FINANCING FOR FIRST TIME HOME BUYERS

[Music] hey what's up everyone Matt Garlin here in MLS number five 8700 but I'm better known as mg the mortgage guy and welcome to Ernie elesia University all right so tonight I'm going to be your host we're gonna talk a little bit about for my first-time homebuyers and we're gonna discuss the the home buying process but before we get to that I'm gonna share my screen for you guys so that way you guys can see the presentation that I put forth together for you so welcome to 'url University like I said my name is Matt Garland in MLS number five 8700 better known as mg the mortgage got today we're gonna talk about first time home buyers so let's get started most people always ask me yo Matt what I need to get started to be a first time home buyer at the buyer house everything starts with your mindset I say this all the time right you have to be prepared for homeownership so ask yourself these questions while your first-time homebuyers are you ready for homeownership what are your real estate goals okay do you have the capital meaning do you have money right most people want to be house rich and cash poor never be house rich in cash for cash poor I don't care if you're getting 100% financing I don't care if you get any homebuyer grants it doesn't matter to me you need to have some money safe house oh do you want to close have realistic expectations on your timeframe check out if you have a current lease when does that least expire if you live in that home how's that situation working out whatever the case may be have a realistic expectation for when you want to closing at home and number most importantly are your documents organized this is key okay keep your documents organized every time if you know you're gonna buy a house you know create a file create a Dropbox of Google Docs you know start putting your pay stubs there every time you get a data bank statement put your bank statements in a file you're doing it you got your w-2s you're doing your taxes you know upload that into a file and Cola file like home ownership file or something like that and just start putting together all your documentation so that way you guys are prepared all right now speaking of documentation what do you need to start the pre-approval process well you need your last two years of w-2s because we show with two year work history last two years tax returns and really you want to provide tax returns if you're self-employed if you have any rental income that you're collecting if you file like a 1099 if you get paid 1099 maybe your uber driver or a lyft driver a hairstylist a barber you know anything that you get like maybe you sell affiliate links you got digital marketing or a lot of marketing sales whatever you do right that you get a 1099 from and if you file that on your taxes I need to see your last two years of self-employed 1099 independent contractor is considered self employees so please remember that last 30 days of pay stubs a very case so we need 30 days full pay stubs if you get paid weekly we need four pay stubs if you get paid bi-weekly we need to pay stubs all right last two months are your bank statements or any assets that you are using for the transaction so if you're borrowing money from a 401k we need the last quarter statement if they if you using your checking's in your savings account we need your last two months of your bank statements now those bank statements we need all pages so now if you know if you look at your bank statements it may say page one to ten right and if that tenth page is intentionally left blank underwriter will still need that tenth page all right so although it's blame once the once underwriter sees one of ten and we only provided nine we need to see the ten all right even if it's blank I know it's stupid but that's just the rules all right copy your valid ID if you are getting any gifts you can get gifts from a family member or a close friend we need a copy of the gift letter all right and we need to complete it loan application now if I'm your lender then obviously I'll send you that online loan application but any bank you go to you're going to have to complete a online loan application the pre-approval process let's go through it so choosing a lender very important guys and I want to say this not trying to bash any of my fellow lenders mortgage brokers bankers because that's not the purpose of my content for at least I try to encourage my entire industry but you want to make sure you don't pick a lender just because you have a quote unquote banking relationship with that Linda meaning you have your checking account there you have your savings account you really need to be interviewing the loan officer someone like myself because you're not doing business with the bank per se you're doing business with the person that's in my chair right so you have to make sure that that loan officer him or her understands your real estate goals completely because your first deal can set you up for your 10th deal but it's very important on how you execute your first deal on how this is all going to play out all right so make sure your loan officer understands your real estate goals is number one number two does your loan officer have a support team very important especially in terms right now will you have interest rates at all-time lows you want to make sure that loan officer is not a one-man band so to speak because you still want don't want your service levels to drop off just because they're busy you still want communication so make sure they have some support whether they have assistance processes these are questions you need to you need to ask you need to interview and how many years of experience that they have now this is not a knock to any of my no beast right but when you're dealing with experienced professional you makes you you have to make sure that they've really understand it goes and you have a track history of helping people accomplish their goals so most of the time obviously if you're dealing with someone who's no they may not have that experience but they may be able to give you all the time in the world that you need versus someone like myself who may be experienced