2. OWNING VS RENTING
2
Home loan payments are now
often less than rent payments.
If you are planning to stay in your
home long-term, owning a home
may be more rewarding.
OWN
It’s your choice to rent or own, but buying a home for yourself often beats
buying one for your landlord.
RENT
If you don’t intend to stay in your
home long-term, need extra
mobility or are unsure about
employment, renting is probably
a good option for you.
3. OWNING VS RENTING
3
OWN
Your mortgage payment is often tax deductible.*
Your home is a significant investment.
A fixed rate mortgage payment of principal and
interest will not increase.
Customize your home to your style and needs.
Backyard for pets and family entertainment.
Sense of pride and ownership.
RENT
Rent is not tax deductible.
Monthly payments go to the landlord.
Rental payments can go up at anytime.
No ability to alter or improve upon your space.
Restrictions on how you can use your space.
The space will always belong to someone else.
*Check with your tax advisor.
4. OWNING VS RENTING
4
If you can afford to rent... You can probably afford to own!
Some people say mortgage loans are impossible to obtain without perfect credit and at least
20% down, but really there are three basic factors for qualifying for a home loan:
Exceptions will exist, but the home loan process is not impossible. For those who work and
pay their bills, there may not be a whole lot standing in the way of homeownership.
Income
If you have a job or steady source of income and are able to pay your rent on time each month,
you are already doing better than you may have thought.
Assets
Not all home loans require a 20% down payment. There are actually many programs that will work
with 3%, 3.5%, 5% and in some cases, even 0% down. Additionally, closing costs can sometimes
be paid by lenders, sellers or come from gifts or grants.
Credit
If you pay your bills on time and have avoided major issues like bankruptcy, foreclosure, short
sales and judgments, your credit is more than likely in good shape.
5. OWNING VS RENTING
5
Need more reasons?
Buying builds equity.
On most mortgage loans, you pay down the principal balance every time you make a payment. This
increases each month through the entire life of the loan as your loan balance decreases. To make a
fair comparison, make sure to subtract principal paid from a home loan payment vs. the cost of
renting that same property.
Home values may rise over time.
Increasing home value is not guaranteed; however, if we use the last 50 years as a guide, values
have typically risen at a pace above inflation.
It’s more than just money!
Families become rooted in a neighborhood, school district and community. Homeowners have the
freedom to choose paint colors and remodel their homes as they wish. Pets are always welcomed.
Intangibles like these often formulate the most valuable returns.
6. FIRST TIME HOME BUYERS
6
Ready to buy your first home?
Buying your first home can be a bit overwhelming, but Pacific Union Financial, LLC
is here to help. We make sure that our customers have the tools and support team
necessary to make the best decision for their financial situation.
In this presentation, we will cover everything you need to know before
you buy your first home.
7. CREDIT SCORE
7
Get your credit ready!
Buying a home may be one of the biggest
financial decisions you ever make. It’s
important to be prepared and that starts with
your credit.
First, obtain a copy of your credit report.
Check your credit report at www.annualcreditreport.com,
identify any discrepancies and fix them.
Did you know you are entitled to one free copy of your
credit report every 12 months from each of the three
nationwide credit reporting companies?
8. CREDIT SCORE
8
Your credit score and the factors that influence it
Understanding the makeup of your credit score is the first step toward
managing and improving it.
As you may already know, payment history is the most influential component of your credit
score, followed closely by the amounts you owe. To lesser degrees, the length of time you’ve
utilized credit, the number of new accounts or inquiries you have, and the various types of credit
accounts you hold will also impact your credit score. Overall credit reporting looks at how these
factors relate to each other in the context of your personal usage.
9. CREDIT SCORE
9
10 Tips to establish and maintain a healthy credit score
1. Make all your payments on time
Stay current on all of your bills for at least 12 months prior to applying for a loan.
2. Have an emergency account to pay for unexpected expenses
Avoid late payments or the excessive use of credit by maintaining an emergency cash “cushion” to
pay for unexpected expenses.
3. Avoid excessive requests or inquiries for credit
If you shop for credit, do so in the shortest time period possible. This minimizes the inquiries counted
against you. Excessive inquiries can lower your score and result in a higher interest rate.
