Welcome to Homebuyer Education Sponsored by the Washington State Housing Finance Commission
Mar 29, 2015
Welcome to
Homebuyer Education
Sponsored by the Washington State Housing Finance Commission
Class Instructors
• Add Your Names Here
• Add Your Names Here
3/27/2012
What we will cover• Steps to Homeownership• Owning vs renting• How Much Can You Afford?• Selecting a Loan Program • Down payment and Closing Costs• How to Shop for a Lender & Real Estate Professional – • Selecting a Home• The Importance of a Home Inspection• House Key Program• Loan Closing• Foreclosure Prevention and Early Delinquency Intervention• Home Maintenance• Consumer Protection Resources• Community Resources for Further Counseling or Other Assistance.• Fair Housing• Predatory Lending• How Going Green Saves You Money
23 benchmarks set by WSHFC04/10/23
Agenda
• The Home Buying Process
• Lender Curriculum
• Assistance Programs
• Real Estate Curriculum
• Q & A’s and Resources
04/10/23
The Home Buying Process
– Steps to Homeownership– Owning vs renting– The Players in the Home buying Process– The Benefits of Getting Loan Pre-Qualified &
Pre-Approved Before Searching for a Home– Shopping for a Lender
04/10/23
The Steps to Homeownership
EducationCredit History
BudgetResearch
Loan Pre-ApprovalYour PrioritiesThe Search
You’re Home!
The eight steps recommended by the Washington Homeownership Center04/10/23
Owning vs. Renting
Benefits of Renting Your Home…• Low maintenance costs• Freedom to move• Lower monthly payments• No risk of losing investment
Benefits of Owning Your Home…• Pets• Yard• Décor• Tax savings• Building equity
04/10/23
Owning vs. Renting
Things to keep in mind about owning….
• Yard work
• Home improvements/maintenance
• Larger monthly payments- Property Taxes
- Homeowners Insurance
04/10/23
The Players in the Homebuying Process
• Who are they?
• What role do they play?
04/10/23
Pre-Approval
• What is the difference between pre-approval and pre-qualified?
• Why is it important to get pre-approved before you shop for a home?
• Good Faith Estimate• Truth In Lending (TIL) • APR
04/10/23
Shopping for a Lender
• Get referrals and interview different lenders
• Questions to ask• Difference between broker and loan
officer
04/10/23
Lender Curriculum
– How Much Can You Afford?
– Credit
– Budgeting
– Selecting a Loan Program
– Down payment & Closing Costs
04/10/23
Credit History– Why it is Important
Your score and history will:
• Affect the interest rate you will be offered.
• Determine what loan program will be offered.
04/10/23
Credit
• Read your credit report
• Correct errors on your report
• How to build your credit
• Maintain good credit history
• Check credit at least annually
• What is a credit score
• How to increase your credit score
04/10/23
Credit Repair & Counseling
The Homeownership Hotline sponsored by
WSHFC
1 – 877- 894- HOME (4663)
Or for a list of counselors statewide:
http://www.wshfc.org/buyers/counseling.htm
04/10/23
Budgeting Basics
Set Financial Goals
• Eliminate debt
• Six months of expenses saved
• Set investment goals
Treat Your Savings Like An Expense
• 10% of all income saved or invested
• Automatic withdrawals04/10/23
Budgeting Basics
• Eliminate credit card debt
• Put your money to work
• Educate yourself
• Plan for future expenses
• Pay yourself first
04/10/23
Budgeting Basics
ABC Your Budget – track what you spend for 30 days…
A: Expenses you need and can do nothing about today (mortgage, car payment)
B: Expenses you need, but CAN do something about today (groceries, clothing)
C: Things you want (cable TV, lattes, movies, eating at restaurants)
04/10/23
Budgeting Basics
• How much do you CURRENTLY spend on housing?
• How much CAN you spend and how much do you WANT to spend on housing?
