Your Guide To Understanding Your Home Financing Choices And The Features Of Your Mortgage

Transcription

1 Yur Guide T Understanding Yur Hme Financing Chices And The Features Of Yur Mrtgage At Wells Farg Hme Mrtgage, we understand the imprtant rle yur hme plays in yur life. That s why we are cmmitted t helping yu make well-infrmed decisins abut yur hme financing. Since there s a lt f infrmatin t digest during the financing prcess, we d like t simplify it fr yu. Let this dcument be yur guide. It cuts thrugh sme cnfusing industry terminlgy and clearly explains the hme financing ptins that are available t yu, including the: Benefits f each mrtgage feature. Drawbacks f each mrtgage feature. Circumstances each feature is designed t meet. The infrmatin in this guide is fr Wells Farg Hme Mrtgage hme financing prducts, unless therwise nted. Yu may als receive infrmatin n ther hme financing prducts and features, and their csts, frm ther Wells Farg Bank divisins, such as Wells Farg Financial and Wells Farg Hme Equity. We hpe this guide helps yu better understand yur ptins, s yu can chse the mrtgage and features that best meet yur needs tday and in the future. Please cntact a Wells Farg Hme Mrtgage cnsultant with any questins Wells Farg Bank, N.A.

2 TABLE OF CONTENTS Intrductin Why Mrtgage Features Matter Page 4 10 Imprtant Questins T Ask And Answer Abut Yur Mrtgage Page 5-6 Mrtgage Feature Descriptins Sectin 1: Interest Rates What is an interest rate? Page 7 What is an annual percentage rate (APR)? Page 7 Hw is the interest rate determined? Page 7 What is a fixed-rate mrtgage (FRM)? Page 8 What is an adjustable-rate mrtgage (ARM)? Page 8 What is a hybrid adjustable-rate mrtgage (hybrid ARM)? Page 8 Hw d rates n an ARM r hybrid ARM adjust? Page 9 What is an interest rate buydwn? Page 9 What des it mean t lck in a range f rates r flat a rate? Page 10 Sectin 2: Types Of Mrtgages What types f mrtgages are available? Page 11 What is a cnventinal prime mrtgage? Page 11 What is a gvernment mrtgage? Page 11 What is the Wells Farg Hme Opprtunities SM prgram? Page 12 What is a nnprime r subprime mrtgage? Page 12 What is an Alternative-A mrtgage? Page 12 What is a piggy-back, cmbinatin, r sim lan? Page 13 What is the Wells Farg Hme Asset Management SM accunt? Page 13 Sectin 3: The Term Of Yur Mrtgage What is a mrtgage term? Page 14 What is a shrter-term mrtgage? Page 14 What is a lnger-term mrtgage? Page 14 Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 2

3 Sectin 4: Dcumentatin And Dcumentatin Levels What is dcumentatin and what is meant by levels? Page 15 What is full dcumentatin? Page 15 What is reduced dcumentatin? Page 15 Sectin 5: Lan-T-Value (LTV) What is a lan-t-value (LTV) rati? Page 16 What is a lw-ltv rati? Page 16 What is a high-ltv rati? Page 16 What is a cmbined-lan-t-value (CLTV) rati? Page 16 Sectin 6: Types Of Mrtgage Payments Hw is the mnthly mrtgage payment amunt determined? Page 17 What are regular mnthly principal and interest payments? Page 17 What are interest-nly payments? Page 17 What are balln payments? Page 18 What are prepayments? Page 18 What payment ptins des Wells Farg NOT ffer? Page 19 Sectin 7: Hw Mrtgage Features Impact Payments And Equity Chart shwing different mrtgage features and their impact t payments and equity. Page 20 Sectin 8: Hw Yu Make Yur Mrtgage Payments What ther charges are included in my regular mnthly payment? Page 21 Are there different ways t make my mrtgage payments? Page 21 Hw can last-minute payments be made? Page 22 What if a payment r payments can t be made? Page 22 If I m late making a payment, is there a fee? Page 22 Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 3

4 INTRODUCTION Why Mrtgage Features Matter The features f each mrtgage lan may have an impact n yur interest rate, the amunt f yur mnthly payment and its variability, and yur verall cst f brrwing. They als may impact yur sense f security. That s why yu shuld select mrtgage features that yu ll feel cmfrtable with ver the lng term. Be Sure Yu Lk Beynd Shrt-Term Benefits Sme custmers select mrtgages with features that wrk t their benefit in the shrt term. They d this thinking that nce the shrt-term benefits end, they ll be able t refinance r sell their hme. Unfrtunately, in sme markets r fr sme hmewners, refinancing may nt be an ptin and selling the hme may be difficult. It s imprtant fr yu t knw that refinancing r selling may nt be an ptin if interest rates are higher verall, if yu cannt qualify because the market envirnment r yur persnal finances have changed, r if the value f yur hme has declined. Even if yu are able t refinance, there may be a significant cst t d s. Fr these reasns, be sure yu lk beynd shrt-term benefits and carefully cnsider yur ability t manage yur mrtgage ver the lng term. Imprtant Pints T Keep In Mind As yu review this guide, it s imprtant t understand the many factrs that cme int play when yu wrk with Wells Farg t determine the hme financing that wrks best fr yu: Yur financial situatin tday and the level f certainty yu have abut yur financial future. Hw lng yu plan t wn the hme r keep the mrtgage. Yur cmfrt level in assuming the risk f ptential rate increases with certain types f mrtgages. Yur credit prfile and yur current ability t manage yur debts and bligatins in a timely fashin. The amunt f funds yu have fr a dwn payment and clsing csts. The type f prperty yu want, its use, and its value. The kind f dcumentatin yu will need and can prvide t btain the mrtgage. Whether r nt this is yur primary residence, a secnd hme r investment prperty. The amunt f mnthly incme remaining after paying all f yur bills. Befre Yu Decide On The Mrtgage Financing That s Right Fr Yu Be sure yu can answer all 10 questins n the next page abut the mrtgage yu have chsen. Be sure yu understand yur mrtgage terms, including any fees/charges that apply. Seek any prfessinal help yu need t better understand yur mrtgage terms by speaking t yur Wells Farg Hme Mrtgage cnsultant, lawyer, accuntant, r translatr. The Mrtgage Features Described In This Guide Are Nt Necessarily Available Wells Farg may chse t temprarily eliminate a mrtgage r feature frm its financing menu. This guide als describes mrtgage features that Wells Farg has decided nt t ffer due t the risks they may pse fr sme custmers. Because yu may be shpping lenders, we ve included brief descriptins just t help yu understand thse mrtgage features. Nt every feature will be available t every custmer. Yur Wells Farg Hme Mrtgage cnsultant can prvide infrmatin t help yu determine what features are imprtant t yu. If yu are getting a Wells Farg hme equity line f credit r lan in additin t yur mrtgage, please refer t the dcument entitled Features Of Wells Farg s Hme Equity Lines Of Credit And Lans fr details n the chices and features available t yu. Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 4

