first time home buyer

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The Keys to Home Ownership

Presented by

Lacy Williams

Joyner Fine Properties

804-864-0316

www.RichmondHousingToday.com

First Time Home Buyer

Seminar:

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Steps to Home Ownership

1. Rent vs. Buy2. Mortgage Preapproval Process3. Find a Realtor4. Find a Home5. Offer and Contract6. Mortgage7. Inspection 8. Appraisal, Survey, Homeowners Insurance,

Title Search9. Closing

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Step 1: Rent vs. Buy

• There is no right or wrong answer when deciding to buy or rent… a good decision is the one that’s right for you.

• Renting provides both equity & tax benefits for the landlord only. When you rent, you are buying someone else’s home for them.

• Buying a home should be a good long-term investment, providing equity and tax benefits.

• Mortgage interest, real estate taxes & some closing costs are tax deductible.

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Source: PMI October 2007(Based on National Data)

The Value of Homeownership

Price Appreciation Return on Equity

35%

140%

71%110%

301%

498%

5 Years 10 Years 15 Years

Purchase Price $100,000

Down Payment 25% $25,000

Appreciation in 5 years 35%

Value of Home $135,000

Equity $35,000

Return on $25,000 investment 140%

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Home Ownership Has been a Good Investment during the 2000s unless

you lived in the city of Detroit!

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Index % Change 2000 – July ‘08

Dow 5

NASDAQ - 41

S&P 500 - 8

Real Estate Composite 10 Cities

86

Real Estate Composite 20 Cities

72

Stocks vs. Real Estate

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Housing Has Been A Good Value in Richmond!!

A 24% increase since 2002!!!

Price Per Square Foot For Closed House Sales By Year

$92.37$99.65

$107.60

$123.38

$135.82 $139.64$132.43

$117.82 $114.46

$80$90

$100$110

$120$130

$140$150

2002

2003

2004

2005

2006

2007

2008

2009

2010

(Thru

9/7

/10)

Year

Pri

ce

Pe

r S

qu

are

Fo

ot

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RENT BUYMonthly Rent $1,200/month $1,207/month Mortgage Payment

Annual rent Increase

4% 0% Fixed mortgage payment

(No increases!)

Renters Insurance $180/year $600 year Homeowners Insurance

$250,000 Purchase Price

$25,000 Downpayment 10%

$2,025 Annual Lock Lane condo Fees

2% Annual appreciation

5 Years before selling

5.25% Mortgage rate – 30 Years

$1,500 Property Taxes *

28% IRS tax rate

Rent vs. BuyExample: House for $250,000 vs. Apartment for $1200/month

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RENT BUYMonthly Rent $1,200/month $1,207/month Mortgage Payment

Annual rent Increase

4% 0% Fixed mortgage payment

(No increases!)

Renters Insurance $180/year $600 year Insurance

$250,000 Purchase Price

$25,000 Downpayment 10%

$2,500 Maintenance

2% Annual appreciation

5 Years before selling

5% Mortgage rate – 30 Years

$3,000 Property Taxes

28% IRS tax rate

Rent vs. BuyExample: Buy a house for $250,000 vs. Apartment for $1200/month

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RENT BUY5 year rental expenses

$78,895 $72,470 5 year total buying expenses

5 year difference $6,424

$15,927 5 year tax savings

$27,122 5 year equity appreciation*

$43,049 Net value gain (tax savings + equity)

($16,561) Cost for selling home in 5 years (6%)

$26,488 Net benefit of ownership

$30,836 Purchase Benefit

Rent vs. Buy

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Rent vs. Buy

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Rent vs. Buy

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Rent vs. Buy

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Rent vs. Buy

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Rent vs. Buy

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Rent vs. Buy

* When you sell, an individual can exempt $250,000 in gain if you have lived in the home for 2 out of the last 5 years. Married couples can exempt $500,000 in gain.

Try a scenario yourself at www.vlender.com/cgi-bin/calc/rent_vs_buy.cgi

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If prices go down by 10% and the Interest Rate Increases my only 1%, you LOSE!!!

