UMB Mortgage Solutions Home Buying 101 1
Agenda Are You Ready to Buy a Home? Selecting a Lender Mortgage Loans Getting Started Home Checklist Purchase Contract Questions 2
Home buying Terms Mortgage Lender Real Estate Agent Asset Principal Interest Foreclosure Debt-to-Income (DTI) Pre-qualification Homeowners Insurance (HOI) Mortgage Insurance/Private Mortgage Insurance ( MI/PMI) 3
Advantages & Responsibilities A home may be the most significant purchase you ever make. Homeownership brings many advantages but also brings new responsibilities. Advantages Tax Savings: Deductibility of mortgage interest and real estate property taxes when filing federal taxes. Contact a tax advisor for more information regarding deductibility of interest. Investment Potential: You may build equity over time as you repay your loan and also through property appreciation. Disadvantages Maintenance: Expenses related to painting, landscaping and repair expenses are your responsibility. Will you actually do it? Repairs: Roof, plumbing, electrical, foundation. Home Improvements: Kitchen or bathroom upgrades, finishing the basement or garage. 4
Rent vs. Buy You may want to rent if You move frequently for your job. You would feel burdened by the additional responsibilities and expenses of maintaining a home. You are new to a community and haven t decided where you want to live. You have income instability. You may want to own if You want to enjoy the feeling of security and permanence that comes with owning a home. You ve had a steady source of income for two to three years. You have a solid credit report and score from paying your bills on time. You pay as much in monthly rent as you would a monthly mortgage payment. You have savings set aside for emergencies. 5
Selecting Your Lender Does your Lender have expertise working with home purchase loans? Are they familiar with low or no down payment home buyer programs? Are they someone you can trust with your financial information? Can they clearly explain loan options and information in ways you understand? Do their rates compares favorably on loan pricing, including fees and other charges? 6
Mortgage Loan Basics What Is a Mortgage Loan? A mortgage is a loan secured by a home. The loan allows you to purchase a home with a promise to pay back the funds over a certain period of time. Backing your promise to repay is the house. If you stop paying the loan, the Lender can take your home (Foreclosure). Typically, the repayment of a mortgage occurs through MONTHLY PAYMENTS for a period less than 30 years. 7
Mortgage Payment What s included in a mortgage payment? Principal Interest What else can be included? Property taxes Hazard insurance premiums Flood insurance premiums Mortgage insurance or guarantee fees or premiums Homeowners Association dues and assessments 8
Qualifying For a Mortgage Key information that a mortgage lender reviews to determine whether you qualify for a mortgage and the amount. Income Credit History Savings Property 9
Nine Easy Steps To Your Loan Buying a home is a significant commitment. The mortgage application process can also seem very long, confusing and intimidating. Understanding how the process works can provide peace of mind as you navigate it. Pre-qualification Choose your loan Application Income and employment verification Credit review Asset review Appraisal Insurance Loan approval and closing 10
Pre-Qualification Pre-Qualification is a simple and easy step that let s you know how much you can afford before you start looking. Helps you to determine your ability to purchase a property Assists a Realtor in matching your financial needs and goals Lets seller know you are a serious buyer 11
Documentation Requirements Personal Data Full names, addresses, Social Security numbers of all borrowers (Some banks accept ITINs). Income The amount and source(s) of income for all borrowers. Assets Information on all assets you ll be using to qualify for the loan, such as checking and savings accounts, stocks and bonds, retirement plans, and other real estate owned. Debts and Obligations Information on all outstanding debts and other financial obligations. Credit References Information concerning loans or debts that have been paid, plus any other references to good credit use. 12
Choosing Your Loan A wide variety of mortgage options are available to meet almost any budget or lifestyle. How long do you plan to stay in your home? Is your income fixed, variable, increasing or decreasing? How much do you have in savings? Do you qualify for any special loan programs? 13
