First Time HomeBuyer Workbook- DeAnn Ellis

YOUR NEW HOME

First Time Homebuyer Workbook

COMMON FEARS

PAYMENT OPTIONS

WHICH IS BEST FOR ME?

PUTTING 20% DOWN LESS OR MORE WHICH FITS?

GETTING STARTED! THE FIRST STEPS

WHAT DO I QUALIFY FOR?

AVOIDING DELAYS SAVE MONEY

AVOIDING OBSTACLES

First Time Homebuyer Workbook

BUYING YOUR FIRST HOME!

What is important about this mortgage to you?

Why is it important?

COMMON FEARS & CONCERNS WHEN DECIDING TO BUY:

Can I afford this?

How long are we going to live in this area?

How long do we want to own this home?

Buying is too complicated! Renting is easy.

It costs lots of money to buy. and I don’t have a down payment.

Is renting really more expensive?

What is this tax deduction I always hear about?

How long will I have my job?

HOW MAY I HELP YOU REACH YOUR GOALS?

First Time Homebuyer Workbook

OUR 3 COMMITMENTS TO YOU

COMMITMENT ONE:

To show you mortgage options so you can reach your financial goals.

Government Mortgages

1. FHA

• 3.5% minimum required investment.

• Maximum loan amounts vary from County to County.

2. STATE BOND PROGRAMS

• Usually linked to FHA or VA loans.

• Special income/ Credit/ Down payment requirements apply.

3. VA

• Must have certificate of eligibility.

• No down payment required.

Payment Options... Which Is Best For Me? Things to Consider.

• You don’t plan on moving for some time.

• You don’t plan on moving and have no other debts.

• You plan to move or relocate after 5 or 6 years.

• You plan to move or relocate after 3 or 4 years.

• You want lower payments now because your income will be increasing over the years.

• You plan to refinance or relocate soon.

• You want to maximize cash flow and pay off other non- tax-deductible debts first.

• You want to build equity quickly but avoid the higher 15-year fixed payment.

Payment Options

• Fixed Rate Payments

• Adjustable Rate Payments

Program Type

• 30-year fixed loan, 20-year fixed loan

• 15-year fixed loan, 10-year fixed loan

Conventional Mortgages

1. CONFORMING

• Loans above $548,250

• 30- I 15-year fixed rates.

• 1 yr. / 3 yr. I 5 yr., etc. ARM products

2. JUMBO

• Loans above $548,250

• 30- I 15- year fixed rates.

• 1 yr./ 3 yr./ 5 yr., etc. ARM products

3. HYBRID-These programs are designed to help you avoid paying monthly mortgage insurance. Here are some common “hybrids”:

• 80 - 10 - 1 Os (1st & 2nd Mortgage)

• 80 - 15 - 5s (1st & 2nd Mortgage)

• 95% no Ml (uninsured - 1 loan)

• 100% no Ml (uninsured - 1 loan)

• 10-year ARM, 7- year ARM, 5- year ARM, 3- year ARM, 1- year ARM, 6-month ARM

If you plan to put less than 20% down and want to avoid paying Monthly Mortgage Insurance, here are some rules & tips:

1. You need to have established good credit.

2. You may not necessarily have a lower monthly payment.

3. Your loan’s tax deductions will increase.

First Time Homebuyer Workbook

COMMITMENT TWO:

To educate you about mortgages so you can make an informed decision.

The 4 Major Financing Sources

1. Banks & Credit Unions

2. Lenders

3. Brokers

4. Internet

Who Writes the Lending Rules?

1. FANNIE MAE

• Conforming/ Conventional loans

2. FREDDIE MAC

• Conforming/Conventional loans

• FHA government loans

• VA government loans

• Portfolio

• Banks & Lenders

3. PRIVATE SOURCES

The Four Criteria Reviewed by Lenders

1. Income?

2. Monthly Debt?

3. Credit History?_________________Credit Score?

4. Money for Down Payment?

Advantages

of

A Mortgage

The Four Criteria Reviewed by Lenders

Compare Renting at $________________ per month to Owning a home priced at $

What’s that deduction I always hear about? Interest on Mortgage $______________Real Esate Taxes $

First Time Homebuyer Workbook

COMMITMENT THREE:

To communicate with you so that you are not surprised with things that may occur during the mortgage process.

Your Mortgage Timeline Decide which category best describes you.

