HomeOwner

							  USDA, RURAL
 DEVELOPMENT

  HOME BUYER
EDUCATION CLASS
               Agenda
I.    Why Are You Here?

II.   Renting vs. Buying

III. Preparing for Home Ownership
          A. Up-Front -- Closing Costs
          B. On-Going Costs
          C. Hidden Costs
          D. Repayment Ability -
           Qualifying Ratios
           Agenda (cont.)
IV. Credit Reports

V.   Shopping for a Home
     A. New Vs. Used
      B. Selecting a Realtor or a Builder

VI. Home Ownership Responsibility

VII. RD Loans & Application Process
Up Front,
On Going
and
Hidden Costs
Up-Front Costs will include:
 Down Payment        Budget
                        Movers
 Various Closing
  Costs

 Moving Costs


 Settling in Costs
On-Going and Hidden Costs
 Monthly Mortgage
  Principal & Interest
 Real Estate Taxes
   (1 / 12 per month to
  Escrow)
 Homeowners
  Insurance
  (1 / 12 per month to
  Escrow)
On-Going and Hidden Costs
                Maintenance
               (A/C, wiring,
                 plumbing, roof,
                 yard, appliances,
                 painting, floor
                 cover, screens,
                 windows, doors,
                 driveway, etc.)
On-Going and Hidden Costs
 Homeowners
 Association Fee
  (if applicable)

 Utilities -
  (deposits, monthly
  payment for use
  electric, water,
  sewer, telephone,
  cable, etc.
Remember:

      AS A
      HOMEOWNER,
      YOU ARE NOW
      RESPONSIBLE
      FOR ALL
      MAINTENANCE
      EXPENSES
    Available Cash and Assets:
List all of your sources of cash and other
assets, then decide how much you want to
apply toward up-front housing costs such as
the down payment and closing costs.

Remember, you will want to reserve some of
your assets for financial security.

It is not a good idea to totally deplete your
savings to purchase a home.
Amount Available for Up-Front
       Housing Costs
 Checking Account $___________

 Savings Account   $___________

 Mutual Funds,
 Stocks and Bonds $___________

 Cash Value of Live
 Insurance Policy $___________

 Cash Gifts from   $___________
 Relatives
Amount Available for Up-Front
       Housing Costs
 Value of Property
 Owned               $___________

 Other Assets        $___________



 Amount Available
 For Up-Front
 Housing Costs       $___________
 How You Can Increase Your
     Borrowing Power!
Reduce existing debts (charge
 cards, installment loans, etc.)
Wait until income increases
 (raises, job changes, part-time
 jobs, etc)
Put off “Big Ticket” items (car,
 furniture, vacations)
Qualifying Ratio or Housing
      Expense Ratio
 “Sample Qualifying Ratio:”


House Payment (PITI)   PITI plus Existing debt
Gross Monthly Income   Gross Monthly Income



    29%                   41%
  Ten Basic Rules of Money
        Management
1. PLAN - Plan for the
   future, major
   purchases and
   periodic expenses.

2. SET FINANCIAL
   GOALS -
   Determine short,
   mid and long range
   financial goals
  Ten Basic Rules of Money
        Management
3. KNOW YOUR
   FINANCIAL
   SITUATION -
   Determine monthly
   living expenses and
   monthly debt
   payments. Compare
   out-going to
   monthly net income.
   Be aware of your
   total debt.
  Ten Basic Rules of Money
        Management
4. Develop A
  Realistic Budget -
  Follow your budget
  as closely as
  possible. Evaluate
  your budget.
  Compare actual
  expenses with
  planned expenses,
  this should include
  “MAD MONEY”
  Ten Basic Rules of Money
        Management
 5. Don’t Allow
 Expenses to
 Exceed Income -
 Avoid paying only
 the minimum on
 your charge cards.
 Don’t charge more
 every month than
 you are repaying to
 your creditors.
  Ten Basic Rules of Money
        Management
 6. Save - Save for
 periodic expenses,
 such as car and
 home maintenance.
 Save 5 - 10 % of
 your net income.
 Accumulate 3 to 6
 months salary in an
 emergency fund.
   Ten Basic Rules of Money
         Management
 7. Pay Your Bills
  On Time - Maintain
  a good credit rating.
  If you are unable to
  pay your bills as
  agreed, contact your
  creditors and explain
  your situation.
  Contact Consumer
  Credit Counseling for
  professional advice.
  Ten Basic Rules of Money
        Management
 8. Distinguish the
 Difference
 Between Wants
 and Needs - Take
 care of your needs
 first. Money
 should be spent for   VS
 wants only after
 needs have been
 met.
   Ten Basic Rules of Money
         Management
 9. Use Credit
  Wisely - Use credit
  for safety,
  convenience, and
  planned purchases.
  Determine the total
  you can comfortably
  afford to purchase on
  credit. Don’t allow
  your credit payments
  to exceed 20% of
  your net income.
  Ten Basic Rules of Money
        Management
 10. Keep a
 Record of Daily
                     Spending
 Expenditures - Be
 aware of where      Diary
 your money is
 going. Use a
 spending diary to
 assist you in
 identifying areas
 where adjustments
 need to be made.
 Indicators of Unacceptable
           Credit
 No Credit History
 Payments on any
  account which was
  delinquent for
  more than 30 days
  on two or more
  occasions within a
  12 month period
 A foreclosure that
  has been completed
  within the last 36
  months.
 Indicators of Unacceptable
           Credit
 An outstanding
 Internal Revenue
 Service tax lien or
 any other
 outstanding tax
 liens with no
 satisfactory
 arrangement for
 payment.
 Indicators of Unacceptable
           Credit