Mortgage Loan Options Types of Loans Fixed rate mortgages Adjustable rate mortgages Types of Loan Programs Conventional: Custom loan programs FHA: Easier loan qualifying criteria VA: No Down payment options available Jumbo: Loan program designed to meet the needs of specialty borrowers Loan Assumptions and Disclosures: Interest rates and annual percentage rates (APRs) are based on current market rates, are for informational purposes only, are subject to change without notice and may be subject to pricing add-ons related to property type, loan amount, loan-to-value, credit score and other variables. This is not a credit decision or a commitment to lend. Depending on loan guidelines, mortgage insurance may be required. If mortgage insurance is required, the mortgage insurance premium could increase the APR and the monthly mortgage payment. Additional loan programs may be available. APR reflects the effective cost of your loan on a yearly basis, taking into account such items as interest, most closing costs, discount points (also referred to as points ) and loanorigination fees. One point is 1% of the mortgage amount (e.g., $1,000 on a $100,000 loan). Your monthly payment is not based on APR, but instead on the interest rate on your Note. Adjustable-rate mortgage (ARM) rates assume no increase in the financial index after the initial fixed period. ARM rates and monthly payments are subject to increase after the fixed period: ARMs assume 30-year term. Sample monthly payments ($200,000 loan): Principal and interest only 30-Year Fixed $955 5/1 ARM variable $8700 14
Comparing Loans Interest is not the only expense associated with getting a loan Lenders may charge a variety of other fees and charges in connection with making a loan It s not always easy to compare because the fees and charges may have different names from lender to lender All lenders are required to give you early disclosure documents Loan Estimate This disclosure allows you to compare loan program costs on an apples-to-apples basis to make the best informed decision for your financial circumstances 15
Buying Power - Conforming Product 30 Year Fixed 30 Year Fixed Home Value $95,000 $200,000 APR Rate (Not actual rates) 4.090% 4.0% 4.043% 4.0% Down Payment (5%) $4,750 $10,000 Loan Amount $90,250 $190,000 Loan Payment (Principal and Interest Payment) $430.87 $954.83 Payment excludes taxes, insurance, Homeowner Association Dues, and other expenses that could be included in the required loan payment Loan Assumptions and Disclosures: Interest rates and annual percentage rates (APRs) are based on current market rates, are for informational purposes only, are subject to change without notice and may be subject to pricing add-ons related to property type, loan amount, loan-to-value, credit score and other variables. This is not a credit decision or a commitment to lend. Depending on loan guidelines, mortgage insurance may be required. If mortgage insurance is required, the mortgage insurance premium could increase the APR and the monthly mortgage payment. Additional loan programs may be available. APR reflects the effective cost of your loan on a yearly basis, taking into account such items as interest, most closing costs, discount points (also referred to as points ) and loanorigination fees. One point is 1% of the mortgage amount (e.g., $1,000 on a $100,000 loan). Your monthly payment is not based on APR, but instead on the interest rate on your Note. Adjustable-rate mortgage (ARM) rates assume no increase in the financial index after the initial fixed period. ARM rates and monthly payments are subject to increase after the fixed period: ARMs assume 30-year term. Sample monthly payments ($200,000 loan): Principal and interest only 30-Year Fixed $955 5/1 ARM variable $870 16
Buying Power - FHA Product 30 Year Fixed 30 Year Fixed Home Value $95,000 $200,000 APR Rate (Not actual rates) 4.089% 4.0% 4.045% 4.0% Down Payment (3.5%) $3,325 $7,000 Loan Amount $91,675 $193,000 Loan Payment (Principal and Interest Payment) $437.67 $921.41 Payment excludes taxes, insurance, Homeowner Association Dues, and other expenses that could be included in the required loan payment Loan Assumptions and Disclosures: Interest rates and annual percentage rates (APRs) are based on current market rates, are for informational purposes only, are subject to change without notice and may be subject to pricing add-ons related to property type, loan amount, loan-to-value, credit score and other variables. This is not a credit decision or a commitment to lend. Depending on loan guidelines, mortgage insurance may be required. If mortgage insurance is required, the mortgage