5 10 Imprtant Questins T Ask And Answer Abut Yur Mrtgage 1. Can my interest rate g up ver time? By hw much and hw ften? Adjustable-rate mrtgages (ARMs) and hybrid ARMs have rates that may start lw and then change ver time at prescheduled adjustments. If yur mrtgage falls int the ARM categry, be sure yu knw the adjustment schedule, plus the index and the margin n which the rate adjustment will be based. (see page 9) 2. Can my principal and interest payment g up ver time? By hw much and hw ften? Payment increases can ccur n certain types f mrtgages and fr multiple reasns ther than an adjustment t yur rate. It s imprtant t knw if the mrtgage yu re cnsidering has the ptential fr payment increases because if yu can t affrd t make yur payments, yu culd lse yur hme. It s als imprtant t remember that even n mrtgages with principal and interest payments that dn t increase, yur payments fr items like prperty taxes and hmewners insurance may increase. (see pages 17-19) 3. Can my mrtgage balance g up, even if I make all payments in full and n time? Wells Farg Hme Mrtgage des nt prvide what is referred t as a negative amrtizatin feature r neg am mrtgages. If yu are shpping ther lenders, be aware that the lw-payment feature n a negative amrtizatin mrtgage permits yur balance t increase, even if yu make minimum payments. (see page 19) 4. Will any scheduled payment exceed the nrmal mnthly payment? Balln mrtgages, which are nt very cmmn, are mrtgages with a final payment that exceeds the nrmal mnthly payment, usually significantly. (see page 18) 5. Will my regular mnthly payment cver nly interest at any pint during the mrtgage term? Sme mrtgages allw yu t make mnthly payments that cver nly the interest accrued during the mnth fr an initial number f years. As a result, payments are lwer than payments that include principal, but they d nt reduce yur mrtgage balance and may increase substantially after the interest-nly perid ends. (see page 17) Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 5

6 10 Imprtant Questins cntinued 6. Will my mnthly payment include escrw payments (taxes, insurance, etc.)? If nt, will I pay a fee fr nt including escrw payments in my mnthly payment? Wells Farg Hme Mrtgage uses the funds yu will pay mnthly int an escrw accunt t pay yur prperty taxes, insurance, r ther charges related t yur hme when they cme due. If yu want t pay these items yurself, yu might be able t waive the escrw accunt requirement, but there may be a fee. (see page 21) 7. If I chse t prvide the lender with less than cmplete dcumentatin f my incme r assets, will I pay additinal csts? Sme Wells Farg Hme Mrtgage custmers qualify fr a lw-dcumentatin feature at n extra cst. If yu d nt qualify fr the n-cst feature and lw-dcumentatin is an available ptin, yu will pay fr that cnvenience in yur rate and/r fees. (see page 15) 8. Will I have t pay a fee if I pay ff the mrtgage in full ahead f schedule? Will I have t pay a fee if I pay mre than the required mnthly payment? Mst mrtgages have n prepayment fees whatsever. Wells Farg Hme Mrtgage des nt currently prvide mrtgages that have penalty fees fr prepayment. Hwever, Wells Farg Hme Equity and Wells Farg Financial prducts may carry a prepayment fee. As yu shp fr a mrtgage, be sure yu fully understand whether there will be a prepayment fee, hw it will be calculated, and when it can be charged. Yu ll als need t understand if there is a prepayment fee nly when yu pay ff the full balance within a certain perid, r any time yu make a payment abve and beynd yur scheduled payment. If yu currently have a mrtgage and are abut t refinance r purchase a new hme, call yur mrtgage servicer t see if yu will have t pay a prepayment penalty r ther fees, and t determine the amunt. (see page 18) 9. Will I pay an additinal fee if my payments are late? Hw much? Late fees apply when yu d nt make a payment n time. Yur lender may, r may nt, give yu a grace perid, during which yu can pay late withut incurring a late fee. (see page 22) 10. What is my initial interest rate and what are my settlement charges? Be sure yu knw what yur interest rate is and the estimate f yur clsing csts (settlement charges), particularly when yu re shpping fr the best mrtgage package. A lwer interest rate may be ffered in exchange fr higher settlement charges. In ther cases, lwer settlement charges may cme with a higher interest rate. (see pages 7-10) Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 6

7 SECTION 1: Interest Rates Q: What is an interest rate? A: The annual rate yu pay n the funds yu brrw. Yu may have the ptin f chsing: A fixed-rate mrtgage (FRM) An adjustable-rate mrtgage (ARM) A hybrid (r intermediate) adjustable-rate mrtgage (hybrid ARM) A temprary buydwn f the interest rate Q: What is an annual percentage rate (APR)? A: When yu chse yur mrtgage, yu are quted an interest rate, which may vary until it s lcked in, that establishes the initial amunt f yur mnthly principal and interest payments. Yu shuld see bth an interest rate and an annual percentage rate (APR) in varius dcuments. The APR, which is usually higher than the interest rate, expresses the ttal cst f the mrtgage as an nging annual rate and includes certain fees, pints, clsing csts and ther expenses (even thugh they are paid at applicatin, r befre r at clsing). APRs can help yu cmpare types f mrtgages and the ttal csts between mrtgages r lenders, but remember that the APR is different frm the actual interest rate n yur mrtgage. Q: Hw is the interest rate determined? A: Many factrs determine the interest rate n a particular mrtgage. Yur rate will reflect cnditins in the financial markets and yur mrtgage type, as well as an assessment f the risk f yur specific mrtgage. This is why a quick rate qute during a phne call t a lender r a rate pulled frm an nline r newspaper advertisement may nt prvide enugh infrmatin r reflect the interest rate yu will receive nce a lender has assessed yur specific circumstances. Mrtgages reflect cnditins in the financial markets. Cmplex variables affect the rise and fall f interest rates. It s mst imprtant t understand that there is n ne mrtgage rate. Rates can fluctuate daily, even hurly, with mvements in the financial markets, and by mrtgage type and mrtgage amunt. In additin, the interest rate n yur mrtgage depends n the risk yur mrtgage features represent. When lending mney t custmers t finance their hmes, lenders and their investrs take the risk that these custmers will, in fact, pay back the mney laned t them. Lenders typically ffer lwer mrtgage rates n mrtgages that present less risk. Based n decades f lending, factrs that reduce r increase risk have been identified, which include dwn payment amunt, credit scre, and ther factrs. Fr example: Because a custmer has mre mney invested in a mrtgage with a higher dwn payment, it is cnsidered less risky than a mrtgage with a lwer dwn payment. Custmers with higher credit scres have histrically defaulted less ften (s there s less risk) than thse with lwer credit scres. Other factrs are similarly cnsidered: yur debt level in relatin t yur mrtgage amunt, whether yur hme is yur residence r an investment prperty, whether it s a single-family r multi-family hme, the mrtgage term yu need r want, the amunt f dcumentatin yu prvide, etc. Be careful if yu decide t shp rates amng several lenders. A rate that s nt based n the full details f yur specific circumstances can nly be a guess. A guess yu btain tday frm ne lender versus a guess yu btained yesterday r a week ag frm anther lender ffers little basis fr an accurate cmparisn. Different mrtgage types (Sectin 2) and different mrtgage terms (Sectin 3) have different rates. Be sure t understand whether the rate yu are quted is an intrductry rate, smetimes called a teaser rate, that might rise dramatically a shrt time after clsing. Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 7

