Homebuyer’s Guide · Components of a Mortgage Payment. Typically, a monthly mortgage payment...

Homebuyer’s Guide

Customer First Care Center: 1-877-367-8178

Banking Service by Phone: 1-888-511-1077

Visit Us Online: First-Fed.com

Have questions or ready to apply? Scan here.

08/14

Components of a Mortgage PaymentTypically, a monthly mortgage payment consists of four parts referred to as PITI:

1. Principal (P): the basic amount you borrow.

2. Interest (I): the cost of borrowing money from thefinancial institution.

3. Taxes (T): the amount charged by local governmentsbased on the assessed property value.

4. Insurance (I): the amount charged to offer financialprotection. The two most common are:

• Homeowner’s Insurance: protects you againstfinancial loss on your property.

• Mortgage Insurance: protects the lending financialinstitution against loss if you do not repay your loan.This is often referred to as Private Mortgage Insurance.(PMI). PMI is generally required by your lender if youhave less than a 20% down payment.

At the beginning of your mortgage, a smaller portion of your monthly mortgage payment will be applied to repay your principal and a larger portion toward your interest. As you continue to make payments over the term of your loan, a greater portion will be applied to principal and less to interest. Taxes and insurance may be collected with your mortgage payment and held in an escrow account to cover your property taxes, homeowner’s insurance and mortgage insurance. The lending financial institution will pay these on your behalf.

Factors in Determining Mortgage QualificationWhile different mortgage products and programs have varying guidelines for qualification, the basic standards to approve applicants for a mortgage remain the same. A financial institution will look at the following four standards:

1. Income: Income is your cash flow that can be usedto make your monthly mortgage payment. A steadyand sufficient income can be composed of:• Primary and/or part-time job(s)

• Bonuses

• Commissions

• Retirement Benefits or Pensions

• Child Support or Alimony(only in cases where you want to have them includedas the basis for repayment of the loan)

• Veterans benefits

• Rental Property Income

2. Credit History: This is a historical snapshot ofwhether or not you pay your monthly obligations ontime. This allows a lender to gauge the likelihood thatyou will pay your mortgage payment on time. Yourcredit history and credit score also help determine ifyou qualify for certain mortgage programs, your downpayment amount, the amount you can borrow andinterest rate in some cases. Even in cases of limited orless-than-perfect credit, programs may still exist tohelp you achieve home ownership.

3. Savings: The amount of money you have saved ishelpful in determining the funds you have available for down payment, the ability you have to pay current financial obligations, and your new mortgage payment.These funds can be composed of:• Savings or Money Market Accounts

• Certificates of Deposit

• Retirement or Investment Accounts

• Gifts from a relative or friend

As a rule of thumb, you should have enough funds available for a down payment and a reserve for several months of mortgage payments in the event of unexpected circumstances.

4. Property Value: An appraisal will be conductedon the property to determine its fair market value incomparison to similar homes that have recently beensold in the area.

Understanding the Basics of a Mortgage

Owning your own home is

one of the biggest and most

important financial decisions

you’ll make in a lifetime. Before

you begin the home buying

process, it is important to

understand what makes up a monthly mortgage payment,

what factors determine how much home you can afford,

and what costs you can expect when closing a mortgage.

FF-HomeBuyerGuide-InsidePgs-0915.indd 1 11/10/2015 2:42:21 PM

Loan Type Loan Features: May Be Ideal If You:Fixed-Rate Interest rate remains the same for the Like a consistent payment amount

Mortgages life of the loan

Fixed, equal monthly payments, and is fully amortized over the life of the loan

Shorter terms have lower interest rates and higher monthly payments, while longer terms have smaller monthly payments and may be easier to budget

Do not like the risk of a rising interest rate

Adjustable-Rate Interest rate can be locked in for an Are planning to stay in the home for

Mortgages initial period, but then rises or falls to reflect economic conditions

Have the potential for changing payment amounts

only a short period of time

Are looking for lower initial rates and monthly payments and understand that the rate and payment may increase

