First Time Home Buyer Guide

First TimeHomeBuyer Guide

YourJourneyHomeWhile thinking about buying your firsthome is exciting, running through all thequestions about how to make it happencan feel overwhelming. That’s why wecreated this quick homebuying guide toanswer many of your questions andgive you insight into how you can buywith confidence.Over the next few pages, we’re going to cover: Down Payments Mortgage Rates Credit Scores The Home Loan Process Affordable Home Loan Solutions Dynamics between Renting and OwningIf you have more questions at the endor need additional information, we’rehere to help.2First Time Home Buyer Guide

What Numbers Matter?A lot of variables go into buying your first home. From interest rates to yourcredit score to your debt, all are important to the approval process and playa role in determining how much home you can afford.Credit ScoreWhen it comes to yourcredit, the higher the better.Ultimately, your credit scorewill help determine whetheror not you qualify for a homeloan and what your interestrate will be. If you need tobuild up your credit, start now.Always remember that youcan check your score once amonth for free on sites likecredit.com or creditkarma.com,or talk to your personalfinancial institution.MortgageInterest RateDebt-to-IncomeRatio (DTI)Mortgage rates are animportant piece of the homebuying equation. While youmay see rates advertisedat various places online,the truth is, your rate isdetermined by your financialsituation, which accounts forincome and credit history.Plus, mortgage interest ratesfluctuate based on marketconditions, so timing mattersas well.DTI is a major factor inqualifying for a home loan.It’s calculated by adding upall your monthly debtpayments and dividing themby your gross monthlyincome. Typically, apercentage below 43% isconsidered acceptable whenqualifying for a mortgage. 2,000 Monthly Rent 6,000 Monthly Income 33% DTIAverage Credit Scores 2018121%16%EXCEPTIONAL (800-850)VERY GOOD (740-799)17 %25%FAIR (580-669)21%3First Time Home Buyer GuideGOOD (670-739)POOR (300-579)

What’s theDeal with MyDown Payment?You may have heard about the 20%rule, but it’s just not true. Sure, youcan put 20% down on your home, butby no means is that your only optionto homeownership. At PrimeLending,our first time home buyer programsrange from zero down to however muchyou want to put down. Here are a fewexamples of options available to youwith details on each:Program4BenefitDown Payment RequiredFHALow minimum credit score requirement.Low minimum down payment requirement.Insured by the Federal HousingAdministration.As low as 3.5%VAGuaranteed by the U.S. Department ofVeterans Affairs. Borrowers can finance100% of their home.No down payment or mortgagepremiums requiredUSDAHome buyers’ assistance for those in ruraland suburban areas who may have lowerincomes.No down payment and closing costs arerolled into the loan for qualified buyersHomeReady byFannie MaeBorrowers can use additional income sourcesfrom family members who live in the home,but aren’t listed on the loan, in order toqualify. Can also use funds from gifts.As low as 3%Freddie Mac HomePossible Down payments can be funded via giftsor grants.As low as 3%First Time Home Buyer Guide

How Does theMortgageProcess Work?Buying a home is a big decision, andthere are a lot of moving parts for bothhome buyers and lenders. What we’vedone at PrimeLending is simplify thatprocess to deliver a transparent andsimple experience that gets you home in4 easy steps.12345Application ProcessOur online application process, named a Best-in-Class LenderAward for Application Process by MortgageSAT 2018,captures all the info we need to get you pre-qualified2, make aloan recommendation and give you an estimate.Confirm Property InformationThe property will need to be appraised and there will needto be a legal search on the property title. We will coordinatethis for you and let you know when each step is complete.Processing and UnderwritingOur team will review your application and any otherdocuments while working through any last-minutequestions before making a decision about your loan.Sign and CloseWe’ll double-check that everything is in place for a smooth,on-time closing.3 Once you get the thumbs up, it’s time tosign papers, pay closing costs and own your first home.First Time Home Buyer GuideSet a price rangeCompare loan optionsDecide on down payment amountGet pre-qualifiedGet your Loan EstimateIntent to proceedProperty appraisalProperty inspectionTitle searchLoan approvalLock a rateOrder title insuranceSchedule closingReceive Closing DisclosureClosing costs and cash needed toclose (if necessary)Closing instructionSign final documents

