Your Home Buying Guide A Complete Introduction to Home Financing
Table of Contents About RPM... 1 Welcome to Your New Loan...2 The Home Buying Process: Brief Outline...3 Who You ll Be Working With... 4 The Pre-Approval Process... 6 Finding the Right Loan for You...7 The Home Buying Process: From Contract to Close... 8 Seven Tips for a Smooth Closing...12 Borrower s Checklist...13 Definition of Common Financing Terms... 14 RPM Mortgage, Inc. 3236 Stone Valley Road West, Alamo, CA 94507 Ph: 925.295.9300 NMLS #9472 AZ Mortgage Banker License #BK-0924551. CA Licensed by the Department of Business Oversight under the Residential Mortgage Lending Act. CO Mortgage Company Registration, Regulated by the Division of Real Estate. ND Money Broker License #MB102711. NV Mortgage Broker License #1232. OR Mortgage Lending License #ML-4876. WA Consumer Loan Company License #CL-9472. Equal Housing Opportunity. 2479
About RPM Trust. Knowledge. Community. Since 1986, RPM Mortgage, Inc. has brought these principles to our colleagues and customers through a tradition of Can Do, Will Do service, making us the independently owned and operated residential mortgage lender of choice throughout the more than 50 markets we serve. Today, we remain grounded in our communities and are guided by the family-owned values on which we were founded. Our established position and hard-won reputation of integrity and ingenuity have made us the real estate finance partner of choice. RPM provides the resources that make each transaction as empowering and effortless as it can be. Through a range of customer-focused products and services, we serve our customers faster and better than the competition generating results that turn aspirations into reality. 1
Welcome to your New Loan Congratulations and welcome to the home buying process! You ve just taken a key step toward purchasing your dream home selecting the lender who is right for you. Buying a home is an important financial investment and one that requires the support and knowledge of true professionals who are on your side. Monica DiPerna Senior Loan Advisor RPM MORTGAGE, INC 1385 Shattuck Avenue Suite B, Berkeley, CA 94709 415.710.0354 phone 844.864.3269 fax NMLS #116494 www.rpm-mtg.com/mdiperna mdiperna@rpm-mtg.com I m here to make it easy for you. It s my responsibility to keep you informed throughout the loan process and to help ensure you re comfortable at each step. My philosophy is to provide an informative and educational approach to the home buying process and to leave you feeling great about our time and partnership. The following information is designed to guide you through the home buying process, let you know what to expect at each step and preemptively answer any questions you might have along the way. I hope you find it helpful and refer to it often over the next several weeks. I look forward to working with you and appreciate the opportunity to help make your dream of homeownership come true! 2
The Home Buying Process Brief Outline 1. Deciding to Buy Start by researching your options and making sure your finances and credit are in order. It is best to consult with a real estate agent and mortgage advisor before beginning your home search. 2. Discussing Your Options After you ve decided to work with me, I will meet with you to collect your documents and we will discuss your financial questions and goals to see what loan program is best for you. 3. Getting Pre-Approved After reviewing and analyzing your documents, I will issue your formal pre-approval letter so you can start looking at homes. 4. Starting Your Home Search With your pre-approval letter in hand, you begin touring open houses with your real estate agent and making offers on homes you d like to purchase. 5. Finding a Property Once the seller accepts your offer, your real estate agent and I will review the terms of your contract, including your contingency and closing date deadlines, and instruct you how to deposit your earnest money check to the title and escrow company. 6. Submitting Prior to submitting your loan, I will review your file for completeness, discuss your interest rate options with you, order your home appraisal and send you initial disclosure forms to sign. 7. Receiving a Loan Approval I will contact you and collect any additional documents requested prior to closing and your real estate agent will consult with you about your contingency removal. 8. Signing Loan Documents The title and escrow company will setup your appointment and you will sign your final loan documents. 9. Funding The signed loan documents will be sent promptly to one of our funders who will clear your loan for funding. 10. Becoming a Homeowner After funding, the title company will record the new lien and your loan will close. Congrats! You ve completed the journey to buying your dream home. 3
Who You ll Be Working With Loan Advisor Real Estate Agent A Loan Advisor is a knowledgeable and experienced mortgage professional who assists you with your financial needs. Their mission is to carefully guide you through the entire home loan process, so you feel confident as you make choices about the many options available. As your Loan Advisor, I will serve as your primary point of contact for your financing questions and will keep you informed throughout all stages of your loan. I will meet with you and collect a list of documents necessary for a formal underwriting analysis and explain the different loan options available that best suit your financial goals. After reviewing and analyzing your income, assets and credit history, I will pre-approve you for a mortgage loan. With your pre-approval, you will be able to make offers on homes you want to purchase. Once your offer is accepted, I ll walk with you through the process in detail from contract to