Your Guide to. Mortgage Lending

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1 Your Guide to Mortgage Lending

2 Your perfect home should come with the perfect mortgage

3 How many mortgage ads have you seen? If you have been looking for a new home or considering refinancing your property you likely have seen a lot. With all of those banks and brokers asking for your business, how do you know you are getting the best deal? Southland Credit Union is a not-for-profit financial institution that works for you. We offer: Aggressive and honest interest rates Low fees A full range of real estate loan options to meet your exact needs Fast processing & underwriting with Southland s local, in-house lending team Personalized and thoughtful service from a real estate professional If getting the best deal means more than just the lowest payment, choose the lender that puts your needs before profits. Freddie Yeawary Sr. Mortgage Loan Consultant NMLS ID # Tel: Fax:

4 the growing family Marcus and Julie are ready for a bigger home. After their first child, and with another on the way, the starter home they purchased four years ago feels like it s shrinking. They have good credit and are confident they ll come away from the sale of their existing home with a 20% down payment to buy their dream home. Marcus and Julie need a loan payment that won t grow as their family does. With a fixed-rate home loan from Southland, Marcus and Julie will have an affordable monthly payment for as long as they plan to stay in their home.

5 Conforming Fixed-Rate Home Loan Conforming up to $417,000 High-Balance from up to $625,500 Southland Credit Union Fixed-Rate Comparison Report Purchase Price / Market Value: $782,000 Purpose of Loan: Purchase Client Name / Property: Marcus and Julie 1st Lien Type: 30 Year Fixed Down Payment / Equity: $156,500 (20%) Total LTV: 80% Initial Monthly Payment and Interest Rate Southland Credit Union Loan Amount $625,500 Upfront Mortgage Insurance (MI) Premium Charge $0 MI Premium Amount Financed $0 Total Amount Borrowed $625,500 Mortgage Start Rate 4.375% 4.533% APR * Monthly Mortgage Payment (P&I) $3,169 Monthly MI Payment $0 Tax, Insurance, HOA n/a Total Monthly Payment $3,169 Fixed-rate Home Loan Eligibility Highlights Loan Amount Up to $417,000 Loan Amount Up to $625,500 LTV / CLTV Up to 95% ( >80% includes MI) Up to 90% ( >80% includes MI) Loan Purpose Property Type Occupancy Loan Type Southland Guidelines Purchase; Take out from construction; Rate/term refinance Detached, Attached, Condominiums Primary residence only Fully amortizing, 30 year, 20 year, 15 year, 10 year fixed rate This table includes highlights only. Loan must meet all other standard Southland guidelines as well as standard Southland documentation; ask Mortgage Loan Consultant for additional criteria. *APR=Annual Percentage Rate. Sample payment based on a $625,500 loan amount quoted as of and subject to change without notice. The loan and accompanying interest rates, points, and APRs may differ and be adjusted based on your credit history, loan-to-value (LTV), occupancy, property type, loan amount, and loan purpose. Payment of $4.99 per $1,000. Rates, terms, programs are subject to change without notice, other fees and conditions may apply. Sample payment includes principal and interest only, taxes and insurance will increase your payment. See last page for complete disclosure.

6 the first time home buyer Adam and Courtney are newlyweds, and have diligently saved $34,000 towards the purchase of their first home that they plan to stay in for less than 4 years. They have good credit and great job stability, but the average price for starter homes in their desired area is about $522,000. With their savings equaling less than a 10% down payment, Adam and Courtney will be limited to an FHA loan with an unattractive monthly payment plus a huge upfront FHA premium of $8,678. However, Southland can provide Adam and Courtney financing with 5% down using a 5/1 ARM and save them over $240 a month plus help them to keep over two months of reserves in their savings account.

