Home Finance Seminar Presented by Commonwealth Credit Union Mortgage Department
Times have changed
Then Any employee could provide mortgage loan information 100% financing was an option The disclosure process was simple The government did not regulate the industry like it does currently
Now Mortgage questions can only be answered by registered employees 100% financing is no longer offered Strict disclosure rules Numerous government guidelines that change often
SAFE Act What is it? How does it change the Mortgage industry? What is a Mortgage Loan Originator (MLO) Nationwide Mortgage Licensing System (NMLS) What do these changes mean to me?
How do I get there from here?
Am I prepared for unexpected repairs? Can I really afford a house? How much more will I pay in utility costs? What about upkeep expenses?
Can I Really Afford a House? Total Gross Monthly Income x.28 will give you a maximum mortgage payment that you can afford. Total Gross Monthly Income x.36 will give you the maximum total monthly payments you can afford including all debts.
Maximum Mortgage Payment Example $1,500 Borrower monthly gross income $1,800 Co-Borrower monthly gross income $3,300 Total monthly gross income $3,300 x.28 = $924 $924 is the maximum mortgage payment affordable (including taxes, insurance and PMI premium if required)
Maximum Total Monthly Payments Example $3,300 mo. Income X.36 $1,188 Maximum total monthly payments should not exceed $1,188 (including your new house payment)
Other Expenses Unexpected Repairs Higher utility costs Upkeep Taxes & Insurance Premiums Down payment & closing costs You must have sufficient savings & income to be prepared for additional expenses that come with home ownership.
What about Closing Costs? Where will the down payment come from? What is an Escrow Account? What is PMI? How much can I afford
Escrow Accounts An escrow account will be established for your new loan. Escrow is required on all loans over 80% LTV (loan to value). A portion of the payment that you make each month will be placed into this account. When your annual insurance premium is due, Commonwealth Credit Union will disburse these funds to your insurance company. Annually when your city/county taxes are due, these will also be paid from this account.
Closing Costs There are certain fees and costs associated with mortgage loans. These may be paid by the buyer or the seller. These can include: Flood Determination Credit Report/Electronic Underwriting Appraisal Fee & Title Examination / Title Insurance Tax Service Fee Attorney Closing Fees & Recording Fees
Prepaid Items Prepaid interest Escrows for taxes & insurance Fees based on credit score and Loan to Value
Down Payment Can come from checking / savings account Can be a gift from a family member Can come from a qualified 401K Plan If you finance more than 80% of the purchase price, PMI (Private Mortgage Insurance) is required. *Closing costs/down payment must be on deposit for 60 days prior to closing & cannot be borrowed.
What Is PMI Private Mortgage Insurance is a type of financial guarantee that helps protect your credit union from the cost of foreclosure should you default on your loan.
What Kind of House Should I You should look for: Look For? A home in average to excellent condition on 20 acres of land or less. A traditional home may be a single family detached house, condominium, townhouse, or manufactured home (doublewide on own land).
What Should I Stay Away From? Some homes are more difficult for appraisers to find an accurate value because they are considered nontraditional. These would include burm homes (underground), log homes, etc. Doublewide mobile or modular homes must be on a permanent foundation & require 10% down payment. Commonwealth Credit Union only finances existing doublewide residences. Condominiums also require 5% down.
I ve Found My Dream Home What Next?
You are ready to begin. You will need to provide your mortgage loan originator Completed Mortgage Application Three forms in application packet $20 for credit report Property address Loan amount Loan type
Good Faith Estimate (GFE) Will be mailed within 3 business days of acceptance of a complete application or if applying online, the GFE will be delivered electronically at time of application The GFE details any closing costs that could be associated with the loan Call and discuss the GFE with your MLO, as some items are optional
The next step will be to provide 1 most current consecutive paycheck stub Last 2 years W-2 s Name / address of Landlord if renting If self-employed or have rental income you will need the last 2 years tax returns Copy of divorce decree, property settlement & child support order (if applicable) $480 application fee Copy of sales contract (if applicable)
Appraisal and Title Exam An appraisal will be completed by a licensed appraiser that will visit the home you are buying or refinancing and determine the market value using other homes in that area that have sold in the past 6-12 months.
What is a Title Examination We order the Title Examination from an attorney that researches the legal ownership on the property you are purchasing. The attorney will check for existing liens, or judgments against the property other than those of which we are aware (i.e. the current mortgage that will be satisfied with this loan transaction).
What is Title Insurance? Insurance against loss resulting from defects of title to a specifically described parcel of real estate property. Defects may run to the fee (chain of title) or to encumbrances.
Do I need Homeowners Insurance? Homeowners insurance will be required in an amount at least equal to the total loan amount(s) on the property.
Now What? Once the appraisal and title examination are completed, an underwriter will review the entire file for final approval.
Closing The Loan Your Mortgage Loan Originator will call and confirm the closing date and discuss payment options as well as closing requirements The closing will take place in an attorney s office
Welcome Home!
All Policies and Procedures are subject to change without notice.
Questions You Should Ask It is important to look at all of your options when choosing a mortgage lender. However, be sure you are comparing apples to apples. There are some key questions you should ask any lender:
Are there Late Fees associated with this loan, and if so, what are the terms?
Do the quoted closing costs contain all cash to close including escrow for taxes & insurance as well as prepaid items?
Does this loan have a prepayment penalty? If so, what are the conditions?
Can I make principal only payments?
Are there rate caps on your adjustable rate products? If so, what are your caps?
Reasons Loans May be Denied Insufficient job time Insufficient cash to close Excessive obligations Insufficient collateral Poor credit history, unpaid collections/judgments Application denied by PMI company Insufficient reserves (PMI companies require 2 months PITI (Principal & Interest, Taxes & Insurance) in reserve (savings) in some instances. Discharge of bankruptcy less than 4 years / credit not re-established
How Can I Prepare Myself? Pay all debts on time Do not accumulate a large amount of debt Establish and grow your savings Obtain your free credit report each year and be aware of what is on your report Establish a budget and know what you can afford
Any Questions?