Insert Realtor/ Builder logo. Insert affiliate Bank logo

Transcription

1 Insert affiliate Bank logo 1 Insert Realtor/ Builder logo

2 Your Step-By-Step Guide HOME BUYERS HANDBOOK Purchasing a home is one of the most important decisions you will ever make. A home can be an excellent investment because properties most likely increase in value over the years and may provide tax benefits (You can usually deduct mortgage interest and property taxes). Just as important, the type of home you buy, its location, and the loan program you choose will shape your future and that of your family. This step-by-step guide will lead you through the entire loan process, from beginning to end, and will help you select the home and mortgage program that best fits your specific needs. This information will also help you work more effectively with the lenders, Realtors, sellers, lawyers, and others on your home-buying team. Happy house hunting! SOLD Home For Sale 2

3 CONTENTS TOPIC PAGE The home buying experience... 4 Step 1: getting pre-qualified... 5 How much house can you afford?... 6 Why get pre-approved?... 7 Types of homeownership... 8 How a good Realtor can help?... 9 Making an offer Appraisal and Inspection Title/Homeowners Warranty Mortgage options Types of mortgages Loan Application Checklist Final steps to closing Frequently Asked Questions Glossary of mortgage terms

4 THE HOME BUYING EXPERIENCE At Synovus Mortgage Corp., we want to ensure that you understand the entire home buying process. If, at any time, you have a question about the process, do not hesitate to ask your Synovus Mortgage Loan Professional! Steps to take before you begin: 1. Contact a Synovus Mortgage Loan Professional to see if you are financially prepared for the investment you are considering and to get an estimate of how much house you can afford. 2. Learn the terms used in buying a home or condominium. 3. Get pre-qualified, or even better, get pre-approved for a loan through your Synovus Mortgage Loan Professional. 4. Decide on the type of home you want and the features. 5. Choose a real estate agent. 6. When you find a home you want and can afford, negotiate! 7. Make an offer in writing. 8. When your offer is accepted, find an inspector. 9. Find an attorney if you feel you need one. 10. Talk with your Synovus Mortgage Loan Professional about the various loan options available. 11. Prepare for the closing. 12. Go to the closing! SOLD 4

5 STEP 1: GETTING PRE-QUALIFIED Your Synovus Mortgage Loan Professional will use the financial information you provide to estimate the maximum mortgage you should be able to obtain. The process doesn t guarantee that your mortgage application will be accepted, but it does help you narrow your search to homes you can afford. Your monthly house payment should typically be around 28% to 30% of your total monthly gross income (how much you make before taxes). Your total monthly debt, which includes your mortgage, as well as your debts (e.g., car payment, credit cards and loans), should not be more than 36% to 40% of your gross income. Maximum Monthly Payment Gross Annual Income House Only Total Debt Annual Income 28% 36% $35,000 $816 $1,050 $40,000 $933 $1,200 $45,000 $1,050 $1,350 $50,000 $1,167 $1,500 $55,000 $1,283 $1,650 $60,000 $1,400 $1,800 $65,000 $1,516 $1,980 $70,000 $1,633 $2,100 $75,000 $1,750 $2,250 $80,000 $1,867 $2,400 $85,000 $1,983 $2,550 $90,000 $2,100 $2,700 $95,000 $2,216 $2,850 $100,000 $2,333 $3,000 $120,000 $2,800 $3,600 $130,000 $3,033 $3,900 $140,000 $3,266 $4,200 $150,000 $3,500 $4,500 $160,000 $3,733 $4,800 $170,000 $3,966 $5,100 $180,000 $4,200 $5,400 $190,000 $4,433 $5,700 $200,000 $4,666 $6,000 5

