HOMEBUYER S GUIDE. Know what it takes to buy your first home

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1 HOMEBUYER S GUIDE Know what it takes to buy your first home

2 homebuyer s guide If you re thinking about buying a home, we say congratulations. Most likely, it s the biggest purchase decision you ve made so far. Of course, before you can make an offer on a home, you need to be pre-approved for a home loan. Your loan officer will work with you to figure out how much you qualify for. (This is basically determined by the monthly mortgage payment you can comfortably afford, plus the money you re able to put toward a down payment and closing costs.) Keep in mind that you may need to budget separately for these items beyond your monthly payment: Property taxes Homeowners insurance Mortgage and flood insurance, if applicable Home Owner Association fees (HOA), if applicable In order to prequalify for a mortgage, your loan officer will ask about your employment and credit history. In addition, your loan officer will review your assets to verify that you have funds for the down payment and closing costs. Do not apply for new credit once your loan is submitted because applying for new credit may change the loan decision.

3 loan process at a glance When you haven t gone through it before, the loan process can start to feel overwhelming at points. Be sure to ask questions even now. There s an orderly nature to things, and your loan officer knows how to help you every step of the way. START» officer Meet with your Umpqua loan for pre-approval You provide all required»documentation» loan Umpqua provides disclosures You set up homeowners «insurance Underwriter approves «the loan «Umpqua submits Umpqua documents to underwriting orders «a home appraisal»»» Documents are sent You sign documents at title HOME AT LAST to title company company and pay remaining Loan is recorded and for signing costs, if applicable keys are exchanged

4 mortgage terms (simplified) Annual Percentage Rate (APR) Total yearly cost of the loan which includes the interest rate and other prepaid finance charges. Closing The meeting between the buyer, seller, and lender where the property and funds legally change hands. Closing is also called a settlement. Closing Costs The fees incurred when purchasing a home or refinancing the mortgage on a property. Costs vary by transaction, and may include lender or third-party fees or prepaid expenses, like taxes, insurance and interest. Down Payment This is the up-front money you need for a home purchase that is not financed by the mortgage. Getting financial help with a down payment or using gift monies toward it may be possible depending on the loan program. Ask your loan officer for more information. Escrow Refers to a neutral third party who carries out the instructions of both the buyer and seller to handle all the paperwork of settlement or closing. Escrow may also refer to an account held by the lender into which the homebuyer deposits money for tax or insurance payments. Interest Rate The charge for borrowing money, paid over a specific period of time. Hazard Insurance Protects your home against loss and may include Flood Hazard Insurance if your home is located in a Special Flood Hazard Area. Mortgage Insurance (MI/PMI) Protects the lender against loss and is generally required with a down payment of less than 20%. Different types of MI include FHA/MIP, Private Mortgage Insurance (PMI) and VA Guarantee Fee Points A percentage of the loan amount, paid at closing, to reduce the interest rate on the loan. One point equals 1% of the loan amount. Settlement The meeting between a home buyer, seller and lender where the property and funds legally change hands. Also referred to as closing. Title Insurance Protects your home against loss arising from problems connected to the title to your property.

5 document checklist Here s a list of documents we ll need from you to get your loan processed. Just submit these to your loan officer on or before the date(s) noted. Verification of Income Most recent pay stubs covering 30 days for each borrower Last two year s W-2 forms for each borrower Please inform your loan officer if you are commission-based or have income in addition to your base salary as more documentation may be required. Rental/lease agreements if you own rental properties, plus personal Federal tax forms (with all schedules) for last year If you are self-employed, please provide signed Federal income tax returns for the last two years, including all schedules K-1 s and: DATE NEEDED/NOTES Sole proprietorship: Personal Federal tax returns for the last two years (form 1040 or 1040A) If you own 25% or more of a corporation: Federal corporate tax returns for the last two years (form 1120 or 1120S) If you have a 25% or greater interest in a general partnership: Last two years Federal partnership tax returns (form 1065) If you receive trust income, please provide a copy of the trust agreement, statement of trust assets/ liabilities and signed Federal income tax returns for the last two years, including all schedules If you are retired, please provide copies of award letters for your: retirement pension Social Security and signed Federal income tax returns for the last two years, including all schedules Verification of assets All account statements (for the most recent two months) that you are using for funds to close and for reserve accounts including: checking savings IRA s 401K stock and brokerage accounts Please include all statement pages including those intentionally left blank. Note: If you are receiving a gift, the donor needs to complete a gift letter and funds must be transferred to you before closing. Ask your loan officer for more information. HUD-1 settlement statement (for recent real estate property sale profit) Continued on next page.

6 document checklist, cont d Purchase Transactions Only Copy of the Purchase Contract & Addendums, signed by all parties Realtors phone and address. Once you re approved, we will stay in contact with him or her throughout the loan transaction process Homeowner s insurance company name, phone and address Copy of the mortgage statement, tax bill and insurance declarations page for any properties that you still will own after the closing of this transaction Your landlord s name, phone and address, if applicable DATE NEEDED/NOTES Refinance Transactions Only Copy of the mortgage statement(s) on any properties you own, including the subject property For all properties that you own, provide a copy of the current hazard insurance declarations page that includes agent contact information Copy of the current tax bill on the property to be refinanced and for all other properties that you own Copy of all statements for accounts to be paid off through this refinance Homeowners association name, phone and address and the monthly dues, if applicable Other Documents Once your loan is submitted, it s important not to apply for new loans or open new credit accounts, increase balances on any debts or move funds between accounts. Any of these situations could adversely affect the loan decision at closing.