8 SECTION 1: Interest Rates cntinued Q: What is a fixed-rate mrtgage (FRM)? A: A mrtgage with an interest rate that remains the same ver the entire term f the mrtgage, regardless f hw interest rates change in the marketplace. Finance their hme when rates are relatively lw. Want the security f predictable principal and interest payments ver the lng term. Seek prtectin frm rising rates and mnthly payments. Generally, the interest rate is higher than the initial interest rate f an ARM r hybrid ARM. Yur rate will nt adjust t a lwer rate unless yu refinance t a new mrtgage. Q: What is an adjustable-rate mrtgage (ARM)? A: A mrtgage with an interest rate that changes at scheduled dates t reflect market cnditins. The initial rate is usually lwer than n a fixed-rate mrtgage, making yur initial payments lwer t. After the initial perid, the rate adjusts at certain times (up r dwn), based n a market index. A ne-year ARM adjusts up r dwn fr the first time after ne year, then every year after that. A six-mnth ARM adjusts up r dwn every six mnths. A ne-mnth ARM adjusts up r dwn every mnth. Will sell their hme befre rates adjust up t high. Want t save as much mney as pssible during their first year(s) f hmewnership. Finance their hme when fixed rates are cmparatively high. Knw their incme will increase ver time, helping them keep pace with ptentially increasing payments. Are willing t take a chance that their rate will stay the same r decrease when it adjusts. If yur rate increases at adjustment, yu may experience payment shck if yur mnthly payments increase t an amunt yu may nt be able t affrd alng with yur ther mnthly bligatins. If refinancing r selling is nt an ptin, yu culd be at risk f lsing yur hme. (see page 4) Q: What is a hybrid adjustable-rate mrtgage (hybrid ARM)? A: A kind f adjustable-rate mrtgage (knwn as hybrid r intermediate ARM) with an initial interest rate that is fixed fr a number f years, typically three, five, seven r 10 years, and then adjusts every year thereafter. Hybrid ARMs are ften referred t as 3/1, 5/1, 7/1 and 10/1 ARMs. Fr example, a 3/1 ARM adjusts fr the first time after three years, and then every year after that. At each adjustment, the rate ges up r dwn based n a market index plus the margin. (see page 9) The rate during the fixed perid is usually lwer than a traditinal fixed-rate mrtgage, but higher than a ne-year ARM. (see chart n page 20 fr cmparisns) Intend t sell their hme just befre r sn after the fixed perid ends. Understand they may need/want t refinance at the end f the fixed perid. Have sufficient incme t manage a ptentially increasing payment if refinancing r sale is nt an ptin. Like any ARM, yu may experience payment shck at the end f the fixed perid. Yu may nt have the pprtunity t refinance r sell if yu can t make the higher payment. (see page 4) Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 8

9 SECTION 1: Interest Rates cntinued Q: Hw d rates n an ARM r hybrid ARM adjust? A: When any type f ARM reaches each adjustment date, the rate will adjust based n a published index, such as the Prime Rate, US Treasury r LIBOR, plus a predetermined margin identified in yur mrtgage dcuments. Adjustments are subject t caps that limit the amunt the rate can rise r fall. Fr example: Let s say yur current 5/1 ARM rate is 5.5%, with a predetermined margin f 2.25%. On yur ARM s adjustment date in year 6, let s say the published index is 3%. The 3% index rate added t the 2.25% margin wuld give yu a new, lwer 5.25% rate. As anther example: Let s say the published index is at 5% when yur 5.5% 5/1 ARM adjusts. The index f 5% added t the margin f 2.25% wuld give yu a rate f 7.75%. The higher rate means yur payments will increase significantly. Annual and lifetime limits (caps) n increases at adjustment prvide sme prtectin frm extreme rate increases. Yur rate can never g higher than yur riginal rate plus whatever the lifetime cap is. Pay attentin t the caps because different mrtgages have different caps. Fr example, many ARMs have a cap f 2% per adjustment and a lifetime cap f 6%. Others can have a first adjustment cap f 5%, a 2% cap n subsequent adjustments, and a lifetime cap f 5%. The margins may be higher r lwer than the examples prvided abve, based n the terms f yur mrtgage. After yu apply, yu will receive a bklet called the Cnsumer Handbk On Adjustable-Rate Mrtgages, which will give yu mre in-depth infrmatin n ARMs. Q: What is an interest rate buydwn? A: Wells Farg Hme Mrtgage prvides tw ways t lwer the rate n yur mrtgage, ne permanently and ne temprarily. Yu can: Permanently buy dwn the interest rate by prepaying yur interest in the frm f pints. Each pint (equal t ne percent f the mrtgage amunt) lwers yur rate by an amunt calculated by Wells Farg Hme Mrtgage. Temprarily buy dwn yur rate fr a ne- t three-year perid. Yu can pay the buydwn yurself r use funds frm the builder, seller, r ther party. In the case f a permanent buydwn, have cash-n-hand t lwer all future mnthly payments, particularly if the custmer expects t stay in the hme fr mre than a few years. In the case f a temprary buydwn, are frtunate t receive mney-saving assistance frm a third party r wh have the extra cash t temprarily buy dwn their wn rate in the early years f their mrtgage. Seek the lng-term security f fixed-rate payments, but want lwer payments in the first year r lnger. Temprary and permanent buydwns must be paid fr and there may be limits t the buydwn amunt. Fr sme temprary buydwns, yu must be qualified at applicatin fr the higher fixed-rate payment after the buydwn ends. This is t ensure yu can make the higher payment when the buydwn ends. If yu sell r refinance befre the temprary buydwn ends, yu may nt recup its cst. Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 9