6 HOW MUCH HOUSE CAN YOU AFFORD? To find out how much house you can afford, you should consider your home s carrying charges as well as your savings, your salary, your debts, and your spending habits. *Your house payment is your basic monthly mortgage payment, consisting of principal, interest, real estate taxes and hazard (homeowner s) insurance. Your house payment may also include mortgage insurance and/or an association fee if required. How much will I need for a down payment? Due at the time of closing, the down payment can range from as little as 3% of the purchase price to however much you wish to put down. The larger your down payment, the less interest you will have to pay. Loans with minimum down payments typically require a fee for mortgage insurance in addition to your monthly payment. Money for the down payment may come from a variety of sources including the sale or refinancing of another house, a gift or loan from family members, your savings or a secured debt (such as a car loan). Your Synovus Mortgage Loan Professional can tell you about the latest regulations regarding down payments. Affordable Housing/Low Income Loan Programs At Synovus Mortgage, we work to ensure that affordable mortgages are available to those with low or moderate incomes. Ask us about these special programs, with lower down payments and more flexible credit guidelines. 6

7 WHY GET PRE-APPROVED? To get pre-approved, you provide the same paperwork you will be asked for when you make a formal loan application. This will probably include your credit history, employment and down payment funds, all of which will be verified. You can t get the mortgage until the lender can appraise the property and do a title search. When you formally apply for a mortgage, certain facts may have to be re-checked. This depends on how much time has passed since the pre-approval. So, why should you get Pre-Approved?. 1. You may be better able to bargain with a seller. When sellers receive an offer from a pre-approved buyer, they know that person can secure a loan. 7

8 TYPES OF HOMEOWNERSHIP It always helps to know the type of home you want and the features that are most important to you. Single family This is the most popular type of home ownership. You are totally responsible for paying the mortgage, property taxes, and any other carrying expenses, including all maintenance costs. Condominium As a condo owner, you own your living quarters in the same way that a single-family homeowner does. You also own a share of the common space, such as gardens, parking areas, and community facilities (e.g., pool, golf course, recreation hall, tennis court). You pay a monthly maintenance fee for the common expenses. The owners association, which you belong to, makes decisions about how the condo is run. Co-operative As the owner of a co-op, you buy a share or a number of shares in the corporation that owns and manages the building your apartment is in and the land it is on. If you took out a mortgage for the apartment, you are responsible for paying it off. You also pay a monthlymaintenance fee for your part of co-op expenses, repairs, and taxes. You must be approved by the co-op board before you can purchase. Multi-family This type of home has separate living quarters for two or more families to rent. The owner may be able to use rent from the other tenants to cover his or her own housing costs. These homes are often restricted to certain areas by zoning laws. 8

9 HOW CAN A GOOD REALTOR HELP? The Realtor you select should: Pre-select homes that are within your price range and meet your requirements for size, location, etc. Schedule appointments for you to see homes, even when the owners are not there. Give you current selling prices for houses similar to the ones you are considering. Get up-to-date information about taxes, school districts, and conditions in the areas that interest you. Handle negotiations over the price and terms of your offer. Arrange for a home inspection, a necessary step in buying a home. What should you look for in a Realtor? Knowledge about local communities Experience Patience Full access to the area s multiple listing service (MLS) The MLS gives you the listings of all sellers, not just those represented by your Realtor s company Ability to understand your wants, needs, and personal tastes Honesty and trustworthiness Willingness to keep you informed of changes in the market, without trying to push you into buying before you are ready. 9

10 MAKING AN OFFER Once you find the home you want, you should negotiate the terms of your offer. Your Realtor will help you determine what to include. Ask your Realtor to provide you with a copy of a purchase agreement when you first begin looking at homes. That way, you will have time to think about what you want your agreement to cover. Before making an offer... Get recent selling prices of similar homes in the area to justify your offer price. Research the property. How long has it been on the market? Why is it being sold? What are its good and bad points? Doing your homework will help you make an offer that meets the needs of both buyer and seller. Talk with neighbors to get information about the neighborhood. Consider the home s resale value. Negotiate the offer price and other items to be covered in the offer before you sign any formal papers. When your offer is formally accepted, you sign a purchase agreement, which is a legal contract. What s covered in the Purchase Agreement? Complete and accurate legal description of the property. Amount being offered. Financing contingency: size and type of loan to be obtained, plus the interest rate and closing cost information. The closing date and when possession of the property will be transferred to the new buyer. The amount of earnest money being offered. Any items of personal property being requested by the buyers to be conveyed by bill of sale. Any other contingencies that must be met in the offer such as...inspection of the home and the appraisal. 10