Construction- For newly built homes, renovations, or Would like to pay one set of

Permanent additions to your current home closing costs

LoansWould like to make interest only payments during the construction period

No and Low- Special loan programs available for Are looking for a longer term fixed-

Down Payment those with little or no funds available rate mortgage

Options for down payment and meet certain income and housing criteria

Special program available through USDA Office of Rural Development (subject to USDA funding)

Want a mortgage where fees and repairs may be financed

Have limited funds for down payment and closing costs

FHA Loans Low down payment requirements

Gifted funds may be used for down payment and closing costs

Have special loan limits and qualification guidelines set forth by the Federal Housing Administration (FHA)


Need flexible down payment options

Need the help of a non-occupant co-borrower to help qualify

A Step-by-Step Home Buying ChecklistNow that you have a basic understanding of the components of a mortgage, you are ready to begin the journey of finding your new home. Use this checklist to guide you through the process and track your progress from the first financial decisions through moving day!

Step 1: Get Pre-Approved for a MortgageHouse hunting becomes even easier with a pre-approval letter. This lets you know how much home you can afford and tells sellers and real estate professionals you are a serious buyer. Lining up your finances ahead of time will speed up the buying process and is often free!

qDiscuss your mortgage options with a lender from a financial institution you know and trust. Below is a basic overview of the most common mortgage options:

An Explanation of Closing CostsClosing costs refer to the amount of money that you pay to finalize a loan. This amount is separate from a down payment and generally consists of:

1. Out-of-pocket expenses: These expenses generally include fees for third-party services, such as appraisals, attorneys, credit reports, title searches and so forth.

2. Pre-paid items: Homeowner’s insurance and mortgage insurance are the most common in this category. Lenders can set up escrow accounts to pay insurance and property taxes on your behalf. You would pay a portion of the insurance and taxes with your monthly payment, instead of paying the lump sum semi-annually or annually.

3. Points: Points refer to fees that are part of the cost of making your mortgage loan. A point represents 1% of your loan amount. Origination points are collected by a lender for making the loan, and discount points are purchased upfront to lower your interest rate, resulting in a lower monthly payment.

While closing costs generally consist of the same items, they can vary greatly among financial institutions. In order to make the best comparison between institutions and loan types, be sure to factor in the total amount you will be paying in closing costs in addition to the rate. One loan may offer a lower rate, but require you to pay more out-of-pocket in closing costs and points to reduce the rate.


Step 1: Continuedq Organize the financial documents required for your

pre-approval and eventual application:

q Copy of driver’s license

q Social Security number

q Residential address for prior two years. If renting, include name, address and phone number of landlord

qOne month most recent paystubs showing pay period, year-to-date income and employer’s name

q W-2s for the last two years. If self-employed, commissioned or show rental income, two years full tax returns

q Names, addresses, account numbers, balances for all checking and savings accounts & statements from the past two months

qAddresses and values for other properties owned

q Loan information for loans on all properties owned

q Consider all factors when choosing a lender and loan program:

q Rate and APR

q Closing costs

q Reputation of financial institution

q Servicing after loan closing

q Points

q Apply for pre-approval

Step 2: Determine What You Are Looking For in a HomeSearching for your new home can be a fun and exciting process, but it can also be overwhelming. Take the time to determine what you are looking for in your new home to help narrow your options. This will not only help you sort through your options, but will help a real estate professional show you properties that best meet your wants and needs.q Use the Home Search Worksheet at the end of this

guide to sort through wanted and needed features in your new home.

