Home Buying Educational Seminar The WU Employer Assisted Housing Program
Bokern Realty– serving St. Louis since 1901.
Bokern Realty– serving St. Louis since 1901.
AgendaWU Employer Assisted Housing Program• Program highlights
• Neighborhoods
Home Financing• Benefits of homeownership
• Preparation
• Loan programs
• Credit
Home Buying• Process
• Inspections
• Closing
Bokern Realty– serving St. Louis since 1901.
WU Employer Assisted HousingProgram Highlights
• Forgivable loans for qualified WU employees and graduate students
• Up to $5,000 at closing or 5% if under $100,000 home sale price
• May be used for either down payment or closing costs
• Can only be used once, limited to a first-come, first-serve basis
• Home must be located in one of the redevelopment neighborhoods
Bokern Realty– serving St. Louis since 1901.
OTHERS
West EndSkinker-Debaliviere
Bokern Realty– serving St. Louis since 1901.
Home Financing
Bokern Realty– serving St. Louis since 1901.
Benefits of Homeownership• Tax breaks
• Property Appreciation/Gains
• Equity
• Savings
• Predictability
• Freedom
• Stability
Bokern Realty– serving St. Louis since 1901.
Qualifying
• Capital (savings)– Do you have enough cash for the down payment?– Do you have enough cash for emergencies?
• Capacity (income)– Can you repay the debt?
• Character (credit history)– Will you repay the debt?
• Collateral (house)– Will the lender be fully protected if you fail to repay the loan?
4 C’s of Lending
Bokern Realty– serving St. Louis since 1901.
Glossary of TermsWhat Lenders Look For
• Debt to Income Ratios– Relationship between current consumer debts and current income– Determines percentage of income available for mortgage payment– Determines program qualification
• Down payment– The higher the down payment, the lower the loan amount
• Reserves– How much money do you have saved?– How much will be left after closing?
Bokern Realty– serving St. Louis since 1901.
Glossary of TermsWhat is MI and LTV?
• MI –Mortgage Insurance protects the lender against borrower default
– PMI is mandatory on any conventional loan that exceeds 80% Loan to Value (LTV)
– The borrower may request the cancellation of PMI when the loan reaches 80% LTV (either through appreciation of the property or reduction of principal)
• LTV is a ratio calculated in the following way:
Loan Amount
Sale Price
Bokern Realty– serving St. Louis since 1901.
How Much Can You Afford?Debt-to-Income Ratios
• 28/36 qualifying ratio for conventional loans
• 28% equals the maximum percentage of your monthly gross income for housing expenses (PITI)
• 36% equals the maximum percentage of your monthly gross income for housing expenses + recurring debt
• FHA loan ratios are 29/41
Bokern Realty– serving St. Louis since 1901.
Principal & Interest Payments
1,6811,6111,5381,4661,3991,3321,2671,1991,136200,000
1,5971,5301,4611,3931,3291,2651,2031,1391,079190,000
1,5131,4491,3841,3201,2591,1981,1391,0791,022180,000
1,4291,3681,3071,2471,1891,1311,0751,019965170,000
1,3451,2871,2301,1741,1191,0641,011959908160,000
1,2611,2071,1531,1011,049998948899852150,000
1,1771,1261,0761,027979931885839795140,000
1,0931,0461,000954909865822780738130,000
1,009966923880839797758719681120,000
925885846807769732695660625110,000
841805769734699665632600568100,000
75772469266062959956954051190,000
67364461558755953250648045480,000
58956353851448946644242039770,000
50548346144042039937936034060,000
42040238436735033331630028350,000
9.5%9.0%8.5%8.0%7.5%7.0%6.5%6.0%5.5%Amount
Interest RatesLoan
Bokern Realty– serving St. Louis since 1901.
How Much Can You Afford?Calculate Other Components
• Mortgage Insurance (if applicable)
– 1% of the loan amount
• Property Taxes
– Between .75% - 1.5% of the value of the property
• Homeowner’s Insurance (if house)
– $500 - $1000 annually
• Condo Fee (if condo)
– $75-$170
Bokern Realty– serving St. Louis since 1901.
How Much Can You Afford?Add All The Payments Together
• Purchase $150,000 condo with 100% financing.
• Current Market Interest Rate for the loan is
• Principal and Interest Payment from the chart
• Condo Fee
• Property Taxes per month ($900.00 annual)
• Hazard Insurance
• Total the payments
6.5%$948
$1188$1188
$90.00$75.00
$75.00
Bokern Realty– serving St. Louis since 1901.
Monthly Homeownership Cost
OTHERS
75%
$150,000 loan amountat 6%, 30-year loan
Single-Family Home
Condo
Mortgage Payment (PITI)
Principal & Interest $900 $900
Real Estate Taxes (1-1.5%) $150 $150
Hazard Insurance $100 $0-50
Utilities
Gas $45 $40
Electric $45 $40
Water $20 $0
Sewer $20 $0
Trash $0 $0
Maintenance Fund (1% per year) $150 $75
Condo Fees $150
Totals: $1430 $1405
Bokern Realty– serving St. Louis since 1901.
Estimated Costs
OTHERS
Down Payment
$1500
Pre-Closing
0 – 20%
Closing Costs
2.5%
-Earnest Money
-Appraisal
-Inspection
-Loan Application
-Hazard Insurance
-Title Insurance
-Loan Fees (1 ¼%)
-Escrows
-Survey
Bokern Realty– serving St. Louis since 1901.
