Welcome to Homebuyer Education

1
Welcome toHomebuyer Education

• Sponsored by the Washington State Housing
  Finance Commission

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Class Instructors

• Add Your Names Here
• Add Your Names Here

3
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

22 benchmarks set by WSHFC
4
Agenda

• The Home Buying Process
• Lender Curriculum
• Assistance Programs
• Real Estate Curriculum
• Q As and Resources

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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

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The Steps to Homeownership
Education Credit History Budget Research Loan
Pre-Approval Your Priorities The Search Youre
Home!
The eight steps recommended by the Washington
Homeownership Center
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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

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Owning vs. Renting

• Things to keep in mind about owning.
• Yard work
• Home improvements/maintenance
• Larger monthly payments
• - Property Taxes
• - Homeowners Insurance

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The Players in the Homebuying Process

• Who are they?
• What role do they play?

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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

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Shopping for a Lender

• Get referrals and interview different lenders
• Questions to ask
• Difference between broker and loan officer

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Lender Curriculum

• How Much Can You Afford?
• Credit
• Budgeting
• Selecting a Loan Program
• Down payment Closing Costs

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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.

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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

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Credit Repair Counseling

• 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.dfi.wa.gov/consumers/homeownership/pre_
  purchase_counselors.htm

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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 withdrawals

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Budgeting Basics

• Eliminate credit card debt
• Put your money to work
• Educate yourself
• Plan for future expenses
• Pay yourself first

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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)

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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?

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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

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Types of Loans

• Conventional (or Conforming)
• FHA
• VA
• USDA
• Sub Prime Non-Conforming
• Portfolio
• Jumbo

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Types of Loan Terms

• Fixed Rate
• Adjustable Rate
• Interest Only
• 15 / 20 / 30 / 40 years
• Balloon

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How Much Can You Afford
How Much Can You Afford?

• What the bank is looking at
• Debt-to income ratios
• The 3 Cs Credit, Capacity Collateral
• Down payment

• What the bank is looking at
• Debt-to income ratios
• The 3 Cs Credit, Capacity Collateral
• Down payment

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How Much Can You Afford
How Much Can You Afford?

• 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)

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)
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How Much Can You Afford
How Much Can You Afford?

• Housing Expense-to-Income Ratio
• Principle and Interest 690
• Hazard Insurance 73
• Real Estate Taxes 117
• Mortgage Insurance 73
• Homeowners Association
  0
• Subordinate Financing 0
  _______
• 
  930.00

Housing Expense-to-Income Ratio Principle and
Interest 690.00 Hazard Insurance
73.00 Real Estate Taxes 117.00 Mortgage
Insurance 73.00 Homeowners
Association
0.00 Subordinate Financing 0.00
___________
930.00
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How Much Can You Afford
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

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How Much Can You Afford
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

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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

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Assistance Programs

• House Key Program
• Recapture Tax
• Occupancy and Property Restrictions
• WSHFC Down Payment Assistance Programs
• USDA, HUD
• Community Land Trusts
• Other DPA Programs statewide

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Washington State Housing Finance Commission

• House Key Express Loan Programs
• Lower interest rate
• First-time homebuyers
• Under income limits
• Under acquisition limits

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Recapture Tax

• 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.

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Washington State Housing Finance Commission

• Down Payment Assistance Programs
• House Key Plus
• HomeChoice
• House Key Schools
• House Key Veterans
• House Key Plus Seattle
• House Key Plus ARCH
• House Key King County
• House Key Rural
• House Key Bremerton
• Down payment assistance program must be used in
  conjunction with House Key State Bond 1st
  mortgage.
• These are All Second Mortgages These are not
  grants
• Only one WSHFC DPA program can be used.