11 APPRAISAL AND INSPECTION These steps must be taken after your offer has been accepted: The appraisal An evaluation of the property s fair market value. The appraiser visits the house and reviews recent selling prices of similar homes in the area. The inspection An evaluation of the property to find out if there are any problems with it that could change its value. The inspection also helps you decide if there are any items that you want the seller to repair before the final contract is signed. The inspector is expected to carefully examine the entire house, inside and out. Selecting a Home Inspector The buyer generally hires the inspector. You want someone who is trustworthy and experienced. Referrals may come from recent home buyers, your Realtor, and/or your lender. Review a sample of each candidate s previous reports for thoroughness. Be sure that the inspector you choose lets you go to the inspection. Walking through the house together will give you a hands-on feel for what is right and wrong with it. A good inspector will check: General condition of the property. Electrical system. Heating and cooling systems. Exterior (outside) structure, possible water damage, garage doors, roof and chimney. Interior (inside) structure; insulation, foundation, windows, and doors. Pest control. Risk of earthquakes/landslides. Termite Inspection: Most areas require a termite inspection. If termites are found, you must have proof that the house has been treated and that any termite damage has been repaired. This is usually the seller s responsibility. 11

12 TITLE/HOMEOWNERS WARRANTY What is a Title Search? A title search is performed by a title company and is needed to uncover any possible problems with the legal ownership of the property. If problems are found, you may decide not to close on the property. Problems could arise if there is a dispute by outside parties about the ownership of the property, its size, or the way it can be used. (For instance, there may be an unknown heir, a secret spouse, or a faulty land survey on the property.) Title searches are generally set up by the buyer s Realtor or lawyer. If no problems are found in the search, the title company issues you title insurance. This is for your protection. Title insurance guarantees that the property you buy is as it is stated in recorded deeds, surveys, and other documents. You may pay a one-time title insurance premium when you buy the house. Then you do not have to pay another premium unless you refinance your mortgage. What is a Homeowner s Warranty? A home warranty covers any repair to the structure, mechanical systems and major appliances of the house for a certain time, usually a year. A homeowner s warranty is especially useful when buying an older home or one that has been vacant for some time. The seller may offer a warranty with the sale. If not, you can buy a homeowner s warranty on your own. 12

13 MORTGAGE OPTIONS Most loan rates will not differ widely from the current rates of interest. However, differences in how a loan is structured can result in large savings or costs to you when buying a home. Loans may differ in such items as term (length of the loan), prepayment options or penalties, processing fees, etc. Most mortgages are offered for terms of up to 40 years; other terms are available under some circumstances. Your monthly payment changes depending on the length of the mortgage. The shorter the term, the less you will pay for your house overall. However, your monthly payments will be higher. Your Synovus Mortgage Loan Professional can work with you to determine which option is best for your specific circumstances. This chart shows your monthly payment (principal plus interest) for a $1,000 loan. Multiply the monthly payment times the number of thousands of dollars you are borrowing to determine monthly charges. INTEREST RATE PERCENT MONTHLY PAYMENT (PRINCIPAL & INTEREST) FOR $1,000 LOAN 15 YEARS 20 YEARS 30 YEARS / ½ ½ ½ ½ ½ ½ ½

