On January 24, members of Freestar Financial attended a Mortgage Mixer Event. The Vice President of Lending, Jennifer Martines and Realtor, Peter Toering presented the importance of having a good credit score and the documentation you will need in order to start a mortgage application.

1. Home Buying 101

2. JENNIFER MARTINES
Vice President of Lending
• 9+ years in the credit union industry
• Graduated from Michigan State University with a
Bachelor of Science degree in Psychology.
• Began my career in credit unions in 2007 as a part
time teller and have held several different
positions within the credit union.
• Active in the credit union advocacy movement
speaking on behalf of credit unions and our
members to educate lawmakers on the legislative
issues that will have the biggest impacts on our
organizations and our membership.

3. AGENDA
• Getting Started
• Credit History
• Budget
• Product Overview
• Prequalifications

4. GETTING STARTED
Before you apply for a mortgage:
• Know what your credit history looks like
• Look at your budget
– What can you afford for a monthly mortgage payment?
• Down payment
– How much will you put down to purchase a home?
• Mortgage Products
– Fixed or Adjustable Rate?
– What type of term?

5. CREDIT HISTORY

6. CREDIT HISTORY
It is important to know what your credit history
looks like:
• A credit score is like a grade at school
– Excellent credit is an “A”; Poor credit is an “E”
• Your credit score dictates the rate you get
• It also affects your eligibility to obtain a mortgage
– Most mortgage programs require a credit score of 620 and above

7. HOW MUCH DO YOU PAY FOR BAD
REPAY HISTORY?
$100,000 home loan paid over 30 years:
CREDIT STATUS RATE PAYMENT
COST OF BAD
CREDIT
Perfect 4.25% $495.00 $0.00
Mildly Damaged 5.50% $569.00 $27,469
Damaged 6.50% $633.00 $51,269

8. CREDIT SCORE WEIGHT
The most recent 12
months of activity has
a 40% impact on your
credit score!
The most recent 36
months of activity has
a 90% impact!

9. COMPONENTS OF A CREDIT
SCORE• 35% = payment history
• Do you pay your bills on time?
• 30% = capacity - amounts owed to creditors
• Do you owe a lot of money to a lot of people?
• 15% = length of credit history
• How established is your credit history?
• 10% = new credit
• Are you increasing your debt obligations?
• 10% = type of credit in use
• Healthy mix = both secured and unsecured loans

10. ITEMS THAT MAY AFFECT ELIGIBILITY
FOR A MORTGAGE
• Bankruptcy
• Foreclosure
• Deed in lieu of foreclosure
• Short sale
• Collections
• Repossessions (other than a mortgage)
• Current delinquencies

11. TIPS TO IMPROVE YOUR
CREDIT SCORE
• Ensure credit bureau data is accurate
• Focus on bringing currently delinquent loan accounts current.
• Pay down the credit cards first that are near their limits.
• Pay down total revolving balances, but do not close these accounts
• Move revolving balances to installment debt – do not close the
revolving accounts
• Minimize new accounts.

12. HOW TO GET A COPY OF YOUR
CREDIT REPORT
You can get a FREE credit report from each of the 3 credit bureaus
once per year.
• You can order your credit report directly from the credit bureau
• Equifax – 800-685-1111 – Equifax.com
• Experian – 888-397-3742 – Experian.com
• TransUnion – 800-888-4213 – Transunion.com
• Visit www.annualcreditreport.com
Note: Credit scores are not free but are available to be purchased.

13. BUDGET
PLANNING AHEAD

14. An acceptable Debt
Ratio for a mortgage
is 43% or less

15. STUDENT LOANS
• Be aware of how much student loan debt you
have
• Too much student loan debt may disqualify you
from obtaining other types of debt, like a
mortgage or auto loan.
• If loans are in deferment 1% of the loan balance
is used to calculate a “payment” for your student
loans
• Student Loans cannot be included in bankruptcy

16. BEING A CO-SIGNER
• Being a co-signer or a co-borrower on a debt makes you equally
responsible for repayment of the debt.
• Debts that you are a co-signer or co-borrower on will be included in
any debt ratios calculated regardless of whether or not you are the
person making payments.
• Before co-signing on a loan, ask yourself:
• “If I had to make payments on this loan, can I afford it?”
• “How will this affect me from obtaining other types of credit?”

17. BASED ON ANNUAL INCOME WHAT
SHOULD MY MORTGAGE PAYMENT BE?
• 25% of your monthly income
• Example: Annual Salary $50,000
• Monthly Income $4,166
($50,000 divided by 12)
• Mortgage Payment should be $1,041.00
($4,166 multiplied by 25%)

18. DOWN PAYMENT
• How much do you want to put down on the purchase of
your home?
• 3% - First Time Home Buyers Only
• 5%
• 20%
• Multiple sources can be used for your down payment.
• Down payments must be documentable.

