I recently hosted a class in my community for first time homebuyers, or seasoned buyers who need a refresher in this fast changing market. Saopon Cha, owner of Cha Mortgage and one of my favorite local mortgage brokers co-hosted, and everyone in the class walked away with some great information!

For those who couldn't attend I still want to share the information from the class. I focused on a market update, some do's and don'ts of home-buying and a timeline of a typical real estate transaction. Saopon spoke about the different types of mortgage companies, the application for pre-approval, credit and loan eligibility. She also shared handouts to help attendees calculate their debt-to-income ratio.

Below is the information from the slides, but please reach out for a complimentary one-on-one session. This information is just a starting point to review before we meet.

Market Update

Inventory is 1.3 months
Average sales price is $395,000
Average sales price up 11.4% from 2015
97229 had the most sold homes in 2016
One of the hottest rental markets in the country
We aren’t in a bubble!

Home Buying Do's & Don'ts

DO get pre-approved before you start looking
DON’T expect to know what you want when you start looking
DO keep an open mind- this might not be your forever home
DON’T let cosmetic features deter you
DO act fast when you find a home you like
DON’T expect to have your offer countered- go in with your best foot forward
DO stay in great communication with your Realtor & Mortgage Broker

Home Buying Process

Get a pre-approval from your lender
View homes (as many as it takes!)
Make offers
Get offer accepted
Work with your lender
Have home inspection
Negotiate Repairs
Appraisal
Move in!!

Types of Mortgage Companies

Mortgage Broker

Approved to do business with several lenders/banks.
Processing/Underwriting/Closing done by the Lender.
Wider array of loan programs and rates.

Mortgage Banker

Loan closes in their name.
Wider array of loan programs and rates.
In-house processing, underwriting and funding and closing.
After loan closing, the loan is sold to a bank or lender.
Typically higher overhead than Broker.

Bank & Credit Unions

In-house processing, underwriting and funding and closing.
After loan closing, the loan is sold to Fannie Mae or Freddie Mac.
Retail interest rates.

Application for Pre-Approval

Personal Information

Name
Social
Phone Number
Date of Birth
Marital Status
Address for Most Recent Two Years

Employment Information For Past Two Years

Employer Name
Employer Address
Years on Job
Your Position or Job Title
Work Phone

Assets

Bank Accounts
Stock
Retirement/401k
Cars Owned
Life Insurance Cash Value
Gifts

Liabilities

Credit Cards
Car Loans
Student Loans
Medical Bills/Collections
Judgements/Child Support

Credit

When you apply for a loan, the mortgage company will pull your credit and scores to determine eligibility. This is typically free of charge to you.
The higher your credit score, the better your interest rate.
Your credit score will also determine what programs you’re eligible for.
Minimum credit score is 620 for most programs but several factors will determine if you need a higher credit score or if you can get away with a lower score. You might not even need a score.
If you want to see your credit scores before applying for a loan, you’ll have to pay for them because the credit bureaus are not required to provide you with free score reports.
Visit www.annualcreditreport.com to get a free copy of your credit report once a year from Transunion, Equifax and Experian.

Loan Eligibility

Based on your credit, debt-to-income ratio and how much money you want to put down, I will determine what program is best for you.
You will often qualify for more than what you want to spend in a monthly payment.
When calculating the monthly mortgage payment, remember to consider: Principal & Interest, Mortgage Insurance, Property Taxes, Homeowner's Insurance, HOA Dues

Calculating Debt-to-Income Ratio

Calculate your monthly gross income.
Multiply gross income by 45%.
1. For example, if your gross income is $5,000, multiply that by .45 and you’ll get $2250.
Write down all the monthly payments for all your credit cards, 1% of the balance of student loans, car loans, etc. Do NOT include cell phone bill or utilities or rents currently being paid.
1. Example: Lets say $25 minimum credit card payment. I have a $20,000 student loan so the payment is 1% of that or $200. Total debt is $225 a month.
$2,250 - $225 = $2,025 Maximum debt allowed - Current monthly debt=Eligible Total Monthly Housing Payment
$2,025 must include principal & interest, property taxes, homeowner’s insurance, mortgage insurance and any homeowner’s association dues (HOA).
Remember, debt-to-ratio could be higher or lower depending on your overall credit profile and the loan type or program chosen.