The Ultimate First Time Home Buyer Guide

The Ultimate

FIRST TIME HOME BUYER GUIDE

Lending Redefined.

Table of Contents 1. Congratulations

9. Loan Process Do’s & Don’ts

2. Saving For A Down Payment

10. Home Buyer Dictionary

3. Get A Mortgage Pre-Approval

11. Home Buyer Dictionary Cont’d

4. Prepare Documentation

12. Home Buyer Dictionary Cont’d

5. Documentation Cont’d

13. Home Buyer Dictionary Cont’d

6. Research Loan Programs

14. That’s A Wrap!

7. Research Loan Programs Cont’d 8. Loan Process Steps

Congratulations!

You’ve taken the first step toward homeownership.

Buckle up, and get ready to learn what it takes to make a successful purchase as an informed buyer.

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Step 1

Save For A Down Payment

While it’s not always a requirement, a down payment will likely be helpful when purchasing a home. It’s wise to have a nest egg saved before you embark on the home buying journey. Here are a few tips to give your savings account a boost while planning to buy.

Pay off credit cards every month - If you run balances on a credit card, the typical interest rates range from 10 – 30%. The savings from this activity can range from $10 – $150 per month depending on the balances.

Avoid insufficient funds or overdraft charges.

At the grocery store, buy staple items in bulk, use coupons, and buy generic brands instead of name brands.

Review your cell phone, cable, and internet bills to see if there are services you can cancel services or negotiate for a lower cost.

Buy clothes in the offseason to take advantage of 50-75% discounts.

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Download a savings mobile app to auto deposit a small amount of funds into savings on a regular basis.

Consolidate student loans into one lower payment or explore the option of income-based repayment.

Choose a higher deductible on insurances Choosing a higher deductible for auto, renter’s, and other types of insurance, can save up to hundreds of dollars per year.

Check with your insurance agent to explore money saving ideas.

If you rent and want to purchase a home, consider moving out of your rental and into a family member’s home for the last 3 months prior to closing.

Step 2

Get A Mortgage Pre-Approval Before Shopping for a Home

5 Reasons For A Mortgage Pre-Approval

1. Determine what’s within your price range 2. Stregthen your offer 3. Get underwriter feedback early 4. Find out if you need seller paid closing costs & how much 5. If you don’t qualify yet, develop a game plan for later

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Step 3

Prepare Documentation

Take the hassle out of document collection.

Documentation is crucial when applying for a loan. You will need to provide documents that prove income, savings and credit information. If you already own a property, or you’re selling a property - you will need to provide related documentation for that, as well. Quickstart will help you efficiently gather all of the documents needed in a secure and organized fashion.

Income Documents: Pay stubs – most recent 30 days Federal tax returns – 2 most recent years (all schedules) W2’s & 1099 forms – 2 most recent years for all sources like retirement, jobs, SSI If self-employed – 2 most recent business returns (all schedules) Retirement, SSI, Disability award letter – most recent Asset Documents: Bank accounts - 2 most recent monthly statements Retirement accounts (401k, TSP, IRA) – most recent quarterly or 2 monthly statements must be actual statements including all pages of each statement Gift funds – Contact us before transferring gift or other funds!

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Credit Related: Landlord contact information covering last 12 months If rent-free, signed letter stating you live rent free from the person allowing it Most recent mortgage statement for any mortgages Bankruptcy – Copy of discharge & if recent, complete paperwork to show creditors included Foreclosure, bankruptcy, short sale – Signed, detailed explanation letter

Step 3

Documentation Cont’d.

Miscellaneous: Color copy of current driver’s license Permanent resident alien - Copy of green card (front and back) Homeowners insurance agent contact information - let us know if you need a referral Divorce decree, separation agreement, child support order if applicable MCC Tax Credit (up to $2000 per year): Need 3 years of tax returns USDA or MCC Tax Credit: Income documents from ALL 18 & over household members Closing by POA? Talk to us ASAP to complete required steps for approval VA Related: DD214 if discharged from military Nearest living relative for each borrower – name, address, phone, & relation to you Transfer order - if applicable Current military - statement of service letter from current command (ask for format)

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Step 4

Research Loan Programs

There are many loan options available to prospective home buyers. Talk with your mortgage loan originator to determine what loan option is the best fit for your unique financial situation. We offer the following loan options: FHA Loan | I’m looking for a low down payment, flexible home loan.