10 SECTION 1: Interest Rates cntinued Q: What des it mean t lck in a range f rates r flat a rate? A: At Wells Farg Hme Mrtgage, yu can lck in yur range f rates at applicatin r at a set time prir t clsing, when it will lck autmatically. The interest rate n the day the rate is lcked will be the rate yu btain at clsing, assuming yu clse within the lck-in perid (nrmally 30, 60 r 90 days). An unlcked rate can flat up r dwn until it s lcked int the market rate. Lck their rate nw that neither the rate nr the mrtgage will change, assuming the clsing takes place within the lck-in schedule. At lck-in, a ne-time flat-dwn ptin can be purchased in case rates fall. Flat the rate have the pprtunity t btain a lwer interest rate shuld market rates decline. Flating puts yur rate at risk (shuld rates rise) and yur mrtgage chice at risk (shuld the mrtgage yu ve chsen be discntinued). If rates g higher yu may n lnger qualify fr the mrtgage amunt fr which yu ve been apprved. Lcked rates can t be lwered if market rates decline, unless a flat-dwn ptin has been purchased. Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 10

11 SECTION 2: Types Of Mrtgages Q: What types f mrtgages are available? A: Different mrtgages meet different needs. The type f mrtgage yu qualify fr impacts yur interest rate and mrtgage terms. The mrtgage types available include: Cnventinal prime Gvernment (FHA and VA) Hme Opprtunities SM prgram (a prprietary Wells Farg mrtgage prgram) Nnprime prvided n a limited basis by Wells Farg Hme Mrtgage based n market cnditins, but may be available thrugh Wells Farg Financial Alternative-A (Alt-A) prvided based n market cnditins Cnventinal prime, gvernment-insured, and Hme Opprtunities SM mrtgages have interest rates that are usually lwer than the interest rates n nnprime r Alt-A mrtgages. Q: What is a cnventinal prime mrtgage? A: The mst cmmn categry f mrtgages, smetimes referred t as A-Paper mrtgages in the industry. They cme in cnfrming mrtgage amunts (limits are set each year by the federal gvernment) and jumb mrtgage amunts (any amunt abve the cnfrming limit). They are nt insured r guaranteed by a gvernment agency, but may be the least expensive. Have gd, thugh nt necessarily perfect, credit histries. Want the mst favrable rates and terms available and can satisfy cnventinal qualificatins. If yur dwn payment fr a purchase, r hme equity in the case f a refinance, is less than 20%, yu will have t pay fr private mrtgage insurance (PMI). Sme custmers may nt have the credit, incme, dwn payment, dcumentatin r prperty requirements t qualify. Sme custmers have financing needs that exceed the cnfrming mrtgage limits. Nncnfrming prime mrtgages usually have a higher interest rate. Q: What is a gvernment mrtgage? A: A mrtgage fr which repayment t the lender is insured by a gvernment agency such as the Federal Husing Administratin (FHA) r guaranteed by the Department f Veterans Affairs (VA). The interest rates and terms are similar t cnventinal prime mrtgages. There may be mre flexibility in qualifying guidelines than with cnventinal mrtgages. Seek a mrtgage with a lwer dwn payment requirement. Need t use funds frm ther surces fr clsing csts. May need mre flexible qualifying guidelines due t limited r less-than-perfect credit histry. Fr a VA mrtgage, have served r are the spuse f smene wh has served in the armed frces. Yu must pay fr FHA insurance r the VA guarantee. Yu must demnstrate yur VA eligibility. The FHA has caps (limits) n the mrtgage amunt based n the cunty where the hme is lcated. Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 11

12 SECTION 2: Types Of Mrtgages cntinued Q: What is the Wells Farg Hme Opprtunities SM prgram? A: A prgram that may accmmdate a custmer s cnstraints regarding dwn payment, incme and credit requirements, and the surce f funds required fr clsing. The interest rate is similar t cnventinal prime mrtgages, but may cst a little mre. Have lw-t-mderate incme. Face challenges in accumulating funds fr the dwn payment. Require flexible credit requirements due t limited r nn-traditinal credit histries. The prgram requires that yur incme fall within the limits set by area. Yu will have t pay private mrtgage insurance (PMI) if yur dwn payment r hme equity is less than 20%. Q: What is a nnprime r subprime mrtgage? A: A nnprime mrtgage accmmdates custmers with qualifying challenges. Nnprime mrtgages are smetimes knwn as subprime r B- r C-Paper in the industry. Nnprime mrtgages generally cme in bth cnfrming and jumb mrtgage amunts. Have had credit challenges that are reflected in lw r lwer credit scres, but want t purchase r refinance a hme. Have higher lan-t-value ratis. Have higher debt-t-incme ratis. Nnprime mrtgages are nt prvided by Wells Farg Hme Mrtgage in certain market cnditins, but nnprime refinance mrtgages may be available thrugh Wells Farg Financial. Interest rates fr nnprime mrtgages are typically higher than fr ther mrtgages. T qualify and receive the lwest pssible nnprime interest rate, yu may need t cnsider: Chsing an ARM instead f a fixed-rate mrtgage. Accepting a prepayment penalty. (see page 18) Q: What is an Alternative-A mrtgage? A: Als knwn as Alt-A, these mrtgages prvide a qualifying alternative t A-paper cnventinal prime prgrams and generally cme in bth cnfrming and jumb mrtgage amunts. Have gd credit scres but cannt meet ther criteria fr a cnventinal r gvernment mrtgage because f prperty type r the need fr reduced r alternative dcumentatin. Have incme that is irregular r hard t evaluate. Alt-A mrtgages are nt ffered by Wells Farg in certain market cnditins. Interest rates fr Alt-A mrtgages are typically higher than cnventinal prime and gvernment mrtgages. Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 12