 Two or more rent
 payments paid 30
 or more days late
 within the last 2
 years.
 Indicators of Unacceptable
           Credit
 Outstanding collection
  accounts with a record
  of irregular payments
  with no satisfactory
  arrangements for
  repayment, or
  collection accounts
  that were paid in full
  within the last 6
  months, unless the
  applicant had been
  making regular
  payments previously.
 Indicators of Unacceptable
           Credit

                         PAID IN
 Non-Agency debts        FULL
 written off within
 the last 36 months,
 unless the debt was
 paid in full at least
 12 months ago.
 Indicators of Unacceptable
           Credit
 Agency debts that
  were debt settled
  within the past 36
  months, or are
  being considered
  for debt
  settlement.
 Delinquency on
  Federal debt.
 Indicators of Unacceptable
           Credit
 A court-created or
 court-affirmed
 obligation or
 judgment caused
 by nonpayment
 that is currently
 outstanding or has
 been outstanding
 within the last 12
 months, except:
Indicators of Unacceptable Credit
 A bankruptcy in
 which:

 Debts were
 discharged more
 than 36 months
 prior to the date
 of application; or
 Indicators of Unacceptable
           Credit
 Where an applicant
  successfully
  completed a
  bankruptcy debt
  restructuring plan
  and has
  demonstrated a
  willingness to meet
  obligations when
  due for the 12
  months prior to the
  date of application.
 Indicators of Unacceptable
           Credit

 A judgment
 satisfied more than
 12 months before
 the date of
 application.
 Indicators of Unacceptable
           Credit
An applicant with an outstanding
judgment obtained by the United
States in a Federal court, other
than the United States Tax Court,
is not eligible for a Section 502 loan.

This requirement is statutory and
cannot be waived.
 Shopping for a Home?

 The following questions should
serve as a partial checklist for
 the prospective home buyer:
        Outside the Home:
 Are adequate
  shopping facilities
  close by?
 Are Churches
  available and
  convenient
 Is the community
  well planned?
 Are police and fire
  protection
  adequate
       Outside the Home:
 Are schools located
  to suit you?
 Is a hospital or
  medical center
  nearby?
 Are recreational
  facilities nearby?
 Are trash and
  garbage disposal
  arrangements
  adequate or frequent
  enough?
        Outside the Home
 Are there adequate
  parking spaces or
  garage facilities for
  your needs?
 Is public
  transportation
  adequate and handy?
 Is there a reliable
  and drinkable source
  of water with
  adequate pressure?
         Outside the Home
 Is the sanitary
  sewage disposal
  system reliable and
  adequate?
 What is the view out
  the front door? Are
  there eyesores? Do
  the neighbors appear
  to take good care of
  their properties?
        Outside the Home
 What is the traffic
  like on neighborhood
  streets? A street
  empty of cars on
  Sunday afternoon
  may be clogged with
  traffic on weekday
  rush hours. If the
  streets are busy, are
  there sidewalks?
        Outside the Home
 Is the land well
  drained?
 Are lots or units
  arranged to suit
  your family
  lifestyle?
 Has proper
  landscaping been
  done to prevent
  erosion?
Inside the Home
         Do walls seem
          sound and smooth,
          floors firm and
          level, carpentry
          well fitted and
          joined?

         Is lighting good
          during both day
          and night?
Inside the Home

         Are rooms large
         enough to
         accommodate your
         furniture and is
         there sufficient
         wall space for
         arranging
         furniture?
Inside the Home
         Does the kitchen
          have good lighting
          and ventilation? Are
          there enough outlets
          for plugging in all
          your kitchen
          appliances?
         Are there ample
          cabinets and counter
          work space for your
          family needs?
Inside the Home
         Do doors, windows
         and drawers work
         easily and safely?

         Does plumbing work
         smoothly and
         quietly with
         adequate water
         pressure and free-
         flowing drains?
Inside the Home
         Is heating and
          cooling and
          ventilating equipment
          satisfactory?
         Are there enough
          electrical outlets
          well arranged and
          sufficient amperage
          for your electrical
          equipment?
Inside the Home


         Are temperature
         controls located in
         safe and convenient
         places?
RURAL DEVELOPMENT
    LOANS

All homes must be
located in a rural
       area
   502 Guaranteed Loans
*30 year fixed rate. * Not subsidized.
 *Low to Moderate income group. *Can be
 either new construction or existing home.
 *Applicants should meet qualifying ratios
 of 29% PITI and 41% MOTI. *May
 qualify for “SHIP” down payment
 assistance as needed. *Apply directly
 with lender. *All applicants eligible for
 guaranteed loan who apply directly with
 Rural Development will be referred to a
 lender.
       502 Direct Loans:
   All direct loan programs
 Apply directly with
                           All applicants will
  Rural Development
                            be reviewed for
 33 year term
                            participation with a
 Fixed interest rate       local lender.
 Qualifying ratios for    All applicants will
  low income:
                            be considered for
 33% PITI 41%               “SHIP” down
  MOTI                      payment assistance
 Qualifying ratios for     as needed.
  very low income:
                           Must have good
29% PITI 41% MOTI
                            credit.
     502 New Construction
 May use any licensed
  contractor.
 Rural Development
  does maintain a list
  of participating
  contractors.
 All new construction
  loans carry a one
  year builders
  warranty
502 Existing Home
          No Warranty




          Home must meet
          the HUD Handbook
          Guidelines
      502 REO PROPERTY
 An existing home
 which Rural
 Development has
 taken back through
 foreclosure.
502 Assumption/Transfer
            An existing Rural
             Development
             borrower who
             wishes to sell their
             home.
            No Warranty
            All homes must be
             in condition to
             meet HUD
             Handbook
             Guidelines
    QUESTIONS?

 RURAL DEVELOPMENT
     863-533-2051 EXT. 4
http://www.rurdev.usda.gov/fl