alright but I always recommend work would experience loan officer because they have a track history of closing deals because the name of the game is closing ABC always be closing all right so the pre-approval process the next steps after you choose your link Linda after you discuss your goals you got to run your credit and review your income back you missed that's what I do right determine what mortgage programs you qualify for now I'm gonna keep it right there for a second determine which mortgage programs you qualify for it's very important there's a ton of programs out there but sometimes Linda letters only want to give you one option make sure that you guys are asking the lender to provide you all the options that you qualify for whether it's a conventional mortgage FHA mortgage whether its 30-year fix 20-year fix whatever it is that way you can see the full picture and always always always always remember there's a big difference between eligibility and affordability just because a bank or lender or broker will approve you it does not mean you can afford that mortgage so choose wisely banks and loan officers like myself we are in the business to make loans and to sell money we will tell you your goals we will tell you what you have to do to accomplish your goals will tell you what you qualify for we will close your loan but guess what at the end of the day you are responsible for that mortgage payment so please please guys it is very difficult one of the scary things about low interest rates is that it is so much easier to over leverage because money is cheap and now you might bite off more than you can chew because let's just say for example when the rates are higher you made like 4% right you may only be able to be pre-approved for 400,000 but now that rates are 2.75 3% you could probably get 550,000 you know I'm saying because of that dip and interest rates so the very scary thing about low interest rates is that people tend to over leverage don't over leverage guys don't bite off more than control this is probably the most important thing that I can tell you especially we got elections coming up we have so we got the the corona disease we have so many things stock market going crazy right now we have so many different things that are happening that no one knows if and when a recession will come so over leveraging is a very scary thing and that's something that I'm paying attention the tool when I'm when I'm having consultations with clients so but it's your responsibility you guys are our adults at the end of the day so you got a man and woman up and make sure you know just because the bank can approve you for a mortgage doesn't mean you can afford it so sorry for the rant but I had to go there all right so now after you discuss your terms for these programs interest rates closing costs etc now you're pre-approved then you're ready to shop all right so let's just give you I'm gonna give you a quick snapshot now of the Blom programs and with what you need to qualify for them now mind you this is not a commitment for me to lend to you all right I'm just giving you a snapshot of the programs for FHA and FHA 203k your minimum credit score is the 580 minimum downpayment is three point five percent of the purchase price the max sellers concession allowed is 6% now for those of you who don't know our sellers concession is when a seller pays agrees to pay a portion of the closing course sorry have the text home is when a settler agrees to pay a portion of a closing cost so ultimately at the end of the day let's say say if the sales price is 100k then six percent is six thousand that the seller will agreed to pay for FHA allows wonderful family on properties FHA approved condos and mixed-use properties now for those of you who don't know what makes use properties are I make shoes property is typically when a commercial property when you have residential on the top and commercial on the bottom right FHA will allow you to purchase this property as long as the total units don't total more than four total units and the residential square footage is at least 51% of the square footage of the building alright so for those of you who are running your own business maybe you have a restaurant a bar you know you have some sort of sales business and you need a brick-and-mortar location this can be ideal for you if someone if someone doesn't have that business remember renting out to commercial clients the rent is probably going to be more expensive than a residential so that can be a good opportunity for you to look for all right and they will allow you to do it with three and a half percent down your max loan amounts is based on the FHA County loan limits now only thing you have to do if you want to know which FHA County loan limits are Google FHA County loan limits for whatever county you live in and they'll tell you from 1 to 4 family what the max loan amount is FHA offers fixed and adjustable and adjustable mortgage rates and FHA is only for primary residence I wish I can zoom in on this camera right now primary residents only okay it's not for investment properties you cannot use your LLC to purchase the FHA purchase the house using an FHA loan you can't put the mortgage the FHA mortgage in your LLC no no no no no it is only for primary residents only FHA does require a one-year occupancy right so that means you have to live in that property for at least 12 months all right and then if you want to run out you can I just wanted to make that clear cuz I get a lot of questions about that let's move on to another program conventional loans you have this is the ideal programs for conventional loans where you can put down at least 3% down payment you have Fannie Mae home ready Freddie Mac home possible you need a minimum of a 620 credit score the down payment can be between 3 and 25 percent of the purchase price Mac's 3% sellers concession is allowed wonderful families and Fannie Mae approve condos are allowed the max loan amounts is based on a Fannie Mae loan limit so again just Google Fannie Mae loan limits and they'll tell you the loan limits for your area of fixed or adjustable rates interest rates primary residence second homes and investment