redfin's free mortgage class - burlingame

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  • 1. Slide 1 of 33 Redfins Mortgage Class September 11, 2013 SF Peninsula Team Follow: @Redfinbayarea Like: http://www.facebook.com/Redfinbayarea

2. Slide 2 of 33 A Little Bit About Who We Are Redfin is a real estate brokerage that has helped over 20,000 people 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 3. Slide 3 of 33 Redfin.com - Benefits of MLS Powered (Multiple Listing Service) All the homes for sale: 30% more listings You see what the agent sees: 4x the data Real-time market data: photos, details of just-sold homes 4. Slide 4 of 33 Highlights of Redfins Site Search by zip code or neighborhood Search by schools Saved searches/instant alerts Agent notes Download results Price your home Forums Home buying guide Home inspection guide Any questions about the site? 5. Slide 5 of 33 Understanding the Market 6. Slide 6 of 33 San Mateo Stats for Houses 7. Slide 7 of 33 San Mateo Stats for Condos 8. Slide 8 of 33 San Mateo Home /Condo Market Trends 9. Slide 9 of 33 San Mateo Area Overview 10. Slide 10 of 33 Experience With Multiple Offers This occurs when inventory is down and buyer interest is up 5 Tips for Winning in a Bidding War Make the competition eat your dust Stay a step ahead of other buyers Set up saved searches & instant alerts Get pre-approved with a local lender & get underwriter approval Start the conversation early Write a letter & appeal to the seller Know your limits 11. Slide 11 of 33 Mortgages 12. Slide 12 of 33 Getting Pre-Approved Income oSalaryPast 30 days oHourlyConsistency and history oSelf-employedTwo year average Assets o Down Payment o Closing Costs o Cash Reserves Credit o640 for FHA o680 for Conventional o720 for Rate Improvement 13. Slide 13 of 33 Who Applies for the Loan? Joint Applicants: All for one, one for all No co-signors allowed today Parents can be non-occupant co-borrowers Married people do not have to both be on the loan Once on the loan, always on the loan unless you refinance It is okay to be on title only 14. Slide 14 of 33 Loan Amount Impact Criteria $417,000 -- Conforming Loan Fannie/Freddie Lowest Rate for 30 fixed Desktop Approval Available instant $625,500 High Balance Conforming Loan For High Cost Areas Higher Rate Credit Score sensitive $625,501 and up Jumbo Loan Highest Rate Portfolio Approval, guidelines vary Lots of review ARMs very popular 15. Slide 15 of 33 Show Stable Employment Salaried Employee W2s are historic 2 year history Most recent paystubs one month Salary increases count immediately Self-Employed (most affected by lending changes) Two Year History (Tax Years) Same line of work (strategic) Hourly Wage Earner Consistent hours over 1-2 year period Verification of employment important 16. Slide 16 of 33 Loan for your Down Payment Conventional 20% down payment Conventional 5% for loans over $417,000 Conventional 10% down, up to 625,500 FHA 3.5% down, up to 729,750 VA 0-3% down, lenders vary as to loan limit Size of down payment affects seller perception 17. Slide 17 of 33 Organize Your Assets Lenders Will Require 2 Months of Statements Liquid Do not move money aroundhard to paper trail Large deposits and transfers are sourced Retirement Accounts (reserves) Consider a 401k Loan Provide all accounts to your lender Gift Funds Family members only 18. Slide 18 of 33 Review Your Debt | Credit History Know Current Credit Score Myfreecreditreport.com: pay to get your score; no affect on scores Limit credit checks by lenders There are 3 bureaus, middle score counts With co-borrowers, lowest middle score counts Fix Errors Remove duplicates Resolve disputes Reduce credit card debt (33% of limit) Do not open, close, or change credit lines Do not make large purchases 19. Slide 19 of 33 10-Minute Break 10 mins 5 mins End Lets Get Started! 