19. PRIVATE MORTGAGE INSURANCE
• Most mortgage products require Private Mortgage Insurance
(added if the Loan to Value exceeds 80%)
• PMI premiums are added into your monthly mortgage
payment

20. MORTGAGE PAYMENT
Your full mortgage payment includes:
• Principal and Interest
• Escrow Payments
– Homeowner’s Insurance
– Real Estate Taxes
• Monthly Private Mortgage Insurance (PMI) Premium

21. MORTGAGE PAYMENT
Based on a 30 Year Mortgage $100,000 Mortgage $200,000 Mortgage
Principal and Interest (4.25%) $ 491.94 $ 983.88
Monthly Escrow –
Homeowners Insurance
$ 67.00 $ 85.00
Monthly Escrow –
Taxes
$ 325.00 $ 527.00
Private Mortgage Insurance
Monthly Premium*
$ 72.00 $ 144.00
Total Monthly Mortgage Payment $ 955.94 $ 1,739.88
*Based on 5% down payment, 680 credit score and 38% DTI

22. FUNDS TO BRING TO CLOSING
• Down Payment - A percentage of the purchase price.
• Closing Costs - Fees and costs to obtain the mortgage loan
• Escrow Deposit - Funds required to fund your escrow account in order
to pay the property taxes and insurance when they are due
• Tax Proration’s – Money owed to the seller for taxes already paid
• Homeowner’s Insurance – 1st year of upfront premium to insure the
home

23. RAINY DAY!
Don’t forget to also plan for that rainy
day! Financial Experts say:
• 3 months of monthly income for a
“rainy day” fund
• Are you prepared to cover an
unexpected expense?

24. CHECKLIST PRIOR TO APPLYING
• Do I have enough saved for my down payment and closing
costs?
• Can I afford the monthly payment including escrow?
• Will I have enough left over to cover unexpected home
repairs?
If you answered yes to all of these questions…..

25. TIME TO GET PRE-QUALIFIED!

26. WHAT FACTORS GO INTO A MORTGAGE
APPROVAL?
• Income and Employment
– How long have you been on the job?
– Do you make enough to support the mortgage payment in addition
to your other debts?
• Credit Score and Repayment History
– What does your credit report look like?
– Are you making your payments on time?

27. WHAT FACTORS GO INTO A MORTGAGE
APPROVAL?
• Assets
– Do you have enough for a down payment and closing costs?
• Property
– What is the value of the property? Does the value support the
amount being asked for?

28. SHOP FOR A MORTGAGE
This is the biggest purchase consumers will make in their
lifetime. Take the time to shop and compare!

29. SHOP FOR A MORTGAGE
Keep the following things in mind as you shop around:
• Service
– Are they giving you the great service you deserve?
• Products
– Do they offer the products that will best fit your needs?
• Rates
– Are you getting the best rate you qualify for?
• Fees
– What fees will I be paying and how does that compare to others?

30. FEES VS. COSTS
• Fees are charged and collected by the lender
– Origination Fee
– Closing Fee (Refinance)
• Costs are charged by a 3rd Party and are required for the
transaction
– Closing Fee (Purchase)
– Appraisal
– Title Insurance
– Inspection
• Fees will change from lender to lender but 3rd party costs should be
relatively the same across all lenders

31. FREESTAR FINANCIAL
MORTGAGE PRODUCT TYPES
Fixed Rate Mortgage
• Terms from 10 years to 30 years
• Rate is fixed for the life of the loan
• As low as 3% down payment
• PMI required until Loan to Value is below 80%

32. FREESTAR FINANCIAL
MORTGAGE PRODUCT TYPES
Adjustable Rate Mortgage (aka ARM)
• Flexible Terms
– 3/3 Year Adjustable
– 5/5 Year Adjustable
– 7/7 Year Adjustable
• Rate is fixed initial term and will adjust in increments of 3, 5, or 7 years based on
product
– Example: A 3 year ARM will have a fixed rate for 3 years and the rate will adjust every 3
years
• Payment amortized over 30 years
• As low as 10% down payment
• NO PMI required

33. FREESTAR FINANCIAL
MORTGAGE PRODUCT TYPES
VA Mortgages
• Available for qualifying Veterans
• 15 or 30 Year Terms
• 0% down payment
• No PMI

34. BEFORE YOU LOOK FOR YOUR NEW HOME
Get Prequalified!
• Contact the lender of your choice and get approved before you
look at homes
• Prequalification letters will outline the terms and loan amounts
you are pre-approved for
• This gives you the ability to “throw your hat into the ring” and
bid on the purchase of your dream home
• Prequalification letters are generally good for 90 days

35. THINGS TO REMEMBER WHILE IN THE PROCESS
OF GETTING A MORTGAGE
• Start shopping for a homeowner’s insurance policy as soon as
possible
• DO NOT obtain new credit
– New credit may disqualify you from obtaining the mortgage
• A prequalification is not a 100% guarantee.
– If your financial situation changes or there are other changes to other qualifying
factors it may affect your ability to obtain a mortgage.
• Documentation, documentation, documentation!

36. GETTING READY FOR CLOSING
• Expect the mortgage process to take approximately 30-45 days
from the date of the purchase agreement
• Know how much you need to bring to closing
• Review all of your documents
– There should be no surprises at the closing table
• Ask questions along the way
• You may not get your keys at closing

37. SUMMARY
• Review your credit history
• Look at your budget and your savings plan
• Think about what product will work best for your financial
goals
• GET PREQUALIFIED
• Review all documentation and ask questions

38. Questions?
FreeStar Financial Credit Union
Real Estate Lending
586-466-7800 opt. 2
mortgages@freestarfinancial.com