closing to ensure you meet your deadlines on time and stress-free. Your real estate agent knows the current housing market like no other. He/she will guide you in your home search, take you to view potential properties, negotiate issues throughout the process and eventually help you make an offer on your dream home. When making offers, your real estate agent will write up the necessary documents and terms including potential close of escrow date, loan contingency periods and requested closing cost credits or inspections. You can rely on their expertise in the industry to help make the process run smoothly. After your offer is accepted, your real estate agent and the seller s listing agent will work together to finalize the agreed-upon terms of your contract. Once all the paperwork is signed and you have officially closed on your purchase, it will be time to move into your new home. 4
Who You ll Be Working With Appraiser Escrow & Title Officers The lender will require an appraisal or opinion of the value for the home you are purchasing. A certified Appraiser is someone who will complete an appraisal report and submit it to the lender as part of their underwriting analysis for your loan. The Appraiser will discuss with your real estate agent and set an appointment to inspect the property. After viewing the property, they will use their expertise and experience to compile together the appraisal report. The appraisal will contain an analysis of comparable sales, market trends and an explanation of formulas used to come up with a fair and unbiased opinion for the value of the home based on its square footage, bed/bath count and location. Title and Escrow Officers are sometimes thought of as one and the same, but their roles differ slightly. The Title Officer investigates any issues related to the title of the property you are purchasing. The documents the Title Officer provides include information about existing liens on the property, current property tax information and property restrictions, if any. They will order a preliminary title report and issue two title insurance policies one for you as the homeowner and one for the lender. These title policies will protect you and the lender against any title issues that arise after closing. The Escrow Officer will handle all funds from the lender, you and the seller, and disburse them to the appropriate parties at closing. They will prepare your final loan documents for you to sign and make sure they are accurate and executed properly. In addition, once your loan closes, the Escrow Officer ensures all documents are legally recorded and list you as the new homeowner. 5
The Pre-Approval Process After you ve made the decision to buy, we will meet and review your financial documents and questions to get the pre-approval process started. We will discuss what type of loan option best suits your needs, what your estimated mortgage payment will be and your maximum qualification amount for a home loan. Getting pre-approved is an important part of the mortgage application process. It allows you to place offers on homes and helps you understand your qualification limits for what you can afford. There are several documents needed to start the process. I will provide a list of all documents that you will gather and then I ll analyze your debt-to-income ratio, credit history and financial assets to determine your maximum pre-approval amount. Our pre-approvals serve as a complete pre-underwrite of your loan. You can feel confident and satisfied when you make offers with your pre-approval letter in hand, assured that you are making a wise decision to work with me and RPM. This is not a guarantee to lend. Pre-approval is given based on comprehensive review of your loan application, credit report and other documentation, and is subject to a satisfactory appraisal and acceptable preliminary title report. Information provided in receiving a pre-approval needs to be correct and accurate as of the date of loan closing and additional information and documentation reasonably requested must be provided in a timely fashion. Maximum loan amounts and other restrictions apply. 6
Finding the Right Loan for You Knowing what type of loan is right for you is an important part of getting pre-approved and purchasing a home. As we work toward getting your pre-approval finalized, we will discuss your mortgage in more detail and I will review your financial documents to find the best loan that not only matches your needs but meets your budget. While there are many different loan programs available, here is an overview of the most common loan types for first time buyers. Ask me about jumbo, VA or USDA Loans. Conventional These are standard loans that are not backed or insured by a government entity. They follow the basic qualification guidelines set by Fannie Mae and Freddie Mac. These loans are typically fixed rate mortgages. Down payments can be as low as 3% on loan amounts up to $417,000 but a minimum 5% down payment is required for loan amounts that exceed $417,000. Gifts are allowed depending on your down payment size. If down payment is less than 20%, mortgage insurance is required to insure the lender in case of default. There are various ways you can pay for mortgage insurance with your mortgage payment, as a single lump sum payment, or by financing it into your loan. If your loan will require mortgage insurance, we will go over this in more detail. FHA These are government-backed loans that are fixed rate mortgages. Down payments can be as low as 3.5% on loan amounts up to $625,500*. Your entire down payment can be gifted. This type of loan offers flexible credit requirements for those with FICO scores starting at 620. FHA loans are often easier to qualify for than standard conventional loans due to their affordability. Interest rates tend to be a little lower for FHA loans. *Loan limits vary by county. Ask me about the county limits in your area. 7