04/10/23
Documents You Will Need
• 2-3 years tax returns
• 2 years of W-2s
• 2 most recent pay stub
• Last 3 months of bank statements
• Credit card information
• Information on any other loans
• Landlord information
04/10/23
Types of Loans
• Conventional (or Conforming)
• FHA
• VA
• USDA
• Sub Prime & Non-Conforming
• Portfolio
• Jumbo
04/10/23
Types of Loan Terms
• Fixed Rate
• Adjustable Rate
• Interest Only
• 15 / 20 / 30 / 40 years
• Balloon
04/10/23
How Much Can You Afford
What the bank is looking at:
• Debt-to income ratios
• The 3 “C”s – Credit, Capacity & Collateral
• Down payment
What the bank is looking at:•Debt-to income ratios•The 3 “C”s – Credit, Capacity & Collateral•Down payment
How Much Can You Afford?
04/10/23
How Much Can You AffordCalculating how much house payment you can afford
depends on your income and current debt
Gross monthly income $_3,000__ x .41 = $1,230 Minus total monthly minimum debt payments - $300
Total housing payment you can afford = $930
PITI (Principle, Interest, Tax, Insurance)
Calculating how much house payment you can afford depends on your income and current debt
Gross monthly income $ 3,000 x .41 =$1,230
Minus total monthly minimum debt payments -$ 300
Total housing payment you can afford = $ 930
PITI (Principle, Interest, Tax, Insurance)
How Much Can You Afford?
04/10/23
How Much Can You Afford
Housing Expense-to-Income Ratio
Principle and Interest: $ 690
Hazard Insurance: $ 73*
Real Estate Taxes: $ 117*
Mortgage Insurance: $ 73
Homeowner’s Association: $ 0
Subordinate Financing: $ 0 _______
$ 930.00
Housing Expense-to-Income Ratio
Principle and Interest: $ 690.00Hazard Insurance: $ 73.00*Real Estate Taxes: $ 117.00*Mortgage Insurance: $ 73.00
Homeowner’s Association: $ 0.00Subordinate Financing: $ 0.00
___________ $ 930.00
How Much Can You Afford?
04/10/23
How Much Can You Afford
To calculate total payment/income
• Take your monthly housing debt and divide by your monthly income
• $930 divided by $3,000 = .31 which is the same as 31%
To calculate “total payment to income” ratio:
Take your monthly housing debt ($930) and divide by your monthly income ($3000)
Example: $930 / $3,000 = .31 which is the same as
31%
How Much Can You Afford?
04/10/23
How Much Can You Afford
Total Expense-to-Income Ratio:
• total house payment • plus total monthly minimum debt
payments• divided by gross monthly income Example: $930 + $300 = $1200 divided by
$3,000 = .41 or 41%
Total Expense-to-Income Ratio =
• total house payment• plus total monthly minimum debt payments • divided by gross monthly income Example: $930 + $300 = $1230
divided by $3,000 = .41 or 41%
How Much Can You Afford?
04/10/23
How Much Cash Will You Need?
• Down payment: Percentage of the value of the house
• Private mortgage insurance (PMI)• Closing costs• Items to be paid before closing (pre-
paids):– Appraisal (also considered Closing cost)– Inspection (also considered Closing cost)– Homeowners insurance– Taxes
04/10/23
Assistance Programs
• WSHFC Home Advantage Program
• WSHFC Down Payment Assistance Programs
• USDA, HUD
• Community Land Trusts
• Other DPA Programs statewide
04/10/23
Washington State Housing Finance Commission
Home Advantage First Mortgage Competitive interest rate
• DO NOT need to be 1st time homebuyer• $97,000 statewide income limit • No acquisition limit, no recapture tax• Automatically eligible for up to 4% of loan amount
in DPA -0% interest 2nd mortgage
04/10/23
Washington State Housing Finance Commission
Down Payment Assistance Programs • Home Advantage 2nd mortgage (up to 4% of loan
amount)**• Home Advantage Rebound **• HomeChoice• House Key Schools• House Key Veterans• Home Advantage Built New• House Key Plus Seattle (Subject to funding)• House Key Plus ARCH (Subject to funding)
**Down payment assistance program must be used in conjunction with Home Advantage 1st mortgage.
These are All Second Mortgages – These are not grantsOnly one WSHFC DPA program can be used.
