Financial Education & Homeownership Workshop. Liabilities ◦ Home mortgage ◦ Credit card balances ◦ Vehicle loan ◦ Hospital and other medical bills ◦

Financial Education & Homeownership Workshop

Liabilities ◦ Home mortgage◦ Credit card balances◦ Vehicle loan◦ Hospital and other medical bills◦ Student loans

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Wealth Creation

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A Five Step Financial Plan

1. Set goals2. Analyze information3. Create plan4. Implement plan5. Monitor and modify

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◦Needs vs. Wants Needs – needed to survive Wants – improve quality of life

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1. Set Your Goals

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2. SMART Goals

Specific Measurable Attainable Realistic Time-bound

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3. Create a Plan

Making Decisions◦ Examine your options◦ Weigh the pros and cons◦ Make your decision◦ Write it all down

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Put it into action◦ Discipline

Stick to the plan◦ Responsible spending

Continue tracking expenses

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4. Implement the Plan

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Preventive Measures

Do not give out personal information Keep confidential information secure Shred documents with personal information Review credit report annually Use a firewall program on computer

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What is credit? Financial trustworthiness

Why do you need good credit? Improves your ability to

◦Get a job◦Borrow◦Secure lower rates◦Purchase a home◦Rent◦Get lower rates on insurance

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Credit

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Flexibility and peace of mind for Big purchases Services that require a credit card Emergencies

Lower cost of living

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Benefits of Good Credit Decisions

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Approve

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Unable to obtain future credit or loans Higher interest rates Too much debt Starting over – rebuilding credit

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Consequences of Bad Credit Decisions

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DENIED

Revolving Credit ◦Most credit cards

Charge Cards Installment Credit

◦Car or mortgage loans Services Credit

◦Utilities or apartment rental

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Types of Credit

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Annual Percentage Rate (APR) – Total cost to use credit in a given year

Over-the-limit Fee – Credit card fee for going above your credit limit.

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Credit Terminology

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Annual Fee – Yearly fee for the privilege of using credit.

Finance Charge – Cost of credit, including interest and additional charges, applied under the terms of a contract.

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Credit Terminology

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Transaction fees – Fees charged for certain uses of your credit line – i.e., ATM cash advance.

Grace Period – Time period for paying bill to avoid charges.

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Credit Terminology

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Fixed Rate – An annual percentage rate that does not change during the term of the loan.

Variable Rate – An annual percentage rate that may change over time.

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Credit Terminology

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No credit history? Blemished history? Open a small credit line Apply for a fully secured loan Get a co-signer

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Getting Credit

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Shop around for credit Ask if account is reported to a credit bureau Make payments on time Read the credit agreement before signing

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Tips

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Review credit report once a year Treat credit cards like cash Set up a budget and stick to it

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Tips

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Payment history Balances owed Length of credit history New credit opened Types of credit used

Source: myFICO.com

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Risk Predictors

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Account payment information Delinquencies, charge-offs, liens,

judgments, bankruptcy Severity of delinquency Amounts past due Recent past due accounts Number of past due accounts Number of accounts paid as agreed

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Payment History - 35%

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Number of accounts with recently reported balances

Average balance across all trade lines Relationship between total balances and

total credit limits on revolving trade lines

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Amounts Owed - 30%

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Payment history: Pay your bills on time Get current and stay current If you are having trouble, contact your

creditors or a credit counselorBe aware – collections, even if paid, stay on

your report for 7 years

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Tips to Raise Your Score

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Outstanding debt: Keep balances low Payoff debt - don't balance transfer Don’t close unused credit cards to raise

your score Don’t open new cards to increase your

available credit

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Tips to Raise Your Score

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Credit history: Don’t open new accounts rapidly Keep the card you’ve had the longest time

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Tips to Raise Your Score

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Inquiries and new account openings: Rate shop for a loan within a 30 day period Re-establish your credit history if you have

had problems Check your own credit report and scores at

least once a year

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Tips to Raise Your Score

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Types of credit in use: Open new credit accounts only as needed Have credit cards, but manage them

responsibly

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Tips to Raise Your Score

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Annualcreditreport.com877-322-8228

Experian Consumer Relations701 Experian Parkway/ POB 2002Allen, TX. 75013-0036888-397-3742www.experian.com

Equifax Consumer RelationsP O Box 740241Atlanta, GA. 30374800-685-1111www.equifax.com

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Important Numbers

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TransUnion Consumer RelationsP O Box 1000Chester, PA 19022866-887-2673www.transunion.com

Federal Trade Commissionwww.ftc.com202-326-3761

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Important Numbers

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Cannot discriminate due to:◦ Age◦ Sex◦ Marital status◦ Race ◦ National origin◦ Public assistance

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Equal Credit Opportunity Act