properties are allowed with Fannie Mae proper conventional loans now let's I'm going to do a little bit of deep dive into this one so wonderful family they do allow but Fannie Mae home ready if you're buying a two to four family or duplex triplex a quad like some folks call it then you will have to put down 15% even if it's owner-occupied and if it's an investment property you have to put down 25% what Freddie Mac home possible you can potentially put down 5% on a duplex triplex or quad but with any of these programs they are income based programs so we will have to determine basically and you can just probably googled it right go to Google Freddie Mac home possible income limit and then there'll be a map that will come up and you punch in your address or the zip code or where you're looking to buy and then the system will tell you the maximum income you can make to be qualified for this loan so they use 80% of the ami Ammar stands for area median income so let's just say for example the heir the ami is $100,000 of income they only use 80,000 income to qualify so if you make $85,000 you automatically don't qualify for this program another thing I want to tell you guys about this if you're using a if you're losing a conventional loan you want to buy a multi-family if you are a first-time homebuyer conventional loans will not allow you to use rent to income to help you qualify let me repeat that if you are a first-time homebuyer conventional loans will not allow you to use potential rental income from those units to help you qualify for the mortgage the only program right now that will allow a first-time homebuyer to use rental income to help you qualify is a FHA loan all right FHA will use 75% of the gross rent to income from those apartments to help you qualify so let's just say you're collecting $1,000 a month and rent FHA we use seven hundred and fifty dollars to help you qualify now this is what I want to tell all all your first-time homebuyers these guidelines for convention we've just changed at the end of 2019 I have a video on my youtube page mg the mortgage guy you can go check that out too but basically stated these new guidelines when you see programs starting to change guidelines like this that means at some point everyone changes their guidelines to kind of match what the other one is doing and it's all based off of risk analysis so right now fh8 allows this still but conventional doesn't so with that being said that means you need to get on it and do not wait because everything about this industry about the mortgage business is all about timing all about timing the market does not wait for you okay it does not wait for you let's go into VA loans VA loans minimum 580 credit score 100% financing with no PMI 6 up to 6% South concession allow one to four family VA approved condos allowed and it's for primary residents only with a one-year requirement for primary residence again VA does not allow first-time homebuyers to use rental income to help you qualify unless you can prove that you have prior rental property management okay so in most cases if you're a first-time homebuyer you're not gonna have that type of experience so you're gonna have to be able to qualify on your own that's why for me in all honesty if someone's looking to buy a multi-family and if they can't qualify on their own income then FHA is the ideal program for that multifamily buyer alright so now we got a little bit information about your the programs you know what it takes to get pre-approved you know what documents that you need now congratulations you will now shopping with your Road sir you saw 150,000 houses you hated them all except for the one you fell in love with it down congratulations and put in an offer and now you have your in contracts now so in some states every state operates differently I'm based here in New York so in New York the process is you you put in the offer with your realtor the realtor puts in awful with the sellers realtor they accept the offer and then we do a home inspection after the home inspection is completed then the the the contracts are sent to the attorneys then the BIOS meets with the attorney the attorney the signed contract they give their down payment check then the seller the the buyers attorney sends the contract over to the seller to sell assigns and now your congratulations you have a fully executed contract and states like Georgia there's no attorneys there's the Realtors take care of this and in a lot of states you know Florida's of to state I believe I think Texas is also this sort of several states out there but they there's no attorneys it's not attorney States so now when you make your offer your offers actually use signing a contract and it's handled by your realtor and then once you make your offer you have a due diligence period some places are different you know I've seen due diligence parents be five days two weeks ten days whatever case may be all of that is negotiated between you and the real estate agents but that's the typical process so check with your local realtor to determine what in your state was that process look like but if in any event you still want to get you're gonna need a home inspection if you're in attorney estate you're gonna meet with an attorney to sign contract they're gonna and then once your contract is executed your realtor or your attorney or you the buyer are gonna now email that contract to your lender the lender is now going to finish the loan application and they're gonna disclose the loan to you meaning when they disclose alone to you they're gonna provide you all the documentation or that initial documentation it's like a hundred pages and you're gonna have to sign your life away basically and within that documentation you're gonna have what's called a loan estimate and alone does estimate the loan estimate or l-e is going to break down or your course your terms what type of loan you have your mortgage payment etc etc all right and I'm gonna break down more towards the end I'm gonna break down the CD which is the closing disclosure and that's one of the most that's the most important thing you need to see all right so after we disclose to you you Isan all of the