HOME OWNERSHIP 101

 
Watch the free Financial Literacy event #HomeOwnership101 presented by Dreamteam Home Studios held at Second Missionary Baptist Church in Monroe now:

https://www.youtube.com/watch?v=C2lfv68tuis&t=1666s

For more free valuable information on building generation wealth follow @mortgaegmandela on TikTok & Instagram

Do you have a qualifying Credit Score to get pre-approved to buy a home?

 



10 things to do with your credit

  1. Monitor your credit

  2. Make sure all personal information is correct

  3. Review inquiries and accounts in good standing 

  4. Review & dispute inaccurate negative accounts

  5. Put everything on autopay

  6. Separate cards by expenses

  7. Pay as much as you can before the statement date

  8. Ask for credit line increases

  9. Don't co-sign for ANYBODY (only spouse)

  10. Build business credit

Why do you need credit?

 

Credit is a tool that can help you now and you can pay it over time

Credit is your ability to borrow money or products under an agreement between a lender and a borrower, who promises to repay the lender later, generally with interest.

A borrower may make a strategic decision to not pay in full, even if they have the available cash

Credit can affect where you live

Good credit = Car approval or Home Approval

Business loans require good credit

HAVING A CREDIT MINDSET

  • DON'T CHECK YOUR CREDIT?

  • I BUY EVERYTHING WITH

         CASH

  • I DON'T NEED DEBT!

  • DEBT IS BAD!

CHECK YOUR CREDIT DAILY

USE YOUR CREDIT FOR EVERYTHING

DEBT HELPS YOU SCALE

DEBT ALSO MAKES YOU LOOK RESPONSIBLE

Do you have a qualifying credit score above 580? You may be ready to buy a home!

To get approved for a mortgage you not only need a qualifying credit score, but a qualifying debt to income ratio & the funds for your down payment and closing costs


Debt to income is a measure of the amount you have coming in monthly versus the amount of your monthly revolving debts going out

FHA mortgage

 

Government Backed Loan program traditional promoted to first time home buyers (not only for first time home buyers)

580 or above to get approved- This usually comes with a lower Debt to income ratio allowed if you are under 620 (tighter DTI at 45% or below instead of the normal 57% or below on FHA) – Comes with Private mortgage insurance – Comes with an Up Front Mortgage Insurance Premium rolled into the loan amount. This amount is 1.75% of the purchase price collected by the lender in case the borrower defaults on their mortgage payments 

At Rocket! We cannot print your pre-approval until you have presented your income and asset documents if your credit score is under 620 

620 or above to print your pre-approval right away - debt to income needs to be at or below 57% 

Comes with Private mortgage insurance – Also comes with an Up Front Mortgage Insurance Premium rolled into the loan amount 

The Down payment requirement on FHA loans is 3.5% of the purchase or above 

This program allows homes that are 1–4-unit properties 

VA Mortgage


 

580 or above

If the qualifying FICO is less than 640 and Loan to Value is over 95%, The debt to income is capped at 45%.

640 or above preferably to take advantage of the %0 down

The property purchased with these loans can be anywhere between 1-4 unit homes (no investment properties)

VA loans offer up to 100% loan to value so you can take advantage of putting 0% down if qualified for this program

We usually prefer to keep the debt to income under 60% but there is no specific debt to income requirement on VA loans

Conventional Mortgage

 

Not government backed loan

620 or above – usually will not get approved unless you are looking at a large down payment above 20%

680 or above –  debt to income or below  47%– if you put 20% down there is no Private Mortgage Insurance and this will drop off at 80% Loan to value

Conventional loans usually provide more competitive offers due to a faster, less involved appraisal process in comparison to FHA or VA loans

Conventional loans require a 3% down payment for first time home buyers and if you already own or have owned in the last 3 years 5% down

You can purchase a Primary Residence, Second home/ Vacation home or an Investment property with these programs

The property purchased with these loans can be anywhere between 1–4-unit homes

“Prepare for a mortgage payment that is just under 1% of the price of the home” – De’Andre Kemp-Jordan my teammate on the pacemakers 

 

Interest Rates 

2 Declining Quarters of our Countries GDP determines if we are in a recession

There is a lot of talk on if we are in a recession or headed towards a recession

Why Mortgage Rates Change

You will often see the mortgage interest rates go up and down with the U.S. 10-year Treasury Rate which fluctuates due to three main things:

  1. Sentiment of the economy: When investors feel optimistic about the economy, the 10-year treasury rate generally goes up. When people are feeling cautious, the rate often goes down.