13 SECTION 2: Types Of Mrtgages cntinued Q: What is a piggy-back, cmbinatin, r sim lan? A: A first mrtgage cmbined with a hme equity lan r line f credit in secnd psitin is a cmmn type f financing fr a number f different reasns, depending n market cnditins. Want t avid the higher rate n a jumb mrtgage by btaining a cnfrming mrtgage up t the permitted limit and cvering the balance f what they need t brrw with a hme equity lan/line. Smetimes this blended jumb cmbinatin (cnfrming mrtgage plus the hme equity financing) has lwer mnthly payments and interest rates than a single jumb mrtgage. Have financing needs fr which the entire amunt is nt needed at nce, such as hme imprvement. With a hme equity line f credit, custmers nly pay interest n the amunt drawn n the accunt. Yu will need t qualify fr tw lans: the mrtgage and the hme equity lan r line f credit. Yu need t make tw payments, ne fr the hme equity lan r line f credit and ne fr yur mrtgage unless yu have a Wells Farg Hme Asset Management SM accunt, which requires nly ne cmbined payment. If the cmbined lan amunt is high in relatin t yur hme s value, and its value declines, yu may find yurself wing mre mney than the hme is wrth. (see high LTV and CLTV n page 16) Q: What is the Wells Farg Hme Asset Management SM accunt? A: A first mrtgage cmbined with a secnd hme equity line f credit with certain features that are different frm the piggy-back, cmbinatin, r sim lan described abve. The mst distinguishing feature is that the available line f credit may increase as the hme s value increases and as the first mrtgage is paid dwn, subject t certain credit qualificatins. The first mrtgage and hme equity line f credit are cmbined n a single payment statement. Have excellent credit and mney management skills in a market envirnment f appreciating values. Want t have easy access t their hme s equity withut having t btain a new lan. If the cmbined lan amunt is high in relatin t yur hme s value, and its value declines, yu may find yurself wing mre mney than the hme is wrth. (see high LTV and CLTV n page 16) If yu are getting a Wells Farg hme equity line f credit r lan in additin t yur mrtgage, yu will be sent a dcument entitled Features Of Wells Farg s Hme Equity Lines Of Credit And Lans explaining the hme equity chices and features available t yu. Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 13

14 SECTION 3: The Term Of Yur Mrtgage Q: What is a mrtgage term? A: The term, which is established in yur mrtgage dcuments, is the number f years it will take t repay yur mrtgage if yu make n mre than the required principal and interest payments every mnth. Typically, mrtgage terms are 10, 15, 20, 30 r 40 years, but any number f years in between might be available as lng as yu qualify fr the mnthly payment amunt. Generally, the shrter the term, the lwer the interest rate, but the higher the mnthly payment. Q: What is a shrter-term mrtgage? A: Generally speaking, mrtgages with terms f 20 years r less are viewed as shrter-term mrtgages. Wells Farg Hme Mrtgage will accmmdate any term length n its first mrtgages, such as 10 years, 11 years, 18 years, etc., but there is a minimum term fr a first mrtgage f 10 years. Less than that can be accmmdated by a different type f lan. Want t take advantage f a lwer interest rate n the shrter-term mrtgage, saving mney n the ttal interest paid ver the mrtgage term. Wuld like t pay ff their mrtgage and wn their hme utright sner. Althugh the interest rate is lwer n a shrter-term mrtgage, yur mnthly payments may be higher because the mrtgage amunt will be repaid in a shrter perid f time. Yu must be able t qualify fr the ptentially larger mnthly payments. Since yu pay less interest and yur mrtgage will be paid ff sner, yu may lse a tax deductin that may be beneficial t yur verall financial prfile (cnsult yur tax advisr). Q: What is a lnger-term mrtgage? A: Generally speaking, mrtgages with terms f 25, 30 r 40 years are viewed as lnger-term mrtgages. Wells Farg Hme Mrtgage will accmmdate any term length between 20 and 40 years, such as 22 years, 34 years, etc., n its mrtgages. Seek lwer mnthly payments than might result frm a shrter-term mrtgage. The interest rate is typically higher than a shrter-term mrtgage, which means yu will pay mre interest because f the higher rate and lnger term f yur mrtgage. If yu nly make the scheduled payments, yu will repay yur mrtgage mre slwly than a shrter-term mrtgage. Sme 40-year term mrtgages have a maturity date f 30 years, even thugh the amunt f the mnthly payments has been based n the full 40 years. Sme 40-year mrtgages may require yu t make a balln payment at the end f the 30 th year, r refinance. (see page 18) Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 14

15 SECTION 4: Dcumentatin And Dcumentatin Levels Q: What is dcumentatin and what is meant by levels? A: When yu apply fr yur mrtgage, yu ll be asked t prvide financial paperwrk that dcuments yur ability t make yur mnthly payments n a timely and cnsistent basis. There may be different levels (amunts) f dcumentatin required, ranging frm full dcumentatin t lw, r reduced dcumentatin. N matter what dcumentatin level is used fr yur mrtgage, it is a federal crime t knwingly prvide false infrmatin n yur applicatin r submit fraudulent dcuments. Q: What is full dcumentatin? A: Full dcumentatin is the full amunt f financial paperwrk required t qualify yu fr a mrtgage at a certain amunt. This dcumentatin may include: Dcumenting incme, emplyment, and funds fr the dwn payment, clsing csts, and smetimes additinal mney in reserve. Fr example: When dcumenting incme, yu culd be asked t prvide several years f W-2s r tax returns and paperwrk supprting anything that supplements yur incme that yu wish t use t qualify fr the mrtgage, such as child supprt r dividend payments. Yu als may be asked t dcument and explain yur debts, such as the payment f alimny and child supprt, r ther items that may r may nt appear n yur credit reprt. Want t avid the additinal cst that may be charged fr the cnvenience f reduced dcumentatin. Appreciate that taking the time t rganize and cllect their financial paperwrk is wrth the effrt t btain a mrtgage type/amunt suitable fr their financial needs. It may take time t assemble all the required dcuments. Yu may have incme r assets that are difficult t dcument. Q: What is reduced dcumentatin? A: A reductin in the amunt r type f financial paperwrk usually required fr mrtgage qualificatin. Sme custmers can be apprved with little dcumentatin and n extra cst because their credit is strng and their dwn payment is substantial. Other custmers may chse t take advantage f certain mrtgage prgrams, if available, with a feature that allws them t chse t prvide less dcumentatin than is nrmally required. Autmatically qualify fr lw dcumentatin n certain mrtgages because f their ttal financial picture and financing needs. Dn t autmatically qualify, but want t take advantage f the lw dcumentatin feature in exchange fr additinal fees r a higher interest rate n certain mrtgages because they: May nt have the required dcumentatin readily available. Wuld like t avid the task f cllecting dcuments t verify cmplicated incme r asset surces (i.e., small business wners, prfessinal partnerships, r thse with several surces f incme). Fr thse wh dn t autmatically qualify, there may be higher rates r fees than fr full dcumentatin. Yu may need t agree t have yur tax returns reviewed fr quality assurance purpses. The reduced dcumentatin feature is nt available fr all prgrams r all custmers, and may nt be ffered in certain market cnditins. Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 15

