HOME FINANCING BASICS

Transcription

1 HOME FINANCING BASICS PRESENTED TO: OMEGA PSI PHI FRATERNITY, INC LEADERSHIP CONFERENCE PRESENTED BY: GRANT BUSINESS STRATEGIES, INC. Copyright 2005 by Grant mortgage services All rights reserved. No part of this document may be reproduced in any form or by any electronic or mechanical mean, including information storage and retrieval systems, without permission in writing from the publisher. July, 2005

2 ABOUT US CONSUMER Grant Mortgage Services (GMS) provides an array of mortgage services, including conforming and non-conforming loan programs. We have a vast network of products and established investors (lenders) that enables GMS to provide the client with creative financing solutions with competitive pricing. Personal Mortgage Services Personal Mortgage Review is a wealth building initiative for the client. The review takes into consideration how the client s mortgage can be used to build wealth by reviewing rates -Can I qualify for LIBOR? Can the mortgage be paid in 15 years vs. 30 years? Can I pay my loan off quicker by making on or two extra payments per year? COMMERCIAL Grant Business Strategies, Inc (GBSI) is a financial advisory and business strategies company to middle market, small business, government, & not-for-profit companies. GBSI specializes in church financing Summary of Services CPA Business Assistance Financial statement Preparation & Analysis Financial Reviews & Strategies Industry Reviews /SWOT Analysis Business Development Strategies Commercial Project Financing/Refinancing Strategic Alliances Market Research Public Relations Construction Management 2

3 Our Objective Make your DREAM a reality Educate families/individuals understand about homeownership, mortgage process, financing and wealth building Leverage our extensive experience in mortgage and combine the skill set with professional banking skills to deliver flexible, creative, competitively-priced optimal financial solutions. Minimize financing expenses 3

4 The Recurring, Historic, Foundational Role Of the Black Church A typical African American member is most likely to turn to his or her church and family members for support. 63% of African Americans surveyed by Barna Research said Pastors of black churches are the most important leaders of the African American community. The black church is the greatest learning institution for African Americans. There are over 43,000 predominantly black churches in this country. Every Sunday, approximately 21 million African Americans come together. Potential for churches to teach financial stewardship from the pulpit. African American philosophy We give and then we give again, with whatever we have at hand 53% African Americans give to charity, with primary interests being religion, education, health and human services with 59% of donations for religious causes particularly their churches. Blacks are far more likely to see themselves as religious and spiritual, and marketers that have tapped into this are making headway in the black community. Businesses targeting the African American market are taking community based strategy by networking through ethnic organizations primarily churches. Smart marketers are taking into account the important role of church in the lives of Black Boomers (e.g. A college investment financial planning program service directly targets black pastors rather than targeting black Boomers because research show black boomers listen to what pastors have to say per AccuData America) 4

5 Personal Mortgage Reviews (PMR) A PMR is a wealth building initiative for our clients The review is an educational process about homeownership, mortgage process, underwriting considerations, financing options, and wealth building It is a process to understand clients needs and objectives Based on client needs, objectives and financial situation - determine and educate clients about the available options and its implications Help clients understand their debt and borrowing capacity Leverage vast networks of products and established investors/lenders to meet clients financial goals Deliver flexible, creative, competitively-priced optimal financial solution to our clients 5

6 Key Questions to Ask Yourself to Get Started Do you have a steady and a reliable source of income? How much can you afford to spend on a home? Can you afford the mortgage and all existing debts you may have? Can you afford mortgage, other debt payments and all household expenses? Have you been employed regularly for the last two years? Do you pay your bills in time? Do you have money saved for down-payment? Do you have money saved for closing costs? Do you plan to live in the new house for more than 2 years to build some equity? 6

7 Why Own a Home? Wealth Building Opportunity: When you pay rent it is money given away, but when you buy a house your money is invested. You are building Equity in your home Gain Tax Advantages: you can write off mortgage interest, property taxes and mortgage points treated as interest Build a foundation for securing your financial future. It is a financial asset that you own and will help you grow over time Gain Borrowing Power: As you build equity in your home, you can borrow against it e.g. home equity loan for home improvements, buy new car, pay for college etc. Build Wealth: Use your real estate to build wealth to reach financial goals 7

