First Time Home Buyer’s Complete Guide to Credit and Qualifying

Thank You for AttendingClass will begin at 7:00pm

Presented By:Broadview Mortgage Corporation

Presenter:Scott Schang

Contact Information:

Phone: 866-667-6724Webinar@BroadviewMortgage.com

First Time Home Buyer’s Complete Guide to Credit and Qualifying

The Purpose and Goals of this Class

• To Create and Empower Home Owners

• Educate you about the current California Real Estate market and Financing Options

• Empower you with the ability to make educated decisions in the home buying process

• Give you the confidence to enter into the housing market without risk

First Time Home Buyer’s Complete Guide to Credit and Qualifying

Topics We Will Cover In This Class

• An Introduction to Your Credit Report

• The Loan Application Process

• The Loan Qualification Process

• Wrap Up and Take Aways

First Time Home Buyer’s Complete Guide to Credit and Qualifying

Ask Questions throughout presentation

– You may type questions in at any time during the presentation – Questions box on your screen

– Home buying specialists are standing by to answer your questions during the presentation

– The only dumb question is the one you don’t ask

Write number down now in case you get disconnected

1-866-667-6724

First Time Home Buyer’s Complete Guide to Credit and Qualifying

An Introduction to your Credit Report

• What you need to know about your Credit

• Installment Loans and Revolving Credit

• 3 Steps to Improving your credit scores

• Wrap up and Take Aways

First Time Home Buyer’s Complete Guide to Credit and Qualifying

What you need to know about your Credit• Your Credit is a Current Snap Shot

– Creditors report on different cycles

• Not knowing how to build good credit can result in bad credit

• How to get your truly FREE Credit Report– FTC Credit Report Site

www.ftc.gov/bcp/conline/edcams/freereports/index.html

– www.AnnualCreditReport.com

• Free credit reports from TV are not FREE• Consumer credit reports do not report the

same as mortgage inquiries

First Time Home Buyer’s Complete Guide to Credit and Qualifying

What you need to know about your Credit• Credit reports are not always right

– Creditors are much quicker to report negative items than they are to remove them

• How credit can affect your loan approval– Can trigger “risk based pricing” – increase cost– FHA does not penalize for credit scores

• 12 Month payment history– Most lenders are looking at past 12 months

• Credit Reports show past employers, past addresses, AKAs, social security number and birth date deviations

First Time Home Buyer’s Complete Guide to Credit and Qualifying

Installment Loans and Revolving Credit• What is an Installment Loan

– Fixed term– Fixed Payments– Auto, Education, Furniture, Cash Call

• What is a Revolving Credit Line– Credit Cards– High credit limit / Balance

• How they differ / How they are the same– On time payments the same– How Balances are treated are different– Number of months remaining

First Time Home Buyer’s Complete Guide to Credit and Qualifying

3 Steps to Improving your credit scores

• Step 1 – Know your Do’s– Do Order your free annual credit report

• Or have a lender run your credit– Do Educate yourself about your credit– Do maintain at least 3 revolving accounts– Do keep balances on revolving credit lines under

50%– Do Treat your revolving credit cards like an AMEX– Do pay your “Reported” debts on-time– Do ONLY use “referred” credit repair services

First Time Home Buyer’s Complete Guide to Credit and Qualifying

3 Steps to Improving your credit scores

• Step 2 – Know your Don’ts– Don’t be afraid to speak to your creditors– Don’t take out “quick fix” loans with extremely

high interest rates– Don’t max out your credit cards– Don’t apply for every credit card application you

receive– Don’t transfer credit card balances to one card– Don’t Make payments more than 30 days late– Don’t use credit repair services without a personal

referral from someone

First Time Home Buyer’s Complete Guide to Credit and Qualifying

3 Steps to Improving your credit scores

• Step 3 – Take Action Now – Manage your existing credit lines

• Pay down balances on revolving lines• Increase high credit limits on revolving lines• Reduce installment to 10 months remaining

– Dispute derogatory items on Credit Report• Order free credit report to identify derogatory

reporting• Order online report for bureaus that are

showing derogatory accounts• Dispute all incorrect or inaccurate information

First Time Home Buyer’s Complete Guide to Credit and Qualifying

Wrap up and Take Aways• There is no Mystery or Magic to credit

reporting• It’s never too late to get on the right track

and improve your credit rating• Knowledge is Empowerment – Educate

yourself about good credit practices• 6 Month Plan – Starting from Scratch• Need it Now – Credit Repair Services