04/10/23
Washington State Housing Finance Commission
Home Advantage
Second Mortgage Loan
• 0% interest –deferred, NO Payment
• Up to 4% of first mortgage loan amount Statewide
• Statewide Income Limit $97,000 (based on household income determined by lender)
• Balloon loan – comes due in full 30 years, or if sell, refinance
04/10/23
Washington State Housing Finance Commission
Home Advantage Rebound
Second Mortgage Loan
• 0% interest –deferred, NO Payment
• Up to $10,000 Statewide• Statewide Income Limit $97,000 (based on household income
determined by lender)• Balloon loan – comes due in full 30 years, or if sell, refinance• Must purchase a foreclosed, bank owned or short sale
04/10/23
Washington State Housing Finance Commission
HomeChoice
Person with a disability or a family member with a disability (ADA)
• Up to $15,000• 1% simple interest, Deferred, No payments
• One on One Counseling requiredIncome Limits:
• King & Snohomish Counties: $88,200
• Kitsap County: $74,000
• Thurston County: $74,200
• Island County $73,000
• All Other Counties: $71,400 04/10/23
Washington State Housing Finance Commission
House Key Schools
• Up to $10,000
• 3% interest on a 10 year termAny Employee of Private or Public
School K -12, Community Colleges or Technical Colleges. Income Limits:
• King & Snohomish Counties: $88,200 • Kitsap County: $74,000
• Thurston County: $74,200• Island County $73,000
• All Other Counties: $71,400
04/10/23
Washington State Housing Finance Commission
House Key Veterans
Second Mortgage
• Up to $10,000
• 3% interest on a 10 year term
• Veterans honorably dischargedIncome Limits:
• King & Snohomish Counties: $88,200 • Kitsap County: $74,000
• Thurston County: $74,200• Island County $73,000
• All Other Counties: $71,400
04/10/23
Washington State Housing Finance Commission
Home Advantage Built New
Second Mortgage
• Up to $10,000
• 3% interest on a 10 year term
• Newly Constructed, Never OccupiedIncome Limits:
• King & Snohomish Counties: $88,200 • Kitsap County: $74,000
• Thurston County: $74,200• Island County $73,000
• All Other Counties: $71,400
04/10/23
House Key Plus Seattle Up to $45,000• 3% interest rate - Deferred, No Payments• Borrower must contribute 1% or $2500
whichever is greater• City limits of Seattle• 80% Area Median Income & below
(lower than House Key first mortgage income limits)
• Shared Appreciation• Extra Inspection and Forms
Washington State Housing Finance Commission
04/10/23
Washington State Housing Finance Commission
House Key Plus ARCH • Up to $30,000• 4% simple interest – Deferred, No Payments, • Borrower must contribute 2% of own funds• One on One Counseling required• 80% Area Median Income & below
(same as HK + Seattle)
• Extra Inspection and Forms
• Available in 15 Eastside Cities
04/10/23
Washington State Housing Finance Commission
Closing Cost Grant
• For homebuyers in the State of Washington
• Up to $500 grant towards closing costs• Must work with a FHLB & WSHFC Participating
lender.
04/10/23Subject
to Funding
Subject to Funding
Mortgage Credit Certificate
MCCs are not mortgages... It is a tax credit which means fewer tax dollars can be withheld from your regular paycheck, increasing your take-home pay. The lender can use the credit to help increase your
buying power.
It is strongly recommended that you contact a tax professional before applying for an MCC in order to determine the potential benefits an MCC may provide for your specific tax situation.
http://www.wshfc.org/buyers/MCCprogram.htm
04/10/23
Mortgage Credit Certificate
MCC eligibility requirements include:•The MCC is available with new purchase loans•Must be a first time homebuyer, unless purchasing in a targeted area.•Recapture Tax Applies•Income and Acquisition Limits •Owner Occupied•Home Buyer Education is required•Must work with a WSHFC MCC participating lender
04/10/23
Recapture Tax
** Applies to the WSHFC Mortgage Credit Certificate program only
Recapture only applies if all 3 of the following occur:
• Your home is sold or disposed of within 9 years of being purchased, for reasons other than your death;
• There is a capital gain on the sale of your home, AND
• Your household income for the year in which you sell your home exceeds federal recapture tax limits. See your lender for current limits.
