Homeownership

1. Homeownership The National Economics Department Financial Freedom Campaign NAACP

2. 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.

3. Is Homeownership still the American Dream? • With rising housing costs and a challenging economy one must ask themselves, what does the AmericanDream mean to me today and how can I achieve it? • If it includes homeownership, make sure you are financially and emotionally prepared for the responsibility. • Many people, however are finding that the American dream does not begin or end with homeownership.

4. 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

5. Pre- home buying tips • Shop Around for the best mortgage terms • Find out the pre payment penalties • Make sure all documents are correct • Ask about additional fees • Understand the total package • Work with legitimate credit counselors • If you’re not sure, don’t sign!

6. Whose Involved In the process?? 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 • 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

7. Other 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.

8. Mortgage Lender V.S. Mortgage Servicer Servicer A mortgage servicer is responsible for the day-to-day management of your mortgage loan account, including: collecting and crediting your monthly loan payments handling your escrow account, if you have one. The servicer is who you contact if you have questions about your mortgage loan account. Lender/ Investor • Lenders or Investors are companies that purchase your mortgage as an investment and own the note to your mortgage • Example: Sarah has a loan that is originated by Ginnie Mae but Serviced by Bank of America

9. The Mortgage Loan Application Tips You will be asked to provide the following: • Paycheck stubs for the past 30 days • W-2 forms for the past two years • Information about long-term debts, like car loans, student loans, etc • Recent statements from all of the your bank account • Tax returns for the past two years if you’re self employed • Proof of supplemental income

10. Understanding all the Costs 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 loan The 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.

11. The Final Step to Homeownership 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

12. More on the Closing The closing process can be stressful because of all of the paperwork you will need to sign. Just remember these few tips

13. New Homeowner Responsibilities Remember that the mortgage is not the only expense of home ownership. Other Expenses include: • Homeowners insurance, interest and taxes (which may be factored into your monthly mortgage payments) • Maintenance Costs • Utilities • Water and Garbage • Unexpected Repairs

14. Foreclosure Prevention Do Don’t Wait to miss your mortgage payment to contact your mortgage servicer Give financial information to organizations that are not HUD approved 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

15. 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

16. 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

17. 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 shareholderin 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

18. 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

19. Pre Purchase Considerations • Visiting at various times of the day • Talking to neighbors • Get a home inspector • Get detailed records on past improvements • Consider the view

20. Resources • KnowYourOptions.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 literate • Homeownership Preservation Foundation : is an independent nonprofit that provides HUD approved counselors dedicated to helping homeowners • www.995hope.org/ • HOPE NOW is an alliance between HUD approved mortgage market participants that provides free foreclosure prevention assistance • www.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 professionals • www.nw.org/ • National Consumer Law Center: provides steps that advocates can take to help prevention foreclosure www.nclc.org/