Vanderbilt University School of Medicine

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Vanderbilt University School of Medicine April
24, 2008 Basics of Home Buying
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Participants In Student Loans
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WHY a Real Estate Presentation by a Guarantor???
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To Buy or Not To Buy ..

• Most common rule ..
• if youre going to be in the house 4-5 years,
  you probably wont be able to recoup what you
  put in to it
• TODAY, all bets are off
• buyers market
• However ..
• if, in a Transitional/PGY-I year, where you are
  NOT going to be doing your PGY-II year in the
  same place, probably not worth time/energy to buy

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Informal Basics of Buying a Home

• Decide what kind of home you desire ..
• - architectural style
• - pool
• - garage, carport, etc.
• Interior you desire .
• - floor plan
• - room sizes
• - of bedrooms baths
• -basement or slab or crawl-space
• -dining room, eat-in kitchen, etc.

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Informal Basics .. Contd

• Community/Location
• Location
• Location
• city/county street guide
• drive by _at_ various times of the day/weekend
• Convenience to Employment
• Transportation Issues
• Schools and/or daycare
• Recreational facilities
• Police/Fire Protection

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Informal Basics .. Contd

• General Appearance of Other Properties in the
  area
• for future sellability
• REMEMBER .
• On the rise buy low sell high
• Upscale buy somewhat high sell higher
• Tony . buy premium sell premium

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Informal Basics .. Contd

• A real fixer-upper???
• OR
• Needs minor work???
• OR
• Brand new home???

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Informal Basics .. Contd

• Calculate YOUR budget ..
• what are YOU (spouse/significant other)
  comfortable with, given other financial
  obligations?
• if you cant sleep because you keep
  thinking about THE COST, its probably too
  much!!!

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Formal Process

• Pre-approval by (a) reputable lender(s)
• CREDIT REPORT/SCORE!!!!!!!!
• What is your (total) income???
• copy of your residency contract
• federal tax returns
• pay stubs
• Debt-to-income (usually excludes
  educational debt IF proof of deferment)

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Factors influencing your credit score
Types of credit used
Payment history
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New credit
1o
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Length of Credit History
Amounts owed (debt-to-credit limit)
Source myfico.com
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U.S. FICO score ranges Where are you?
Source myfico.com
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30 year fixed mortgage 300,000
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30 year fixed mortgage 150,000
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Formal Process

• Find a Real Estate Agent that you trust
• referrals from resident/housestaff where
  youre going
• local (TN) agent can refer to an agent (who is
  familiar with resident/MD lifestyle)
• are they listening to what you are saying??
• are they working for you or with you?
• are they responsive?
• do they explain things?
• credentials?
• you can fire them

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Formal Process

• They will do an in-depth needs analysis
• takes into consideration all the things youve
  already identified
• they can/should do homework for you
• they SHOULD not steer you away/toward a
  specific area
• BUT, dont let anyone talk you into a house/
  youre not comfortable with

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Formal Process

• Buyer Beware ..
• Are there covenants and/or bylaws?
• can restrict use of land, i.e., no cars in
  front driveway, no fences, no alcoholic
  parties, etc.
• be sure to ask for receive at/before
  closing
• there can be additional monthly/yearly fees
• Is disclosure statement available?
• should be available when viewing the
  home/condo, etc., usually on kitchen counter
• if not available, make sure to receive before
  making an offer

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Formal Process

• Making an offer
• Time for earnest money
• Dont be afraid to write an offer above or
  below the asking offer what it is worth to
  you
• Always, always, always, have an inspection
• reputable inspectors are members of ASHI
  (bonded)
• may want to have inspection for radon,
  environmental issues, etc.
• if inspector finds things of concern and
  seller does not make concessions, you can
  usually get out of contract
• Set a time-limit for seller to respond to your
  offer, i.e., 24/48/72 hours
• Title company should run a title search
• checks for liens against seller and/or
  contractor(s)

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Formal Process

• Closing day
• Request closing cost statement 24/48 hours
  prior to closing so you can review
• Be prepared for Buyers remorse
• it happens to everyone BUT, if youve done
  your homework, dont worry
• Do a walk-thru prior to closing
• Show up, early, with all necessary items from
  your closing checklist

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Average Closing Costs for Buyers .. (may vary by
state)

• REAL ESTATE EXPENSE
• Sale Price of Home _________________
• Broker/Agent Administration Fee ________________
  _
• BUYER OUT-OF-POCKET EXPENSES
• Earnest (reduction off sale
  price) _________________
• Building/termite Inspection _________________
• Lead Base Paint Testing _________________
• Radon Gas Testing _________________
• Home Owners Insurance Premium _________________
• City Ordinance Inspections (if applicable) _____
  ____________
• Down Payment _________________

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Average Closing Costs for Buyers ..