documents then you have to pay for your appraisal so that the lender can order the appraisal appraisal fees varies from different states single families can be anywhere from 450 to 550 duplexes can be anywhere from 650 to 800 it just all depends on the sales price in your location and then the settlement agent or the attorney will order the title report now the title report consists of so many documents is is basically given a report of the house if it's a new construction home then is the title was not going to contain too much information but the sediment company or the attorney will order that title report all right so after you do all of this you choose your long print program with the lender you just discuss the loan estimate you Isan like I just said you discuss your rate locks now right now guys like I said earlier interest rates are right now at the lowest that I've ever seen it in my career if you are looking to purchase a home you need to step on it right now tax money is about to start coming in you guys need to get serious with this because I have and I've been doing this almost eighteen years I have never seen interest rates this low the money is the cheapest that has ever been take advantage do not waste time you don't have time don't be waiting for the bottom to come no one has a crystal ball no one knows when the body the bottom is gonna come right so kick it into gear and lock in all right you pay for your prelude titles ordered now your loan goes into underwriting for initial approval underwriting let's talk about underwriter the role of the mortgage underwriter they are responsible for analyzing your risk to determine if the terms of your loan are acceptable this required mortgage underwriters to look closely at an applicant's employment and financial history before approving alone now the role of an underwriter right they're looking at your income documentation and verifying everything to make a decision underwriting decisions that they can make as other approved with conditions denied suspended or final approved equal G C T C which we love all right they review appraisals to make sure the appraisals are clean they're reviewing the titles to make sure the title reports a claim that there's no issues there's no permits there's nothing that can hinder their investment so I want to really I really want to dig deep and into this right now all right when you're talking about the underwriter yeah underwriter can make or break you all right if and it's all based off how you put in the loan see the underwriters they don't know you guys a loan officers job is to get you approve and I tell people this all the time my job is to get you approved on the writers job is to decline you so to speak they have to sign off on your loan if you guys follow me you've probably heard me say pre-approval letters are garbage and the reason why I say is because a loan officer is actually giving you a pre-approval not the underwriter upfront that pre-approval letter doesn't mean anything right it's really honestly not worth the paper that is printed on all right because that loan officer can't make a underwriting decision okay so when your file goes just because you were pre-approved it does not mean that the underwriter the underwriter cannot decline you right yeah see this is live I'm in my office I got my man Manny back here throwing out the garbage right now as we speak so this is how we do it university is life right money distracted me I had to get a laugh out of that that's too serious I can't hold it no more I let me give had the business so to underwrite outright they don't have to approve that loan yeah just because your loan officer gave you that letter doesn't mean anything so it's very important that's why screw from the beginning of the process I said don't pick a lender just because you bank with them that doesn't mean anything that loan office is the person that you are working with and that person is the one who trained you yes you can go buy this home but if they're not experienced if they don't know what they're doing they can mess things up like calculate your income wrong a whole slew of things that I'm not going to get into and that's what can cause the underwriter to decline you another thing is that underwriters pretty much do a background check and I tell people this all the time was done in the dark will come out in the light right don't hide nothing from your loan officer your loan officer we don't have the technology upfront on the sales capacity to do that background check on that that that forensic diagnosis of you like the underwriting department does so they're going to know if you had pre if you don't disclose on your loan application that you own the property and it's been you had a foreclosure or short sale or bankruptcy or you have the Fortis student loans we're gonna find that out once it gets to underwrite it and the only thing you're going to do is kind of delay your own process here all right so very important if you had any derogatory credit events in the past any of the things I just named make sure you're very clear and upfront with them but upfront about it with your loan officer so that way they can tell you what to do because ultimately it's going to come out anyway and it could honestly put you behind the eight ball and get you along decline so that's really the role of the underwriter is to make sure that if they issue an issue in what's called a loan commitment that that commitment is valid in the bank won't suffer any losses behind approved me alone I hope that makes sense all right so what does the underwriter look for they're looking at your credit score they're looking at your credit history large deposits so your credit score again we went through the minimum credit score for FHA and VA 586 20 for conventional your credit history very important do you have collections account so you have charge-offs do you have repossession that you have the four to student loans are you paying your student loans more time are you student loans deferred or not you know we're looking at all of that information all right large deposits into your bank account this is a big thing people you can't be move the