14 TYPES OF MORTGAGES A wide choice of home loans and financing options are available. Some choices are yours to make. Others are based on your specific circumstances. Conventional This mortgage is a contract between the lender and the borrower, at the lender s risk. The borrower s property is security (which means the lender can take your home for nonpayment of the mortgage). This mortgage is not insured by any federally insured program. However, it may be insured with a private mortgage insurance company. Conventional mortgages usually require larger down payments than FHA or VA loans. Fixed Rate Mortgage The interest rate on this agreement stays the same for as long as you hold your mortgage, no matter how interest rates change in the financial markets. With this type of mortgage, you know exactly how much you will pay in principal and interest on your home each month. (Remember, taxes and insurance on your home may change from year to year.) Jumbo A loan which is larger than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate. Construction Permanent Loan This loan allows you to take advantage of lower interest rates during the construction process, then modifying to a permanent loan. Interest-only These loans are a good means of increasing your home purchasing power or maximizing your flexibility to control cash flow. 14

15 TYPES OF MORTGAGES FHA (Federal Housing Administration) Our FHA (Federal Housing Administration) insured mortgages allow qualified buyers to purchase a home with a lower down payment than most conventional type mortgages. These loans are available with fixed or variable rate options. Talk with your Synovus Mortgage Loan Professional to see if you qualify. VA (Veterans Administration) We offer home loans available from the Department of Veteran Affairs. This VA program enables a qualifying veteran to buy a home at 100% financing. Loan amounts, appraisal restrictions and funding fees vary. Please speak with one of our representatives for all of the details. These loans are available with fixed or variable rate options. Adjustable Rate Mortgage (ARM) The interest on an ARM may vary up or down at fixed intervals. The changes are tied to a financial index such as one-year Treasury notes. The ARM often offers a low beginning interest rate as a teaser. However, this rate will go up after a certain time. If interest rates are low, an ARM may be a good option. This is especially true if its cap (the highest interest you may be charged) is not more than a few points higher than the current fixed rate. If you are considering an ARM, be sure you know: What is the period adjustment cap? What is the lifetime adjustment cap? What is the adjustment period (time between rate changes)? What index is used to determine interest rate? Does the introductory rate differ from the normal rate? What is the margin (the percentage added to the index rate each time your loan is adjusted)? 15

16 LOAN APPLICATION CHECKLIST Your lender will let you know what information is required to make the mortgage loan process go as quickly as possible. Be sure to supply accurate information. Otherwise, the loan may be delayed or even denied. A lot of information is needed at the time you apply for a home loan, so it s a good idea to begin gathering the paperwork you will need well ahead of time. Here are some of the items you should be ready to provide. Picture ID. Proof of Social Security number(s). Residence address(es) for past two years. Names and addresses of each employer for the past two years. W-2s and last two pay stubs. For each checking and savings account: name of financial institution, address, account number, and balance; last two month s statements. For each current loan: name of lender, address, account number, balance, and monthly payment. If you are self-employed: last two years tax returns; year-todate profit and loss statement prepared by an accountant. Loan information and address(es) of real estate owned. Estimated value of furniture and personal property. Certificate of eligibility or DD214s (VA only). Deposit for credit report and appraisal. 16

17 FINAL STEPS TO CLOSING Documents you ll receive from your Synovus Mortgage Loan Professional once your application is submitted: A truth in lending disclosure This statement provides information about the proposed loan, such as annual percentage rate, total finance charges, amount financed, total payments, schedule of payments, late payment charges, prepayment penalty (if any), and assumption options, which indicate the lender s willingness to allow a future buyer to take over your original loan. A good faith estimate of closing costs This is an estimate of the approximate amount of money you will need at closing. The forms lenders use to prepare this estimate vary, but the information is basically the same. This estimate gives you a rough idea of the fees the lender will charge you when you apply for a loan. Standard fees are interest adjustment, title insurance, recording fees, and survey fees. There are also many variable fees, including application fee, points, appraisal and credit report fees, and closing and settlement fees. A booklet from HUD (U.S. Department of Housing and Urban Development) to help you understand closing costs and truth in lending disclosures. The actual closing is when papers change hands and the home officially becomes yours. You must pay for the rest of your closing costs and down payment at closing. Payment should be by a certified or cashier s check rather than a personal check. Before you go to closing: Review all loan documents and your purchase agreement. Do a final walk through inspection. Make sure that all repairs have been made and no items in your agreement have been changed or removed from the house. 17