FHA loans provide excellent terms, flexible qualification, and low down payment options for home buyers.

VA Loan | I’m in the military, a veteran, or a surviving spouse.

VA loans offer up to 100% financing on a purchase or refinance a home with affordable terms and flexible qualification. It is even possible to have two VA loans at once as well as loans up to $1,000,000.

Conventional Loan | I want to purchase or refinance a home.

Today’s conventional loans provide an array of options for primary, secondary, or investment properties with flexible guidelines and down payment options, as low as 3%.

Jumbo Loan | I want to buy a home that exceeds $453,100.

A jumbo loan, also known as a jumbo mortgage, is a type of financing that exceeds the limits set by the Federal Housing Finance Agency (FHFA). This loan is not eligible to be purchased, guaranteed or securitized

by Fannie Mae or Freddie Mac. Down Payment Assistance | I need help with a down payment.

Each state has its own options of down payment assistance which to help buyers bridge the down payment gap or pay for closing costs. Consult your mortgage loan originator to determine eligibility.

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Step 4

Research Loan Programs Cont’d.

USDA Loan | I’m looking for a no down payment loan.

USDA Rural Development offers a no money down purchase option with a 30-year fixed term providing affordable financing to first time or subsequent buyers.

Renovation Loan | I want to buy or refinance a home in need of renovations.

OVM has renovation programs providing small cosmetic updates to major projects like room additions or pool installation. Each loan has a low down payment option as well.

Reverse Mortgage | I’m 62 or older and looking to use my home equity.

The Home Equity Conversion Mortgage (HECM) loan is for homeowners or buyers 62 or older and can help borrowers be more financially secure and maintain their quality of life through retirement.

New Construction | I would like to build a custom home.

Struggling to find the “perfect” home? New construction loans can help you finance the build of a custom home. If the builder isn’t providing construction financing, we can help.

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Loan Process Steps We have built a solid reputation of being able to close mortgage loans in an efficient and timely manner.

Our unique process makes your closing experience with us, a great one – from application to move in!

START Apply online for pre-qualification

You set up homeowners insurance

OVM provides loan disclosures

Underwriter approves the loan

You provide all required documentation

OVM submits documents for underwriting

OVM orders a home appraisal

x

Final documents are prepared for signing 8

You sign documents and pay remaining costs, if applicable

HOME AT LAST Loan is recorded and keys are exchanged

Loan Process Do’s & Don’ts When applying for a mortgage, your credit, income, and assets are verified after submitting your application. It’s important to keep a few things in mind during this process to ensure a smooth closing.

PLEASE MAKE SURE YOU DO Keep all accounts current, even if an account is to be paid off at closing Keep copies of all paycheck stubs and any statements of bills being paid off Call your loan officer to discuss any major changes in your financial routine Call your loan officer before receiving gift funds to be used for closing costs Review copies for clarity & all pages included Provide all documentation up-front for faster approval Finalize insurance up-front

PLEASE MAKE SURE YOU DON’T

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Change employment without talking to your loan officer first Apply for new credit or loans without speaking to your loan officer Change bank accounts or transfer money within your existing bank accounts Make cash or other general deposits in your bank account without consulting your loan officer Pay for earnest money or other deposits in cash Pay-off or close collections/debts without consultation Co-sign on new accounts

Home Buyer Dictionary ADJUSTABLE-RATE MORTGAGE (ARM): a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also sometimes known as a variable-rate mortgage.

BALLOON (PAYMENT) MORTGAGE: usually a short-term, fixed-rate loan which involves small payments for a certain period of time; after that time period elapses, the balance is due or is refinanced by the borrower.

