Full Page Organization - Freddie Mac

1 Ste ps to Hom eownershipAboutFreddieMacFre dd ieMac is astock ho lder -o wn ed co rporationcharter ed by Congressin 1970 to create aco ntinuousflow of fundsto mo rt gage lender s in supp ort of homeo wnershipand rental ho us ing . FreddieMac purchas es mo rtgag es fromlen de rs an dpa cka ge sth em into secu rities that are so ldto nc eits cre ation, FreddieMac has hel pe dfina nceon e in six Ame ri ca n hom AsianCre di tSmar t As ian is a mu ltilingu al ser ies to guide Asian Americ an consumerson how to buil d and ma inta in bette rcre dit, un der st an d the steps to buying a home and ho w to prote ct thei r inv eci al thank stothe follow ing org ani za tio ns fortheir collaborationin the dev elo pment of the CreditSmart As ian :AsianAm er ican s for Equ al ity, Boa t Peo pl e SOS, ChhayaCDC, Filipino s for Aff irmativeAct ion, KoreanChu rch es forCo mmu nity Dev elop me nt, Nak at omi & Associates,Nation al Coalitionfo r Asian PacificAmer ican Co mmu nityDe ve lopment(Nat ional CAPACD),Nation alCong ress ofVietn amese Ame rica ns, Natio nal Korea nAmeric an Serv ice &Ed uc ati on Conso rt ium , Inc.

2 , and Quo n Des AAssiiaann:: SStteeppss ttoo HHoommeeoowwnneerrsshhiipp Maint ain your good credit rati ng Est ab lish your home buying budget Save money for a down payme nt and moving expenses Pr e-qualif y f or a ho me loan Find the hom e yo u want to buy Make an off er Apply fo r a mo rtg age Com plet e a ll esc ro w requirements Move inFred die Mac: St ep s to HomeownershipWe lcom e .. 3A Hom e of Your Ow n ..4 An I ntroduction Getti ng Sta rt ed .. 5 Renting a P lace to Li ve vs. O wning a Ho meAre You Re ad y? .. 6 Conta cting Profes sion al s to He lp YouYo ur Own Hom e .. 8 How Much C an Yo u Af fo rd To Sp en d? Is Your Income Stea dy? Do Y ou Have Goo d Cre dit? Do Y ou Have Enou gh Mon ey f or a D own Pay ment & Clo si ng C os ts ?

3 Do Y ou Have Enou gh Cas h To Mov e? How Much H ouse Can Yo u Af fo rd ?Qualify ing for a Mo rtga ge .. 15 The 4-C s: C apaci ty, Cr ed it, Ca pital , Co lla tera l Pre -A pprovalFi ndi ng Your Way Ho me .. 17 Making An Offe r After the Offer Mortgage Ap prova lMortg age Typ es .. 20 Fi xed-R ate Mortg ag es Adus tab le- Rate Mo rt ga ge s (ARMs ) Othe r M ortgages & G ov er nm en t Pr ogr am s Inte re st R ates: How Low Can You Go ?Yo ur Ri gh ts as a Bo rr owe r .. 25 Ente ri ng E scro w Home Inspection The Cl os ing P roces sCo nc lus ion .. 292 CCrreeddiittSSmmaarrtt AAssiiaann:: SStteeppss ttoo HHoommeeoowwnneerrsshhiippTab le o f C ont ents3 CCrreeddiittSSmmaarrtt AAssiiaann:: SStteeppss ttoo HHoommeeoowwnneerrsshhiippWelcom e,or m illio ns of f amilie s, homeowners hip is a r out e t o creating wealt h.

4 I t bui ldsfinancia l secu rity for the future . As you b egin t he journey to homeownership, Freddie Mac is providi ng thi s info r-ma tion t o help you s ucc es sfully ma ke your way through the process. We knowthe pro cess may see m daunting, es pecially if you have limited English sk ills or ifyo u don t ye t h ave cr edit e st ablis hed and don t know how the system work s. W ecr eat ed t his se ries of guidebook s t o help get you started. The guidebook s coverthe impo rtan ce of es ta blishing your credit, t he process of buying a home, inc lud -ing how t o make the bes t fina nc ial choices for you and your family, and there sponsibilities of be ing a re ar e many oth er r es ou rce s av ailable to you, including commu ni ty orga niz at ions, your loc al gov ernment housing agencies, real estate agents andlen de rs wh o un der sta nd and ar e willing to work with prospective homebuyerslike yo u.

5 We str ongly enc ourage y ou to seek out their professional servi ce s togath er t he fac ts so y ou ca n ma ke the best decisions. You will face ma ny cho icesthr ough ou t th e p roce ss .In th is gu ide book, Steps to Homeownership, you will l earn t he st eps to buyi ng aho me . Yo u will ga in important knowledge t hat will help you throug h the purc has eof your fir st resid en ce . We als o e xplain important terms used in the ho mebuyingpro ce ss which some time s se ems like a foreign a good cre dit history is an important first step. If you have not yet est ablished a cr edit history or ne ed information on how to establish o r impr oveyo ur c red it hist ory, y ou should revie w our companion guidebooks, TheImportance of Good Creditand Homeowner Benefits and Responsibilities to u nde rst and h ow to protect a nd grow your investment now that you ar e aho me own er.