18 FREQUENTLY ASKED QUESTIONS I ve had credit problems, can you help? If you have been turned down because of credit or cash flow problems, or other circumstances beyond your control, call us for a no-cost, confidential consultation. Should I consider an interest-only loan? On a 30 year fixed rate mortgage, roughly 70% of the payment is for interest during the first few years. Instead of paying down that low rate loan, you could take the extra money from making interest payments and invest it in something that would bring you a higher rate of return. Or, pay down higher interest credit cards. Is an ARM (Adjustable Rate Mortgage) right for me? The interest on an ARM may vary up and down at fixed intervals. The changes are tied to a financial index such as one-year Treasury notes. The ARM often offers a low beginning interest rate as a teaser. However, this rate will go up after a certain time. If interest rates are low, an ARM may be a good option. This is especially true if its cap (the highest interest you may be charged) is not more than a few points higher than the current fixed rate. ARMs are of special interest to buyers who know their income will rise in the future or who don t plan to own the home for many years. How do interest-only loans differ? Like regular mortgages, interest-only loans come in many different forms. The rate can adjust annually or be fixed for a while (usually five, seven or 10 years) before becoming variable. The interest-only portion may end after the fixed period, or it may continue for a few more years before principal payments are required. Most mortgages require that you pay back some principal with each payment. Interest-only loans skip that requirement in the early years of the loan so that none of your payment goes toward paying down principal. The result is a smaller initial payment compared with other options, such as a 30-year fixed-rate mortgage. 18

19 FREQUENTLY ASKED QUESTIONS How much is a point? Points are finance charges paid to the lender as part of the closing costs. Each point equals 1 percent of your total mortgage loan. Points can be negotiable and are sometimes tied to your interest rate. Paying more points to get a lower interest rate may be a good idea if you plan to take a long-term loan What is prepayment and how will it benefit me? Prepayment refers to making early or extra payments toward the principal (amount borrowed). Prepayment can shorten the length of your mortgage and thus lower your total interest. However, some lenders may charge a penalty if you pay off the mortgage very quickly, usually in the first few years. Be sure to ask about prepayment conditions in your mortgage and read all of the documents. Common Mortgage Abbreviations APR - Annual Percentage Rate ARM - Adjustable Rate Mortgage CRV - Certificate of Reasonable Value DTI - Debt-To-Income Ratio ECOA - Equal Credit Opportunity Act FHA - Federal Housing Administration FHLBB - Federal Home Loan Bank Board FHLMC - "Freddie Mac" Federal Home Loan Mortgage Corporation FmHA - Farmers Home Administration FMV - Fair Market Value FNMA - "Fannie Mae" Federal National Mortgage Association GEM - Growing-Equity Mortgage GNMA - Government National Mortgage Association GPM - Graduated Payment Mortgage LTV - Loan-to Value MIP - Mortgage Insurance Premium PITI - Principal, Interest, Taxes, and Insurance PMI - Private Mortgage Insurance RAM - Reverse Annuity Mortgage RESPA - Real Estate Settlement Procedures Act SAM - Shared Appreciation Mortgage VA - Veterans Affairs VOD - Verification of Deposit VOE - Verification of Employment VRM - Variable Rate Mortgage 19

