Welcome Home Buying 101

Home Buying 101 Home Buying 101 Presented by NASA Federal Credit Union Bert Aguilera Mortgage Consultant NMLS # (301) , x334

What is a mortgage? A long-term loan in which the member uses the home as collateral to secure financing. It is typically referred to as a mortgage loan, a lien, or a security interest which is held by a financial institution. The lien is paid off and released after making timely payments for the term of the loan, the loan is refinanced to change the terms, or the home is sold. It is also known as a home loan.

Overview of the Market What’s Different Now?

The Mortgage Market Has Gone Back to Basics When applying for a mortgage 25 years ago, four things were critical:  Job Stability  Cash  Credit  Income Today, these are still important!

How Do You Qualify For A Home Loan in 2014? A Healthy Credit Score Cash to Close Full Documentation

What To Avoid When Preparing To Get A Home Loan Lots of credit card debt Major purchases (buying a car or other large items) Changing jobs Applying for new credit

Documentation Requirements The documentation requested on a mortgage loan is to determine the creditworthiness of the member and if they are able to repay the debt. Asset documentation to support funds for down payment, closing costs, and reserves. Income documentation such as recent pay stubs covering a one month period and W-2 statements for the last two years are normally required for salaried employees.

Documentation Requirements Cont’d For self employed borrowers, additional documentation such as tax returns for the last two years and year to date profit and loss statements are required. For S corporations and businesses that are incorporated, business tax returns for the last two years are also required.

Settlement Fees Cost associated with closing the loan Normally estimated at 4%-6% on purchase transactions. Exact closing costs will depend on fees charges in your area, how much you are borrowing, how you finance your mortgage (points), and your closing date, i.e., where it falls within the month. Closing costs are in addition to the down payment amount required.

What is a point? A point is a fee the member can choose to pay to reduce the rate. The secondary markets may apply other points for credit score, occupancy, subordinate financing (etc). Each point is equal to 1% of the loan amount and is added to the total closing costs. Members can elect to pay points or lenders can increase the offered interest rate to reduce the applicable points.

What are other closing costs? Pre-paids (escrows for property taxes and homeowners insurance) State and local transfer and recordation taxes Origination Fees Appraisal Fees (paid outside closing) Credit Report, Flood Certification, Tax Service Fees Settlement Fees, such as title search and title insurance, inspection fees, survey, recording fees, and buyer attorney fees

Do I need a down payment? Not always. The credit union offers a Zero Down, No MI portfolio special. Other mortgages can require a minimum down payment of 3.50%, 5%, 10%, or even 20% of the sales price. Some mortgage programs require the money to be your own funds. The only borrowed funds must come from a secured asset such as a 401(k) plan. Other programs allow you to use a gift from a relative to cover your down payment.

Basic Mortgage Terms LTV (loan-to-value) - The ratio between the amount of the mortgage and the total value of the property. CLTV (combined-loan-to-value) – This means there is a second mortgage (80/15)(80/10) on the property. ARM – adjustable rate mortgage EMD – Earnest money deposit GFE – Good faith estimate MI – Mortgage insurance that is necessary if the LTV is greater than 80%. P/I (PITI) – Principal and interest (taxes & insurance) DTI – debt-to-income ratio HUD-1 – settlement sheet detailing final cost of purchase

Types of Mortgages Types of Mortgages Conforming up to $417,000 Non-Conforming Jumbo Mortgages above $417,000 FHA & VA 80/15/5 or 80/10/10 Zero Down No MI Special (purchase only)

ARMs VS Fixed ARMs VS Fixed ARMs 3/1, 5/1, 7/1, 10/1 Fixed Rates 10, 15, 20, 30 Year

NEW PROGRAMS 100% Financing to $650,000 - Zero Down Payment required- Purchase Loans - No mortgage insurance (MI) required - Need Good Credit, Income and Savings Pattern - Available on 30 and 15 year Fixed, 3/1, 5/1, 7/1 and 10/1 ARM - 95% Financing to $850,000 with 5% down payment This offer is limited to well qualified applicants. Some restrictions may apply. Offer is valid for primary Residence Only.

Record Low Interest Rates Rates haven’t been this low since %, 30 Year Fixed – Conforming Rates effective 08/15/2014 * subject to change daily 3.75, 20 Year Fixed 3.125%, 15 Year Fixed What This Means For You…

Advantages of Lower Rates Lower Monthly Payments Reduced Terms May Qualify for More

Monthly Payment Sample for a $400,000 Mortgage Loan Term: 30 Year Fixed RateP&I Payment Amount 4.00%$1, %$2, %$2,398 Total monthly payment (PITI) will include property taxes, homeowner’s insurance and possibly mortgage insurance

Things to Consider When Shopping For Your Home? Location and “must have” features Your maximum pre-approved loan limit Your Realtor Home Advantage ( Your Settlement Company CU Title

Home Advantage Program Access program through Link on NASA’s website Free program to members View current listings through the Multiple Listing Service (MLS) Obtain school and neighborhood data Find a qualified real estate professional and receive up to 20% of their commission towards your closing costs.

Are You Ready To Buy A Home? Call NASA Federal’s 1 st Mortgage Professionals First. We can help with a personal consultation. Get Pre-Approved Making an offer on a home with your agent What to expect from lender once your offer is accepted and ratified by the sellers (locking rate, disclosures, processing, underwriting) Loan Commitment Letter Settlement / Closing

Recommendations Eliminate as much consumer debt as possible Save, Save, SAVE for a down payment & closing costs Don’t make any major purchases, change jobs, or get new credit while qualifying for a mortgage Thoroughly examine your credit report Free annual credit report ( Use BALANCE for credit consultation

Financing with NASA FCU One-Stop Shop! –From finding a Realtor to Financing to Closing! Prompt, Courteous, Professional Service Lower Fees Online Tools Personal Consultations

Free Personal Consultation Discover how much you can afford Explore different loan options Review the home buying process If you are not already a member of NASA FCU becoming one is easy!! Ask us how.

Questions?

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