04/10/23
Rural USDA Programs502 Direct Loan (work directly to USDA)Income limits: up to 80% of area median incomeLocation: rural community with less than 10,000 populationLoan amount: may be up to 100% of appraised market valueDown Payment: not required (Please Note: WSHFC DPA Programs CAN NOT be used with USDA direct)
www.rurdev.usda.gov/wa/
502 Guarantee (work with a lender that offers USDA)Income limits: up the 115% of area median incomeLocation: rural community with less than 10,000 populationDown payment: not required (ALL WSHFC DPA Programs CAN be used with USDA 502 Guaranteed)
04/10/23Subject
to Funding
Subject to Funding
HUD 184
HUD 184 Indian Home Loan Guarantee Program• Funds can be used to purchase and/or rehabilitate an
existing home, or construct a home• Must be an Alaskan Native or Native American, to
participate in program• Down payment as low as 1.25%• Long term fixed rate financing with loan to value ratios as
high as 150%• Nontraditional methods may be used to demonstrate
borrower’s credit and income• No income limits
04/10/23
HUD 203k Streamline
HUD 203k Streamline Rehab Program• Include funds for eligible repairs to the base loan amount.• No minimum repair cost – maximum amount up to $35,000• Can be used to purchase and rehabilitate an existing home.• Same credit and down payment requirements as an FHA
loan.• Can be used with the Home Advantage First mortgage
program and WSHFC Down Payment Assistance programs.• Please note: only selected Home Advantage lenders offer
the 203k Streamline product.• Visit Hud.gov for a list of eligible repairs and verify with your
lender.
04/10/23
Community Lending Funding Note
Be aware that specialty financing options have limited funding so you will want to ensure your program is available when you are in the home buying process.
Organizations make every attempt to maintain continuous funding but they occasionally exhaust their assistance programs.
All Housing Assistance programs are subject to funding availability
04/10/23
Subject to Funding
Subject to Funding
Down Payment Assistance Programs by
Region
04/10/23
Region 1
Clallam, Grays Harbor, Jefferson, Kitsap, Mason, and
Thurston Counties
04/10/23
Aberdeen Neighborhood Housing Services– Up to 20% of appraised value – Grays Harbor County– Housing Education (HUD Approved)– Housing Rehab loans
City of Bremerton – Housing Rehab Loans
Community Frameworks- Bremerton – Built in Bremerton DPA
Housing Kitsap (Kitsap County Consolidated Housing Authority)– Up to $20,000– Must purchase in Kitsap County outside Bremerton City limits
04/10/23 Region 1
Region 2
Island, King, San Juan, Skagit, Snohomish, and
Whatcom Counties
04/10/23
City of Seattle Down Payment Assistance– Up to $45,000– HomeStead CLT, HomeStreet Bank, – HomeSight & Parkview (see below)– Home Repair Program
City of Seattle Teacher Homebuyer Program – Up to $45,000
HomeSight – City of Seattle– South King County – Snohomish County– Up to 35,000 - $75,000– Housing Education
04/10/23 Region 2
Parkview Services– People / families with Developmental Disabilities– Down Payment Assistance– Housing Counseling & Hotline
Habitat for Humanity Seattle / South King County– Serves City of Seattle, -South King County,– Finance the mortgage at 0% interest for the buyer– Shared equity and shared appreciation apply– Some projects are land trust model in partnership with
Homestead Community Land Trust– Buyer participates in construction of home
04/10/23 Region 2
Region 3
Pierce County
04/10/23
Pierce County Community Services– Up to 3.5% of the sales price– Purchasing in Pierce County outside of Tacoma and Lakewood
city limits
City of Tacoma– Up to 3.5% of the sales price– Designated neighborhoods, Primarily south of 6th Ave
City of Lakewood– Up to $7000– Lakewood City Limits
Homeownership Center of Tacoma– Up to 22% of purchase price– Below market price homes– Hilltop area– Housing Education
04/10/23 Region 3
Region 4
Benton, Chelan, Douglas, Franklin, Grant, Kittitas, Walla Walla, and Yakima
Counties
04/10/23
City of Yakima– Up to $4000– Purchasing in City of Yakima targeted area– City acquired property purchase program also, up to $30,000 in assistance
City of Richland– Up to $5000
City of Kennewick– Up to $5000– Purchasing in City of Kennewick targeted area
City of Pasco– Up to $5000– Priority given to property within the Museum and Longfellow districts