Step 3: Work with a Real Estate Professional Who Knows the CommunityRely on the expertise of a real estate professional to take the wants and needs you have listed and match them to available properties. Just as you rely on a lending professional to guide you through the loan process, a real estate professional can guide you through the search for your new home.

q Get referrals and look for experience and good chemistry with a real estate professional

q Browse listings online, in newspapers and in real estate magazines

qPick up flyers

Step 4: Research Each Potential Home that You May Want to BuyThe best way to determine if a home is right for you is to see it and thoroughly evaluate it against the factors you determined were important.

q Attend open houses

q Ask your real estate professional for tours of listings that meet your criteria

q Ask the seller’s reason for selling

q Review all property disclosures

q Find out about liens, easements or other restrictions

q Use the Open House & Home Tour Checklist at the end of this guide to help evaluate each home you tour

Step 5: Make an Offer, Negotiate and Finalize the DealNow that you have found that perfect home, it is time to start the process of making it yours.

q Determine the purchase price: $______________________

q Include contingencies, such as financial, inspection or purchase

q List any special requests and repairs you would like included in the sale

qGet a professional home inspection. Consider specific inspections for structural integrity, roofing, and termites

q Inspector contact: ________________________________

q Get homeowner’s insurance quotes and choose a trusted insurance company

q Once both parties agree to the terms, sign the Purchase and Sale Agreement

qComplete the loan application process with your lender

q Do a walk-through inspection prior to closing

qDetermine a target move-in date: _____ /_____ /_____

Step 6: Close the PurchaseYou’re almost there…it is about time for the big move and to make this house your home!

qReview the Closing Disclosure at least 3 days before closing and compare it with your Loan Estimate. The Closing Disclosure will show how funds will be collected and disbursed, and show what you need to bring to your closing.

q Get a cashier’s check payable to the Closing Agent for the amount you need to bring to closing; this is the number from the Closing Disclosure form. $__________________

qUse the Change of Address Checklist at the end of this guide to notify important contacts of your move and new contact information.

q Move in and celebrate by welcoming friends and family to your new home!

Loan Type Loan Features: May Be Ideal If You:Fixed-Rate Mortgages

Interest rate remains the same for the life of the loan

Fixed, equal monthly payments, and is fully amortized over the life of the loan

Shorter terms have lower interest rates and higher monthly payments, while longer terms have smaller monthly payments and may be easier to budget

Like a consistent payment amount

Do not like the risk of a rising interest rate

Adjustable-Rate Mortgages

Interest rate can be locked in for an initial period, but then rises or falls to reflect economic conditions

Have the potential for changing payment amounts

Are planning to stay in the home for only a short period of time

Are looking for lower initial rates and monthly payments and understand that the rate and payment may increase

Construction-Permanent Loans

For newly built homes, renovations, or additions to your current home

Would like to pay one set of closing costs

Would like to make interest only payments during the construction period

No and Low-Down Payment Options

Special loan programs available for those with little or no funds available for down payment and meet certain income and housing criteria

Special program available through USDA Office of Rural Development (subject to USDA funding)

Are looking for a longer term fixed-rate mortgage

Want a mortgage where fees and repairs may be financed


FHA Loans Low down payment requirements

Gifted funds may be used for down payment and closing costs

Have special loan limits and qualification guidelines set forth by the Federal Housing Administration (FHA)