AMORTIZATION: loan payment by equal installments of principal and interest, calculated to pay off the debt at the end of a fixed period.

CERTIFICATE OF ELIGIBILITY: document given to qualified veterans entitling to Veteran's Administration guaranteed loans.

Obtained by sending DD-214 (Separation Paper) to the local VA office with VA form 1880 (request for Certificate of Eligibility).

ANNUAL PERCENTAGE RATE (APR): the interest rate reflecting the cost of a mortgage as a yearly rate. It allows home buyers to compare different types of mortgages based on the annual cost for each loan.

APPRAISAL: a document giving an estimate of a property's fair market value; generally required by a lender before loan approval.

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CERTIFICATE OF REASONABLE VALUE (CRV): appraisal issued by the Veteran’s Administration showing a property's current market value.

CLOSING: the meeting between the buyer, seller, and lender or their agents where the property and funds legally change hands.

Home Buyer Dictionary

COMMITMENT: agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.

CONTRACT SALE OR DEED: contract between buyer and seller of real estate to convey the title after certain conditions have been met.

CREDIT REPORT: documents an individual's credit history, listing all past and present debts and the timeliness of their repayment.

DEBT-TO-INCOME RATIO: the ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debt is divided by their gross monthly income.

DEFAULT: failure to make the monthly payments on a mortgage.

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DELINQUENCY: failure to make payments on time. This can lead to foreclosure.

DOWN PAYMENT: the portion of a home's purchase price paid in cash and not part of the mortgage loan.

EARNEST MONEY: money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.

EQUITY: an owner's financial interest in a property; calculated by subtracting the amount still owed on the mortgage from the fair market value of the property.

ESCROW: an account held by the lender into which the home buyer pays money for tax or insurance payments.

Home Buyer Dictionary

FIXED-RATE MORTGAGE: mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed.

FORECLOSURE: a legal process in which a mortgaged property is sold to pay the loan of the defaulting borrower.

LIEN: a legal claim against property that must be resolved before the property is sold.

LOAN-TO-VALUE (LTV) RATIO: a percentage calculated by dividing the amount borrowed by the sales price or appraised value of the home to be purchased.

LOCK-IN: guarantees a specific interest rate if the loan is closed within a specific time.

MARKET VALUE: the highest price that a buyer would pay and the lowest price a seller would accept on a property.

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MORTGAGE INSURANCE: a policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; usually required with a down payment of less than 20%.

MORTGAGE MODIFICATION: an option that allows a borrower to refinance and/or extend the term of the mortgage loan and thus reduce the monthly payments.

ORIGINATION FEE: fee charged by a lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property; usually a percentage of the loan’s amount.

POINTS: prepaid interest charged at closing by the lender. Each point equals l percent of the loan (e.g., 2 points on a $ l 00,000 mortgage would be $2,000).

PREPAYMENT: permits the borrower to make payments in advance of their due date, thus saving money on interest.

Home Buyer Dictionary

PREPAYMENT PENALTY: charges for the early repayment of debt.

PRINCIPAL: the borrowed amount, less interest or additional fees.

RECORDING FEES: money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.

REFINANCING: paying off one loan by obtaining another; refinancing is generally done to secure better loan terms (like a lower interest rate).

TITLE: a document that gives evidence of an individual's ownership of property.

TITLE INSURANCE: a policy, usually issued by a title insurance company, which insures a home buyer against errors in the title search. The cost of the policy is usually a function of the value of the property, and is often borne by the purchaser and/or seller.

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That’s A Wrap!

Now you are armed with an arsenal of knowledge, tips, and best practices to help make your first time home buying experience a breeze. Remember an informed buyer is a successful buyer!

Ready to embark on your home buying journey? Visit www.ovmfinancial.com to secure a local, licensed mortgage loan originator or get pre-approved and into your new home faster with Quickstart, our online mortgage application.

Visit www.ovmfinancial.com/quickstart to begin.

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