insurance premium could increase the APR and the monthly mortgage payment. Additional loan programs may be available. APR reflects the effective cost of your loan on a yearly basis, taking into account such items as interest, most closing costs, discount points (also referred to as points ) and loanorigination fees. One point is 1% of the mortgage amount (e.g., $1,000 on a $100,000 loan). Your monthly payment is not based on APR, but instead on the interest rate on your Note. Adjustable-rate mortgage (ARM) rates assume no increase in the financial index after the initial fixed period. ARM rates and monthly payments are subject to increase after the fixed period: ARMs assume 30-year term. Sample monthly payments ($200,000 loan): Principal and interest only 30-Year Fixed $955 5/1 ARM variable $870 17
Buying Power - VA Product 30 Year Fixed 30 Year Fixed Home Value $95,000 $200,000 APR Rate (Not actual rates) Down Payment (0%) 4.086% 4.0% 4.545% 4.50% Loan Amount $95,000 $200,000 Loan Payment (Principal and Interest Payment) $453.54 $1,013.37 Payment excludes taxes, insurance, Homeowner Association Dues, and other expenses that could be included in the required loan payment Loan Assumptions and Disclosures: Interest rates and annual percentage rates (APRs) are based on current market rates, are for informational purposes only, are subject to change without notice and may be subject to pricing add-ons related to property type, loan amount, loan-to-value, credit score and other variables. This is not a credit decision or a commitment to lend. Depending on loan guidelines, mortgage insurance may be required. If mortgage insurance is required, the mortgage insurance premium could increase the APR and the monthly mortgage payment. Additional loan programs may be available. APR reflects the effective cost of your loan on a yearly basis, taking into account such items as interest, most closing costs, discount points (also referred to as points ) and loanorigination fees. One point is 1% of the mortgage amount (e.g., $1,000 on a $100,000 loan). Your monthly payment is not based on APR, but instead on the interest rate on your Note. Adjustable-rate mortgage (ARM) rates assume no increase in the financial index after the initial fixed period. ARM rates and monthly payments are subject to increase after the fixed period: ARMs assume 30-year term. Sample monthly payments ($200,000 loan): Principal and interest only 30-Year Fixed $955 5/1 ARM variable $870 18
Finding The Right Realtor Choosing the right agent that you trust can save you time, effort and aggravation in finding the right home at a price you can afford. Choose an agent who is a certified Realtor In addition to being licensed, Realtors belong to the National Association of Realtors and must abide by as strict Code of Ethics. They also have access to Multiple Listing Services (MLS) to see all of the listings in your area. Talk to friends and family. Many have most likely been through the process and can provide recommendations as a starting point. Choose an agent who listens Real estate transactions can be complicated and confusing. Find an agent whose personality you like. Never be afraid to interview prospective agents and meet them in person to see if it is a good fit. Don t hesitate to ask for references. Consider the agent s experience and capabilities Many people have real estate licenses but only a handful make it a full-time profession. An ideal Realtor has several years of experience. Find out how many homes the agent has helped buyers purchase in the areas you are interested in. 19
Narrow Your Home Search Have a good checklist to help you compare 20
Finding The Right Home Take pictures while touring homes Fill out a House Tour Checklist for each home visited Be realistic 21
Purchase Contract What Is a Purchase Contract? What Should Be Included? Sales price Contingencies Move in date Items sold with the home Miscellaneous expenses Earnest money 22
Once You Have an Accepted Contract Appraisal Home Inspection Pest Test Lead Test Other Environmental Tests 23
Closing Settlement Process What to Expect at the Closing Table Information on Closing Disclosure Comparing Charges on Your Closing Disclosure to Your Loan Estimate 24
Questions? My contact information: MiGuale Green, VP Regional Manager 816-860-7586 MiGuale.Green@umb.com NMLS# 308947 Additional Resources: UMB.com Tools & calculators, news, articles, Blog 25
Thank You UMB.com/Mortgage MiGuale Green, VP Regional Manager 1010 Grand Blvd., Kansas City, Missouri 64106 816.860.7586 Office 816.716.1600 Mobile MiGuale.Green@umb.com NMLS# 308947 26