7 90% to 95% LTV Solutions Up to $625,500 Loan Amount Portfolio Adjustable Rate Mortgages (ARM) Southland Credit Union Options and FHA Comparison Chart Purchase Price / Market Value: $522,000 Purpose of Loan: Purchase Client Name / Property: Adam and Courtney 1st Lien Type: 5/1 ARM Down Payment / Equity: $26,100 (5%) Total LTV: 95% Initial Monthly Payment and Interest Rate FHA Southland Credit Union Loan Amount $495,900 $495,900 Upfront Mortgage Insurance (MI) Premium Charge $8,678 $0 MI Premium Amount Financed $8,678 $0 Total Amount Borrowed $504,578 $495,900 Mortgage Start Rate 3.375% 4.533% APR * 3.375% 3.056% APR * Monthly Mortgage Payment (P&I) $2,230 for 60 months $2,191 for 60 months $2,099 for 300 months $2,062 for 300 months Monthly MI Payment $532 $326 Tax, Insurance, HOA n/a n/a Total Monthly Payment (60 Months) $2,762 $2,517 Eligibility Highlights Jumbo Intermediate ARM Loan Amount Up to $625,500 Loan Amount $625,501 to $750,000 LTV / CLTV Up to 95% Up to 90% Loan Purpose Purchase; Take out from construction; Rate/term refinance Purchase; Take out from construction Property Type Detached, Attached, Condominiums Detached Occupancy Loan Type Southland Guidelines Primary residence only Fully amortizing, 3/1, 5/1, 5/5, 7/1 or 10/1 ARM (5-year ARMs qualify at Note Rate + 2%; > 5-year ARMs qualify at Note Rate.) This table includes highlights only. Loan must meet all other standard Southland guidelines as well as standard Southland documentation; ask Mortgage Loan Consultant for additional criteria. *APR=Annual Percentage Rate. Sample payment based on a $522,000 loan amount quoted as of and subject to change without notice. The loan and accompanying interest rates, points, and APRs may differ and be adjusted based on your credit history, loan-to-value (LTV), occupancy, property type, loan amount, and loan purpose. Payment of $4.42 per $1,000 for 60 months at 3.375% and $4.16 per $1,000 for 300 months at 2.819%. Rates, terms, programs are subject to change without notice, other fees and conditions may apply. Sample payment includes principal and interest only, taxes and insurance will increase your payment. See last page for complete disclosure.

8 the real estate investor B arbara knows a good investment when she sees one. Despite the dated appliances and need for a fresh coat of paint, the five-unit property close to the local college is a promising investment that will provide her with positive cash flow for years to come. Barbara has saved for a 25% down payment with enough reserves to make repairs and upgrades. Barbara knows the numbers can work, but only if she can receive a loan with a competitive interest rate that doesn t include unnecessary fees and expenses. A non-owner occupied home loan from Southland Credit Union can help Barbara realize her goals by putting more money in her pocket every month.

9 Non-Owner Occupied Home Loans Multifamily Home Loans Investment Home Loans from Southland Credit Union Non-Owner Occupied and Multi-family Home Loans from Southland Credit Union provide you with an option to secure your investment and leverage your purchasing power. Southland is unique as a Credit Union lender by offering investment home loans and allowing borrowers to save by choosing a not-for profit lender. Non-Owner Occupied and Multifamily Home Loans Eligibility Highlights Cash out financing options Not limited to Fannie Mae or Freddie Mac guidelines Loans for purchase transactions Refinance of completed construction loan (Take out from construction) Fixed-rate Home Loan Eligibility Highlights* Now-Owner Occupied Home Loans Loan Amount LTV / CLTV Loan Purpose Property Type Occupancy Multifamily Home Loans Up to $2 Million Up to 95% ( >80% includes MI) 75% LTV Purchase; Take out from construction; Rate/term refinance 1-4 Unit Detached, attached, condominiums 5-20 Unit Detached, attached, condominiums Non-owner Occupied Primary, Secondary & Non-owner Occupied Loan Type Fully amortizing, fixed rate up to 30 years or 5/1, 5/5, 7/1, or 10/1 ARM with no 5, 7, 10 year terms with 30 year amortization adjustments for a minimum of 5 years. Southland Guidelines This table includes highlights only. Loan must meet all other standard Southland guidelines as well as standard Southland documentation; ask Mortgage Loan Consultant for additional criteria. *APR=Annual Percentage Rate. Sample payment based on a $200,000 loan amount at 4.533% APR quoted as of and subject to change without notice. The loan and accompanying interest rates, points, and APRs may differ and be adjusted based on your credit history, loan-to-value (LTV), occupancy, property type, loan amount, and loan purpose 360 monthly payments of $ ($4.99 per $1,000). Rates, terms, programs are subject to change without notice, other fees and conditions may apply. Sample payment includes principal and interest only, taxes and insurance will increase your payment. See last page for complete disclosure.

10 the non-conforming borrower Paul loves his split-level home with a view of the downtown skyline. After 12 years of proud ownership, the time has come to replace the roof, a $35,000 expense. Paul doesn t have the funds to make the repairs and needs a loan that can also refinance his existing high-interest mortgage. He applies for a loan with a national bank, but because his roof is in disrepair, his home does not appraise for enough and he is denied the loan. Paul feels he s stuck in a catch-22; he can t get a loan until he fixes his roof and he can t fix his roof unless he gets a loan. Paul applies for a Home Loan with Southland, a loan that can help with unique situations just like this, and he is able to receive the funds to fix his roof and lower the interest rate on his existing mortgage.

