TOP 25 Questions about First Time Home Buyer Mortgages

1. TOP 25 Questions about First Time Home Buyer Mortgages

2. #1 WHAT IS A MORTGAGE? • A loan/lien on property • The promise to pay

3. 2. ARE THERE SPECIAL MORTGAGES FOR FIRST-TIME HOMEBUYERS? • Yes • Affordable First time home buyer options

4. 3. WHAT STEPS NEED TO BE TAKEN TO SECURE A LOAN? • Complete a loan application • Provide the following • YTD Pay stubs for the past 2-3 months • W-2 forms for the past 2 years (Tax returns if self employed) • Information on long-term debts   • Recent bank statements (Checking, savings, 401K’s, etc.) • tax returns for the past 2 years   • Proof of any other income   • Address and description of the property you wish to buy   • Sales contract • 12 month rental history

5. 4. HOW ARE PRE-QUALIFYING AND PRE-APPROVAL DIFFERENT? • Pre-qualification is informal and can be done over the phone • No obligation • No paper work • Ball park figure • Pre-approval is lenders commitment to lend to you • Lender collects items listed in how to secure a loan • Definite idea of what you can afford

6. 5. WHAT IS A CREDIT BUREAU SCORE AND HOW DO LENDERS USE THEM? • Scores Range from 300-850

7. 6.HOW CAN I FIND OUT INFORMATION ABOUT MY CREDIT HISTORY? • Equifax • Experian • Transunion • Call me for a copy of your Report

8. 7. HOW DO I CHOOSE THE BEST LOAN - PROGRAM FOR ME? • Ask Yourself these questions • Do you expect your finances to change over the next few years?   • Are you planning to live in this home for a long period of time?   • Are you comfortable with the idea of a changing mortgage payment amount?   • Do you wish to be free of mortgage debt as your children approach college age or as you prepare for retirement?

9. 8. WHAT TYPES OF LOANS ARE AVAILABLE AND WHAT ARE THE ADVANTAGES OF EACH? • Fixed Rate Mortgage • Predictable • Rate and payment stay the same for term of loan • Typically 15 or 30 year • Adjustable Rate Mortgage (ARM) • Payment increases or decreases on a regular schedule with interest rate changes • Generally Lower rate than Fixed • Monthly payments lower • Two- step mortgage. Interest rate adjusts only once • Balloon Mortgage offers initial low rate (5,7or 10 year) when time lapses balance is due

10. 9. WHEN DO ARMS MAKE SENSE? • Increase in Income • Short term Purchase

11. 10. WHAT ARE THE ADVANTAGES OF 15- AND 30-YEAR LOAN TERMS? • Principle – The original amount of money that was borrowed. • Interest – The amount the lender charges you for borrowing the money • 30-Year: Larger tax deductions.   • 15-year: • Loan is usually made at a lower interest rate.  Equity is built faster because early payments pay more principal.

12. 11. WHAT HAPPENS IF INTEREST RATES DECREASE AND I HAVE A FIXED RATE LOAN? • Investigate Refinance Options

13. 12. WHAT ARE DISCOUNT POINTS? • Allows you to lower your interest rate • Cost involved • Recommended if you plan to say in your home for some time • Tax Deductible on a home Purchase

14. 13. WHAT IS INCLUDED IN A MONTHLY MORTGAGE PAYMENT? • Principal • Interest • Real Estate Taxes • Home Owners Insurance • Mortgage Insurance

15. 14. WHAT IS AN ESCROW ACCOUNT? DO I NEED ONE? • Established by your Lender to Pay for your Taxes and Insurance from your monthly mortgage payment • Sometimes they are optional, check with your Lender

16. 15. HOW MUCH OF A DOWN PAYMENT DO I NEED? • 5% or less • Closing Costs • Home Owners Insurance • Inspections • Repairs

17. 16.WHAT IS A LOAN TO VALUE (LTV) AND HOW DOES IT DETERMINE THE SIZE OF MY LOAN? Amount of Money you borrower compared with Purchase Price or Appraiser Value

18. 17. WHAT MAKES UP CLOSING COST? • Attorney's or escrow fees •  Property taxes (to cover tax period to date)   • Interest (paid from date of closing to 30 days before first monthly payment)   • Loan Origination fee (covers lenders administrative cost)   • Recording fees   • Survey fee •  First premium of mortgage Insurance (if applicable)   • Title Insurance (yours and lender's)   • Loan discount points   • First 2-3 payments to escrow account for future real estate taxes and insurance   • Paid receipt for homeowner's insurance policy (and fire and flood insurance if applicable)   • Any documentation preparation fees • Third Party Appraisal Fee

19. 18. WHAT RESPONSIBILITIES DO I HAVE DURING THE LENDING PROCESS? • Be sure to read and understand everything before you sign.   • Refuse to sign any blank documents.   • Do not buy property for someone else.   • Do not overstate your income.   • Do not overstate how long you have been employed.   • Do not overstate your assets.   • Accurately report your debts.   • Do not change your income tax returns for any reason. • Tell the whole truth about gifts. • Do not list fake co-borrowers on your loan application. •  Be truthful about your credit problems, past and present.   • Be honest about your intention to occupy the house   • Do not provide false supporting documents.

20. 19. WHAT IS RESPA? • Real Estate Settlement Procedures Act • Protects you the borrower from Lending Abuses • All costs associated with the loan must be fully disclosed to you. • HUD Phone Number 800-669-9777

21. 20. WHAT HAPPENS AFTER I'VE APPLIED FOR MY LOAN? • Between 4-6 weeks • Assist the lender with all requests • Loan gets approved • Schedule a closing date

22. 21. WHAT SHOULD I LOOK OUT FOR DURING THE FINAL WALK-THROUGH? • Examine every corner of the empty house • Check Floor to Ceiling • Be sure Seller fixed any problems promised • Make sure everything is perfect Before you close

23. 22. WHAT CAN I EXPECT TO HAPPEN ON CLOSING DAY? • Bring your Paid Home owners insurance • Bring a Cashiers check for money you owe for down-payment and closing costs • You will get proof of inspections and / or warranties • Sign on the dotted line  • Mortgage Note  Mortgage or Deed of Trust   • Binding Sales Contract • Keys to your new home

24. 23. CAN I PAY OFF MY LOAN AHEAD OF SCHEDULE? • Yes • Check with lender for any Pre-payment penalties

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