16 SECTION 5: Lan-T-Value (LTV) Q: What is a lan-t-value (LTV) rati? A: The lan-t-value (LTV) rati is the mrtgage amunt expressed as a percent f the hme s value. The hme s value is either the purchase price r its appraised value, whichever is lwer. Fr example: If the appraised value f the hme is $200,000 and yur dwn payment r existing equity in the hme is $40,000 (20% f the value), yur lan amunt will be $160,000 r 80% f the value, making yur LTV 80%. Q: What is a lw-ltv rati? A: Generally speaking, a lw-ltv rati is ne that is equal t r less than 80% f the hme s value. Have a large dwn payment r a lt f equity in their hme typically qualify fr: The best rates and terms with lwer mnthly payments. N requirement t pay private mrtgage insurance (PMI). Experience a decline in hme values will have less cncern abut wing mre than the hme is wrth. With a lw-ltv rati, cnsiderable equity (persnal wealth) is lcked in yur hme. Unlcking the equity requires a cash-ut refinance, btaining a hme equity lan/line f credit, r selling the hme. Q: What is a high-ltv rati? A: Generally speaking, a high-ltv rati is ne that is higher than 80% f the hme s value. Are unable t make a large dwn payment, but may still be able t qualify fr a mrtgage. Prefer t use their savings fr hme imprvements, educatin, etc., instead f a dwn payment. Mnthly private mrtgage insurance (PMI) payments may be required. These payments are cllected in additin t yur mnthly principal and interest payments. Cnditins under which yu are n lnger required t pay private mrtgage insurance differ by yur type f financing. High-LTV financing may nt be available in certain market cnditins. If yur LTV is high and hme values drp, yu culd have a mrtgage larger than the hme s value. This makes it mre difficult t refinance r sell yur hme withut lsing mney. As tax law stands tday, the interest n the prtin f the mrtgage that is greater than the appraised value may nt be tax deductible (cnsult yur tax advisr). If yur hme sells fr an amunt lwer than yur mrtgage, yu may we yur lender mney. Q: What is a cmbined-lan-t-value (CLTV) rati? A: Financing with a first mrtgage and a hme equity lan r line has a cmbined-lan-t-value (CLTV) rati. Fr example: If yur first mrtgage is 70% f yur hme s value, and yur hme equity lan is 10% f yur hme s value, yur CLTV is 80%. A high-cltv rati has the same drawbacks as a high-ltv rati if hme values drp. (see abve) Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 16

17 SECTION 6: Types Of Mrtgage Payments Q: Hw is the mnthly mrtgage payment amunt determined? A: The amunt f yur mnthly mrtgage payment ver the life f yur mrtgage is dictated by: Yur interest rate Yur mrtgage type: fixed-rate mrtgage, adjustable-rate mrtgage (ARM), r hybrid ARM Yur mrtgage term: 10 t 40 years The type f payments yu make: Regular principal and interest payments Interest-nly payments Balln payment Any vluntary prepayments yu chse t make in additin t the required payment If applicable, yu will als make escrw payments Q: What are regular mnthly principal and interest payments? A: Regular payments are thse made nce-a-mnth t cver the required principal and interest amunt that will pay ff the mrtgage ver a specified term, such as 15, 20, 30 r 40 years. This prcess is called amrtizatin. Yur payments in the early years are cmprised f mstly interest and partly f principal. As the years g by, yur payment shifts t mre and mre principal and less and less interest. Yur hme mrtgage cnsultant can prvide an amrtizatin schedule fr any term. Want t steadily build equity thrughut the mrtgage term by making mnthly payments twards principal, s they ll wn their hme utright by the end f the term. Appreciate the tax deductin usually allwed n the interest paid n the mrtgage (cnsult a tax advisr). Paying nly the required principal and interest each mnth instead f making larger principal payments means yu ll be making mrtgage payments fr the full term f yur mrtgage. Yu will be paying the full amunt f interest ver the full term f yur mrtgage. Q: What are interest-nly payments? A: Payments that cver the interest prtin f yur mnthly bligatin fr an initial perid (typically abut 10 years), but d nt include any payment n principal. Yu are required t pay nly the interest, but als have the ptin f making additinal principal payments at any time. It s critical t nte that, unlike ther lenders, Wells Farg Hme Mrtgage des nt prvide interest-nly mrtgages that negatively amrtize. As lng as yu make the interest payments, yur mrtgage amunt will nt increase. Have an incme stream with peaks and valleys (cmmissined, seasnal r high-bnus jbs), allwing them t pay nly interest during the valleys and pay dwn principal in large chunks during the peaks. Want t reduce the amunt f their required mnthly payments by making lump-sum principal payments. This is nt the case with regularly amrtizing fixed-rate mrtgages, fr which the extra principal paid reduces the term f the mrtgage, but nt the amunt f the required mnthly payments. Want lwer mnthly payments during the initial perid mre than they want t build equity. Expect t sell the hme at r befre the end f the interest-nly perid. At the end f the interest-nly perid, yu must begin paying principal in additin t interest, increasing the amunt f yur mnthly payment. Since yur principal is nw being paid ver fewer years, the mnthly amunt may be substantially higher than if yu had made principal payments all alng. Yu will nt reduce yur principal balance if yu make nly the interest payments, s the nly way t build equity is if the market value f yur hme increases. Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 17