Interest Rate MONTHLY PAYMENT

8.00% $1,321 $1,357 $1,394 $1,431 $1,468 $1,504 $1,541 $1,578 $1,614

7.75% $1,290 $1,325 $1,361 $1,397 $1,433 $1,469 $1,504 $1,540 $1,576

7.50% $1,259 $1,294 $1,329 $1,363 $1,398 $1,433 $1,468 $1,503 $1,538

7.25% $1,228 $1,262 $1,296 $1,330 $1,364 $1,398 $1,433 $1,467 $1,501

7.00% $1,198 $1,231 $1,264 $1,297 $1,331 $1,364 $1,397 $1,430 $1,464

6.75% $1,167 $1,200 $1,232 $1,265 $1,297 $1,330 $1,362 $1,394 $1,427

6.50% $1,138 $1,169 $1,201 $1,233 $1,264 $1,296 $1,327 $1,359 $1,391

6.25% $1,108 $1,139 $1,170 $1,201 $1,231 $1,262 $1,293 $1,324 $1,355

6.00% $1,079 $1,109 $1,139 $1,169 $1,199 $1,229 $1,259 $1,289 $1,319

5.75% $1,050 $1,080 $1,109 $1,138 $1,167 $1,196 $1,226 $1,255 $1,284

5.50% $1,022 $1,050 $1,079 $1,107 $1,136 $1,164 $1,192 $1,221 $1,249

5.25% $994 $1,022 $1,049 $1,077 $1,104 $1,132 $1,160 $1,187 $1,215

5.00% $966 $993 $1,020 $1,047 $1,074 $1,100 $1,127 $1,154 $1,181

4.75% $939 $965 $991 $1,017 $1,043 $1,069 $1,095 $1,122 $1,148

4.50% $912 $937 $963 $988 $1,013 $1,039 $1,064 $1,089 $1,115

4.25% $900 $910 $935 $959 $984 $1,008 $1,033 $1,058 $1,082

4.00% $859 $883 $907 $931 $955 $979 $1,003 $1,026 $1,050

Loan Amount 180,000 185,000 190,000 195,000 200,000205,00

0 210,000 215,000 220,000

Price Change -10.00% -7.50% -5.00% -2.50% Loan 2.50% 5.00% 7.50% 10.00%

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NAR Projections

Mortgage Rates – 30 year fixed

MBA Projections

5.4%

5.8%

National Association of Realtors, Mortgage Bankers Association 10/2010

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More affordable than any time in the last 30 years!

Housing Affordability

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Owning Your Own Home is More than a Good Investment

• Good place to raise and educate children• A place where you and your family can feel safe• You have control over your own living space• You and your neighbors have a sense of

ownership and responsibility.

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Once I decide to buy what do I do next?

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1. Rent vs. Buy

2. Mortgage Preapproval Process

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Step 2: Mortgage Pre-Approval Process

• Start the process early!!!

• Mortgage professional will check your credit report to make sure you can get a loan

• How much will I be able to afford?

• What kind of loans are available for me?

• What are my closing costs and how much?

• Start saving money now!

• Typical down payment is 3.5-5%

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Types of Loans• Conventional

– Fixed rates and ARMs– 5% minimum down payment– 10% minimum down payment for condominiums

• VA– 100% financing for veterans with no mortgage insurance

• FHA– Government loan with 3.5% down payment. Gifts allowed

• ARM– Adjustable Rate Mortgage. Lower fixed rate for short period (3 ½ or 7

years)

• VHDA– Virginia Housing Development Authority has a variety of first time buyer

loans with minimum down payment. Usually have income restrictions.

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Closing Costs

• Lender Costs– Appraisal, administrative fee, Origination fee

• Attorney Fees– Includes fee to close and title insurance ($4 per $1000 of

purchase price)• Government Recording

– Includes tax stamps for the deed and county and state charge $3.33 per $1000 for both deed and note

• Escrows– Usually 3-4 months of homeowners insurance and real estate

taxes are put into an escrow account by the lender• The total closing costs typically are $5,000 to $7,000 on

a $250,000 purchase.

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More on the Mortgage Process

• Gifts are allowed with some loans.• First time home buyer programs.• Important to have easy access to your loan officer.• Deal with someone you trust!

