Welcome to First Atlantic Federal Credit Union s. First HomeOwner s Club. Table of Contents

Transcription

1 Table of Contents Welcome to First Atlantic Federal Credit Union s First HomeOwner s Club Table of Contents 1 Home Buying Process 2 Financial Health 2 Find a Loan 2 Getting Your Act Together 3 Down Payments 4 The Upside of Down Payments 4 Pre-Qualified or Pre-Approved? 5 Getting Pre-Approved 5 Consider Convenience 7 Know the Rules 8 What Do You Want In a Home? 9 Property Types 10 Making Your Offer 11 The Mortgage Process 12 Select the Type of Loan You Want 12 Apply For the Loan 13 Credit Approval 13 Processing Your Loan 13 Final Loan Approval 14 Closing 14 Closing Time 14 Fees at Closing 15 Escrow Accounts 16 Homeowners Insurance 17 Required Insurance 17 Insurance that may be required 18 Optional Insurance 18 1

2 Home Buying Process Financial Health Any way you look at it, the decision to buy a house is yours and yours alone. First, make sure that it's financially feasible. Can you pay the up-front costs of purchasing a house, as well as the ongoing monthly mortgage and other living expenses? We've provided a wide range of calculators for you to use to determine some preliminary answers. How Much Can You Afford? How Much Income Do You Need? What Is Your Monthly Payment? Should You Rent Or Buy? Getting Pre-Qualified Find a Loan It's time to decide on the right loan for you. We've made this an exercise in speed and ease. You also want to begin gathering up all the information you'll need to apply for and to close your loan. Other factors affecting the loan you choose include insurance information and your down payment. Once you're ready just answer a few questions and we'll provide you with a variety of loan options to help you decide. Getting Your Act Together The Upside of Down Payments Now is the time to find and organize some basic documents before you start looking for a loan. Collect all the information listed below in one spot and you'll be ready to go on the next step. Here's What You Need: Name, current address, social security number Name(s), and work number(s) of employer(s) for the past two years Monthly income for you and your co-borrower (most recent pay stub(s) with year-to-date income) includes bonuses, commissions and overtime income for the past two years (this information is on your tax return) If you are self-employed, you will need the last two years' tax returns for the type of business you own: Sole Proprietorship (Schedule C), Partnership (From 1065), or Corporation (Form 1120 or 1120s). In addition, the last two years' personal tax returns (including K-1s) Documentation to support credit history problems (if applicable), which can be a written explanation of late payments, bankruptcy (petition and discharge papers), defaults, judgments, and/or liens As part of closing, we will have to verify all funds that you receive, so it's a good idea to get together any documents that will verify proof of receipt or deposit for funds, like gifts and trust accounts 2 3

3 Down Payments The Upside of Down Payments Getting your nest egg together for a down payment is probably the biggest hurdle for many first-time home buyers. You may already be worth more than you realize. When calculating your assets, be sure to include ALL of the following sources: All checking and savings accounts Stock, bonds, stock options, 401k value 401K loan Gifts from family Your bottom line just might be better than you think. Know your assets. It's the first step in coming up with the amount of money you need to secure your interest in the home and the loan you want. The Downside of Down Payments What if it doesn't add up to the right amount? Don't give up hope. There are ways to make it work. Here are a few ideas for you: 1. Looking for a loan that requires less money down? There are several options, just keep looking 2. Think about getting Private Mortgage Insurance (PMI) which: o Allows for a lower down payment o Lenders (like us!) like it because it protects us in case you default on the loan o You can pay for it on a monthly basis o You can drop it once you reach 20% equity 3. Talk to one of our loan representatives for other loan options 4 Pre-Qualified or Pre-Approved? Pre-Qualified Getting pre-qualified is like getting an estimate from a mortgage institution detailing how much of a loan you can likely afford. It serves more as a guide to you of what a lender might require rather than as any official approval by them. Pre-Approved Pre-approval means that you fill out a loan application and provide all your salary and credit information. The lender then checks your assets and pre-approves your capability to get a loan. Getting Pre-Qualified Loan Product Purchase Price Down Payment Monthly Income Monthly Debt Payments Exclude any loans with less than 10 payments left Balances on All Credit Cards State Property Located In Getting Pre-Approved When you find your dream home, you can present the seller with your pre-approved loan document, showing them that not only are you serious about buying their house, but you've already been pre-approved for financing. It could make the difference between getting the house you want or watching some other bidder step in with a preapproved loan and snatch that house away. Pre-approval is good for 120 days and depends on the appropriateness of the property you want to purchase. Fees, like credit reports may apply. 5

