AGENDA State of the industry First Time Homebuyer definition Pre-qualification letter vs Pre-approval letters Mortgage qualification guidelines Unders

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2 AGENDA State of the industry First Time Homebuyer definition Pre-qualification letter vs Pre-approval letters Mortgage qualification guidelines Understanding Credit Programs Impact of TRID (TILA Respa Integrated Disclosures)

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5 FIRST TIME HOMEBUYER A first time home buyer is defined as someone who has not owned a home, either primary residence, second home, or investment property in the last three years.

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7 FINANCIAL LENDER APPROVAL LETTERS P R E - Q U A L I F I C A T I O N Informal evaluation of finances Generally no documents required Verbal conversation regarding income, assets, and credit Pre-qualification letter issued P R E - A P P R O V A L Formal application taken Complete financials collected Credit is pulled Application is fully underwritten Commitment letter issued

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9 QUALIFICATIONS CONTINUED - INCOME Salaried 3 years of income history required Self employed Commission, Bonus, Overtime Seasonal Unemployment Alimony, Child Support Rental income on subject property * Retirement Social Security, dividends, asset depletion

10 DEBT TO INCOME RATIO Will vary depending on program parameters Debts included in ratio calculation Installment loans; car payments (loans vs lease), personal loans Credit cards (revolving credit) Student loans (deferred minimum payments needed) minimum payment calculation 1% of the balance * co-signed student loans and or parent plus loans Qualification example varies by program Monthly income multiplied by 33% /41% Housing ratio $6,000 monthly income x 33% = PITI Back end ratio $6000 x 41% =

11 CREDIT Achieving Maintaining Understanding credit

12 CREDIT CONTINUED

13 CHECKING YOUR CREDIT Where to regularly check you credit: MYFICO - Annual Credit report Monitoring credit from current accounts such as: Credit Karma Discover Capital One

14 ASSETS Savings Gifts must be sourced and verified Spend down limits depending on program Closing costs credit from seller limits 3% -6% max Depending on loan to value Grants vary depending on program offered FHLB, State of Ct., HDF

15 LIMITS Some limits may apply depending on the chosen program Income limits for individuals and or households Purchase price Type of property Number units

16 LOAN TO VALUE Varies depending on program parameters Private mortgage insurance required on loans with a loan to value higher than 80% Examples Purchase price $400,000 x 90% = $360,000 (loan amount) Purchase price $400,000 x 80% = $320,000 ( loan amount)

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18 PROGRAM OPTIONS FOR FINANCING Conventional (Home Ready) CHFA HDF or similar community programs FHA*/ 203K VA* USDA* Portfolio

19 CONVENTIONAL LOAN PROGRAM A conventional loan is one not insured or guaranteed by the government. Adheres to guidelines established by Fannie Mae or Freddie Mac. Fixed or adjustable rates available. Up to 97% Financing Mortgage insurance required with less than 20% down Income limits may apply depending on census tract Suggested debt to income not to exceed 43%* Minimum credit scores 620* Approve eligible automated findings report required* Home buyer education course required through Framework *

20 CHFA HFA (housing finance agencies) Preferred- Conventional financing guidelines with traditional mortgage insurance at a discounted rate. A 3% down payment is required. Home Buyer online educational course is required. 680 Fico score for 97% loan to value* 640 Fico for 95% loan to value* Guidelines *Depending upon the use of CHFA DAP (down payment assistance program) Income and sales limits apply per county (see attachment) Maximum combined loan to value 100%

21 CHFA CONTINUED BENEFITS Qualifying ratios to 43%* Discounted mortgage insurance Combined loan to value up to 100% Reduced interest rates Standard Appraisal Discounted rates for teachers, municipal workers, targeted census tract Can be combined with HDF for down payment assistance Release of mortgage insurance at 78% LTV Recapture tax may be applicable

22 HDF- HOUSING DEVELOPMENT FUND A non profit organization that provides second mortgages for down payment and or closing cost assistance designed to make homeownership achievable and sustainable. Smart Move - 20% second mortgage with a 3% rate and a 20 year term Live where you work and State of Ct. provides closing costs grant funds Home buyer education course required One on one required to become mortgage ready Conservative maximum debt to income ratio of 41% Maximum combined loan to value up to 105%

23 HDF BENEFITS Products can be combined (CHFA/HDF) Not credit score driven Credit counseling available along with action plan from counselors to assist borrowers in becoming mortgage ready Avoids needing mortgage insurance Builds equity faster due to a 20 year term Fees are applicable at closing Grant money

24 FHA FEDERAL HOUSING AUTHORITY Guidelines 620 minimum FICO score* 96.5 LTV 1-4 family housing Upfront MI required Monthly MI required FHA appraisal required Condos must be FHA approved MI can be removed in 10 years* Benefits Credit score flexibility No income limits No spend down requirements Do not need to be a first time homebuyer Lower interest rates High purchasing lending limits per county

25 VA VETERANS ADMINISTRATION LOANS The VA loan became known in 1944 through the Original Serviceman Readjustment Act. Also known as the GI Bill of Rights. The GI bill was signed into law by FDR and provided veterans with a federally guaranteed home with no down payment. This feature was designed to provide housing and assistance for veterans and their families. The dream of homeownership became a reality for millions of veterans.

26 No minimum credit score required Maximum 41% Debt to income VA LOANS CONTINUED Loan limits to $453,100 except in Fairfield county which is $601,450 Upfront funding fee of 2.15% of the loan amount Six year requirement for National Guard and Reservists with certain criteria Two year requirement if veteran enlisted an began service after September 7, 1980 or was an officer and began service after October 16, 1981 Veterans that served on active duty and have a discharge other than dishonorable after a minimum of 90 days service during war time or 181 continuous days during peace time

27 USDA LOANS US Department of Agriculture - Rural development loans. Eligibility based on eligible properties, income and area.

28 USDA CONTINUED 30 year fixed rate No down payment required No cash reserves needed Closing costs may be financed on some transactions Seller contributions allowed Competitive low rates Low to very low income programs (Direct) Low to moderate income programs (Guaranteed)

29 PORTFOLIO LOANS Individual lender programs for first time homebuyers Reduced rates No mortgage insurance with 10% down payment Reduced closing costs Limited or no reserve requirements Gift money allowed Alternate credit sources allowed *Programs and features vary depending on the lender*

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31 TRID CONTINUED This new rule primarily does two things: It simplifies and consolidates some of the required loan disclosures, and It changes the timing of some activities in the mortgage process. This guide will help you work with your clients to ensure smooth and on-time closings. Updated April 23, 2018

32 PROGRAM AND CREDIT WEBSITES CHFA HDF FHA VA USDA Credit Reports annualcreditreport.com myfico.com Mortgage Insurance