8 Key Factors For Underwriting a Mortgage Loan CAPACITY: How much can you afford? CREDIT: How is your credit history and credit score? COLLATERAL: What is the property value? 8

9 How Much Can you Afford? How to Qualify for A Mortgage Loan? Gross Income: Multiply your annual gross income by 2.5 times. For Example, if your annual household income is $40,000, you might be able to qualify for a $100,000 home. Monthly Mortgage payment as a % of Gross Income: Monthly mortgage payment should be no more than 25% -33% of your monthly gross income Debt Situation: Your debt and expenses including credit card bills, car loans, student loans, housing expenses, alimony and child support should not be more than 30%-40% of your gross income. Credit History: A satisfactory record of paying your bills ON TIME. Credit Report is a history of how you have managed & repaid debt. Credit Score indicates your ability & willingness to repay debt based on credit record Employment History: A history of steady employment and/or earnings. 9

10 How Much Money Do you Need to Have? Down- payment: Usually range from 3% to 20% of the property value. You may be required to have Private Mortgage Insurance (PMI) if your down-payment is less than 20%. Closing Costs: Generally, ranges 2% -7% of the property value. It usually includes: Origination fees Loan processing fees appraisals, surveys Prepaid expenses mortgage insurance premiums Escrowed accounts property taxes, mortgage insurance, hazard & flood insurance Title insurance Recording & transfer charges Attorney s fees 10

11 What Documentation Do You Need? Loan Application Employment information Recent Pay Stubs W-2 Forms for past 2 years Current Debts Bank statements Federal Income Tax Returns Proof of supplemental income Records of child support or alimony 11

12 Types of Mortgage Loan Type Fixed Rate Loan Adjustable-Rate Loan Plan to live long-term at least 5 years Predictable and stable interest rate Plan to live shorter period of time Expect income to increase Features Seeking lower initial interest rate & lower payments High Interest rate environment - likely to drop after initial period Balloon/Reset Mortgages Repayment Schedule Features of cap/option to convert to fixed rate Do not plan to own beyond maturity date Cannot afford the home you want this comes with lower initial rate 10 year, 15 year, 20 year, 30 year mortgages Shorter terms have lower interest rates The sooner you repay the loan you save in interest Longer the term of the loan the lower your monthly payments & qualify for larger loans 12

13 What Loan is Right for You? How long do you plan to live in the house? Lowest Monthly Payment is most important Paying off mortgage faster and saving money by paying less interest is most important No Credit History 13

14 Why Refinance? Attractive Interest Rates Switch the type of mortgage e.g. from variable to fixed rate Shorten Mortgage term Reduce Monthly mortgage payments Cashing Out Borrow more than the outstanding balance on the original loan the excess it the equity in your home that is converted into cash 14

15 Is Refinancing Good for You? Good Choice Current interest rate is significantly lower than original loan Need to Shorten the term of mortgage Need to change type of mortgage Not A Good Choice Current mortgage has been for a long time Already paid off most of the interest on your mortgage Your mortgage has a prepayment penalty clause Plan to stay in the house for at least 2 years You plan to move from your house within 2 years You can afford the closing costs associated with the new loan You have a Balloon or reset mortgage that is maturing Loan Modification of original loan is cheaper 15

16 Key Factors you Need to Consider? Interest Rates Points Terms/Amortization Loan & Origination Fees APR Lock-in-rates Prepayment Penalty 16

17 Mortgage Terminologies Adjustable-Rate Mortgage (ARM) Fixed Rate Mortgage Balloon or Reset Mortgage Amortization Annual Percentage Rate (APR) Mortgage Rate Lock-In Rate Points Closing Costs Collateral FHA/VA Loans Credit Report/Score/History Amortization Schedules Down-payment Equity Private Mortgage Insurance (PMI) Debt & Borrowing capacity Pre-approval Letter Pre-qualification Letter Rate Cap Refinance Loan Modification Debt-to-Income Ratio Gross Income Mortgage Payment Interest Principal Commitment Letter Pre-payment Penalty Adjustment Period Appraisal Escrow Good-Faith Estimate 17

18 For more Information on Grant Mortgage Services, Inc. Please : James Means, IV Or Tony Grant 18