11 Mortgage Lending from Southland Credit Union A flexible home loan when you need it Mortgage Lending from Southland Credit Union offers Members greater flexibility and is an alternative for those whose loan needs do not qualify for a conventional loan program from Fannie Mae, Freddie Mac or FHA. Southland sets the guidelines and can offer Members flexible home loan options. Mortgage Lending Eligibility Highlights Cash out financing options beyond Fannie Mae guidelines Loans for homes needing improvement Lending on outside traditional LTV Requirements Flexible debt-to-income ratios Available options for secondary home & condominium association limitations Fixed-rate Home Loan Eligibility Highlights * Loan Amount Up to $2 Million LTV / CLTV Loan Purpose Property Type Occupancy Loan Type Southland Guidelines Up to 95% ( >80% includes MI) Purchase; Approved construction; Rate/term refinance Detached, Attached, Condominiums Primary, Secondary & Non-owner Occupied Fully amortizing, 3/1, 5/1, 5/5, 7/1, 10/ 1 ARMs with no adjustments for a minimum of 3 years. This table includes highlights only. Loan must meet all other standard Southland guidelines as well as standard Southland documentation; ask Mortgage Loan Consultant for additional criteria. *APR=Annual Percentage Rate. Sample payment based on a $200,000 loan amount at 4.533% APR quoted as of and subject to change without notice. The loan and accompanying interest rates, points, and APRs may differ and be adjusted based on your credit history, loan-to-value (LTV), occupancy, property type, loan amount, and loan purpose 360 monthly payments of $ ($4.99 per $1,000). Rates, terms, programs are subject to change without notice, other fees and conditions may apply. Sample payment includes principal and interest only, taxes and insurance will increase your payment. See last page for complete disclosure.

12 frequently asked questions What is PMI? Private Mortgage Insurance (PMI) protects lenders against losses that can occur when a borrower defaults on a mortgage. PMI is required on first mortgage purchase transactions when the borrower has less than a 20% down payment. Likewise, it is required on first mortgage refinance transactions when the borrower has less than 20% equity in the property being refinanced. The cost of the mortgage insurance is typically added to the monthly mortgage payment. Do I need a down payment? For first mortgage financing, Southland Credit Union offers low down payment financing. Opportunities are dependent on the loan product, loan purpose, occupancy and credit profile. Loans may be up to 95% of a property s current appraised value. A Mortgage Loan Consultant will assist you in understanding how this affects your loan. Do I need a fixed rate or an adjustable rate mortgage (ARM)? Fixed-rate loans have interest rates that do not change during the life of the loan. Adjustable-rate mortgages have rates that are linked to an index, the 1-Year London Interbank Offered Rate (LIBOR) as published by the Wall Street Journal, and therefore can change over time. Consider factors that could affect your decision, such as how a higher monthly payment would impact your budget if the rate were to increase, and the length of time you plan to stay in your home. Can I finance my rental property? Yes, you can. The interest rate may be higher. This is because there s more risk for the Credit Union when lending on a property that is not the Member s primary residence. Why should I refinance? There are numerous reasons Members refinance the loans they already have. Some of these are: To lower the monthly payment To lower the interest rate To switch from an adjustable rate to a fixed rate or vice-versa To refinance for a higher amount in order to pay off other debts or get cash To change the remaining term of the loan Whatever your needs, we can help you decide what makes the most sense for you. Can I get pre-approved? Yes, you can. Your information is reviewed, and a decision is made as to whether you qualify. Contact us to see what information you need to provide. Once pre-approved, you can look for a new home with confidence, and sellers will feel more comfortable negotiating with you. Do I need a home appraisal? Sometimes we do not need to conduct an appraisal; other times we have to conduct a full appraisal, and there are levels in between. Only after reviewing your application and collateral information will it be determined whether an appraisal is needed for your situation. How fast will I get my money? On a purchase, your funds are available on the day you close your loan. On a refinance, funds are normally disbursed on the fourth business day after you sign your loan documents. This is because federal regulations require a 3-day rescission period during which time you have the right to cancel your loan outright. What are points? Points are a one-time fee that a borrower pays to lower the interest rate. One point equals one percent of your loan amount. What is the difference between interest rate and APR? The interest rate is the cost to borrow the money disbursed in the loan. The APR is the total cost of the loan over its life, including costs, points and fees. Why do I pay pre-pay interest? When you close your loan, interest accrues in between the closing date and the last day of that calendar month. This amount is added to the closing costs for your loan rather than making your first monthly payment larger in order to absorb the extra interest that would be due. Should I pay my fees out of pocket? If you are refinancing, you can either pay the fees in advance or roll them into the closing costs. For refinance loans only - if you have extra funds, as you would for a down payment on a car, for example, then it makes sense to consider paying them