4 Choosing Where to Live 1. Concentrate your search in areas where houses are in your price range. Finding them is easy: o Work with a qualified real estate agent o Check the real estate section of the newspaper o Search online at various real estate sites 2. Choose where you would like to live. Demographic, employment and community information is also online, often on the same sites where you'll search for a home. 3. Drive through the neighborhoods you've chosen. Starting with your top two, drive to your place of work, both in the morning and the evening. How long is the commute? Is the time commitment reasonable? Are there alternative forms of transportation (bus, ferry, train) that you could use? 4. Visit the neighborhood you've chosen. Drive through the neighborhood where you plan to live at different times of the day and at night (especially late night if you're a light sleeper) to check traffic and noise levels. Listen for: o Airplane traffic/noise (This information is available on a hazards report if you decide to get one.) o Foot traffic o Trains o Car traffic o Is it quiet/peaceful? o Look at nearby businesses. What places are open at night that you wouldn't notice during the day (dance clubs, late night restaurants) 5. Think about this: what are you chances of staying in the job you have now, for the length of time you'll be living in the house? If changing work locations is a possibility, you won't want to pick a house just because it's near your current job. 6 What to Consider in Schools The quality of your children's education will determine the quality of their future. Call and visit the local school district. Conduct online research as well. Most school districts have websites; they are a good place to being your inquiry. Here are some suggested questions to think about: How do students score on statewide and national tests? How many students go on to college? What colleges do they attend? What are some of the problems facing the schools? What about drug use and the incidences of violence? What about their weapons in school policy? (Zero tolerance is best.) What is the student/teacher ratio? What about art, music, drama and sports programs? What are the ages of their facilities? Old, new? At what grade level do they start teaching computer skills? What is their language program like? Consider Convenience 1. Look at the local Chamber of Commerce website to get a feeling for the type of community you'll be joining. If the Chamber of Commerce doesn't have a website, look up the phone number in the Yellow Pages and give them a call. They'll be happy to talk with you and mail any information you need. 2. Take a drive around the adjoining shopping areas and take notes on what you find. Will you have easy access to your: Grocery stores Hospital Dentists Dry cleaners Fire station Place of worship Doctors Police station Restaurants 7

5 Know the Rules 1. Tax rates for your area are usually available online and from your real estate agent 2. Covenants Many neighborhoods may have covenants you will be required to follow. Here are some examples: o How may outbuildings you can have and/or build o House paint color guidelines o Maximum number of pets allowed 3. Crime rates. You want your family and your possessions to be safe, so be sure to check out the rate of personal and property crime in your area. Call the local police department and talk to the Public Information Officer. 4. Zoning. How is your new neighborhood zoned? Could you wake up one morning with an office building going up across the street? Ask your real estate agent or check with the local library for help in identifying any zoning issues. 5. Natural Hazards. Research natural hazards that may or may not be obvious. Is your neighborhood of choice: o On a flood plain o In a weather conversion zone o Over an earthquake fault o In a wetland area o In a potential wildfire zone o Near a: Super Fund site Solid waste landfill Leaking underground storage tanks What Do You Want In a Home? Make a list of all the things you want in a home. Be as specific as possible. It will save you time in your search for a new home. Consider some of the following things: 1. Think about what you want on the outside of your home. o Will it have a yard? If so, what size? o Do you want an established garden or a chance to create your own? o Do you want a garage? Attached? Detached? One, two or three cars? 2. Think about what you want on the inside of your home. o How many bedrooms do you need? o How many bathrooms? (Not just for the immediate future, but for those teenage years, as well.) o What about a den or office? A guest room for grandparents and out-of-town guests? o Do you want a basement or an attic? Your real estate agent can help you find the perfect home once you determine what is important to you. To check out these hazards and more, you may want to pay for a risk report. 8 9

