WelcomeWelcomeHome Buying 101

Home Buying 101Home Buying 101Presented by NASA Federal Credit

Union

Bert Aguilera Mortgage Consultant

NMLS #551894

(301) 249-1800, x334

What is a mortgage?What is a mortgage?

• A long-term loan in which the member uses the home as collateral to secure financing. It is typically referred to as a mortgage loan, a lien, or a security interest which is held by a financial institution. The lien is paid off and released after making timely payments for the term of the loan, the loan is refinanced to change the terms, or the home is sold. It is also known as a home loan.

Overview of the MarketOverview of the Market

What’s Different Now?

The Mortgage Market Has The Mortgage Market Has Gone Back to BasicsGone Back to Basics

When applying for a mortgage 25 years ago, four things were critical:

Job Stability Cash Credit Income

Today, these are still important!

How Do You Qualify For A How Do You Qualify For A Home Loan in 2014?Home Loan in 2014?

A Healthy Credit Score

Cash to Close

Full Documentation

What To What To AvoidAvoid When Preparing When Preparing

To Get A Home LoanTo Get A Home Loan• Lots of credit card debt

• Major purchases (buying a car or other large items)

• Changing jobs

• Applying for new credit

Documentation RequirementsDocumentation Requirements

• The documentation requested on a mortgage loan is to determine the creditworthiness of the member and if they are able to repay the debt.

• Asset documentation to support funds for down payment, closing costs, and reserves.

• Income documentation such as recent pay stubs covering a one month period and W-2 statements for the last two years are normally required for salaried employees.

Documentation Requirements Documentation Requirements Cont’dCont’d

• For self employed borrowers, additional documentation such as tax returns for the last two years and year to date profit and loss statements are required. For S corporations and businesses that are incorporated, business tax returns for the last two years are also required.

Settlement FeesSettlement Fees

• Cost associated with closing the loan• Normally estimated at 4%-6% on purchase

transactions.• Exact closing costs will depend on fees

charges in your area, how much you are borrowing, how you finance your mortgage (points), and your closing date, i.e., where it falls within the month. Closing costs are in addition to the down payment amount required.

What is a point?What is a point?• A point is a fee the member can choose to pay to

reduce the rate.

• The secondary markets may apply other points for credit score, occupancy, subordinate financing (etc).

• Each point is equal to 1% of the loan amount and is added to the total closing costs.

• Members can elect to pay points or lenders can increase the offered interest rate to reduce the applicable points.

What are other closing costs?What are other closing costs?

• Pre-paids (escrows for property taxes and homeowners insurance)

• State and local transfer and recordation taxes

• Origination Fees

• Appraisal Fees (paid outside closing)

• Credit Report, Flood Certification, Tax Service Fees

• Settlement Fees, such as title search and title insurance, inspection fees, survey, recording fees, and buyer attorney fees

Do I need a down payment?Do I need a down payment?

• Not always. The credit union offers a Zero Down, No MI portfolio special.

• Other mortgages can require a minimum down payment of 3.50%, 5%, 10%, or even 20% of the sales price.

• Some mortgage programs require the money to be your own funds. The only borrowed funds must come from a secured asset such as a 401(k) plan.

• Other programs allow you to use a gift from a relative to cover your down payment.

Basic Mortgage TermsBasic Mortgage Terms• LTV (loan-to-value) - The ratio between the amount of

the mortgage and the total value of the property.

• CLTV (combined-loan-to-value) – This means there is a second mortgage (80/15)(80/10) on the property.

• ARM – adjustable rate mortgage

• EMD – Earnest money deposit

• GFE – Good faith estimate

• MI – Mortgage insurance that is necessary if the LTV is greater than 80%.

• P/I (PITI) – Principal and interest (taxes & insurance)

• DTI – debt-to-income ratio

• HUD-1 – settlement sheet detailing final cost of purchase

Types of MortgagesTypes of Mortgages

• Conforming up to $417,000

• Non-Conforming Jumbo Mortgages above $417,000

• FHA & VA

• 80/15/5 or 80/10/10• Zero Down No MI Special (purchase only)

ARMs VS FixedARMs VS Fixed

•ARMs 3/1, 5/1, 7/1, 10/1

•Fixed Rates 10, 15, 20, 30 Year

NEW PROGRAMSNEW PROGRAMS

• 100% Financing to $650,000- Zero Down Payment required- Purchase Loans- No mortgage insurance (MI) required- Need Good Credit, Income and Savings Pattern- Available on 30 and 15 year Fixed, 3/1, 5/1, 7/1 and 10/1 ARM- 95% Financing to $850,000 with 5% down payment

• This offer is limited to well qualified applicants. Some restrictions may apply. Offer is valid for primary Residence Only.

Record Low Interest RatesRecord Low Interest Rates

Rates haven’t been this low since 1971• 4.00%, 30 Year Fixed – Conforming Rates effective 08/15/2014 * subject to change

daily

• 3.75, 20 Year Fixed

• 3.125%, 15 Year Fixed

What This Means For You…

Advantages of Lower RatesAdvantages of Lower Rates

• Lower Monthly Payments

• Reduced Terms

• May Qualify for More

Monthly Payment Sample for a Monthly Payment Sample for a $400,000 Mortgage Loan$400,000 Mortgage Loan

Term: 30 Year Fixed

Rate P&I Payment Amount4.00% $1,9105.00% $2,1476.00% $2,398

Total monthly payment (PITI) will include property taxes, homeowner’s insurance and possibly mortgage insurance

Things to Consider When Things to Consider When Shopping Shopping For For Your Home?Your Home?• Location and “must have” features

• Your maximum pre-approved loan limit

• Your Realtor

• Home Advantage (www.mycuhomeadvantage.com)

• Your Settlement Company

• CU Title

Home Advantage ProgramHome Advantage Program

• Access program through Link on NASA’s website

• Free program to members

• View current listings through the Multiple Listing Service (MLS)

• Obtain school and neighborhood data

• Find a qualified real estate professional and receive up to 20% of their commission towards your closing costs.

Are You Ready To Buy A Are You Ready To Buy A Home?Home?

• Call NASA Federal’s 1st Mortgage Professionals First. We can help with a personal consultation.

• Get Pre-Approved

• Making an offer on a home with your agent

• What to expect from lender once your offer is accepted and ratified by the sellers (locking rate, disclosures, processing, underwriting)

• Loan Commitment Letter

• Settlement / Closing

RecommendationsRecommendations• Eliminate as much consumer debt as

possible

• Save, Save, SAVE for a down payment & closing costs

• Don’t make any major purchases, change jobs, or get new credit while qualifying for a mortgage

• Thoroughly examine your credit report

• Free annual credit report (www.annualcreditreport.com)

• Use BALANCE for credit consultation

Financing with NASA FCUFinancing with NASA FCU

• One-Stop Shop! – From finding a Realtor to Financing to

Closing!

• Prompt, Courteous, Professional Service

• Lower Fees

• Online Tools

• Personal Consultations

Free Personal ConsultationFree Personal Consultation

• Discover how much you can afford

• Explore different loan options

• Review the home buying process

• If you are not already a member of NASA FCU becoming one is easy!! Ask us how.

Questions?Questions?

Thank You Thank You For Attending!For Attending!

Home Buying 101