6 Together, thes e books ar e a valuable road map addressi ng theissu es an d qu estion s mos t important to all of u s at Freddie Mac , we wis h you gr eat success. With pro per pl ann ing ,tim e an d har d work , you c an r ea lize y our dr eam of Cred it S ma rt : Steps t o Ho meo wne rshi pAs you be gin the jou rn ey to homeown ers hip,Fred die Mac is he re to hel p guide youthr oug h the pr oce an d y ou r fa mily me mbe rs wor kha rd . Y ou s av e y our mo ne y. Youha ve e sta blis he d a nd ma inta ined agood cre dit his to ry. Now, aft er years of de dic at ion, you ar ere ad y to give yo ur fa mily a val uabl egift : a h ome. Or per haps yo u are newto t he Un ite d S ta tes , a nd y ou wa nt topr ep are to bu y a home s ome da y.

7 Do y ou kn ow whe re to s ta rt ? A re y oure ad y f or the r es pons ibili tie s of hom eowne rsh ip in A mer ica?Af te r re adin g th es e guidel ines, yo u wi llkn ow th e st eps in volv ed i n bu ying yourfir st h om e, an d y ou wil l kn ow wh atqu est ion s t o as k a long t he wa y toma ke s ur e t he pro ces s goe s a ssm ooth ly a s po ssi ble. Be cau se of t hecom plexit y of bu yi ng y our o wn h omein Am eric a, it is a dvi sa ble th at y ouse ek as sista nc e fr om a n on -pro fi torgan izat ion t ha t prov ide s home own er-ship education and cou nsel ing servi AAssiiaann:: SStteeppss ttoo HHoommeeoowwnneerrsshhiippDon t rush into it. A home wi ll b e on eof th e large st pu rc hase s yo u w ill mak ein you r l ife time . Wi th pr epa ra tion andres earc h, yo u wi ll achieve yo ur dreamof home own r first home is n ot only a place t olive and gr ow to ge th er, but it also is avaluabl e assetfor th e fu ture on e t hatwi ll create we alth for y ou and you rfamil y over ti me.

8 Wh ile ho me valuescan go u p and down in ge ner al, t hevalue o f y ou r ho me apprec iate s(orinc reas es) ov er t ime ; it be co mes anasse t t hat can be pa ssed do wn to yo urchildre n. It c an be an eff ecti ve way toesta bl ish financial se curity f or you rfamil y. H ome own ership is mor e t hanhavi ng a s helter; it can hel p youfinance you r bu sine ss o r y our chi l-dr en s e du cat ion .DI D YO U KN OW..?Rese arch sho ws t hat ch ildren o fhome own ers do be tte r i nscho ol , a nd ne igh bor hoo ds w ithhigh l eve ls of home own ers hipten d to be saf er ( Hau rin, Don aldR., T . Par cel, and R. JeanHau rin. Doe s H ome own ersh ipAff ect Chi ld O utc omes ? RealEstate Economics,vo l. 30, issue4, 2 002).A Home of Yo ur OwnAr e y ou ready forthe re sponsibilitiesof ho meownershipin A merica?

9 Y5 CCrreeddiittSSmmaarrtt AAssiiaann:: SStteeppss ttoo HHoommeeoowwnneerrsshhiipphet her yo u c ur rently live wit hfrie nd s and fam ily me mbe rs orre nt you r own apa rt ment, you need t oan alyze t he pr os and cons of owningyo ur ow n home versus rent ting a Pl ace to LiveCo ns: Your re nt pa yme nt s do not buildequityfor you your money goesto yo ur lan dlor d. You ca nnot fr eely ma ke improve-me nt s, such as up grading you rkitc hen o r b at hroom, to your homeor dwelling. Ther e may be res tric tions r ega rdingch ild re n or pe ts . Ther e may be res tric tions regar ding how you can decora teyo ur ho me. You may not f eel comfortable cook ing your f avor ite ethnic dishe s. You d o not have cont rol ov erwh et her r ent will incre as e.

10 Your land lord could ask y ou tomove bec ause he or she ha s madeothe r d ecisions regarding the prop -erty (want s to sell or change us e).Pr os: Some one else h andles the re pairsan d m aint en anc e. The lan dlor d pa ys the pr opertyinsur an ce, taxe s and certai n util ities. You ca n move when you wantwith out havin g to sell the home .Own ing a Ho meCons : You ar e r es po ns ible f or pa yingmore tha n ju st yo ur mo rt ga gepay men t, in cludi ng pr ope rty ta x,ho me owne r s in sur anc e, home-ow ner a ssociati on fees, utilities a ndoth er e xpen ses . You mus t pa y for r epa irs and mai nten an ce, as wel l as renova tion s,of yo ur ho me an d pr ope rty. If yo u c an no t pay y our mor tga ge ,yo ur ho me may be s ubj ect t o for ec lo su : You ha ve a n as set t hat yo u o wn.