Columbia Valley Housing Association (Housing Authority of Chelan & City of Wenatchee)– DPA/ Self help – Housing Counseling & education
04/10/23 Region 4
Region 5
Adams, Asotin, Columbia, Ferry, Garfield, Lincoln, Okanogan, Pend Orielle, Spokane, Stevens, and
Whitman
04/10/23
Community Action Center of Whitman CountyHomeowner Resource Center of Whitman County:– Self Help– Rehab– Weatherization– Housing Education and Counseling
Spokane Neighborhood Action Program– City of Spokane & Spokane County– Rehab, Weatherization & Energy Efficiency– Minor Home Repairs– Housing Education and Counseling (HUD Approved)
The ARC of Spokane– Down Payment Assistance– People with Disabilities– Housing Education and Counseling
04/10/23 Region 5
Region 6
Clark, Cowlitz, Klickitat, Lewis, Pacific, Skamania, and Wahkiakum Counties
04/10/23
Community Housing & Resource Center Vancouver– Housing Education & Counseling – Credit Repair/Debt Management/ Budget Counseling – Mortgage Default Counseling – Reverse Mortgage Counseling– Pre-Purchase Services – Tax Preparation Assistance– City of Vancouver Rehab program
Family Finance Resource Center (Longview Housing Authority)– Housing Education & Counseling – Credit Repair/Debt Management/ Budget Counseling – Mortgage Default Counseling – SHARE / Self Help
04/10/23 Region 6
Community Land Trusts• City of Seattle
– Homestead Community Land Trust• San Juan Islands
– Opal Community Land Trust– Lopez Island Community Land Trust
• Whatcom– Kulshan Community Land Trust
• Clallam– Homeward Bound Community Land Trust
• Kitsap /Bainbridge Island– Housing Resource Board
• Kittitas County (Yakima Valley) <<new>>– Kittitas Yakima Valley Community Land Trust
04/10/23
Self-Help Housing Opportunities
Self Help Clients participate in the construction of their home Low interest mortgage loan
Sweat Equity Low Income (up to 80% AMI)
• Habitat for HumanityClients participate in the construction of their home Zero interest loans
Very Low- Low Income (30-60% AMI)To find an affiliate near you
http://www.habitat.org/
04/10/23
Additional Self Help Housing Opportunities
Self-Help Programs Statewide
Vashon Household Self Help,Northwest Housing Development, Housing Hope, Homes for Islanders, Whatcom Skagit Housing, Northwest Housing Development,Port Gamble S'Klallam Housing Authority/ Southern Puget Sound Intertribal Housing Authority, Kitsap County Consolidated Housing Authority, Clallam County Housing Authority, Community Frameworks Spokane, SHARE Longview
04/10/23
Matching Programs
• HomeStartClients are matched $3 for every $1 of their own up to $5,000
Must be first-time homebuyer
• Individual Development Accounts (IDA’s)Clients are matched $2 for every $1 of their own up to $8,000
Money can be used for: buying a home, education or starting a small business
United Way of King County (YMCA) offers IDA program
04/10/23
Housing Authorities
• Section 8 for Homeownership
• Family Self Sufficiency
• Classes and Counseling
04/10/23
Real Estate Curriculum
– How to Shop for a Real Estate Professional – Understanding Agency Representation
– Selecting a Home and Negotiating a Purchase Price
– The Importance of a Home Inspection– The Loan Closing – What to Expect, Review
Sample Loan Documents
04/10/23
Your Priorities
• Size of home
• Number of bedrooms
• Number of bathrooms
• Neighborhood
• State of home (new vs fixer)
• Garage
04/10/23
How to Shop for a Real Estate Professional
• Why use a Real Estate Agent?
• Interview several people
• Questions to ask
• Buyers agent vs. sellers agent
04/10/23
Selecting a Home
• Dream Home vs. Starter home
• Where do you want to live?
• What is important to you?
• Do research – explore neighborhoods
04/10/23
Negotiating a Purchase Price
• Know the market
• What are you willing to pay
• Be prepared for a counter offer
• Keep your priorities in mind
• Be prepared to put up earnest money
04/10/23
Making the Offer
• Purchase and sale agreement
• Sellers disclosure
• Neighborhood review
• Financial contingency
• Inspection contingency
04/10/23
Home Inspection
• Why you should have one
• How to find an inspector
• Questions to ask
• How much will it cost
• How long will it take
• What should I receive from the inspector
04/10/23
The Loan Closing – What to Expect
Signing papers
• Deed-of-trust
• Promissory note
• HUD-1
• Truth in Lending
When do you get the keys?