If you don’t have a card with an interest rate of 14% or lower,

GET ONE!◦ Make sure the rate is fixed◦ Read the fine print◦ Compare

*TERMS AND CONDITIONS:Length of your introductory period will be 0.0% for 12 months from the date of cardmembership on purchases and balance transfers or 0.0% for 6 months from the date of cardmembership for balance transfers and purchases depending on our review of your application and credit history. After the promotional period ends, the standard variable purchase APR will be applied to any unpaid purchase and balance transfer balances. As of August 9, 2007, the standard variable APR for purchases is either 10.24% Rate 1, 13.24% Rate 2 or 15.24% Rate 3 in that order based on our review of your application and credit history. The standard APR for cash advances is 23.24%. However, if you default under any Card Agreement that you have with us, we may automatically increase the rate on all balances (including any promotional balances) to a variable default rate of 32.24%. The minimum finance charge is $.50. Foreign purchase transaction fee is 3.0% of the purchase amount after its conversion into U.S. dollars. The transaction fee for cash advances is 3.0% of each cash advance, minimum $5. The transaction fee for balance transfers is 3.0% of the amount of each balance transfer, $5 minimum.

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Shop Around

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Use your cards for emergencies only◦ Cut them up if necessary

If you can’t pay for it with cash, and it is not an essential,

YOU CAN’T AFFORD IT!

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Stop Using Your Cards

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Are you sure you want to buy a house?Do you have steady income and steady

employment?Do you anticipate remaining in the same

location for the next several years?Have you created a budget so you know

how much you can realistically afford to pay for housing?

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Ask Yourself

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Do you have established credit?Can you build a non-traditional credit

history with records of payments to landlords and utility companies?

Do you have enough money saved up for a down payment and closing costs?

Have you “pre-qualified” yourself?

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Ask Yourself

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Have you been pre-qualified by a lender, real estate professional, or counselor to determine how much you can borrow based on existing income and debt?

Is your existing debt low enough to qualify for a mortgage?

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Ask Yourself

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Demand Experience◦ High turnover industry - many new realtors◦ Ask for at least 2 years of experience

Consider Education◦ Consider Graduate REALTOR® Institute (GRI)

designation

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Choosing a Realtor

Look for Commitment◦Too many part-time realtors◦Consider full-time realtors; shows

commitment Conduct Interviews

◦Interview at least three realtors◦Recommendations from friends and

family◦Make sure you feel comfortable working

with them

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Choosing a Realtor

Place of your own Feeling of permanence Financial incentives

◦ Best form of family asset development

◦ Insurance bundling ◦ Equity

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Advantages of Homeownership

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Mortgage may be higher than rent Repairs and maintenance Limits mobility

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Obligations of Homeownership

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Down payment Closing costs Moving expenses Settling-in costs

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Up Front Costs

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Monthly mortgage payments Taxes and insurance Homeowner association fees Utilities Repairs and maintenance

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On Going Costs of Homeownership

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Good credit Pay off long-term debts Hold off buying until income increases Find a mortgage with a lower down

payment

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Increasing Your Home Buying Power

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Market value of house Condition of house Circumstances of the sale Affordability Financing terms

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Considerations for Making Offers

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Legal description Earnest money Offering price Down payment Type of financing

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Offer Includes

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Personal property to be left behind in house Proposed closing and occupancy dates Length of time the offer is valid Other contingencies

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Offer Includes

Financing Home inspection Presence of termites and termite damage Appraisal Repairs Other provisions you want to make

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Common Contingencies Included In Offers

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Seller May: Accept the offer Turn down the offer

Counter offer (come back with another offer)

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Options

You May: Accept counter offer

Negotiate another counter offer

Back out

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TFCU

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Locations for Mortgages

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Fill out pre-application worksheet Ask what documentation to bring

◦ Purchase contract◦ Recent bank statements◦ Pay stubs and W2 income statements◦ Debt information

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Preparing For Your Interview

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Can debt be repaid? Is it likely that debt will be repaid? Is there enough cash for the down payment

and closing costs? Is there some financial cushion left after

your home purchase?

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Considerations for Lenders

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Property appraisal Order a credit report Verification of information provided Get approval from a mortgage insurer if

required

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Lender Requirements

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Type of loan Loan amount Loan term Loan origination fee

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Commitment Letter

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Points - if any Annual Percentage Rate Amount of the monthly principal and

interest payment

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Commitment Letter

Low appraisal of property Poor credit history Insufficient funds Insufficient income Too much debt

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Reasons for Loan Denial

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Title search Title insurance Survey Homeowner’s insurance Termite inspection

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Requirements Before Closing

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HUD-1 Settlement Statement◦ Down payment◦ Loan origination fee◦ Loan discount points◦ Appraisal fee◦ Credit report fee

Truth in Lending Statement

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Closing Involves

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Promissory Note Mortgage/Deed of Trust Affidavits Property Deed/Warranty Deed

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Closing Involves

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Escrow items◦ Mortgage ◦ Hazard insurance premiums

Interest Down payment

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Lender May Require You To Pay Some Items at Settlement

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Loan documents signed Property title transferred Payment of closing costs and remaining

down payment Keys to new house received

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Mortgage Loan Closing/Settlement

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Any Questions