The Home Buying Process From Contract to Close Making an Offer Getting into Contract Submitting Your Appraisal Underwriting Signing Loan Documents Funding Receiving Your Keys! Making an Offer After we sit down to discuss your financial goals, I will analyze your documents and pre-approve you to purchase a home. I will then issue you a formal preapproval letter to submit with your offer(s) to show sellers and listing agents that you are a serious buyer. When it comes to deciding how much to offer for a home, your real estate agent will be able to advise you on what it may sell for by analyzing comparable market trends and pending sales within the area. That knowledge will allow you to decide on a fair offer and, when paired with your pre-approval letter, will help make your offer as competitive as possible. Getting into Contract After a seller selects your offer, your real estate agent will notify and congratulate you. You are now officially in contract! The clock starts ticking at this point and the loan process has begun. Any contingencies written in your contract will need to be met within the timeframe specified in your offer. A contingency is a condition or clause for certain items such as inspections, an appraisal and financing approval. While your contingencies are in place, your initial earnest money deposit is protected. Once released, you are saying you are satisfied with those particular conditions. It is important to have a Loan Advisor you trust so you are able to meet these deadlines on time. 8
The Home Buying Process From Contract to Close Making an Offer Getting into Contract Submitting Your Appraisal Underwriting Signing Loan Documents Funding Receiving Your Keys! Submitting After you receive your ratified contract, you or your real estate agent will send a copy to me so I can submit your complete loan file to an Underwriter for review. After your real estate agent opens escrow, I will obtain any necessary fees or terms from the Escrow Officer. Your Escrow Officer will instruct you where to submit an initial earnest money deposit to show your serious commitment as a buyer. This deposit is a percentage set within your purchase contract and will serve as part of your down payment contribution. We will then discuss locking in your interest rate and I will send over disclosure forms for you to sign. Your disclosures will contain information regarding lender laws, terms of your loan, and details about closing costs and prepaid items. After you sign the disclosures and documents are received, I will work with a Loan Processor who will prepare your file for submission for an Underwriter s review. Your Appraisal I will order your appraisal after you get into contract. RPM has their own appraisal affiliate, Appraisal Services, Inc. (ASI), which helps for a smooth and timely turn around. Since I have a direct relationship with ASI, I am able to monitor and expedite your appraisal if needed. The appraisal is the only cost you will have to pay for upfront. After the Appraiser inspects your home, he/she will work on putting together the final report as well as calculating the appraised value. The final report is usually sent to you and the lender within a few days after the inspection takes place. We can review your appraisal together and go over any questions you have within the report. The appraisal will be sent to the Underwriter to review along with your complete loan file. 9
The Home Buying Process From Contract to Close Making an Offer Getting into Contract Submitting Your Appraisal Underwriting Signing Loan Documents Funding Receiving Your Keys! Underwriting The Underwriter will analyze your financial documents and overall strength and risk associated with your loan file. In their decision, they will review your credit history, assets, income and debt-to-income ratios. Within their analysis, the Underwriter will make sure your total debt ratio falls within lender and investor guidelines. After thorough review of your loan file, the Underwriter will approve or deny your application for a loan. Once approved, I will send over a list of conditions necessary to satisfy your loan approval. There will also be some internal conditions such as verifying your tax filing records with the IRS (known as a 4506-T form), verification of employment information and receipt of your completed appraisal. Be sure to send requested conditions back to me in a timely manner since these items will need to be sent back to the Underwriter for a final review and sign off of your loan. Signing Loan Documents After the Underwriter receives your final loan conditions and completed appraisal, they will clear your file for closing. I will confirm the final terms of the loan and order your loan documents which will be ready for you to sign. Your signing appointment will be coordinated with either the Escrow Officer or a licensed notary. You will need to bring any remaining funds for your down payment contribution and closing costs to the signing. I will let you know the final amount due and how it should be paid (typically via wire or a cashier s check). After you sign, you will have the option to complete a final walk through of the home with your real estate agent. After the walk through, real estate agent will advise on releasing any remaining contingencies. 10