13 out of pocket as you will have a lower monthly payment. If you do not have the extra funds, it makes sense to roll the fees into the loan. The difference in payment and total cost of the loan is usually nominal. (If you are purchasing, first lien mortgages typically do not permit fees to be included in the loan amount.) What are closing costs and how much will they be? Closing costs include items like appraisal fees, title insurance fees, attorney fees, pre-paid interest and documentation fees to name a few. These items are usually different for each customer due to differences in the type of mortgage, the property location and other factors. You will receive a good faith estimate of your closing costs in advance of your closing date for your review. Can I lock my interest rate when purchasing a home? For first mortgages, Southland Credit Union does not always require a property address to lock a rate. The borrower, however, must provide the subject property address no later than 30 days after locking the rate. How do I figure out how much equity I have? To understand how much equity you have in your home, just write down your home s value and then subtract all amounts that are owed on that property. The difference is the amount of equity you have. For example, if you have a property worth $100,000, and the total mortgage balances owed on the property are $80,000, then you have a total of $20,000 in equity. When performing this exercise, just take your best guess as to what your property is worth, use a home value estimator, or ask a Mortgage Loan Consultant for other methods of determining value. What is LTV and why does it matter? LTV stands for loan-to value. It is the total amount of liens on the property divided by its fair market value. If the subject property is a purchase transaction, fair market value will be based on the lower of purchase price or estimated market value as established by the appraisal. Why should I use my equity? Using the equity in your home is a great way to improve your property, consolidate high-interest debt, finance important life events, or even cover unexpected emergencies. The interest you pay is usually tax deductible. (Consult a tax advisor for more information.) How do I find out my home s value? When you first apply for a loan, use a home value estimator or ask a Mortgage Loan Consultant for other methods to determine your home s value. The Credit Union will determine the value during your application process. Is my interest tax deductible? Interest you pay on a loan which is secured by your primary residence may very well be tax deductible. You should consult with a tax advisor to determine whether this applies to your situation. What will my rate be? Rates are based on a variety of factors such as the loan purpose, your credit history and ability to repay, the value of the collateral, and the loan amount, to name a few. How much money can I get? The two main factors in answering this question are your debt-to-income ratio, and the amount of equity you have in your home. To calculate your debt-to-income ratio, write down all of your monthly debts (don t worry about utilities or your television service), then divide that amount by your monthly gross income. The underwriter will take a look at the percentage that results and determine how much you can afford to pay per month. Then, within the amount of equity you have available, it can be determined how much you could borrow and still be within what you can afford. Do I have to have perfect credit? While it is true that if your credit score is high you may receive better rates and have more options available to you, this does not mean you cannot obtain a mortgage if you have had some slips in the past. Credit is only one factor in the underwriting process, so don t think that this alone will stop you from getting a loan; however, your credit history needs to demonstrate both willingness and ability to repay on time.