18 SECTION 6: Types Of Mrtgage Payments cntinued Q: What are balln payments? A: A feature n certain mrtgages that keeps mnthly payments lwer, but requires the custmer t pay the entire remaining principal n the mrtgage at the end f a predetermined number f years. Fr example: Mnthly payments n a 40-year fixed-rate mrtgage are lwer than a 30-year fixed-rate mrtgage because the amunt f the payment is calculated as if spread ut (amrtized) ver 40 years. Hwever, the 40-year fixed-rate mrtgage may have a lump-sum balln payment due at the end f 30 years. The lump sum can be paid in cash, thrugh a new refinance, r thrugh the sale f the hme. Need lwer mnthly payments t qualify and anticipate mving befre the balln payment due date. Are sure they will be able t refinance r therwise will have the funds required t pay ff the balance f their mrtgage in a lump-sum payment at the time the balln payment is due. Since the payments made during the initial perid are nt enugh t pay ff the entire mrtgage balance, the balln payment may be 50% r mre f the riginal principal, depending n yur mrtgage. If yu are unable t make the large lump-sum balln payment at nce, yu must refinance r sell yur hme befre the balln payment is due. Falling real estate prices and/r rising interest rates can impact yur ability t refinance. Yu may pay mre interest ver yur mrtgage term than with regular principal and interest payments. Q: What are prepayments? A: Prepayments can be either the payment f extra principal during the mrtgage term r payment f full principal befre the term is up, usually at the time f a refinance r hme sale. Prepayments fall under tw categries: Prepayments with n penalty r fee, available n mst cnventinal mrtgages, allw yu t pay ff sme r yur entire mrtgage amunt at any time withut cst. Fr Wells Farg Hme Mrtgage prducts yu can: Make extra principal payments at any time during the mrtgage term in any amunt nline, by check, in persn, r thrugh autmatic withdrawals. (see pages 21-22) Sell yur hme r refinance at any time and pay ff yur mrtgage withut a penalty. Prepayments with a penalty r fee are assciated with certain prducts, typically hme equity r nnprime prducts. (see page 12) The penalty is an additinal lump-sum fee that must be paid if yu pay yur mrtgage ff by selling the hme r refinancing prir t a specific date typically the first tw t three years f the mrtgage. Wells Farg Hme Mrtgage des nt currently prvide mrtgages that have a penalty fr prepayment. Have n prepayment fee have cmplete freedm t prepay their mrtgage at any time. Need higher-priced nnprime financing t qualify may be able t get the lwest interest rate available t them by accepting a prepayment penalty. By nt prepaying during the initial perid, they will save mney. If yu have a prepayment penalty r fee and sell r refinance yur hme during the prepayment penalty perid, yu may have t pay the penalty r fee. Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 18

19 SECTION 6: Types Of Mrtgage Payments cntinued Q: What payment ptins des Wells Farg NOT ffer? A: Wells Farg Hme Mrtgage des nt prvide ptin ARMs r payment ptin ARMs which generally begin with a lw teaser rate, resulting in extremely lw payments. Each mnth the hmewner has the ptin f making a principal and interest payment, an interest-nly payment, r a minimum payment that may nt cver the interest wed. If the hmewner cntinues t make nly the minimum payment each mnth, negative amrtizatin may result and the additinal interest wed is added t the principal balance. Eventually, a new payment schedule is calculated and the new mnthly payment may increase significantly. The hmewner may we mre than riginally brrwed and may n lnger be able t affrd the mrtgage payments. Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 19

20 SECTION 7: Hw Mrtgage Features Impact Payments And Equity The table belw prvides illustratins f several mrtgage chices and what yur mnthly payments and hme equity might lk like at varius pints in the future. The illustratins are based n buying a $300,000 hme with a 10% dwn payment and a $270,000 mrtgage. They assume n change in the market value f the hme in rder t illustrate hw the mrtgage type itself impacts the hmewner s ability t build equity. These numbers are nly examples. Yur balance and mnthly payment will depend n the type f mrtgage, the interest rate and hw ften the interest rate changes. Please nte the fllwing: Mrtgage types 1, 2, and 3 require principal and interest (PI) payments frm the utset; mrtgage types 4 and 5 are interest-nly (IO) mrtgages fr the first 10 years. As a result: Clumn F shws that, by year 10, the mrtgage principal remains at the riginal amunt f $270,000 fr mrtgage types 4 and 5, which have required nly interest payments thrugh this perid. Clumn G shws an increase in equity beynd the riginal $30,000 dwn payment fr mrtgage types 1, 2, and 3 in year 10, and n additinal equity fr mrtgage types 4 and 5. Mrtgage type 2 builds less equity ver 10 years than types 1 and 3 because f its 40-year term. The adjustable-rate mrtgages (ARMs) in mrtgage types 3 and 5 start with a rate lwer than the fixed-rate mrtgages. These ARMs culd see a rate increase f up t 5% in year 6, making the payments higher than thse required by a fixed-rate mrtgage. Clumn C shws that principal and interest payments culd rise even if the ARM s index rate (the market rate used as the basis fr rate adjustments) is the same as it was 5 years earlier, at the mrtgage s inceptin. This is true fr an ARM clsed with an initial rate that was discunted. In the example belw, the discunt n the mrtgage rate fr the first 5 years was assumed t be 1.25%, and n lnger applies at the mrtgage s first reset. Clumn E shws that the mnthly principal and interest payment n mrtgage type 3 culd jump frm $1,576 in year 5 t a maximum f $2,410 in year 6. Fr mrtgage type 3, Clumns F and G assume the highest pssible interest rate path in years 6 thrugh 10. Lwer rates wuld generate a lwer utstanding balance and additinal hme equity. A. Mrtgage type B. During year 1 1. Traditinal fixed-rate 30-year term 6.375% interest rate 2. Traditinal fixed-rate 40-year term 6.75% interest rate 3. Traditinal 5/1 hybrid ARM 30-year term 5.75% interest rate fr 5 years Then becmes 1-year ARM 4. Fixed-rate interest-nly 30-year term 6.5% interest rate Interest-nly first 10 years Principal payment begins in year /1 interest-nly hybrid ARM: 30-year term 5.75% interest rate fr 5 years Then becmes 1-year ARM Interest-nly first 10 years Principal payment begins in year 11 Mnthly Payment Principal and Interest (PI) r Interest-Only (IO) C. During D. During year 6 year 6 with even with 2% rate cnstant increase index rate $1, PI $1, PI $1, PI $1, IO $1, IO $1, PI $1, PI $1, PI $1, IO $1, IO $1, PI $1, PI $1, PI $1, IO $1, IO E. Maximum pssible and effective years $1, PI, 1 30 $1, PI, 1 40 $2, PI, 6 30 $2, PI, $2, PI, These mnthly payments exclude any hmewners insurance, taxes, and Private Mrtgage Insurance (PMI) that may be due. F. Balance wed after 10 years G. Equity in year 10 with $30,000 dwn payment $228,173 $71,827 $251,167 $48,833 $237,349 $62,651 $270,000 $30,000 $270,000 $30,000 N hme price changes are assumed. Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 20