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1. Rent vs. Buy


3. Find a Realtor

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We help you through the process.1. Market Knowledge – We will help you make a smart buying decision.

a. Neighborhoodb. Pricec. Style of homed. Resale value

2. Negotiating – We are experienced in developing and negotiating competitive offers.

3. Inspection – Identifying and resolving issues with the home.4. Advocacy – we do everything we can to find your home and

represent YOU in the process.5. Questions – We will answer your questions throughout the buying

process.

Step 3: Find a Realtor

What is the benefit of having an agent to represent me?

Remember: The total real estate commission is paid by the Seller. You don’t have to pay any of it... You get representation for Free!!

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1. Rent vs. Buy


3. Find a Realtor

4. Find a Home

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Step 4: Find the New Home

• Assess your wants & needs: • Define your criteria (Price range, area, neighborhood,

style of home, number of bedrooms, etc)

• Shop for a Home:• Realtor will email you properties that meet your criteria

• Realtor will help you select homes to see

• While viewing a home, Realtor will add expert opinion of home

• Factors to consider:• Neighborhood profile

• Type of home, square footage, # bedrooms, # baths

• Price and comparable sales

• Quality of schools

• Amenities

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House vs. Condominium?• House: You own the house, the land and are responsible for everything• Condominium: You own the inside. The outside of the building, the land, and the

amenities are owned in common. You pay a monthly fee for the maintenance of the common areas. (Not included in mortgage payment)

• Townhouse: You own the land. Exterior maintenance may or may not be included.• Factors to consider:

– Cost for upkeep– Ability or willingness to do exterior maintenance– Do I want or need a yard? Do I want to maintain it?– Amount of living space needed– Amenities, pool, fitness center etc.?– Parking?

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New vs. “Used” Home• New Home or condominium allows you to pick your floor

plan and your finishes.• New home or new condominium have warranties.• VA Condominium Act requires the Developers to provide

a 2 year warranty on the structure of the building.• You can do a walkthru and create a “Punch List”.• New homes tend to be a bit more expensive than

resales.• For new homes, you can save on the inspection costs.• For new homes, the price is usually fixed-- you can

negotiate the price on resales.• For Used Homes, we recommend that you purchase a

Home Warranty.

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Association Documents• Docs, Association documents, Public Offering Statement

(POS), or Condo Docs are the rules and regulations for neighborhoods of single family homes or condominiums.

• Documents specify what you can and can’t do e.g., fence requirements, pet restrictions, rental restrictions.

• The Docs also contain the association budgets• Seller must deliver a current copy of the Docs to the

Purchaser. • Purchaser has 3 days (resales) or 10 days (new homes) to

review docs and rescind the contract. Rescission must be in writing.

• Read the documents and ask your realtor if you have questions.

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Foreclosures and Short Sales

• What a deal!!! But…..• Sold “As Is”. Purchaser takes all the risk. You can have

an inspection but they are not going to pay for anything.• Banks respond fairly quickly on foreclosures but...• There are often multiple offers and sometimes they sell

for more than asking price• 3 out of 4 short sales do not close. You make the offer

and it may take months for the bank to reject the offer. • Things may be missing and you may not be able to get a

loan.

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1. Rent vs. Buy


3. Find a Realtor

4. Find a Home

5. Offer and Contract

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Step 5: Offer and Contract• Congratulations! We found the right home… now what?• Your agent will evaluate comparable sales and write a competitive offer for

you.• Seller contributions: Buyer may ask Seller to pay some of the closing costs.• Strategies to make your offer competitive: Price, terms and conditions.• Agent will explain the contract, attached forms and offer process to you.• Be prepared…

1. Have your mortgage preapproval ready.

2. Have your funds available – Earnest money deposit with contract.

3. Ask questions about the contract and the process.

OfferBuyer Seller

CounterofferBuyer Seller

CounterofferBuyer Seller Ratified Contract!

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1. Rent vs. Buy


3. Find a Realtor

4. Find a Home


6. Mortgage

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• Prequalification letter does not obligate you to use a mortgage company.

• Mortgage may come from a mortgage company, savings & loan, bank, or credit union.