– Costs range from Hundreds to Thousands

• Perfect credit not required for FHA loans

First Time Home Buyer’s Complete Guide to Credit and Qualifying

The Loan Application Process

• 2 years Housing History

• 2 years Income / Employment History

• Assets and Liabilities – Credit History

• Legal Declarations and HMDA Reporting

First Time Home Buyer’s Complete Guide to Credit and Qualifying

The Loan Application Process

• 2 years Housing History- Pg 1– Rental history from Apartment / Mgmt Company

• Verification of rents – verify timely payments

– Rental history from Private Party landlord• 12 months cancelled checks showing monthly

payments

– Living with Parents / Family• No documentation required – must be truthful• Cannot not have residence history on credit

First Time Home Buyer’s Complete Guide to Credit and Qualifying

The Loan Application Process2 years Income / Employment History- Pg 1

– If less than 2 years employment, may ask for schooling in similar subjects as line of work

– Ok to change jobs if line of work is similar– Ok to change line of work if history is at least 2

years – Ok to go from Self Employed to employed (W2)

with less than 2 years “employed” if in same line of work

– Self employed must show minimum of 2 years• Tax returns, business license

– Income documentation is 2 years of tax returns or W2’s and most current 30 days pay stubs

First Time Home Buyer’s Complete Guide to Credit and Qualifying

The Loan Application ProcessAssets and Liabilities / Credit History- Pg 2

– Sourced and seasoned assets• Must show in account for 60 days

– Assets must cover closing costs and reserves• Reserves not required for FHA• Reserves = compensating factor for approval• Must be able to use funds to be reserves

– Gift funds can be used when allowed• Must provide paper trail if deposited• Best to always wire directly into escrow

– Liabilities imported from Credit Report– Present and Proposed housing expenses

First Time Home Buyer’s Complete Guide to Credit and Qualifying

The Loan Application ProcessLegal Declarations / HMDA Reporting- Pg 3• Declarations

– Discloses law suits– Bankruptcy history– Co-ownership / Co-maker on note– Intentions of occupancy– Past occupancy

• HMDA Reporting – Monitors discrimination– Ethnicity & Race– Sex– Acknowledgment and Authorization

First Time Home Buyer’s Complete Guide to Credit and Qualifying

The Loan Qualifying Process

• Automated Underwriting Engines– Fannie Mae is standard– FHA DU

• Risk Assessment Underwriting Model– Income of household– Assets (reserves)– Credit profile– Equity (loan to value)– Loan to Value

First Time Home Buyer’s Complete Guide to Credit and Qualifying

The Loan Qualifying Process• Compensating Factors

– Debt to income– Months of reserves– Credit Scores– Loan to Value

• Manual Underwriting – FHA Only– Actual FHA approved underwriter reviews all

documents – much more restrictive

• Debt to Income Ratios are most restrictive– Maximum purchase price will be determined by

maximum payment / DTI

First Time Home Buyer’s Complete Guide to Credit and Qualifying

Wrap up and Take Aways• Getting approved for loan is the first step

• You cannot get approved without completing the loan application and getting an underwriting approval

• Begin gathering your documents and putting together all information for loan approval

• If credit challenges prevent approval now, at least you know and you can work on it

First Time Home Buyer’s Complete Guide to Credit and Qualifying

Wrap up and Take Aways– We are a direct Lender for all CalSTRS,

CalPERS, CalHFA, FHA & VA, Conventional and Jumbo Loans

– We can Refer you to a qualified Real Estate Agent in your area

– We are more than happy to be your “second opinion” if you are already working with someone

– We are committed to educating and empowering homeowners - Join us for future classes

Upcoming Home Buyer Classes

• A Complete Guide to Buying Foreclosures and Short Sales

• Real Estate Agent Round Table • Open Q&A with Experienced Buyer’s Agents

talk about buying home in this market

• A Complete Guide to FHA Purchase Loans

• A First Time Home buyer’s Complete Guide to Closing Costs and the Good Faith Estimate

Check back often for upcoming classes

Thank you for Attending

Please Join us for one of our other educational

home buyer classes

Presented By:Broadview Mortgage Corp.

Presenter:

Scott Schang

Contact Information:

Phone: 866-667-6724Webinar@BroadviewMortgage.com