I am considering purchasing a home in the next:

1 to 3 months

• Gather Financial Items - Tax returns, bank and asset statements, creditor information

• Have lender review credit report and submit application

• Consolidate down payment sources; obtain gift funds (if applicable).

• Organize team - Lender, Realtor, Attorney, Inspector, etc.

3 to 6 months

• Gather financial Items - Tax returns and creditor information

• Review credit report with lender and correct as necessary.

• Interview agents - Begin to organize your team - Lender, Attorney, Realtor, and Inspectors

• Locate potential areas.

6 to 24 months

• Educate yourself by attending home buying classes or meeting with lenders or realtors to learn the basics.

• Gather together tax returns and creditor information.

• Review preliminary credit report with lender and correct as necessary.

• Locate general desired areas.

GETTING STARTED: Your Loan Application

Most Lenders Require These Standard Items For A Complete Application*:

• Last 2 years W-2s or tax returns

• Last 3 months of bank statements

• Most recent one month pay stub

• A copy of you sales contract (purchase)

• A copy of your deed or current mortgage statement (refinance)

• A deposit for your credit report ($50-$75)

• A deposit for your appraisal ($250-$350)

• A copy of your driver’s license

• A copy of your 0D214 (VA only)

• Call to schedule your application time.

* Other items may be required dependent upon lender’s guidelines or program requirements.

First Time Homebuyer Workbook

AVOIDING DELAYS

Here is a list of potential problems that can occur throughout your mortgage timeline. Please review this list and ask us any questions

The Lender

• Does not properly pre-qualify borrower.

• Decides last minute that appraisal does not meet guidelines.

• Wants property repaired or cleaned prior to settlement.

• Interest rates or closing costs increase.

• Borrower does not qualify because of late addition of information

• Requires appraiser to re-review property/ additional comparables.

• Does not ask for all the information up front ( asks in bits and pieces).

• Cannot verify borrower’s information in a timely manner.

The Buyer

• Did not fully disclose everything at time of application.

• Source of down payment changes.

• Fails to update imperfections on credit report.

• Does not return required paperwork in a timely fashion.

• Job change or financial setback.

• Comes up short of funds for settlement.

• Does not obtain insurance in a timely fashion.

• Does not like the list of repair items on inspection and backs out of contract.

The Seller

• Fails to disclose hidden defects that are discovered later on.

• Home inspection uncovers small defects that Seller is unwilling to repair.

• Removes items from property that Buyer believed were included.

• Is unable to clear up title problems.

• Did not own 100% of the property as initially disclosed.

• Forgets to sign power of attorney prior to leaving town.

The Appraiser/ The Home Inspector

• The appraiser does not properly value the home.

• No comparable sales are available.

• Appraiser delays reviewing property.

• Home inspector makes mistakes, delays report, or becomes incredibly picky.

• Termite report shows major damage and buyer becomes nervous.

• Property doesn’t pass inspections.

First Time Homebuyer Workbook

WAYS TO AVOID LAST-MINUTE DELAYS

By reading it carefully, and completing any of the items you know to be “still outstanding”, you will guarantee yourself the smoothest loan closing.

Your Missing Items List

These are the items that were discussed at the time of your loan application. These could include, but are not limited to: any unsigned disclosures, incomplete or missing bank statements, W-2s, paystubs, etc. By not having any items we’ve requested, your loan settlement could be delayed.

Your Settlement Attorney Company

Have you chosen a title company or settlement attorney? Do we know who it is?

• If you are purchasing a home, please discuss this with your Real Estate Agent and contact us.

• If you are refinancing, may we suggest a company for you?

Your Hazard/Fire Insurance

ave you chosen a Hazard Company to insure your home?Do we know who it is?

• If you are purchasing a home, you will need to contact an insurance provider and have them contact us.

• If you are purchasing a condo, we need to have a copy of your Certificate of Insurance. Please contact your future Homeowner’s Association for this information and have them fax the certificate to us.

• If you are refinancing, we need to update your current policy. Please give us your insurance company’s name and numbers.

Shifting Your Assets & Gift Letters

If you have shifted your assets from one account to another from the time of application to settlement, please provide a paper trail documenting this. A paper trail means copies of checks deposited (wire transfers, etc.) and deposit slips. If you are receiving gift funds, have you provided us with a signed gift letter for the monies that you have received as a gift?

Funds Needed at Closing

Once we have established a settlement date, you will need to have a certified check made payable to the attorney/title