Home Finance Seminar - Commonwealth Credit Union

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 PMI?
What is an
Escrow
Account?
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
Look For?
You should 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?