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Hines Financial Consulting Company

Capacity

  • Your ability to pay back a loan
  • Measures debt-to-income ratio

Capacity

Includes:

- Income

- Loans

- Savings / Savings Accounts

- Debts

- Other Expenses

Relation to You:

- $65,000 Annual Salary

- $300 Monthly Car Payment

Relation to you

Your Debt-To-Income Ratio:

$300 per month = $3,600 annually

$3,600 / $65,000 = 5.5% (about 6%)

- Good Percentage

Capital

Capital

Includes Cash Reserves Such As:

- Savings

- Funds

- Individual Retirement Accounts (IRA)

- Stocks

- Down Payments

- Gifts

Collateral

Value of the property and other possessions that you're pledging as security against the loan.

Collateral

In the case of a mortgage, the collateral is the home that you're buying

An appraisal will be done to compare the fair market value to the mortgage amount

Relation To You:

- Protects you from overpaying on the value of a house

- Protects the lender's financial interest

Relation to You

Credit

Lenders check your credit score and history to assess your record of paying bills and other debts on time

Credit

Credit score dictates the interest rate you get and how much of a down payment will be required

It is a good idea to monitor your credit so that you will be in a good position to buy a house in the future

Types of Mortgage

Before you begin searching for the right home to buy, you'll need to search for the right kind of mortgage to help make the purchase

Types of

Mortgage

Conventional Loans

Not backed by the federal government, and they come in two types: conforming and non conforming

Conventional Loans

Pros of Conventional Loans

- Borrowing costs tend to be lower

- Can pay as little as 3% down

- Sellers can contribute to closing costs

Pros

Cons

- Can have a minimum credit score of 620, however a much higher down payment will accompany that score

- Significant documentation required to verify income, assets, down payment, and employment

Cons

Typical Customer:

If you have a strong credit score and can afford to make a sizable down payment, a conventional loan is your best pick.

Who is this for?

Government Insured:

The US Government isn't a mortgage lender, but it does help Americans become homeowners.

Government Insured

A Few Government Agencies that Help with Mortgages

- Federal Housing Administration (FHA)

- US Department of Agriculture (USDA)

FHA and USDA Loans:

FHA / USDA

FHA

Convenient for those who:

- Don't have large down payment saved up

- Low Credit

USDA

Convenient for:

- Moderate to low-income borrowers

- Those looking to buy in a rural area

- Unsaved Down Payment Costs (Most do not require a down payment)

Pros and Cons of Government Insured Loans

Pros

- Credit requirements are relaxed

- Don't need a large down payment

- Available to repeat and first-time buyers

Pros and Cons

Cons

- Loan limits are lower

- Can be location restrictions

- Could have more fees involved

Typical Customer

Convenient for those:

- Who can not put a huge amount of money down

- Buying a home for the first time

Who should get one?

My Recommendation

I'm prepared to offer you 3 options today based on the figures below.

My Recommendation

- Annual Income: $65,000

- Monthly Income (before taxes): $5416.67

- Monthly Tax Rate: 25%, or $1,354.17

- Monthly Income (after taxes): $4,602.50

- Monthly Income (after $300 car payment): $3,762.50

I recommend a maximum monthly payment of $2,000, which should bring your total mortgage amount to $285,000.

*This number can change based on new information*

Your FHA Loan

- Budget of $285,000

- Down Payment of 3.5%: $9,975

- Total Mortgage: $275,025

Much more freedom and choice when looking for a place to live!

Option 1 - FHA Loan

Your USDA Loan:

Option 2 - USDA Loan

- Total Budget: $285,000

- Down Payment not required!

- Total Mortgage: $285,000

Why USDA?

- No major down payment

- Saving money up front

- House might not be in a location allowed by USDA.

Current Condition

Option 3 - Current Condition

- Stay where you currently are

- Begin to save monthly

- Monitor your credit

Reevaluate in a year and see where you're at. You may be able to afford the home of your dreams!

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