• LENDER CLOSING COSTS
• Loan Origination Fee Points _________________
  __
• Appraisal Fee ___________________
• Credit Report ___________________
• PMI (Private Mortgage Insurance) _______________
  ____
• Mortgage Insurance Escrow ___________________
• Home Owners Insurance Escrow ___________________
  
• Property Taxes Escrow ___________________
• Lender Inspection Fee ___________________

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Title Closing Costs .

• FLOOD LETTER
• Survey ____________________
• Mortgage Title Policy ____________________
• Owners Title Policy ____________________
• Mortgage Interest Adjustment __________________
  __
• Closing Fees ____________________
• Recording Fees ____________________
• Tax Servicing Fees ____________________
• Notary Fees ____________________
• Federal Express (if needed) ___________________
  _
• Request a good faith estimate from Lender for
  estimated costs!!!
• This is all negotiable seller may be willing to
  pay some or all of costs!!!

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Important Definitions ..

• Adjusted Rate Mortgage (ARM) mortgage with
  interest rate that changes over time in line with
  movements in the index also referred to as
  AMLs/adjustable mortgage loans or VRMs/variable
  rate mortgages
• Annual Percentage Rate (APR) total finance
  charge (interest, loan fees, points, etc.)
  expressed as a percentage of the loan amount
• Appraisal estimate of the propertys value
• Balloon Payment lump sum principal payment due
  at the end of some mortgages or other long-term
  loans
• Closing Statement financial disclosure
  statement that accounts for all of the funds
  received expected at the closing, including
  deposits for taxes, hazard insurance, mortgage
  insurance
• Comparables/comps evaluation of home prices in
  a particular area

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Important Definitions ..

• Contingency condition that must be satisfied
  before a contract is binding. For instance, a
  sales agreement may be contingent upon the buyer
  obtaining financing, etc.
• Debt Ratios (housing ratio) comparison of a
  buyers housing costs to his/her gross or net
  effective income (total debt ratio) the
  comparison of a buyers total long-term debt to
  his/her gross or net effective income
• Disclosure Statement listing of any/all issues
  that seller is aware of
• Earnest Money portion of the down payment
  delivered to the seller or escrow agent by the
  purchaser with a written offer as evidence of
  good faith
• Fannie Mae Federal National Mortgage
  Association/FNMA privately owned corporation
  created by Congress to support the secondary
  mortgage market. It purchases sells
  residential mortgages insured by the FHA or
  guaranteed by the VA, as well as conventional
  home mortgages

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Important Definitions ..

• FHA Loan a loan insured by the Federal Housing
  Administration (of HUD)
• Fixed Rate Mortgage conventional loan with a
  single interest rate for the life of the loan
• FSBO for sale by owner
• Gift Letter - letter from a relative stating
  that an amount will be gifted to a buyer, and
  that said amount is not to be repaid
• Ginnie Mae Government National Mortgage
  Association/GNMA governmental part of the
  secondary market that deals primarily in
  recycling VA and FHA mortgages, particularly
  those that are highly leveraged
• Homeowners Hazard Insurance required by the
  lender. Paid receipt for the 1st years premium
  are generally required to be in the lenders
  possession at least ten (10) days prior to
  closing.

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Important Definitions

• Joint Tenancy equal undivided ownership of
  property by two or more persons. Upon death of
  any owner, the survivors take the decedents
  interest in the property
• Tenancy in Common type of joint ownership of
  property by two or more persons with no right of
  survivorship
• Jumbo Loans mortgage loans that exceed loan
  amounts acceptable for sale in the secondary
  market these jumbos must be packaged and sold
  differently to investors and, therefore, have
  separate underwriting guidelines
• Lien legal hold or claim on property as
  security for a debt or charge
• Mortgage Banker where the is
• Mortgage Broker shops for lenders (hidden fees)

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Important Definitions

• Preapproval the buyer has consulted with a
  lender of choice and has provided the necessary
  information to complete the process, including
  social security number. A credit report is run
  and income information is provided and verified.
  Some lenders provide this service at no charge.
• Prequalification potential buyer has spoken to
  a lender of choice and the lender states that the
  buyer can purchase a home within a certain price
  range. This is NOT the same as preapproval, as
  the credit report has not been reviewed.
• Prepayment Penalty fee charged to a borrower
  who pays a loan before it is due. Not allowed
  for FHA or VA loans
• Primate Mortgage Insurance (PMI) insurance
  written by a private company protecting the
  lender against loss if the borrower defaults on
  the mortgage (required if you finance more than
  80 of value of the home). It can be dropped
  when you either pay down 20 of the loan value or
  when the value of the house increases in value
  (through appraisal).
• VA Loans loan, made by a private lender, which
  is partially guaranteed by the Veterans
  Administration

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REMEMBER

• If it sounds too good to be true . it
  probably is!!!!

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Helpful Websites .

• www.realtor.com
• www.trulia.com
• www.zillo.com
• www.cbgundaker.com
• www.bankrate.com
• www.ashi.org

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