4. Do not open new credit cards just to save on a purchase
Opening new accounts can lower your credit score and too many payments can be difficult to manage.
Remember that saving 10% on a $200 lawn mower means little if it costs you even just fractionally
more on a $200,000 home loan.
5. Do not open new accounts or transfer balances for an introductory rate
While these offers could possibly lower your score, they often have traps. Instead of opening a new
account, use the offer to leverage a lower rate from your existing card company.
6. Do not close old accounts
If you have a good record of payments on old accounts, these will benefit your credit score. Use them
occasionally and conservatively. Doing this will keep them active and contribute toward a good score.
10. CREDIT SCORE
10
7. Don’t ‘max out’ your credit cards
Keeping a high credit line and a low balance is best. Credit utilization ratios measure this
relationship and lower is better.
8. Do not be afraid to use credit
If you don’t use credit, you will have no score. No score can be just as bad as a low one.
9. Maintain a variety of account types
A combination of revolving, installment and secured financing along with excellent payment will result in
a higher score. This doesn’t mean you should run out and open an account just to have diversity, as this
is the least influential factor.
10. Borrow only what you can afford
This requires knowing what you can afford, which leads to the next section of this presentation: Budget!
11. BUDGET
11
Know what you can afford!
When looking for a new home, make your search more effective by knowing
how much you can afford.
Calculate the overall monthly payments and include additional costs like homeowners insurance,
utilities, property taxes, insurance premiums, homeowners association dues, etc. Looking at your
overall budget allows you to see how a mortgage payment will fit in.
Knowing what you can afford before looking at any homes will also
save you the disappointment that can come from falling in love
with a home that’s out of reach.
12. BUDGET
12
How much cash will
you need?
Knowing how much cash you’ll
need and making sure the funds
are consolidated into one account
will make your home buying
experience much easier.
Combine all funds needed for
down payment and closing into
one account 60 to 90 days prior
to your application.
13. BUDGET
13
Down payments - How much is enough?
While many people believe a 20% down payment is required, or simply
the most prudent, other options are actually available.
If you don’t have enough money for a significant down payment, it may not be a problem.
There are a variety of loan programs offered at various credit levels that could be an
option for you and your family.
Pacific Union has mortgage loan products that offer a 3%,
3.5% and 5% down payment or even a 0 down payment option
for military families.
However, it’s important to remember that most loan options that offer below 20% down
often have additional insurance premiums that will increase your monthly payment.
14. AGENT
14
Work with a local agent.
Decide the neighborhood in which you’d
like most to own a home, and then reach
out to a real estate agent that lives and
works local to that area.
Ensure the agent has worked extensively in that
area. Ask how many homes they have helped sell
in your desired neighborhood. Find out if they
have insight to local matters like schools, taxes,
city ordinances, new housing developments,
businesses, etc.
Real estate agents can offer valuable support during your home buying
process. Who better to help you find your home than someone who lives
and works in that community?
15. LOCATION
15
Know where you want to be!
Learn about the neighborhood before
you make an offer to buy.
Visit the neighborhood at various times,
including rush hour, weekends, holidays, etc.
Talk to would-be neighbors about the
neighborhood and the people that live there.
See the schools, shops and services before you
start negotiating.
16. PROPERTY TYPE
16
What kind of property do you want?
Single family, condo, townhome, country home, new construction.
There are many types of homes to choose from. Do your research beforehand to help narrow
your search. Decide which is best for you and your family and define your search accordingly.
17. Confidential & Proprietary
PRE-APPROVAL
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Obtain a valid pre-approval before you make an offer.
Pre-approval is viewed favorably by potential sellers when you start home shopping.
Pre-approvals include document verification, a credit check and automated or actual underwriting. If all is
in order, you will receive the equivalent of a loan commitment that’s subject to a contract, appraisal and
title work. The lender will look at your bank statements, credit score and other information to determine
your financial capability.
Your pre-approval gives you and the seller confidence in your ability to close the deal
once you find the perfect home.
18. APPLICATION
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Plan ahead for the perfect mortgage application.
Preparing in advance will save you time and trouble once you’ve started making offers.