21 SECTION 8: Hw Yu Make Yur Mrtgage Payments Q: What ther charges are included in my regular mnthly payment? A: Principal and interest are included with each regular amrtizing mrtgage payment. Additinally, hmewners are respnsible fr paying: Prperty taxes Hmewners insurance (smetimes knwn as hazard insurance) Sme hmewners are als required t pay fr: Private mrtgage insurance (PMI), if the dwn payment r equity is less than 20% Fld insurance, if the prperty is in a gvernment-designated fld plain Cndminium, assciatin, maintenance r ther fees, if the hme is a cnd, c-p, PUD r twnhuse Secnd mrtgage payments if they have a hme equity lan r line f credit Escrw payments. Yu may want t, r be required t, include taxes and insurance and sme f the ther abve csts in yur mnthly payment t Wells Farg Hme Mrtgage. The funds t cver these csts g int an escrw accunt a hlding accunt Wells Farg Hme Mrtgage establishes n yur behalf. Yu can mnitr yur escrw accunt activity nline at yurwellsfargmrtgage.cm. Typically, yu prepay sme f these funds at clsing t pen yur escrw accunt. Every mnth Wells Farg Hme Mrtgage cllects a prtin f the funds needed annually fr taxes and insurance, alng with yur principal and interest payments. On specific due dates Wells Farg Hme Mrtgage makes tax, insurance, private mrtgage insurance (PMI), and ther payments n yur behalf. Once a year, Wells Farg Hme Mrtgage evaluates yur escrw accunt. In sme instances, we might have cllected t much, and will return that mney t yu. In ther instances, the mney we paid ut fr yur taxes, insurance, r ther fees may have been higher than the amunt in yur escrw accunt. In that instance, we ll wrk with yu t help yu repay the mney yu we. If yur mrtgage des nt require escrw and yu dn t want Wells Farg Hme Mrtgage t make these payments fr yu, they are yur respnsibility under yur mrtgage terms. That s why it s imprtant t budget accrdingly. It s als imprtant t remember that nce yur mrtgage is paid in full, yu are still respnsible fr yur taxes, hmewners insurance and ther fees that may be assciated with yur prperty. Q: Are there different ways t make my mrtgage payments? A: Yes. Wells Farg Hme Mrtgage prvides multiple ways fr yu t make n-time payments. They re based n yur needs cnvenience, security, ease in managing yur husehld budget, r yur desire t build equity and pay ff yur mrtgage sner. Wh benefits? All ur custmers. Because Wells Farg Hme Mrtgage ffers s many ways t make mrtgage payments, yu have the pprtunity t select the ptin that best meets yur individual needs: Free, autmatic Preferred Payment Plan SM withdrawals frm ne r mre bank accunts, with r withut additinal principal: Weekly ¼ payment amunt n the weekday f custmer s chice Biweekly ½ payment amunt every ther week n the weekday f custmer s chice Semi-mnthly ½ payment amunt n the 15 th and 1 st f each mnth Mnthly full payment amunt due, typically n the 1 st thrugh 5 th day f each mnth One-time last-minute payments via phne r nline (see page 22) Online via Wells Farg Online Bill Pay r transfers, with r withut additinal principal By check, with r withut additinal principal Althugh yur regular n-time payment methds are free, rush payments are fee-based, and late payments are subject t a late fee. If yu chse t use a service frm utside Wells Farg, yu culd be assessed fees frm that cmpany. Wells Farg Hme Equity and Wells Farg Financial have different payment ptins. Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 21

22 SECTION 8: Hw Yu Make Yur Mrtgage Payments cntinued Q: Hw can last-minute payments be made? A: With the Wells Farg Easy Pay SM ptin, Wells Farg Hme Mrtgage custmers can make same-day r nextday payments nline at yurwellsfargmrtgage.cm r by calling The funds are psted within 24 hurs. D nt use autmatic payment methds, have frgtten the payment, r are away frm hme. Need extra time right befre the due date t accumulate the funds fr the mnthly payment. Want t avid a late fee that wuld have been charged due t pstal delays. Wells Farg Easy Pay has a fee that varies by payment methd. Q: What if a payment r payments can t be made? A: At Wells Farg, we knw circumstances may arise that impact ur custmers ability t make ne r mre payments. It s in ur custmers best interests t call ur servicing team as sn as they dubt their ability t make ne r mre payments. We are cmmitted t helping yu any way we pssibly can. Call us early, befre their circumstances are dire. Can be helped with a variety f tls, prviding alternatives t the wrst-case scenari f freclsure. Many custmers can be helped, but there are exceptins. Legal r investr cnstraints may limit available ptins. Q: If I m late making a payment, is there a fee? A: Late fees differ by mrtgage type and state. The late fee fr yur mrtgage is n yur Mrtgage Nte. The best way t shw hw late fees wrk is t prvide an example, which des nt apply fr every mrtgage type: Let s say a custmer has a mrtgage with payments due n the 1 st f the mnth, with a 15-day grace perid. Althugh the payment is cnsidered late after the 1 st f the mnth, we allw additinal time fr the custmer t send us the payment due. If we receive payment n r befre the 16 th f the mnth, n late fee will be charged. If we receive payment after the 16 th, a late fee will be charged. If yu have any questins abut the infrmatin in this guide, please call yur Wells Farg Hme Mrtgage cnsultant. Legal nte: Because the hme ffice f Wells Farg Bank is lcated in the state f Suth Dakta, the laws f that state will apply t yur mrtgage and hme equity financing fr all interest, fees and ther amunts (including prepayment penalties) charged r accruing theren that are cnsidered interest charges by applicable law. Other rights and remedies f yur mrtgage and hme equity financing are gverned and interpreted by federal law and the cnsumer prtectin laws f the state where yur prperty is lcated excluding any state laws that are preempted by federal law. Nte n refinancing a special subsidized mrtgage : If yu are already a hmewner and have a special subsidized mrtgage n yur current hme, please ntify Wells Farg as sn as pssible. We want t ensure that refinancing prvides yu with a benefit. Fr clarificatin, a special subsidized mrtgage means that it was riginated r subsidized thrugh a state, lcal r tribal gvernment r nnprfit rganizatin. This mrtgage may have a belw-market interest rate, an interest recapture prvisin, may nt have t be repaid, r may nly require partial payments. This infrmatin is accurate as f date f printing and is subject t change withut ntice. Wells Farg Hme Mrtgage is a divisin f Wells Farg Bank, N.A. All rights reserved. CS /08 Wells Farg Hme Mrtgage 2008 Wells Farg Bank, N.A. 22