20 GLOSSARY OF MORTGAGE TERMS Amortization Means loan payment by equal periodic payment calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance. Bridge Loan A second trust that is collateralized by the borrower s present home allowing the proceeds to be used to close on a new home before the present home is sold. Also known as swing loan. Buy-down When the lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires. Caps (interest) Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage which may change per year and/or the life of the loan. Certificate of Eligibility The document given to qualified veterans which entitles them to VA guaranteed loans for homes, business and mobile homes. Certificates of eligibility may be obtained by sending form DD-214 Construction loan A short term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he or she progresses. Conversion Clause A provision in an ARM, allowing the loan to be converted to a fixed-rate at some point during the term. Usually conversion is allowed at the end of the first adjustment period. The conversion feature may cost extra. Credit Risk Score A credit risk score is a statistical summary of the information contained in a consumer's credit report. The most well known type of credit risk score is the Fair Isaac or FICO score. This form of credit scoring is a mathematical summary calculation that assigns numerical values to various pieces of information in the credit report. The overall credit risk score is highly relative in the credit underwriting process for a mortgage loan. 20

21 GLOSSARY OF MORTGAGE TERMS Deed of trust In many states, this document is used in place of a mortgage to secure the payment of a note. Deferred interest When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance. See negative amortization. Earnest Money Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment. Entitlement The VA home loan benefit is called an entitlement (i.e. entitlement for a VA guaranteed home loan). This is also known as eligibility. Equity The difference between the fair market value and current indebtedness, also referred to as the owner's interest. The value an owner has in real estate over and above the obligation against the property. Escrow An account held by the lender into which the home buyer pays money for tax or insurance payments. Guaranty A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract. Housing Expenses-to-Income Ratio The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his/her gross monthly income. HUD-1 statement A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing. 21

22 GLOSSARY OF MORTGAGE TERMS Index A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one- three-, and five-year U.S. Treasury security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average costs-of-funds incurred by savings and loans), which is then used to adjust the interest rate on certain mortgage products. Indexed rate The sum of the published index plus the margin. For example if the index were 9% and the margin 2.75%, the indexed rate would be 11.75%. Often, lenders charge less than the indexed rate the first year of an adjustable-rate mortgage. Interest Rate Buydown Plan An arrangement that allows the property seller to deposit money to an account. That money is then released each month to reduce the mortgagor's monthly payments during the early years of a mortgage. Lifetime Payment Cap For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the life of the mortgage. Loan-to-Value Ratio The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage. Lock Lender's guarantee that the mortgage rate quoted will be good for a specific number of days from day of application. Margin The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate. Market Value The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time. 22

23 GLOSSARY OF MORTGAGE TERMS Maturity The date on which the principal balance of a loan becomes due and payable. MIP (Mortgage Insurance Premium) It is insurance from FHA to the lender against incurring a loss on account of the borrower's default. Mortgage Life Insurance A type of term life insurance: In the event that the borrower dies while the policy is in force, the debt is automatically paid by insurance proceeds. Origination Fee The fee charged by a lender to prepare all loan documentation in combination with the application process. PITI Principal, Interest, Taxes, and Insurance. Also called monthly housing expense. Principal The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage. Private Mortgage Insurance (PMI) In the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment - as low as 3 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance will usually require an initial premium payment and may require an additional monthly fee depending on your loan's structure. Survey A measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimensions, and the location and dimensions of any buildings. Underwriting The decision whether to make a loan to a potential home buyer based on credit, employment, assets, and other factors. 23

24 OUR CUSTOMER COVENANT We pledge to serve every customer with the highest levels of sincerity, fairness, courtesy, respect and gratitude, delivered with unparalleled responsiveness, expertise and accuracy. We are in business to create lasting relationships, and we will treat our customers like we want to be treated. We will offer the finest personal service and products delivered by caring team members who take 100% responsibility for meeting the needs of each customer. Corporate Headquarters / 2204 Lakeshore Drive / Suite 325 / Birmingham, AL Toll-Free Subject / to credit approval and required documentation approval. Offices in Alabama, Georgia, Florida, Tennessee, Mississippi and South Carolina 24