• Closing costs and Good Faith Estimate… being able to compare apples with apples!

• Your mortgage lender will need things like the following (Pay stub, copies of your tax returns for the past few years, bank statements…….)

• Interest rate is not the only important thing.

• Important to have easy access to your mortgage lender.

• Respond quickly to your lender!!

Step 6: Mortgage

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1. Rent vs. Buy


3. Find a Realtor

4. Find a Home


6. Mortgage

7. Inspection

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Home Inspection: • Your realtor can recommend inspectors. Typical costs

below:1. Whole House inspection ($300-$400)2. HVAC inspection ($150)3. Chimney inspection ($100)4. Roof inspection ($150)5. Radon inspection ($350)

• Your realtor will help you address inspection issues – credit or fix prior to closing.

Home Warranty: We recommend a home warranty for “used” homes. It is usually not necessary for new homes. Cost is generally $350-400 for first year and can be paid for as part of closing costs.

Negotiation: Your realtor will address any issues that change your contract.

Step 7: Inspection

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1. Rent vs. Buy


3. Find a Realtor

4. Find a Home


6. Mortgage

7. Inspection

8. Appraisal, Survey, Homeowners Insurance, Title Search

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Step 8: Appraisal, Survey,Homeowners Insurance, Title Search

• Appraisal: Your lender will have this done to make sure your home is worth equal or more than they are loaning you.

• Survey: Your lender or attorney may require a survey of the lot showing dimension, house placement and easements.

• Home or condo insurance: Get quotes, select agent and get information to closing attorney.

• Title Insurance: Your closing agent will have a title company do a title search to make sure that the title to the property is free and clear. All existing loans (liens) on the property will be paid off when you buy the property. You will pay for title insurance to protect you after you buy the property.

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1. Rent vs. Buy2. Mortgage Preapproval Process3. Find a Realtor4. Find a Home5. Offer and Contract6. Mortgage7. Inspection 8. Appraisal, Survey, Homeowners Insurance,

Title Search9. Closing

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Step 9: Closing

Attorney or non-attorney for your closing agent?

We strongly recommend using an attorney.

• Attorneys are most knowledgeable about the RESPA laws

(Real Estate Settlement Procedures Act).

• You receive your own legal representation & protection.

• Attorneys will lead your through the settlement and have your best interests in mind.

• Attorney is there to deal with any issue that may arise!!!

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Step 9: Closing• Your contract has a closing date. If closing date changes, all

parties need to agree on it.

• Remember your mortgage has an expiration date for your rate… get closed before it expires.

• Set up all your utilities prior to closing to start on closing date. (electric, gas, water & sewer, propane, oil delivery)

• Don’t forget to set up trash pickup, TV, Internet, telephone.

• Be flexible on your moving date. Closings are often delayed by lenders, new Federal regulations, etc.

• Attorney will explain the closing costs.

• Who is at closing? You, your attorney and your realtor.

• Bring your funds (cashiers check) or arrange for electronic transfer.. And don’t forget… bring a picture ID!

• You will sign lots and lots of papers.

• Congratulations!! Enjoy your new home!

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Questions??? Mortgage PreQualifications Available-

Christy Feiler Richmond Mortgage Funding/SunTrust(804) 673-1793 Office (804) 673-1794 Fax (804) 305-0464 Cell 319 Maple Avenue Richmond, VA 23226

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Why You Should Buy Now

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Return on Investment

(January 1, 2000 –December 1, 2010)

MSN Money.com, Case Shiller

49Macro Market Home Price Expectations Survey 11/2010

Home Price Expectation Survey

% Cumulative Price Change from Year End 2009

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Foreclosures Will Be Dropping

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Future House Sales – Fannie Mae & NAR

Fannie Mae and NAR 11/2010

NAR Fannie Mae

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“If you don’t own a home, buy one.

If you own one home, buy another one.

If you own two homes, buy a third.

And, lend your relatives the money to

buy a home.”

– John Paulson 9/27/2010

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Your realtor:Lacy Williams

Joyner Fine Properties804-864-0316

Lacy.Williams@JoynerFineProperties.comwww.RichmondHousingToday.com

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