out how much monthly income goes towards debt -typically 28 40% healthy Pay down credit balances to 1/3rd of high limit Dont open any new lines of credit Dont buy any big ticket items Determine source of funds Current employment status 14. Pre-qualification vs. Pre-approvalLoan pre-qualification is aBEST GUESS at yourhousing affordability. Pre-qualificationis typicallybased upon a verbalconversation with potentialborrowers and a lender anddoes not include formalunderwriting or proof ofdocumentation to support theborrowers loan request. Aloan pre-qualification is not acommitment to lend.Loan pre-approval is aCOMMITMENT TO LEND. Itcomes after a formalunderwriting of a borrowersloan request. Loan pre-approvalis achieved with acomplete mortgage loanapplication. Documentation,such as pay stubs, bankstatements, and/or IRS taxreturns, are typically requiredto support the loan request. 15. Get Pre-Approved Factors of Pre-Approval Gross Income Income before taxes and any other deductions Net income if self-employed borrower 2 year employment history in similar field, may include education Debt Loans listed on your credit report Child support or alimony Credit Minimum of 12-24 months clean credit with no new adverse activity Minimum of 3-4 tradelines maintained for at least 12-24 months Cash Total funds available for the purchase (downpayment, closing costs, etc) Reserves Final Loan Approval Collateral (review and approval of appraisal) 16. Facts on Getting Pre-Approved Applications are usually free and credit checks should not cost morethan $20 You will get a better idea of any other action items you need tocomplete before you can buy Gives you a chance to discuss different financing options For every $100 you decrease your other debt, and are therefore able toincrease your house payment, you can afford up to $20,000 more insales price on a 30 year amortization loan. Your pre-approval stays valid as long as your income, debts, credithistory, and assets remain the same or better The application does not bind you to a lender, loan or rate Being pre-approved is required by sellers to consider offers 17. Calculating what you can affordMonthly income (gross): $4500/monthMaximum debt to income ratio (percentage) = 40-43%Calculation Example: $6500 x 43% = $2795 maximum debts allowed- $450 auto loan- $100 minimum payment on credit card(s)= $2245 is the most you may spend on a monthly mortgage paymentPITI: Your Monthly House PaymentP= Principal (amount of payment going toward original balance of loan)I= Interest (amount of payment going toward interest on the loan)T= Property TaxesI= InsuranceHazard/Homeowners Insurance: Replacement value, liability,possessionsMortgage Insurance: Covers lender against loss unless 20%equity/downNOTE: Homeowners Dues must be added for a condo or townhome. 18. Credit History and Credit Scores 3 credit bureaus: Equifax, Experian, TransUnion Credit score range: 350- 850 Most lenders use the middle score numerically: Primary wage earners mid score or lowest of both/all mid scores Minimum credit score for most loan programs is 660 Best credit score for most loan programs is 740 Factors of credit scoring Past delinquencies Revolving debt ratio Age of credit file Debt diversity InquiriesCredit Rating35%30%15%10%10%Past DelinquenciesRevolving Debt RatioAge of Credit FileDebt DiversityInquiries 19. Cash to close: Your Good Faith EstimateDown paymentNon-recurring costs Prepaid Items3.5-5.0% minimum downTitle insuranceEscrowAppraisalCredit ReportFloodCertificationTax Service FeeUnderwriting FeeDiscount PointsPer diem interestInsuranceProperty TaxesImportant! HOA/Condo DuesA Good Faith Estimate is abreakdown of your total cash-to-close.The estimate will includedownpayment, non-recurringcosts, and prepaid items. Makesure you understand the total cashrequired of you to close! 20. Organize Your Assets Get ready for the down payment Cash accounts (liquid funds) 401 (k), stocks, other investment Gift funds? (Max. allow caries) Move funds around before you start shopping 21. Choose a Loan Program Conventional:As low as 5% down, can be giftedHigher credit standards (680+)Mortgage insurance can be paid up front, monthly or acombinationUp to $417,000 loan amount **** Up to $506,000 in Seattle SMSA Federal Housing Administration Loan (FHA):Min 3.5% down, can be giftedMinimum credit score 640, most lenderUp front and monthly mortgage insurance requiredIf condo, must be FHA approved. Verify at www.hud.govUp to $417,000 loan amount **Up to $506,000 in King and Snohomish 22. Choose a Loan Program cont VA:Active duty or reserves onlyNo monthly mortgage insuranceCan be 0 down up maximum guarantee Jumbo:Loans over $506,001Minimum credit of 700+Minimum of 20% down with most investors **** Can do 10% down with a combined loan scenario 23. Key Loan Choices Types of Loans: Fixed Rate: 15,20,30 year terms Adjustable Rate Mortgage (ARM): 3/1;5/1;7/1;10/1. Hybrid FixedDetails of ARM: Index; Margin; First, Annual & Lifetime Capsi.e. Index: 1 YR LIBOR; Margin: 2.75%; Caps: 2/2/6 Interest Rates Points are the price of interest rates, 1 point = 1% of the loan amount Points paid buy down an interest rate Locking a rate occurs after you have a signed and accepted offer on ahome What is the Annual Percentage Rate (APR)?Rate Price (points)4.50% 0.0 (closing costs only, no points)4.25% 1.0 (closing costs + 1 point)A good lender helps borrowers calculate their break-even to determine ifpaying points is right for them doesnt just focus solely on the interest rate! 24. Interest Rates and PricingInvestors use risk-based pricingFactors include, but are not limited to: Middle credit score of borrowers (lowest of all borrowers) Loan to Value (LTV) & Combined Loan to Value (CLTV) Loan amount and Loan Program (FHA, VA, Conventional, Jumbo)a) Conforming: Up to $417,000b) Expanded Conforming: $417,001 - $506,000 (King, Snohomish, Pierce)**c) Jumbo: $506,001 and higher Loan type: Fixed vs. Adjustable Rate Mortgage (ARM) Loan term: 15, 20, 30 year amortization Type of property: Single family home, townhome, Condo Number of units: 1-4 units Occupancy: Owner occupied, vacation home, investment** Loan limits set for 2014. 25. Where Are Rates Headed?Type of Loan July 10, 2014 October 16, 201430-Year Fixed 4.15% 3.97%15-Year Fixed 3.24% 3.18%5/1 ARM 2.99% 2.92%1-Year ARM 2.40% 2.38% 26. Where Are Rates Headed? 27. After ClassPlease fill out the survey that was handed out at thebeginning of class. We appreciate the feedback!Questions? Get in touch:Kahlil Mathews [email protected] Syltebo-Kearney [email protected] out our upcoming classes and events at:www.redfin.com/events

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@Redfin www.facebook.com/Redfin How to Finance Your Home Redfin Bellevue - Mercer Island Team Kahlil Mathews & Heidi Syltebo Kearney October 22, 2014
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