mattress money into your account day after you you go you try to sign a contract that doesn't work if you have my money needs to be seasoned in your bank account for at least two months all right you can't just be making large deposits large withdrawals underwriters gonna connect that if you have a lot of what they call that overdrafts right underwriting we'll look at that and they will say why you negative I gotta remember if you can't manage your personal finances if you can't manage like a cell phone bill or cable bill a car no what makes you think underwriter wants to approve you for two hundred three hundred four hundred thousand you know I'm saying our under body uses discretion just because you meet the guidelines if they're not comfortable with your loan if they feel like you're a risk because of your history they will decline you period just want to be clear about that all right another thing I wish I knew how to highlight on this for those who know me know I'm not good with this PowerPoint stuff but I'm I'll highlight it there I hope you guys see that occupancy fraud they looking for this stuff guys don't call me and tell me hey I want to buy this FHA loan I want to buy this house use the FHA loan but I live in New York and I'm buying it in Kansas like what are you talking about that's an investment property you can't you can't do that right I could proceed fraud they are looking for that trust me you don't want the FHA police knocking at your door appraisal meeting meeting the program guidelines every program has different guidelines of what they see they want to see in the appraisals underwriters looking for child support very important if you are have child support on your credit report and I've seen as so many times where what folks are behind a blue on child support now showing up as a collection they're not going to lend to you until that child support these are the in good standing or paid off so very important folks if you have also IRS debt that's not the end-all be-all as long as you are in the payment arrangement and you could document your payment arrangement with the payment arrangement from the IRS and you can show on-time payments then no no worries it's just that money is going to be included NT a debt to income ratio the same with child support if you pay child support alimony that would be included into your debt to income ratio ratio all right here's a big thing verification of employment man this should be so self-explanatory but I gotta keep always saying this don't quit your job today before closing we meaning lenders will do a verification of employment 3 within 10 days of closing I have had verifications of employments done the date of closing and guess what mr. Jones doesn't no longer works here they quit a week ago you call mr. Jones why you quit I cuz I hate my job I just wanted to use it for the house well guess what you can't get a house now you have no job don't quit your job it just doesn't make any sense um discrepancies in address again that goes to occupancy fraud you're using all these different addresses they're gonna look up these addresses and see who owns these homes right I've seen it happen where people don't disclose on a loan application but we see on the credit report come to find out you own six properties they gonna look for that stuff what's done in the dark will come on the light all right so now once you pass the underwriter stage you got your loan commitment all right you know what conditions you need conditions are just basically you know the underwriting me once won a letter explanation maybe because you've got a lot of different addresses if you got large deposits they're gonna want you to source those deposits another common condition is if you're getting gift funds you need to show to gift money coming in coming from your donor coming to you so once you meet all the conditions that the underwriter needs on that long commitment then we go into my favorite thing which is clear to close hallelujah we are clear to close we are through the writing process life is good all right now you son the next steps after you get that clear to close you sign a closing disclosure to CD you set the closing date and time and then you do you'll find a walkthrough of the house right so your closing disclosure let me bring this off for you guys all right so now your closing disclosure is very very important now on the left hand side it gives you let me see can I can i zoom this in no I won't let me zoom in well I hope you guys can see it as good on my ass so you have the closing disclosure this is kind of what it looks like on the first page it breaks down you loan them out right here and in the slides you'll have this link I'm also so that way you guys can see this on your own if you can't see it right here so it shows you interest rate it breaks down your monthly payment but let's go to page 2 page 2 because this is what a meat-and-potatoes the top part is where you have all your bank fees now when people are shopping around for a mortgage they always acts and wish your closing costs what's your closing costs what's your closing costs if you're going to shop around for mortgage you have to understand the bank only controls the bank fees and interest rates so when you shop in one lingo to another lender those are the two things you need to know what's your interest rate and what are your bank origination fees because everything else title course state taxes title insurance all of that stuff is all third party the bank does not control that all right and those fees are should be set no matter where you go so no matter if you go to bank a or bank B or Bank C those third party fees should all line up to be the same but the main thing that you guys want to go through and want to learn and know from your lender is what are your fees and what is your interest rate all right so again I'm not gonna go through this entire closing disclosure just for just because of effort of time [Music]

Channel: Earn Your Leisure

Views: 33,233

Rating: 4.9784689 out of 5

Keywords: real estate, home refi, home loans, investing, fha loans

Id: MGX_rMTapg8

Length: 35min 31sec (2131 seconds)

Published: Wed Mar 11 2020