Need flexible down payment options

Need the help of a non-occupant co-borrower to help qualify


1. What price range are you comfortable with for your new home?

$_________________________ to $________________________

2. What age home would you like?

qOlder Home qNewer Home qCustom Built

3. What type of neighborhood appeals to you?

qDowntown q Rural qSuburb

qOther: _______________________________________________

4. What style of home do you prefer?

qRanch qTraditional q Two Story

qSplit Level qContemporary q Cape Cod

qTownhouse qCondominium q Manufactured

5. What type of construction do you prefer?

qVinyl Siding qWood qAluminum Siding

qBrick qStone

qOther: _______________________________________________

6. What lot size are you looking for?

qSmall qMedium qLarge qNot Important

7. How many bedrooms do you need?

q1 q2 q3 q4 q5+

8. How many bathrooms would you like?

q1 q2 q3 q4+

9. Is a separate laundry room important to you?

qNo qYes

10. Is a separate dining room important to you?

qNo qYes

Home Search Worksheet

11. Is a basement important to you?

qNo qYes, finished qYes, unfinished

12. Is having a garage important to you?

qNo qYes, attached qYes, detached

13. If a garage is important, are you looking for a:

q1-Car q2-Car q3-Car qWith work area

14. Is central air conditioning important to you?

qNo qYes qWall/Window units are acceptable

15. What source of heating do you prefer?

qGas qElectric qWood

qGeothermal qOil qPropane

16. Would you prefer a fenced yard?

qNo qYes qPartial

17. List other features important to you:

_______________________________________________________

_______________________________________________________

_______________________________________________________

_______________________________________________________

_______________________________________________________

_______________________________________________________

18. Is there a specific school district that you prefer?

qNo qYes: _______________________________________

19. What preferences do you have for your commute to work?

__________ Miles __________ Minutes

qNo preference


Open House & Home Tour Checklist

Address: ____________________________________________________ Listing price: _______________________________________________

Age of home: ______________________________________________ Property taxes: _____________________________________________

Number of floors: __________________________________________ Square footage: ____________________________________________

Basement: qNo qYes No. of bedrooms/bathrooms: _______________ /_______________

Style: qRanch qTraditional qTwo Story qSplit Level qContemporary qCape Cod qTownhouse qCondominium qManufactured

Enough storage space: q No qYes Room for expansion: qNo qYes

Included appliances:________________________________________ Lot size: ____________________________________________________

Type of Construction Outdoor SpacesqVinyl Siding qWood qAluminum Siding qAttractive landscaping qDeck is in good conditionqBrick qStone qOther: __________________________ qGarden qEnough privacy

qAge: ___________________________________________________ qAmple yard space qSwimming pool

Condition: 1 2 3 4 5 needs replaced like new Overall rating: 1 2 3 4 5 6 7 8 9 10 (best)

qNo visible cracks in mortar if brick qAttractive paint job

WindowsqAge: ___________________________________________________

Condition: 1 2 3 4 5 needs replaced like new

qLocks & latches work qWeather stripping in place

qInsulated qNo signs of water damage

qCaulking around windows qWindow coverings included not cracked

Eaves and DownspoutsqAge: ___________________________________________________

Doors Condition: 1 2 3 4 5 q Open & close freely qDoorbell works needs replaced like new

qLocks & latches work qAlarm system: qNo qYes qWater is directed away from foundation

Overall rating: 1 2 3 4 5 6 7 8 9 10 (best)

RoofqShingles qMetal qOther: _______________________

qAge: ___________________________________________________


qNo signs of leakage or discoloration

qNo signs of sagging qGreen roof or roof deck


Foundation All RoomsqGround slopes away from house qLevel floors qNatural lighting

qNo signs of cracks or seepage qBaseboards

Condition: 1 2 3 4 5 Garage and Driveway needs replaced like new

qAttached qDetached qSize: ___________ cars qDoor FramesqAccess from inside house qGarage door opener works Condition: 1 2 3 4 5

needs replaced like newqDriveway surface: ________________________________________

Condition: 1 2 3 4 5 qCrown Molding needs replaced like new


Pestsq Fireplace: q Gas qWood-burning

qSigns of ants qSigns of termites (small piles of sawdust) Working? qNo qYes

qSigns of mice qSigns of other pests qStairs: Creak? qNo qYes

qSmoke Detectors: Working? qNo qYes

Flooring qCarbon Monoxide Detectors: Working? qNo qYes

qCarpet Age: ____________________________________________Bedrooms Condition: 1 2 3 4 5

needs replaced like new qRoom sizes:

Master ________x________ Room 1 ________x________ qHardwood Age: ________________________________________

Room 2 ________x________ Room 3 ________x________ Condition: 1 2 3 4 5 needs replaced like new Room 4 ________x________ Room 5 ________x________

qAmple closet space qMaster bathqTile Age: _______________________________________________