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Washington State Housing Finance Commission

• House Key Plus
• Second Mortgage Loan
• 5 interest with a 10 year term
• Up to 10,000 Statewide
• Income Limits
• Clark/Skamania/Thurston Counties 70,000
• Island County 77,900
• King/Snohomish Counties 84,300
• Kitsap Counties 70,900
• All Other Counties 66,300

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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 payment
• One on One Counseling required
• Income Limits
• Clark/Skamania/Thurston Counties 70,000
• Island County 77,900
• King/Snohomish Counties 84,300
• Kitsap Counties 70,900
• All Other Counties 66,300

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Washington State Housing Finance Commission

• House Key Schools
• Up to 10,000
• 3 interest on a 10 year term
• Any Employee of Private or Public School K -12,
  Community Colleges or Technical Colleges.
• Income Limits
• Clark/Skamania/Thurston Counties 70,000
• Island County 77,900
• King/Snohomish Counties 84,300
• Kitsap Counties 70,900
• All Other Counties 66,300

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Washington State Housing Finance Commission

• House Key Veterans
• Second Mortgage
• Up to 10,000
• 3 interest on a 10 year term
• Veterans honorably discharged
• Income Limits
• Clark/Skamania/Thurston Counties 70,000
• Island County 77,900
• King/Snohomish Counties 84,300
• Kitsap Counties 70,900
• All Other Counties 66,300

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Washington State Housing Finance Commission

• House Key Plus Seattle
• Up to 60,000
• 3 interest rate - Deferred payment
• 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

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Washington State Housing Finance Commission

• House Key Plus ARCH
• Up to 30,000
• 4 simple interest - Deferred Payments,
• Borrower must contribute 2 of own funds
• One on One Counseling required
• 80 Area Median Income below
• (lower than House Key first mortgage income
  limits)
• Available in 15 Eastside Cities

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Washington State Housing Finance Commission

• House Key Plus King County
• Up to 30,000
• 4 simple interest - Deferred Payments,
• Borrower must contribute 2 of own funds
• One on One Counseling required
• 80 Area Median Income below
• (lower than House Key first mortgage income
  limits)
• Available in the rest of King County
• (City of Seattle ARCH Cities excluded)

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Washington State Housing Finance Commission

• House Key Rural
• 10,000 or 6 of purchase price, whichever is
  greater
• Deferred payment
• 3 simple interest
• Buying in a rural area (see web site)
• 80 Area Median Income below
• (lower than House Key first mortgage income limits

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Washington State Housing Finance Commission

• House Key Bremerton
• Up to 20,000
• 3 interest on a 10 year Term
• Buying in Bremerton city limits
• One-on-one Counseling Required
• 80 Area Median Income below
• (lower than House Key first mortgage income
  limits)

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Rural USDA Programs

• 502 Direct Loan (work directly to USDA)
• Income limits up to 80 of area median income
• Location rural community with less than 10,000
  population
• Loan amount may be up to 100 of appraised
  market value
• Down Payment not required
• No Mortgage Insurance
• www.rurdev.usda.gov/wa/
• 502 Guarantee (work with a lender that offers
  USDA)
• Income limits up the 115 of area median income
• Location rural community with less than 10,000
  population
• Down payment not required
• No Mortgage Insurance

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HUD

• 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
  borrowers credit and income
• No income limits

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Down Payment Assistance Programs by Region
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Region 1Clallam, Grays Harbor, Jefferson,
Kitsap, Mason, and Thurston Counties
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• Aberdeen Neighborhood Housing Services
• Up to 15,000
• Grays Harbor County
• Housing Education (HUD Approved)
• City of Bremerton
• Up to 15,000
• (also See House Key Bremerton)
• Kitsap County Consolidated Housing Authority
• Up to 20,000 (currently only available for Self
  help clients)
• Must purchase in Kitsap County outside Bremerton
  City limits