04/10/23
Q & A’s and Resources
• Foreclosure Prevention and Early Delinquency Intervention• Home Maintenance• Consumer Protection Resources• Community Resources for Further Counseling or Other Assistance.• Fair Housing• Predatory Lending
04/10/23
Foreclosure Prevention
• Don’t be late
• Contact your lender as soon as possible
• Contact a local housing counseling agency
• Visit Washington Homeowners & Homebuyers Web Site:
http://www.wshfc.org/buyers/counseling.htm
04/10/23
Home Maintenance
Protect your investment• Test smoke detectors• Clean out gutters• Have regular service on heating system• Change furnace filters• Yard upkeep • Budget for home repairs
Visit http://www.wshfc.org/buyers/guide.htm
Download:
Post Homeownership Guide & Seasonal Newsletter04/10/23
Predatory Lending
Predatory lending can be one or more abusive lending practice:
• Excessive interest rates and/or high fees• Failing to disclose the true terms of the loan• Approving a loan with payments higher than the
borrower can afford to pay• Pressuring a borrower to sign documents
without understanding the terms of the loan• “Flipping” or frequent refinancing of a loan
04/10/23
Predatory LendingPredatory lending vs. sub-prime lending
• Sub-prime loans help borrowers with: - less than perfect credit
- inconsistent employment history - incomplete application documents
• Sub-prime loan has a higher interest rate because the lender is taking a bigger risk in making the loan.
04/10/23
Fair Housing
• Who is protected
• What is prohibited in the sale & loan
• How to file a complaint
04/10/23
How “Going Green” can save you money $$
To get you thinking “green”, here are some tips that will not only help conserve resources but may also save you money:
•If you haven’t already, convert to the compact florescent light bulbs (a bulb at a time…) •Use biodegradable cleaning products.•If you are not already recycling paper, glass and plastic, call your disposal company and ask for recycling bins.•Recycle your yard waste, contact your disposal company or purchase a bin.•Use less water - flush less often, use your dishwasher, wash full loads.
04/10/23
How “Going Green” can save you money $$
• Use less energy – unplug small appliances, turn off computers, use timers on outdoor lights.
• Unfortunately, traditional wood burning fireplaces tend to lose more energy than they produce, pulling heated air out of the house and sending it up the chimney (and burning wood adds to air pollution). If you have natural gas or propane heating, consider gas logs.
• Replace shower heads. Choose a low-flow unit and you'll get virtually the same sensation of water flow while saving money and water.
• Purchase cloth re-useable grocery bags.• Organize closets and donate unused clothing and household items
to charity instead of throwing away.
04/10/23
How “Going Green” can save you money
• As you upgrade:
– Purchase Energy Star appliances, there may even be additional rebates and tax incentives
– Purchase a higher output rated furnace or consider converting that oil tank to gas heating
– Check out Solar Panel options in your area
• Here are some handy links to track Utility Rebate Programs and Energy Usage:
• http://www.dsireusa.org/incentives/
• http://hes.lbl.gov/consumer
Continue to visit the Commission’s Seasonal Newsletter for additional tips http://www.wshfc.org/buyers/newsletter.htm
04/10/23
Housing Counseling Agencies
The Homeownership Hotline sponsored by
The Department of Financial Institutions
& WSHFC:
1 – 877- 894- HOME (4663)
Or for a list of counselors statewide:
http://www.wshfc.org/buyers/counseling.htm
04/10/23
Housing Counseling Agencies
• One on one counseling
• Loan document review
• Budgeting and financial literacy
• Mortgage default counseling
• Predatory lending counseling
• Reverse mortgage counseling
• Run /Check credit report
04/10/23
Research & Resources• Housing counseling agencies• Down payment assistance programs• Low-interest loan programs• Affordable homeownership opportunities
04/10/23
Washington State Housing Finance Commission www.wshfc.org
US Housing & Urban Development www.hud.gov
(look for HUD’s Settlement Cost Booklet)
Or Call the Homeownership Hotline:1 – 877- 894- HOME (4663)
Now What?
Are you pre-approved for a mortgage loan:
If not, meet with a lender
If you know how much you can afford, then you are ready to go house shopping:
Meet with a real estate professional
Want to know more about the home buying process?
Meet with a Housing Counselor
04/10/23