1. INCOME
You will need to provide your last two paystubs along with your W2s and Federal tax returns for the last
two years (include all schedules). State returns will not be needed. If you are self-employed, ask your
loan officer for the additional documentation requirements. If you receive bonuses, commissions or have
changed your job or position, be sure to tell your loan officer.
2. STATEMENTS
Save all pages of your asset statements, even
if some are blank or are just advertisements.
3. DEPOSITS
Make copies of checks and deposit slips. This will
prove they are not borrowed money. Deposit
checks individually and don’t deposit cash unless
you have clear proof of the source.
19. APPLICATION
19
4. LIQUIDATION
If you are going to sell stocks, bonds, investments or borrow against a retirement account, do it now.
Cashing out now may cost you a few dollars in additional gains, but it also protects against losses.
5. CURRENT HOUSING
If you are renting, show 12 months of canceled checks demonstrating on-time payments and/or written
verification from your management company. If you live with family, you might need a letter stating
you live rent-free.
6. CREDIT
Check your credit report annually. Identify any erroneous information now and consult with your loan
officer for the correct action to take. If you co-signed a loan or are being reimbursed for a loan that’s in
your name, you’ll need at least six months of checks to exclude it. Avoid new credit and inquiries.
7. EMPLOYMENT STABILITY
Ideally, you’ll have two years or more with your current employer. Consult with your loan officer before
changing employers, position or method of compensation.
8. HELP IN ADVANCE
Your loan officer can help you now, too, not just once you’ve found a home. Contact your loan officer
with any questions you may have!
20. HOME LOANS
20
Choose the right loan
Each situation is different when it comes
to qualifying for a home loan.
If you can afford the payments, go with a
15-year loan. If you can’t afford them, go with a
20-year or 30-year loan and make extra
payments toward your principal when you can.
An ARM (Adjustable Rate Mortgage) can be a
good option for borrowers who will pay off their
loan before it adjusts, but keep in mind the risk
of interest rates rising.
Your Pacific Union loan officer will make
sure that you have the tools and support
team necessary to make the best
decision for your financial situation.
21. MORTGAGE DOs AND DON’Ts
21
DO KEEP ALL RECORDS AVAILABLE AND IN GOOD ORDER
Keep your financial records close at hand in case updates are requested.
INCOME AND ASSETS
Be aware that underwriters usually verify your income and tax documents through
employer(s), CPA, and/or IRS tax transcripts. Hold on to new paystubs as received and
continue saving incoming account statements.
GIFTS
If you’re receiving any gift money from relatives, they’ll need to sign a gift letter (we’ll
provide it) and an account statement identifying the source, which must be “seasoned” funds.
CURRENT RESIDENCE
If you’re renting, continue paying your rent on time and save proof of payment.
DO KEEP YOUR CREDIT SHINING
Again, continue making payments on time! Your credit report may be pulled again and any negative
change to your score could cause you to lose your approval and your home.
DO UNDERSTAND THAT THINGS HAVE CHANGED
Underwriters require more documentation than in the past. Even if requests seem silly, intrusive or
unnecessary, please remember that if they didn’t need it, they wouldn’t ask.
22. MORTGAGE DOs AND DON’Ts
22
DON’T APPLY FOR NEW CREDIT
Changes in credit can cause delays, change the terms of your financing or even prevent closing.
If you must open a new account (or even borrow against retirement funds), please consult with
your loan officer first.
DON’T CHANGE JOBS DURING THE PROCESS
Probationary periods, career or even status changes (such as from salaried to a commissioned
position, leave of absence or new bonus structure) can be subject to very strict rules.
DON’T MAKE UNDOCUMENTED DEPOSITS
Primarily large, but sometimes even small deposits, must be sourced unless they are identified.
Make copies of checks and deposits slips. Keep your deposits separate and small. Avoid
depositing cash.
DON’T WAIT TO LIQUIDATE FUNDS FROM STOCK OR RETIREMENT ACCOUNTS
If you need to sell investments, do it now and document the transaction. Don’t take the risk that
the market could move against you, leaving you short of funds to close.
DON’T EVER BE AFRAID TO ASK QUESTIONS
If you’re uncertain about what you need or what you should do, your loan officer is there to help
you through the process, even long before you intend to buy.