The Home Buying Process From Contract to Close Making an Offer Getting into Contract Submitting Your Appraisal Underwriting Signing Loan Documents Funding Receiving Your Keys! Funding After you sign, your Escrow Officer will package your documents together. This is referred to as your funding package and is immediately sent back to your lender and assigned to a Funder for review. The Funder will sign off on any remaining conditions for the loan. Once the loan is ready to fund, the Funder will wire the final loan figures to the Escrow Officer who will then disburse the funds to the appropriate parties. Receiving Your Keys Typically your loan documents are officially filed and recorded with the county a day after funding. I will let you know when your loan is on record. Once that happens, you are the official owner of your new home and you can make arrangements with your real estate agent to pick up your keys. Congratulations! 11
Seven Tips for a Smooth Closing We value communication, responsiveness and accuracy to ensure your closing is smooth and without surprises. To make our partnership successful, we have a few tips and reminders to keep your loan on schedule. 1 Please send documentation in a timely fashion. We anticipate the initial requested 5 Inform us of travel plans. You will need to be present to sign your final paperwork and to send documents will be sent within 48 hours and requested documentation. It is helpful for us to additional requests may take 24-48 hours know as we get started about days you will be for your response. If you need extra time, unavailable. Depending on your travel, we can communicating this is important. make arrangements ahead of time. 2 The timeline for a smooth closing requires prompt action. The underwriting process and 6 Be mindful of large deposits. All large non-payroll deposits must be documented. time to prepare your documents takes time. Depending on the type, this process could be Being proactive in the first week will help this lengthy and require re-underwriting. If possible, process proceed effectively. please put off large deposits until after your transaction is complete. 3 Remember the down payment source must match what you disclosed. If the source account of your down payment changes, this will 7 Steer clear of credit increases or inquiries. We do a soft credit pull before funding to see require your loan to go back to underwriting. if there are new inquiries or an increase in credit balances. We advise avoiding significant 4 State your gift funds up front. If you will be receiving any gift funds, letting us know early increases to credit balances or opening new debt during your purchase. in the process allows us time to prepare proper documentation. 12
Borrower s Checklist Required Documents Please submit all documents and forms as soon as possible. Any applicable items missing could delay your loan approval process. For any questions about why these documents are necessary for a loan, please don t hesitate to ask. Thank you in advance for your timely assistance. Last Two Years W-2s Last Two Years Federal Tax Returns filed with IRS (all schedules, please) Most Recent Thirty Days Current Pay Stubs Two Months Most Current Bank Statements for All Accounts (all pages) Investment Accounts/401K and Retirement Statements (quarterly or past 2 months) Homeowners Insurance Agent Name and Number or Insurance Quote Proof of Taxes/Insurance/HOA and Current Mortgage Statement for All Properties Owned If Applicable Copy of Permanent Resident Alien Card(s)/Visa Divorce Decree Child Support Order Bankruptcy Papers and Discharge Notice Rental Agreements for All Properties Owned Copy of Driver s License Schedule K-1s for Last Two Years Prior Year and Current YTD Profit and Loss Statement Last Two Years of Corporate Returns Last Two Years of Partnership Returns 13
Definitions of Common Financing Terms Closing Costs: Standard costs set by your loan amount, purchase price and any points and fees negotiated. DTI: Debt-to-income ratio. This is expressed into two parts: front end DTI and back end DTI. Front end DTI is a percentage of your proposed PITI divided by your gross monthly income. Back end DTI is your proposed PITI and any liabilities and debts divided by your gross monthly income. Earnest Money Deposit: A percentage of your down payment given to the title company after you are in contract to purchase a home. This assures the seller you are committed to the purchase and serves as leverage towards your strength as a buyer. month. The lender will pay for your taxes and insurance on your behalf once they are due. Depending on the loan program and down payment, an Escrow/Impound account may be required. LTV: Loan to Value Ratio. This is the ratio of your loan amount divided by the appraised value of your home. This expresses how much you are contributing into the purchase. For example, if you purchase a home for $500,000 and put 20% down, your loan amount is $400,000 and your LTV is 80%. PITI: This is the sum of the total monthly mortgage payment including principal, interest, taxes and insurance. This is included in the calculation for qualifying for your loan. Equity: The difference between the value of your home and the amount of your mortgage. Escrow/Impound Account: A separate account set up by the lender for your property taxes and homeowner s insurance. In addition to your monthly principal and interest payment, if you setup an escrow/ impound account, then the lender will collect a portion equal to 1/12th of your taxes and insurance each Points: A cost that can be paid to a lender to lower your interest rate. A point is equal to 1 percent of the loan amount. Ex: 1 point on a $100,000 loan is $1,000. Preliminary Title Report: A report prepared by the Title Plant. This report includes details about the current property ownership, liens and property record information. 14
We value your relationship as our client for life and encourage you to reach out to us with any financial questions or concerns in the future. www.rpm-mtg.com Thank you for trusting in RPM Mortgage, Inc. for your mortgage financing needs.