Types of Mortgage Products
30 Year Fixed Mortgages – the rate is fixed for 30 years.
– Benefits include guaranteed protection from loan payment increase for
the life of the loan
– Disadvantage is a higher interest rate
– This loan is perfect for somebody looking to stay in their home for
more then seven years
A.R.M. – Adjustable Rate Mortgage
– The rate stays constant for a period of typically 3, 5 or 7 years and
then adjusts according to an index
– Benefits include a lower monthly payment for the initial fixed period
– Disadvantage is that the interest rate will start fluctuating after the
initial period
Bokern Realty– serving St. Louis since 1901.
Loan ProgramsCredit Impaired (Fannie Mae’s Expanded Approval Program)
– Offers competitive interest rate
– Expanded credit and financial qualifications
– Fixed or ARM
– 100% financing available
– Requires $500 – 3% of purchase price for closing costs
Down-Payment Assistance
– Examples include Fannie Mae’s Flex 97, Flex 100, and Community
Solutions for Healthcare Professionals
– $500 funds
– Up to 40 year terms
– Disadvantage is that Mortgage Insurance (MI) will be added to your
monthly payment and is expensive.
Bokern Realty– serving St. Louis since 1901.
Loan ProgramsPledges Securities (Merrill Lynch’s Pledges Assets Mortgage)
– Pledge securities only from immediate family in lieu of down payment
– Higher LTV requirements, 39%
– Pledged assets still earn interest, dividends
– Fixed or ARM (max 30 year terms)
– 100% financing available
– Stocks, bonds, mutual funds, annuities, etc.
Future Income Loans (Merrill Lynch’s Emerging Professionals)
– Time in school considered for employment history
– 100% financing
– Up to 30 year terms, fixed rate or ARMs
– Disadvantage is that Mortgage Insurance (MI) is required
– Interest rate will be higher
Bokern Realty– serving St. Louis since 1901.
Loan ProgramsSimultaneous Second Mortgages
– Objective is to avoid MI when you do not have 20% down payment
– First mortgage is for 80% of the sale price
– The second is amortized for 15 years
Bokern Realty– serving St. Louis since 1901.
CreditYour Credit Score & How a Lender Uses It
• The credit bureau risk score is a summary of the information in your credit file
• Scores range from 300-850 – Score ranks consumers according to risk
• The higher the score, the lower the risk of default
• Scores assess past bill paying history to predict future behavior
• Scores are used to perform a risk analysis which helps predict the likelihood of loan repayment
Bokern Realty– serving St. Louis since 1901.
CreditCommon Credit Problems
• Multiple credit cards used to their limit
• Obtain new credit when existing debts remain unpaid
• Pattern of late payments on current debts
• Charge-offs
• Bankruptcies
• Judgments
• Foreclosures
Bokern Realty– serving St. Louis since 1901.
CreditSolving Credit Problems
• Pay off or pay down debts
• Resolve unpaid debts
• Write letters to credit bureaus for corrections
• Settle with collection agencies
– Phone and utility companies make frequent mistakes and report them on your credit
– These mistakes cost borrowers a lot of money
Bokern Realty– serving St. Louis since 1901.
Steps to Buy a Home
Get Ready to Buy
• Get a REALTOR
• Find a Lender for Preapproval
• Search for a home
• Submit a contract to the Seller
Prepare to Close
• Get a home inspection
• Meet Lender’s conditions
• Close on the property
Bokern Realty– serving St. Louis since 1901.
Buyer’s TimelinePaperworkMonth 1 Month 2 Month 3 Month 4 Month 5 Month 6
Preapproval (1-2 days)
Home Shopping ( 2 – 4 months)
Write contract ( 1 – 5 days)
Inspection Period (10 -20 days)
Loan Processing (3 weeks)
Closing!
Bokern Realty– serving St. Louis since 1901.
Writing A Contract• Consider what to include:
– Closing costs
– Refrigerator
– Home warranty
• Include earnest money:– $500 minimum to 1% of asking price
– Shows earnest, commitment to close
– Goes towards Buyer’s closing costs/down payment
• Determine closing date:– Often a negotiable date
Bokern Realty– serving St. Louis since 1901.
Home Inspection• Overall home construction and condition, including
major mechanical systems.
• Contract is contingent on satisfactory inspection.
• Inspection period lasts approximately 2 weeks after an accepted contract.
• Inspections cost approximately $300 - $400.
Inspection Report
Resolve inspection contingency
Ask for repairs / compensation
Terminate contract and get earnest money back
Bokern Realty– serving St. Louis since 1901.
Contract to Close
REALTOR
Lender
Buyer
Title Co. Closer
•Order home inspection ($400)
•Notify title co & lender
•Order appraisal ($400)
•Meet loan commitment date
•Satisfy lender conditions
•Order homeowner insurance
•Order title insurance
•Order survey
•Transfers deed
Process takes approximately 4 – 6 weeks
Bokern Realty– serving St. Louis since 1901.
St. Louis Metro Area
Median Price of Existing Single-Family Home Source: Moody’s Economy and Forbes
33% increase over the next 10 years.
Bokern Realty– serving St. Louis since 1901.
St. Louis City Neighborhoods
OTHERS
Bokern Realty– serving St. Louis since 1901.
St Louis County
OTHERS
Bokern Realty– serving St. Louis since 1901.
Hwy 40 ConstructionOTHERS
Bokern Realty– serving St. Louis since 1901.
Needs Assessment
OTHERS
75%
What do you require in your next home? And what additional amenities would you like to have? Distinguishing between “needs” and “wants” will be important as we travel together toward your next home purchase. Let’s be sure to discuss the following items, and where you’d rate their importance:
•Location
•Price range
•Lifestyle
•Short term/long term goals
•Style/architecture
•Schools
•Neighborhoods
•Space and size
Bokern Realty– serving St. Louis since 1901.
Free Pre-Approval / CreditTeam of Lenders
Mortgage Brokers Banks
WU Employer Assistance Lenders
Merrill Lynch
Bokern Realty– serving St. Louis since 1901.
Surveys