Mortgage project

The number of tools,
websites and schemes
promising the path to a
new home are as
numerous as the stars

You Decide
Needs:
Bedrooms Wants:
Bathrooms Open Concept
Kitchen Master Suite
Garage Fireplace
Yard Pool
Close to Work Gated Community
Quality of Schools Etc…….
Neighborhood
Etc…..

How much can you afford?

www.google.com

Use Your Financial Prequalification to
Find Your Needs, Wants and Desires!!

www.zillow.com

Many Services allow you to research
listings (This is www.Zillow.com)

Multiple
Listing Service
identifies
each property
with a unique
number

www.zillow.com

It is critical to do price research, not only for the home you like, but
for the homes around it also. The value of neighboring homes
affects your potential investment.

www.zillow.com

So, you found a home, great!!!! Now
it’s time to bring in the professionals!!

You should like your Realtor, so conduct some
interviews! You will potentially be spending many
hours with this person and you need to
communicate with them very well!

This was my last
Realtor (Just an
example)

Most reputable
Realtors will
have a website
with listings and
facts.

http://www.cbbain.com/Pages/AgentDetail.aspx?AID=3253

Money Matters

The most confusing part
of buying a home is also
the most important part.

Loan Options

Courtesy Of: http://www.imortgageguide.com/mortgageresources/home-financing-options.aspx

Most Common Types of Loans

Fixed-rate mortgage: This type of home loan carries the same interest rate
for the entire term (length) of the loan. The interest rate makes up part of your
monthly payment. It's also the only component that has the potential to
change over time. So if you get a mortgage with a guaranteed fixed rate, your
monthly payment is guaranteed to stay the same -- for the entire life of the
loan. more: http://www.homebuyinginstitute.com/mortgagetypes.php#ixzz2DrQiAIa1

Adjustable-rate mortgage: These are also referred to as ARM loans for
short. Unlike the previous option, this type of mortgage has an interest rate
that changes over time. This also means that the size of your monthly
payment will change over time. It might adjust up or down, depending on
market conditions at the time of adjustment. But they usually adjust upward,
resulting in a larger monthly payment.
http://www.homebuyinginstitute.com/mortgagetypes.php#ixzz2DrRFaH8K

Courtesy of: http://www.homebuyinginstitute.com/mortgagetypes.php

Fixed Rate Loan

The Fixed Rate Loan is the most common home loan issued due to the
ability of the home buyer to budget monthly expenses on a long term
basis. This loan is issued as a 30 year or 15 year loan.

Payments on this type of loan stay the same over the length of the loan
regardless if federal interest rates change.

At the beginning of the loan, a large portion of the monthly payment
will pay interest, and a much smaller portion of the payment will apply
to the principal.

Example: Fixed Rate 30 Year loan $200,000 4% Interest Rate
Month 1 Payment $954.83 Interest = $666.67 Principal = $288.16

Total Money Paid: $343,739.43 - $200,000 Loan Amount = Total Interest $143,739.43

Adjustable Rate Loan (ARM)
The Adjustable Rate Loan is one of the least common home loan issued.
This loan is a dangerous tool and is only for the financially disciplined
buyer. The loan interest rate typically starts out lower than a fixed rate loan.
If the payment on a fixed rate loan is $1500.00, then it is possible for the
ARM monthly payment to be $1100.00 initially. This allows some buyers to
purchase a more expensive home initially, however many neglect to
consider the increasing interest over the life of the loan. This loan is issued
as a 30 year or 15 year loan.

Payments on this type of loan change over the length of the loan. The
Interest amount paid will change with interest rate changes.

Example: Fixed Rate 30 Year loan $200,000 3% Initial Interest Rate
Month 180 Payment $1,197.81 Interest = $771.08 Principal = $426.73
Month 360 Payment $1,365.54 Interest = $11.84 Principal = $1353.68

Total Money Paid: $421,230.10 - $200,000 Loan Amount = Total Interest $221,230.10

http://www.bankingmyway.com/real-estate/mortgages/smart-way-use-adjustable-
rate-mortgages

Down Payment
Down Payment Amounts vary significantly with numerous variables:
• Credit Score
• Type of Loan
• Value of the Home
•Etc…

Although the amount necessary for down payment is affected by outside
influences, the most important factor to consider is the effect on your
monthly house payment.

The rule of thumb that has been passed down from generation to
generation is that a down payment for a home should be 20%. So, for a
$200,000 home, the down payment would need to be $40,000.

In the current economy, most families have a very difficult time saving
for a down payment that could amount to a full year salary.

Lenders have recognized the need for alternatives to a large down
payment and have developed programs and products to assist with
buying a home.

Down Payment
Assistance Links

http://www.fha.com/fha_programs.cfm

http://www.makinghomeaffordable.gov/programs/Pages/default.aspx

http://www.cityoftacoma.org/page.aspx?nid=454

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sf
h/np/sfhdap01

http://www.guidetolenders.com/new_home_loan/articles/fha-
mortgage-down-payment-assistance.jsp

http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_pla
nning/affordablehousing/programs/home/addi

http://homebuying.about.com/cs/downpaymentgift/p/gift_money.htm

Paper Work

The home buying process comes with virtual mountains of paperwork.