14 Southland Mortgage Options Conforming Fixed-Rate Mortgages * 30 Year Conforming (Loans up to $417,000) 20 Year 15 Year 10 Year Conforming High-Balance Area (Loans up to $625,500) 30 Year 15 Year Non-Owner Occupied - Investment Properties * Non-Owner Occupied (Investor) (Loans up to $417,000) 30 Year 15 Year Adjustable Rate Mortgages (ARM) ** 3/1 ARM Conforming (Loans up to $417,000) Conforming High-Balance Area & Non-Owner Occupied (Investor) (Loans up to $625,500) 5/1 ARM 5/5 ARM 7/1 ARM 10/1 ARM 3/1 ARM 5/1 ARM 5/5 ARM 7/1 ARM 10/1 ARM Home Equity Line of Credit HELOC Prime A Home Equity Line of Credit (HELOC) is a low-cost alternative to high-interest consumer loans and credit cards. You can borrow up to 80% of your home s appraised value to do things you want to do such as home improvements, go on your long-overdue vacation even pay off your credit card debt. Since a HELOC is a revolving line of credit it allows you to access your funds when you need to. If a Mortgage Loan doesn t fit your needs, Southland s HELOC Prime may be right for you. Rates as low as Prime +1.25% 1 Flexible monthly payments No Fees No Points Cash advances available any time, up to your available credit limit Credit lines up to 80% of your home s equity up to $500,000 Convenient Access with HELOC Access Card For More Information on a HELOC Prime Loan, contact a Service Representative at ) APR=Annual Percentage Rate. Loans are subject to credit and collateral qualification, other fees and conditions may apply. Rates are subject to change without notice. Other rates may apply based on your individual credit profile. The rate shown assumes that you have a FICO of 700 or above. Prime is based on the Wall Street Journal Prime Rate + margin based on credit score. All HELOCs are variable rate loans. Rates can change monthly on the first of the month. Rate cannot change by more than 5% in any one year. The rate cannot drop below 4.5% or exceed 15%. 10-year interest only terms followed by a 15-year amortized payback period. $50 annual fee is waived on HELOCs with a minimum outstanding of $10,000 for 30 days during the year. If the loan is paid off and closed during the first 3 years of the loan, you will be charged a $450 early termination fee. Real Estate Loans are subject to credit approval. Property you own which generates income is not eligible. Credit limit determined by the equity in the real property, which is used as security for the loan. Membership is subject to eligibility. All new accounts will be verified through ChexSystems and are subject to credit approval and verification of equity. Rates and terms are subject to change without notice.

15 Notes Disclosures Loans are available to Southland Credit Union Members only. Credit Union Membership is subject to eligibility. Loans are subject to credit and collateral qualification, other fees and conditions may apply. Rates are subject to change without notice. Other rates may apply based on your individual credit profile. NMLS *APR=Annual Percentage Rate. Sample payment based on a $200,000 loan amount at 4.533% APR quoted as of and subject to change without notice. The loan and accompanying interest rates, points, and APRs may differ and be adjusted based on your credit history, loan-to-value (LTV), occupancy, property type, loan amount, and loan purpose. 360 monthly payments of $ Rates, terms, programs are subject to change without notice, other fees and conditions may apply. Sample payment includes principal and interest only, taxes and insurance will increase your payment. The rates offered are examples, and not intended to be inclusive or a commitment to the pricing for which you may qualify. The loan and accompanying interest rates, points, and APRs may differ and be adjusted based on your credit history, loan-to-value (LTV), occupancy, property type, loan amount, and loan purpose. All loans are subject to a qualifying credit score and approval. Interest rates, points, and APRs are subject to change without notice. Estimated payment per $1,000 borrowed includes principal and interest only. Taxes & insurance will increase your payment. Loan costs include points, loan origination fee, title insurance, escrow, recording, processing fee and impounds for taxes & insurance (if applicable). Southland will send Members a Good Faith Estimate detailing these costs within 72 hours of receiving a completed loan application. We do business in accordance with the Federal Fair Housing Law and the Equal Credit Opportunity Act. Additional loan programs are available; ask for details. Other fees and conditions may apply. **ARM=Adjustable Rate Mortgage. The loan and accompanying interest rates, points, and APRs may differ and be adjusted based on your credit history, loan-to-value (LTV), occupancy, property type, loan amount, and loan purpose. Rates are subject to increase or decrease at the end of the fixed rate period, may adjust annually, and are based on an index plus a margin. The current index is the 1-Year London Interbank Offered Rate (LIBOR) as published in The Wall Street Journal. P&I payment is subject to change after first interest adjustment. FIXED-RATE LOANS Conforming loan amounts vary and depend on property location. Maximum Loan Amount: Up to 80% combined loan-to-value. JUMBO LOANS Jumbo loan amounts vary and depend on property location. Maximum Loan Amount: Up to 80% combined loan-to-value.

16 DOWNEY 8545 Florence Ave. Downey, CA GARDEN GROVE Euclid St. Garden Grove, CA LOS ALAMITOS (CORPORATE OFFICE) Los Alamitos Blvd. Los Alamitos, CA BRANCHES MAILING ADDRESS P.O. Box 3003 Los Alamitos, CA PHONE WEBSITE LOS ANGELES 200 S. Spring St. Los Angeles, CA LOS ANGELES (FEDERAL BLDG) 300 N. Los Angeles St. Los Angeles, CA SANTA MONICA 525 Santa Monica Blvd. Santa Monica, CA Federally insured by NCUA Freddie Yeawary Sr. Mortgage Loan Consultant NMLS ID # Tel: Fax: Revised: 5/13/2014

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