Condition: 1 2 3 4 5 needs replaced like new Bathrooms

qNo signs of leaks near faucets qOther: __________________________ Age: ___________________ qNo signs of mold or mildew on tile or caulking Condition: 1 2 3 4 5 qNo stains on fixtures qAmple lighting needs replaced like new

qFan and/or window in all bathrooms

Walls KitchenqPainted plaster or drywall qWallpaper qGranite qStainless steel qNo stains or unevenly painted surfaces qAmple countertop and cupboard spaceqPaneling qSoundproof qWalls need repair qIsland counter qBacksplash qDishwasher

qGarbage disposal qDouble sink

qEating area or breakfast nook qSeparate dining room

qFlooring: _______________________________________________

qAge and condition of appliances:________________________

qOther: _________________________________________________

Open House & Home Tour Checklist


Basement / Crawlspace WiringqCrawlspace: qNo qYes qWiring up-to-date qAmple outlets in each room

qBasement Type: qPartial qFull qWalk-out qProfessionally wired qGrounded outlets

Basement Finished: qNo qPartial qYes qOutdoor outlets qWired for: _____________ amps

qNo signs of water damage or moisture

qEnough head room qSump Pump Overall NeighborhoodqWell-maintained houses & lawns

Heating and Air Conditioning qNear public transportation qGood school system

qFurnace Age: __________________________________________ qNear freeways or major roads qFamily-friendly

Condition: 1 2 3 4 5 qHigh property values qNeighborhood watch group needs replaced like new

qZoning laws qAdequate street lights

qHeated by: qGas qElectric qWood qNear police & fire departments qLow crime rate

qGeothermal qOil qPropane qNo hazardous conditions

qCentral Air Age: _________________________________________ qHomeowners Association: Dues: $_________________________


FacilitiesqWindow/Wall Unit Age: __________________________________ qSchools: Condition: 1 2 3 4 5 District: _________________________________________________ needs replaced like new

K – 6 Schools: ____________________________________________qWell-insulated with safe materials

Jr. High Schools: _________________________________________

Water and Sewage Service High Schools: ____________________________________________

qMunicipal Water qWell Water qPond Water Colleges: ________________________________________________

qWater needs treated or filtered qParks: ___________________________________________________

qWater heater: qRented qOwned Age: ________________ qHospitals: ________________________________________________

Condition: 1 2 3 4 5 qShops: ___________________________________________________ needs replaced like new

qRestaurants: _____________________________________________qMonthly water bill: $ _____________________________________

qSupermarkets: ___________________________________________qSeptic System qPublic Sewage

qLibraries: ________________________________________________qAdequate water pressure

qNo signs of leakage around fixtures

qShut-off valves at each fixture


Contact Information Cancel Service

Activate Service

Change Address Notes

UtilitiesCable/Satellite Company

Cell Phone Provider

Electric Company

Gas Company (Oil/Propane)

Home Phone Company

Internet Service Provider

Personal AccountsAccountant

Auto Insurance Company

Bank A

Bank B

Bank C

Broker

Credit Card Company A

Credit Card Company B

Credit Card Company C

Credit Card Company D

Child Care Provider

Dentist

Employer

Family Doctor

Health Club

Health Insurance Provider

Home/Renter Insurance Company

Lawn Care Service

Lawyer

Pharmacy

Satellite Radio Company

Security Company

Veterinarian

PublicationsMagazine A

Magazine B

Magazine C

Newspaper A

Newspaper B

Newsletters

Professional Journals

Government OfficesCity/County Tax Assessors

City/Town

Department of Motor Vehicles

Federal/State Tax Bureaus

Post Office Online change of address form is available online at www.usps.com

Social Security Administration

Veteran’s Administration

Change of Address Checklist


Homebuyer’s Guide

Customer First Care Center: 1-877-367-8178

Banking Service by Phone: 1-888-511-1077

Visit Us Online: First-Fed.com

Have questions or ready to apply? Scan here.

08/14

Homebuyer’s Guide · Components of a Mortgage Payment. Typically, a monthly mortgage payment...

Documents

Transcript of Homebuyer’s Guide · Components of a Mortgage Payment. Typically, a monthly mortgage payment...