6 Property Types There are two property types you should know about: Traditional and Non-Traditional. Traditional Property Types You can finance the following property types using our standard mortgage products: Single Family Residences Multi-Family with Units of 4 or Less. Condominiums Planned Unit Developments (PUD) Non-Traditional Property Types Additionally, our Member Option Program may allow the financing of other non-standard property types including: Log Homes Multi-Lot (contiguous) Raw Land Improved Land Geodesic Home Berm Homes Leasehold Properties Mixed Business/Residential Property Occupancy Types We can also finance the property with the following occupancy types: Owner Occupied Second/Vacation Home 10 Making Your Offer You've found a house you love. It has the perfect living room, or that playroom you've always wanted for kids. But it's not yours, yet. First you have to make an offer, in writing, and submit it to the sellers. This is usually done through your agent and is accompanied by your earnest money, which is a pre-determined amount of money, demonstrating that your offer is in earnest. Follow the advice of your agent or lawyer when deciding how best to make your offer. Here are examples of some things your offer should include: The price you're willing to pay When you want to move in What kind of inspections you'd like to have If your ability to buy the house depends on your ability to get financing (which is taken care of if you're preapproved) The amount of time both you and the seller have to make all these things happen (usually 30 to 60 days) The seller usually has 24 to 48 hours to consider your offer or make a counter offer, which means, under the terms you offered, they want to sell you their house, but they want a change. Inspections It is always wise to make your offer contingent on inspection. That means that your offer isn't really valid until the home has been carefully examined by a qualified home inspector, who is trained to take a critical look at various aspects of the home including: Foundation Roof Plumbing Windows and doors Heating and cooling system Electrical system 11 Siding Exterior grading (to make sure water drains away from house)

7 The Mortgage Process Buying or refinancing a home is about you and your home, not about the mortgage. We've streamlined the process for both into easy steps. Once you have the financing you need you can focus on what really matters: your home. Select the Type of Loan You Want This part is easy. You answer some questions online in the Mortgage Center. Then you decide on the best loan for you. We provide a variety of loan options based on: Your monthly income How much you owe How much you want to spend on your new house, or if you're refinancing, how much do you still owe How much you have to put down How long you're planning to stay in your new home How much flexibility you have with your monthly payments You will be able to preview a variety of loan programs and pricing options. For your information on total costs, you can use the Estimated Closing Costs tools to view the costs associated with a specific loan program. If you have any questions, just give us a call. Don't worry, we can help, just Contact Us. 12 Apply For the Loan We've pared our loan application down to only the most essential information. Here's what we need to know: Borrower Information - The basics about you. Property Information - The basics about the property you want to finance. Income - What you make. Assets - The assets you plan to use for the down payment and closing costs. Liabilities - What you owe and to whom. We will run a credit report to confirm liabilities and fill in that section of the application for you. (You'll have a chance to review and make any corrections.) Declarations - A few more questions to complete your application. Credit Approval In many cases, we can immediately credit-approve your loan request. This is a true loan commitment, not just a qualification typically offered by other lenders. It approves a specific loan amount and loan program based on your income and debts. It is, however, legally subject to underwriting the home you are financing and verification of the information you've provided us on your application. Processing Your Loan When we process your loan we verify the information you've provided us on your loan application. We will request minimum documentation to verify assets and income. Your new home, or existing home if you are refinancing, will be reviewed by ordering an appraisal, title report, and flood certification on the home. A prepaid processing deposit is 13

8 required for these services and will be applied toward your closing costs. We also set up escrow for the loan closing and send out applicable disclosures so you have a chance to read through them. Final Loan Approval Final loan approval involves underwriting your new home or existing home, if you are refinancing and the information on your loan application. Once we've reviewed this information, we will give you a final approval, and then ready your loan for closing. Closing With final loan approval, we prepare the loan documents for you to sign and send them to an escrow company for signing. Once we receive the signed documents, we'll transfer the money to the escrow company and they will disburse the loan and record the documents. Closing Time To close the deal on your house you will meet with a representative of the escrow company who is handling your loan. Once the title is recorded, ownership will transfer to you. Here is the place to gain a good understanding of the fees you (and the seller) will be responsible for paying at closing. 14 Fees at Closing Buyer's Fees Here is a list of fees you should typically expect to pay at closing; there may be more or fewer: Credit Report - done by an independent credit association, to establish your credit rating Appraisal - done by an independent appraiser, to establish the value of the house Inspection - done by an independent home inspector, to provide information about the integrity of the house (typically not required by the lender) Title - to disclose whether there are any liens and encumbrances Recording Fees - to record the transfer of property with the appropriate government bodies Courier Fees - to cover the cost of transporting documents between the escrow service and various other entities Loan Origination Fee - this is a fee imposed by a lender to cover certain processing expenses in connection with making a real estate loan Discount Points - prepaid finance charges tied to interest rate (the higher the interest rate, the lower the discount points.) Seller's Fees - Here is a list of fees the seller should typically expect to pay: Escrow services (seller's portion) Title Insurance (based on purchase price) Excise tax Recording fee Real estate commissions 15