20. Slide 20 of 33 How much can you borrow? Lenders tolerate more than most borrowers Fannie Mae 45-47% of gross monthly income Freddie Mac 45-49% Jumbo Lenders 43% PMI Carriers 41% FHA 50-52% 21. Slide 21 of 33 Debt to Income Scenario oEarns $10,000/month oHas car payment $350 oWants to buy a home for $750,000 oHas 20% down payment o $10,000 x 45% = $4,500 o $4,500 350 (other debt) = Allowed $4,150/Month! $600,000 Loan o30/Yr Fixed, 4.125% = $2,908 oProperty Taxes o1.25% on purchase price = $781 ($9,375/yr) oHomeowners Insurance = $125 ($1,500/yr) oTotal: $2,908+781+125 = Qualified $3,814/Month! 22. Slide 22 of 33 Low Down Payment Scenario oEarns $6,500/month oHas car payment $300 oWants to buy a home for $500,000 oHas 10% down payment o $6,500 x 41% = $2,665 o $2,665 300 (other debt) = Limit $2,365/Month! $450,000 Loan o 30/Yr Fixed, 3.875% = $2,116 o Property Taxes o 1.25% on purchase price = $520 ($6,250/yr) PMI = $203 o Homeowners Insurance = $100 ($1,200/yr) o Total: $2,116+520+100 +203 = Too High $2,939/Month! 23. Slide 23 of 33 Choose a Lender Pre-Approval Letter is Critical Part of the offer Sellers want accountability, Local lenders preferred Using Referrals to find your lender From Redfins partner lenders From friends who recently financed a home From Realtor Research Your Lender Check Yelp, Berkeley Parents Network, Google Schedule a meeting by phone or in person 24. Slide 24 of 33 Questions to Ask Any Lender Please describe your mortgage banking experience? How many transactions do you close each year and what % are purchase transactions? What does a "loan pre-approval with your bank involve? Do you pre-underwrite my application, subject to the property address? Who handles your appraisals? Do you know your underwriter's first name? If I provide everything you request, how long will it generally take to get loan approval? Are you available on weekends or evenings if needed? 25. Slide 25 of 33 Rate Shopping Within a one hour period, call your top three prospective lenders and ask: What is your rate for: $417,000 and $625,500 Single Family Home Assume 780 credit Assume Owner Occupied Assume 20% down payment (and what if I have 30% down?) Assume no impounds No points, no lender credits Then ask: What are the standard lender fees for this scenario? Can you close this in 30 days? Did you close your last three transactions on time? Did the homes appraise at or above the purchase price? Last ask: How can I learn more about you? (Realtors, web site, testimonials) 26. Slide 26 of 33 Understand Your Costs Get a Good Faith Estimate o Itemized List of Fees: o Lender: Appraisal, Credit, Processing, Underwriting, Points o Escrow: Title Insurance, Documents, Notary Public o Government: Recording fee, Transfer Tax o Prepaid Items: Mortgage Interest, Homeowners insurance, impounds Loan payments are made in arrears, so your next loan payment will not be for almost two months! 27. Slide 27 of 33 Local Recommended Lenders *In no way does Redfin benefit financially from recommending lenders we just think theyre great lenders! 28. Slide 28 of 33 Current Average Rates Type of Loan August 22, 2013 August 15, 2013 30-Year Fixed 4.58% 4.40% 15-Year Fixed 3.60% 3.44% 5/1 ARM 3.21% 3.23% 1-Year ARM 2.67% 2.67% 29. Slide 29 of 33 Where Are Rates Headed? 30. Slide 30 of 33 Putting it all together to find YOUR home 31. Slide 31 of 33 Overview of a Purchase Research Neighborhoods Real Estate Agents Mortgage Options Preapproval Consider your needs Search Define Preferences Saved Search Home Tours Open Houses Offer Comparables Draft Offer Docs Negotiate Mutual Acceptance Closing Earnest Money Inspection Loan application Title Review Appraisal Financing Approval Closing 32. Slide 32 of 33 Future Events! 33. Slide 33 of 33 After Class Please fill out the survey handed out at the beginning of class. Wed love to get your feedback on how the class could improve. To get even more info on the home buying process, check out our home buying guide: http://redfin.com/home-buying-guide