  2. Interest rates: When it comes time to invest, investors might prefer stocks over bonds or vice versa which affects all interest rates – including the 10-year rate.

  3. Inflation: The policies of the U.S. Federal Reserve, or The Fed for short, focus on monetary actions that will help us reach our economic goals as a nation. Treasury rates generally rise when The Fed, the policies of the U.S. Federal Reserve, takes measures to combat inflation like raising their benchmark rate

 

Discount Points

At a time like this it is very important to know how interest rates will affect your monthly payment and to be in the know on how much you will pay over the life of the loan in interest so you can make the best decision for you and your family

As a buyer you should also be informed on if you are being charged more at closing to secure a specific interest rate by paying for something called “discount points”

1 discount point is equal to 1% of the loan that you as the buyer will be responsible to pay additional in cost at closing

Knowing this information will help you to decide if you would like to invest in discount points to secure a lower monthly payment or if you would like a loan without points to keep the cost at closing as low as possible

 

Assets

When preparing yourself to buy a home it is important to know how much money you need to save based on the purchase price of the home

As a buyer you are responsible for your down payment and closing costs 

It is also common for a seller to ask for an earnest money deposit. This is a deposit made to a seller demonstrating the buyer's good faith in a transaction, securing the home against competing offers for a set period of time. 

Earnest money allows the buyer additional time to seeking financing

All funds for closing must be sourced or seasoned for a minimum of 60 days, which means no mattress or shoebox money

You can use funds from a bank account, retirement account, brokerage account and more but you will not be able to provide cash as a source of funds for a down payment

 

Gift funds

Based on the program and loan type you may be able to use gifted funds from Family 

Gift funds can be used for the down payment, including earnest money deposits, and/or for closing costs

Gift funds can also be used to pay off debt to qualify

All gift requirements must be met. Gift funds can be used when the subject property is a primary residence or second home.

If the subject property is an investment property gift funds cannot be used.

Gift funds must come from Family                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

All the following are considered family members:

  • Spouse

  • Domestic partner

  • Fiancé(e)

  • Future in-laws

  • Parent, including step-parent and foster parent

  • Grandparent, including great grandparent, step-grandparent, and foster grandparent

  • Grandchild, including great grandchild and step-grandchild

  • Aunt or uncle, including great aunt or uncle and step-aunt or uncle

  • Niece or nephew, including step-niece or nephew

  • Cousin, including step-cousin, adopted cousin

  • In-laws, includes parents, grandparents, aunt or uncle, brother or sister

  • Child, including step-child, foster child, adopted child

  • Sibling, including step-sibling, foster sibling, adopted sibling

  • Former relative

  • Godparents

  • Relative of a domestic partner

Down Payment Assistance and Grants

Different mortgage lenders and brokers have access to different down payment assistance programs and grants

I will share some that I have access to with my company Rocket Mortgage but please do your own research on the state and local level for additional programs.

Inflation buster – 1% lower interest for the entire first year due to a lender paid credit to buy down your rate 

This will ensure that you have a lower monthly payment and pay less interest for the first year of your mortgage, after the first year your rate will return to the rate you locked in

Rate Drop Advantage

 

FOR MORE INFORMATION
WWW.DREAMTEAMHOMESTUDIOS.com

Ready to be Pre-Approved?

https://social.pr/p/rocket-mortgage-purchase/DorianGray/?page=1&order=recent#stories