9 As part of your Purchase and Sale Agreement, you can ask the seller to pay your closing costs and prepaid items. Please be aware that lenders may have limitation on the amount of seller contributions typically 3% to 9%, depending on the loan to value. Some things that may be required at closing, but not always: Water and sewer certification (if your new home is not on municipal and sewer facilities a certification may be ordered through your local health department to save you money) Building code compliance letter Mortgage insurance Survey Escrow Accounts Escrow accounts were originally established during the Great Depression of the 1930s, when Americans were unable to pay their property taxes because they were unemployed. It was hard enough, at that time, to come up with the money to pay for food and clothing, let alone a large tax payment. Lenders and the government worked together to establish a way to keep people in their homes by attaching an extra payment every month to their mortgage payment. Escrow accounts were set up to hold that money in reserve, until it was time to pay taxes. Collections for insurance were also added so that all houses would be covered in the event of fires or other hazards. That practice continues today, if required by your lender to ensure that: Homeowners are protected from the possibility of losing their homes for missing tax payments The escrow account will advance the funds to cover any unexpected increase in tax or insurance payments, which may result in higher monthly payments. 16 Homeowners Insurance As you progress through the home buying process, the question of insurance will be raised. Here are the basic types of insurance you should know something about. Be aware that most policies contain standard exclusions and exceptions. Required Insurance Homeowner's Insurance Homeowner's insurance covers fire, theft, certain natural disasters and personal liability if someone is injured on your property. It protects the lender against the loss of the property securing your mortgage. You'll have to prove that you have adequate homeowner's coverage as a condition of obtaining a mortgage. Title Insurance Several things happen behind the scenes when you buy a house. For example, First Atlantic requires that you either have an attorney or obtain a settlement agent. They will be responsible to order the title search and policy. The closing will occur in the settlement agent's office. Title insurance provides protection against financial loss in case a defect in the title turns up at some future date. Possible defects include: Flawed information in deeds or mortgages (like an incorrect name) Liens or claims against the property or the property owner (unpaid taxes or bills for water service) Claims to ownership from a former owner or spouse Invalid deeds (from a past sale or transfer by a party who didn't actually own the property) 17

10 Insurance that may be required Private Mortgage Insurance When you acquire a mortgage with less than a 20% down payment, First Atlantic may require you to purchase mortgage insurance. This coverage helps protect the lender in case you can't make your payments and default on the loan. First Atlantic isn't the only beneficiary. Mortgage insurance makes it possible for people with small down payments to buy the home of their choice. Flood Insurance Flooding is not covered by a standard homeowner's insurance policy. To determine if you need flood insurance, ask your insurance professional about the flood history in your area. If there is a potential for flooding, you will be required by First Atlantic to purchase a policy that covers the structure and your personal belongings. Flood insurance can be purchased from an insurance agent or company under contract with the Federal Insurance Administration (FIA), part of the Federal Emergency Management Agency (FEMA). Flood insurance is only available where the local government has adopted adequate flood plain management regulations under the National Flood Insurance Program (NFIP). Optional Insurance Mortgage Life Insurance This coverage can reduce or pay off your mortgage if you die before the loan is repaid. It generally is decreasing term life coverage. The benefit payable matches your mortgage balance. Consider your entire financial picture, not just your home, in deciding what life insurance protection you need. This type of insurance is not offered through First Atlantic but you may obtain it through a company of your choice. 18 (732) Locations Eatontown 468 Industrial Way West Eatontown, NJ Neptune 2070 Route 66 Neptune NJ Oceanport 495 Oceanport Ave. Oceanport, NJ Toms River 1580 Lakewood Rd. (Route 9) Toms River, NJ **All Banking features are also Available 24/7 on our Mobile Banking App or at 19