Homeownership
description
Transcript of Homeownership
The National Economics DepartmentThe National Economics DepartmentFinancial Freedom CampaignFinancial Freedom Campaign
NAACPNAACP
Why the push to own?
Homeownership is thought to be “good” for the following reasons:– it helps families acquire
wealth– It is also good for the
economy because it encourages people to save
– Studies show that homeowners invest more in their neighborhoods, engage in more civic activities, etc.
Is Homeownership still the American Dream?
o With rising housing costs and a challenging economy one must ask themselves, what does the American Dream mean to me today and how can I achieve it?
o If it includes homeownership, make sure you are financially and emotionally prepared for the responsibility.
o Many people, however are finding that the American dream does not begin or end with homeownership.
Ownership V. Renting
• Property builds equity• Sense of community,
stability, and security• Free to change decor
and landscaping• Not dependent on
landlord to maintain property
• Little to no responsibility for maintenance
• Easier to move• Depending on the
state of the economy, you could get more “bang for your buck” as housing prices sky rocket, rental prices tend to stabilize
Shop Around for the best mortgage termsShop Around for the best mortgage terms Find out the pre payment penaltiesFind out the pre payment penalties Make sure all documents are correctMake sure all documents are correct Ask about additional feesAsk about additional fees Understand the total packageUnderstand the total package Work with legitimate credit counselorsWork with legitimate credit counselors If you’re not sure, don’t sign!If you’re not sure, don’t sign!
• Loan Officer: – “mortgage specialists”– They use your credit, financial, and
employment information to see if you qualify for a loan, then come up with the financing options to match your financial capacity
• Real Estate Agent– Help you find the kind of home you
seek, by examining comparable homes and neighborhoods.
• Loan Processor: – Evaluates and double checks for
completion of all the relevant documents about your income, etc. and presents the package to the underwriter
• Mortgage Underwriter:– The person authorized to assess if
you are eligible for the mortgage loan you are applying for.
• Real Estate Appraiser:– Look at the property you are
purchasing to determine its worth ( or fair market value)
• Home Inspector:– Checks if the home is safe and
properly prepared for your arrival• Closing Representative:
– Oversees and coordinates the closing, records the closing documents and disperses money to the appropriate individuals/org’s
Other Housing ProfessionalsOther Housing Professionals• Community Based Org’s/ Local Housing
Counseling Agencies: – They could help you assess your individual financial
situation and help you improve your credit to ensure that you are prepared for homeownership
• Mortgage Lender and Servicer Lender: The financial institution that provides the
funds for your mortgage. Servicer: The financial institution that is responsible
for collecting your ongoing mortgage payments.
Mortgage Lender V.S. Mortgage Servicer
You will be asked to provide the following: Paycheck stubs for the past 30 daysPaycheck stubs for the past 30 days W-2 forms for the past two yearsW-2 forms for the past two years Information about long-term debts, like Information about long-term debts, like
car loans, student loans, etccar loans, student loans, etc Recent statements from all of the your Recent statements from all of the your
bank accountbank account Tax returns for the past two years if Tax returns for the past two years if
you’re self employedyou’re self employed Proof of supplemental incomeProof of supplemental income
Good Faith Estimate: Provides you an estimate of your mortgage loan terms and settlement charges(also
closing charges or costs to complete your mortgage transaction) you are approved for a mortgage loan
Truth In Lending Disclosure Statement You are able to see the total cost of your mortgage under the terms of your
particular mortgage loanThe Commitment Letter
After your lender has approved your mortgage loan application, send this letter detailing the amount of the mortgage loan (the term), the interest rate, the APR, and the
monthly charges. Other Disclosures
Include a credit report disclosure, etc.
What is a closing? – A closing is a meeting that involves all of the
parties signing the final documents and legally transferring the property to you.
– When you are finished signing the closing documents, you will be given the keys to your new home
The closing process can be stressful because of all of the paperwork you will need to sign. Just remember these few tips
Remember that the mortgage is not Remember that the mortgage is not the only expense of home ownership. the only expense of home ownership.
Other Expenses include:Other Expenses include: Homeowners insurance, Homeowners insurance,
interest and taxes (which interest and taxes (which may be factored into your may be factored into your monthly mortgage monthly mortgage payments)payments)
Maintenance CostsMaintenance Costs UtilitiesUtilities Water and GarbageWater and Garbage Unexpected RepairsUnexpected Repairs
Foreclosure Prevention
Do
Contact your lender (or
servicer) if you think you may have a problem paying your mortgage on time
Seek assistance from a HUD certified counselor
Don’t
Wait to miss your mortgage payment to contact your mortgage servicer
Give financial information to organizations that are not HUD approved
Other Ownership Options: Condos
• A condominium is one of a group of housing units where each homeowner owns their individual unit space, and all the dwelling share ownership of areas of common use.
• Advantages:– Homeowners association responsible for
maintenance– Cheaper than other homeownership options
• Disadvantages:– Limited space– Harder to sell than other housing options– Close proximity to neighbors
Other Ownership Options: Townhomes
• A townhouse is a home attached to adjacent houses.
• Advantages:– Less Exterior Maintenance– Close Proximity to neighbors =Increased Security
• Disadvantages: – Homeowner Association fees– Small parcel of land
Ownership Alternatives: Co-op’s In a cooperative apartment complex you don't actually own any real estate. When you buy into a co-op, you become a shareholder in a corporation that owns the
property. As a shareholder you get the right to lease space in the building. The corporation owns the common areas.
Advantages: Tenants control their rent (within their co-ops financial framework) Tenants control the quality of management because mangers are directly accountable to them Reduces dependency and gives people a stake in where they live
Disadvantages: Real property (i.e. a condo can be passed down to your heirs
A cooperative is considered to be intangible personal property Abuse of communal facilities Maintenance responsibly falls on the residents
Ownership Alternatives: Rent to Own
Usually requires prospective buyers to pay extra rent each month plus up-front fees of about 5% of the purchase price. The regular rent then goes to the owner, to help pay the mortgage, but the additional payments are used to buy down the price of the home.
Advantages: – Gives buyers the chance to experience homes & neighborhoods without
having to make major commitments– Opportunity to build up your down payments and credit profile so obtaining a
mortgage is easier
Drawbacks: – Losing your investment– Still not able to get a loan– Falling home prices– Foreclosure Scams– Walk Aways– Affordability
• Visiting at various times of the day• Talking to neighbors• Get a home inspector• Get detailed records on past
improvements• Consider the view
Pre Purchase Considerations
ResourcesKnowYourOptions.com : an online resource created by Fannie Mae to help homeowners learn about their options to avoid foreclosure, etc.The HomeLoanLearningCenter.com : provides step-by-step information on how to become financially literateHomeownership Preservation Foundation : is an independent nonprofit that provides HUD approved counselors dedicated to helping homeownerswww.995hope.org/HOPE NOW is an alliance between HUD approved mortgage market participants that provides free foreclosure prevention assistancewww.hopenow.com/National Foundation for Credit Counseling: provides high-quality financial education and counseling services www.nfcc.org/Neighborworks America : offers resources for foreclosure prevention professionalswww.nw.org/National Consumer Law Center: provides steps that advocates can take to help prevention foreclosure www.nclc.org/