It is critical to understand that you have a team to help with paperwork
and you do NOT have to accomplish this alone.

Realtor
Lender Your Team
Title Company

It is imperative that during the home buying process every piece of
paperwork must be understood completely.

If any part of the process is not completely crystal clear, a subject
matter expert must be consulted.

Good Faith Estimate

The Good Faith Estimate is
supplied by the Lender to keep
the home buyer informed of all
estimated costs associated with
the home purchase.

It is considered a “Best Practice”,
to sit down in person with a
subject matter expert to have
this document explained in great
detail.

The Good Faith Estimate is an
“Estimate”. The numbers on the
estimate are a best guess by the
lender, based on lending
experience.

http://www.saintlouiscity.com/media/global/Sam
ple_Good_Faith_Estimate.pdf

Good Faith Estimate
The Good Faith Estimate is a summary
of ALL estimated costs associated with
a home purchase. This document
comes in many different formats, but
the information it contains is very close
to the same between different versions.
In addition to the loan summary. You
should see Escrow information, a
summary of Settlement charges,
Origination charges, and Miscellaneous
charges that will include Taxes, Filing
Fees, Title Fees, etc.
This document is not to be taken
lightly. You will need assistance
understanding all of the associated
charges.

http://www.saintlouiscity.com/media/global/Sam
ple_Good_Faith_Estimate.pdf

Good Faith Estimate

The Initial portion of a Good Faith
Estimate will contain the contact
information and address for both
the Originator (lender) and the
Borrower.

On the HUD version of the Good
Faith Estimate, the purpose
statement provides more helpful
information resources.

www.hud.gov/respa

It is very important to note, that
this is a time sensitive document.
The terms of time are stated in
this portion of the document, so
that all parties understand the
deadlines that must be met in
order to prevent a change to the
estimated cost.

http://www.hud.gov/offices/hsg/rmra/res/gfestimate.pdf

Good
Faith
Estimate

The Loan Summary portion of a Good Faith Estimate will contain the terms of the loan:
•Initial Loan Amount Term (Length) of the Loan
•Initial Interest Rate Initial Monthly Mortgage (Payment)
Important Questions and Answers follow the initial summary :
•Can your interest rate rise? Can your loan balance rise?
•Can your monthly payment rise?
•Does your loan have a prepayment penalty?
•Does your loan have a Balloon Payment?

Good Faith Estimate

The Loan Summary portion of a Good Faith Estimate will also contain the terms of Escrow:
What is Escrow in understandable terms?
Escrow is a process that designates a neutral third party (Usually a title company employee, or
escrow company) to collect all terms of the loan, all documentation, and all money to pay for
the terms.
Essentially, the Escrow Officer (neutral third party) makes sure all parties meet the obligations
stated in the contract for the home transaction.
It is possible that the terms of the loan will require a portion of the monthly payment to be
deposited into an “Escrow” account. This will usually be used for property taxes, homeowners
insurance, etc.
This monthly deposit will be transparent to the homeowner. Simply making the monthly
payment to the Loan Servicer is the homeowner’s responsibility.
For More Information see:
http://www.realtor.com/Basics/Buy/ClosePossess/Escrow.asp?source=web


Good Faith Estimate

The Settlement Charges portion of a Good Faith Estimate will contain the terms that the
homebuyer will owe the lender for the loan:
Origination Charge is very self explanatory. The homebuyer pays this amount for the services
and using the lender’s money.

Many people are involved in the loan process. This is a way for the Lender to pay their
employees for working with the homebuyer to get the best servicing possible.


Good Faith Estimate

The second area in the Settlement Charges portion of a Good Faith Estimate will contain the information about
interest rate and points:

Many times a lender will allow the home buyer the opportunity to “purchase” or “sell” points.

To purchase 1 point, typically costs 1% of the mortgage amount. For example the loan amount will be $200,000.
For $2,000.00 you can purchase 1 point. This will lower the interest rate about ¼ percent. The original loan was 4%
interest, purchasing 1 point will drop the interest rate to approximately 3.75%.

Considerations:
If the homebuyer plans to live in the home for the life of the loan, buying down points can be significantly
beneficial in terms of amount paid for the loan. A home buyer planning to live in the home for a short time (5 years
or less) will not see the significant benefits.

The money to buy points is paid at closing, NOT built into the loan. It is part of closing costs.

For More Information: http://www.ehow.com/about_6565090_explanation-mortgage-points.html


Good Faith Estimate
The third area in the Settlement Charges
portion of a Good Faith Estimate will
contain the information about
miscellaneous charges:
•Appraisal Fee
•Credit Report
•Notary
•Title Insurance
•Recording Fees
•Mortgage Insurance
•Home Inspection
•Pest Inspection
•City, County and State Taxes
•Etc.