Region 1
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Region 2Island, King, San Juan, Skagit,
Snohomish, and Whatcom Counties
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• City of Seattle Hope for Homes
• Up to 45,000
• International District Housing Alliance or The
  Urban League
• City of Seattle Teacher Homebuyer Program
• Up to 45,000
• ACORN
• Low Interest Rate First Mortgage
• No Mortgage Insurance
• Stated Income
• Housing Education
• HomeSight
• City of Seattle
• South King County
• Snohomish County
• Up to 35,000 - 75,000
• Housing Education
• Parkview Services
• People / families with Developmental Disabilities
• Up to 127,000

Region 2
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Region 3 Pierce County
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• Pierce County Community Services
• Up to 6 of the sales price
• Purchasing in Pierce County outside of Tacoma and
  Lakewood city limits
• City of Tacoma
• Up to 6 of the sales price or 20,000
• 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
• Martin Luther King Housing Development
  Association
• Homebuyer Education Counseling (HUD Approved)
• Below market rate homes rentals

Region 3
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Region 4 Benton, Chelan, Douglas, Franklin,
Grant, Kittitas, Walla Walla, and Yakima Counties

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• 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

Region 4
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Region 5 Adams, Asotin, Columbia, Ferry,
Garfield, Lincoln, Okanogan, Pend Orielle,
Spokane, Stevens, and Whitman
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• Community Action Center of Whitman County
• Up to 15,000 - 20,000 Available
• Single Family homes
• Manufactured homes ok with approval
• Housing Education Counseling
• Spokane Neighborhood Action Program
• Up to 15000
• City of Spokane Spokane County
• Housing Education and Counseling (HUD Approved)
• The ARC of Spokane
• Up to 20,000
• People with Disabilities
• Housing Education and Counseling

Region 5
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Region 6 Clark, Cowlitz, Klickitat, Lewis,
Pacific, Skamania, and Wahkiakum Counties
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• Columbia Non-Profit
• (Vancouver Housing Authority)
• Up to 35,000
• Must have lived or worked in Clark or Cowlitz
  County for one year prior to closing
• Housing Education Counseling
• Must be at or below 80 AMI
• Loan term up to 30 years at 0 interest

Region 6
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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

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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 Humanity
• Clients participate in the construction of their
  home
• Zero interest loans
• Very Low- Low Income (30-60 AMI)

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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

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Matching Programs

• HomeStart
• Clients are matched 3 for every 1 of their own
  up to 5,000
• Must be first-time homebuyer
• Individual Development Accounts (IDAs)
• 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

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Community Lending Funding Note

• Washington State Housing Finance Commission, City
  of Seattle, Hopelink, Parkview, Homestead, Home
  Choice, House Key, Mortgage Credit Certificate,
  Home Sight, Individual Development Accounts
• 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.

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Housing Authorities

• Section 8 for Homeownership
• Family Self Sufficiency

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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

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Your Priorities

• Size of home
• Number of bedrooms
• Number of bathrooms
• Neighborhood
• State of home (new vs fixer)
• Garage

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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

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Selecting a Home

• Dream Home vs. Starter home
• Where do you want to live?
• What is important to you?
• Do research explore neighborhoods

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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

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Making the Offer

• Purchase and sale agreement
• Sellers disclosure
• Neighborhood review
• Financial contingency
• Inspection contingency

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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

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The Loan Closing What to Expect

• Signing papers
• Deed-of-trust
• Promissory note
• HUD-1
• Truth in Lending
• When do you get the keys?

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Q As 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

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Foreclosure Prevention

• Dont be late
• Contact your lender as soon as possible
• Contact a local housing counseling agency
• Visit Washington Homeowners Homebuyers Web
  Site
• http//www.dfi.wa.gov/consumers/homeownership/

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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

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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

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Predatory Lending

• Predatory 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.

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Fair Housing

• Who is protected
• What is prohibited in the sale loan
• How to file a complaint

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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.dfi.wa.gov/consumers/homeownership/pre_
  purchase_counselors.htm

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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

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Research

• Housing counseling agencies
• Down payment assistance programs
• Low-interest loan programs
• Affordable homeownership opportunities

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Now What?

• Call the Homeownership Hotline
• 1 877- 894- HOME (4663)