Although the list above is by no means
comprehensive, the items listed are
typical of settlement costs.
Depending on the form used for the
Good Faith Estimate, this can be the
most confusing part of the process. It is
critical once you reach this point, to
consult your Real Estate Team to have
your questions answered. The
responsibility of paying the loan and
fees falls only on the new homeowner.
Understand this document thoroughly or
continue to ask questions until you do.

Good Faith Estimate
Good Faith Shopping Chart:
Many prospective home buyers suffer
from fear at some point in this
process. Once the “Dream” home is
located, the shopper is many times
over cautious and becomes
dependent on the Lender to “help”
them get a home.
It is important to remember that a
Lender wants your business.
The home buyer is the consumer.
Shop around for lenders, even if your
credit is not great, shop around.
In most cases, the home loan will be
sold from company to company
many times over the life of the loan,
so the original lender that the home
owner built a relationship with and
The ultimate responsibility for
depended on, will no longer be the paying for the new home falls
owner of the loan. directly and solely on the buyer
alone.


Interesting Facts

Every three months, 250,000 new families enter into foreclosure.
– Mortgage Bankers Association

Six in 10 homeowners wish they understood the terms and details of their mortgage
better.
– Freddie Mac/Roper poll of 2,031 U.S. homeowners, conducted 2005.

If home foreclosure were likely for you, what best describes how you would feel?
38% Scared
35% Depressed
9% Angry
8% Embarrassed
9% None of these
– Harris Interactive poll of 1,334 U.S. homeowners, conducted October 5-7, 2005.

Low- and moderate-income borrowers who enter a repayment plan are 68% less
likely to lose their homes.
– Dona Dezube, “Heroic Homeownership,” Mortgage Banking, (June 2006) p. 82.

http://www.fdic.gov/about/comein/files/foreclosure_statistics.pdf

Summary
•The home buying process is a long and difficult process with many questions and stressful
situations along the way.

•The home buyer has a team of dedicated professionals standing ready to assist with the
process. If the home buyer doesn’t feel the team is helpful, the team must be changed. Do not
be held hostage to poor customer service by fear of losing the “perfect” house. The real estate
team only exists because of consumer’s dollars.

•Use the tools available to make the best possible decision. Home Search tools, Mortgage
Calculators and Research centers are abundant online. Be well informed before, during and
after this process.

•The choices made in the home buying process are not short term choices. It is critical to take a
long hard look in the honesty mirror before embarking on this path. Know your needs, desires
and limits, and above all do not let anyone convince you to do something you will regret later.

•Emotional Choices in this process cost more than you make. Consistently consult with your
family, friends and colleagues to keep the dream grounded.

•Communicate with the Lender Before, During and After the Home Purchase!!!!

References
www.Google.com (2012, December 1). “How much of a home loan can I afford?”. Google search results.

www.zillow.com (2012, December 1). “Homes in 98513”. Zillow search results.

Kimberlee Calabazza. (2012, December 1). “Coldwell Banker Bain Agent Listings”. Retrieved from
http://www.cbbain.com/Pages/AgentDetail.aspx?AID=3253 .

Know Your Mortgage Options. (2012). [Graphic Illustration Mortgage Types]. Retrieved from
http://www.imortgageguide.com/mortgageresources/home-financing-options.aspx .

Cornett, Brian. (2011). “Home Loans 101 – The Different Mortgage Types Explained”. Retrieved from
http://www.homebuyinginstitute.com/mortgagetypes.php .

Staff, www.mybankingway.com. (n.d.). “The Smart Way to Use Adjustable Rate Mortgages”. Retrieved from
http://www.bankingmyway.com/real-estate/mortgages/smart-way-use-adjustable-rate-mortgages .

www.saintlouiscity.com/media/global. (n.d.). [Graphic Illustration Good Faith Estimate of Settlement
Costs]. Retrieved from http://www.saintlouiscity.com/media/global/Sample_Good_Faith_Estimate.pdf .

http://www.hud.gov/offices/hsg/rmra/res/gfestimate.pdf. (n.d.). [Graphic Illustration Good Faith
Estimate (GFE). Retrieved from http://www.hud.gov/offices/hsg/rmra/res/gfestimate.pdf.

Kennan, Mark. (n.d.). “Explanation of Mortgage Points”. Retrieved from
http://www.ehow.com/about_6565090_explanation-mortgage-points.html .

www.FDIC.com. (n.d.). “Foreclosure Statistics”. Retrieved from
http://www.fdic.gov/about/comein/files/foreclosure_statistics.pdf .

References Given , Not Cited In Text

http://www.fha.com/fha_programs.cfm

http://www.makinghomeaffordable.gov/programs/Pages/default.aspx

http://www.cityoftacoma.org/page.aspx?nid=454

http://www.guidetolenders.com/new_home_loan/articles/fha-
mortgage-down-payment-assistance.jsp

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/s
fh/np/sfhdap01

http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_pla
nning/affordablehousing/programs/home/addi

http://homebuying.about.com/cs/downpaymentgift/p/gift_money.htm

http://www.realtor.com/Basics/Buy/ClosePossess/Escrow.asp?source=
web

www.hud.gov/respa

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