What are MyHome LoanOptions?Every home buyer is different. That’s why weoffer numerous home loan programs that fitvarious budgets and situations.LoanNumbersOverviewConventionalPay as little as3% to 5% for adown payment.Straightforward optionwith fewer docs.Requires great credit.FHAPay as little as3.5% down with a580 credit scoreor higher, or 10%down if credit scoreis lower than 580.Can purchase with lessupfront cash. Must paymortgage premium onloan amount.Fixed RateYour rate will neverchange. Downpayment optionsas low as 3%.With your rate locked,you can save moneyover loan term. If ratesfall, you could refinance.AdjustableRateARM optionsfrom 3, 5, 7 and10 years. Adjustsannually after term.Save on front endof loan. Rates couldfluctuate and changeyour payment duringadjustable period.Interest OnlyYour rate is lockedfor a fixed period,which you will onlypay interest.Lower monthlypayments at start ofloan. Payments increasewhen starting to payprincipal balance.There are other options, such as VA and apurchase renovation loan, that could fit yoursituation better. VA loans require no downpayment and no lender fees4 for all eligiblemilitary. A renovation loan allows you topurchase a fixer-upper and create the homeyou really want.6First Time Home Buyer Guide

Should I Rent or Own?This is an age-old argument, but whether you choose to rent or buy iscompletely up to you. Each has their benefits and ultimately whatever yourlong-term goals are will determine what’s right for you. Let’s cover the basics.Sample Payment Scenarios5Monthly Rent5 Years10 Years30 Years 1,200 72,000 144,000 432,000HomeSales Price30 Year Conventional, Fixed-Rate Mortgage at 4% Interest Rate/Annual Percentage Rate 4.08%, and 3% Down Payment 200,000Monthly PaymentPayment Over 30 years 926 376,550The average first timehome buyer age 29-35spends less than 200,000on their first home. 67First Time Home Buyer Guide

RentingRenting means you don’t take any riskin owning or maintaining a property.If something breaks or stops working,that’s typically not your responsibilityto fix. Renting also gives you easiermoving flexibility if you need to breaka lease.When it comes to your rent, that moneywill go to your complex or landlordevery month. You also may have otherunpredictable financial obligations youhave to pay, such as application fees,deposit or pet fees. They may alsochoose to raise your rent.OwningOwning a home gives you a level offreedom, space and privacy you may notfind elsewhere. While you're paying amortgage payment every month, you’repaying for something you own whileyour property is building equity andvalue over time. Another major perk isthe stability of your payments.Unlike renting, when you own a home,you are responsible for all maintenanceand upkeep. Homeownership is alsoa long-term commitment, has moreupfront fees like a down paymentand closing costs, and gives you lessflexibility if you need to move quicklyfor one reason or another.The Millennial Generationearns and spends more onrent than any otherprevious generation.7Conclusion:This comparison is really just an overview of renting and buying. Before youmake the decision that is right for you, it’s important to review all advantagesand disadvantages of renting and owning. Working with a home loan expertcan be helpful as you set your short- and long-term financial goals.8First Time Home Buyer Guide

How Do LendersPlay a Role?Your loan officer will be an essential part of your homebuying process, whichis why it’s so important to find the right one. From application to underwritingto closing, your loan officer will be there to guide you every step of the way.While technology significantly streamlines the application process and canhelp you track the progress of your loan, your loan officer will be able toprovide you with all of the resources you need, give personalized consultation,send loan comparisons and pre-approval letters, answer questions, prepare allimportant documents for review and approval, and so much more.9First Time Home Buyer Guide

Common Mortgage TermsAmortization — The gradual reduction of themortgage debt through regularly scheduledpayments over the term of the loan.Escrow — An item of value, money, or documentsdeposited with a third party to be delivered uponthe fulfillment of a condition.Annual percentage rate (APR) — The measure ofthe cost of credit stated as a yearly rate; includessuch items as the stated interest rate, plus certaincharges.Mortgage insurance — Insurance that protectslenders against losses caused by a borrower’sdefault on a mortgage loan.Appraisal — A written estimate or opinion of aproperty’s value prepared by a qualified appraiser.Debt-to-income (DTI) ratio — The connectionbetween a borrower’s total monthly debtpayments and his or her gross monthly income.Discount point (or point) — A fee paid by theborrower at closing to reduce the interest rate.A point equals 1% of the loan amount.Prequalification — A preliminary assessment bya lender of the amount it will lend to a potentialhomebuyer.Principal — The amount of money owed on aloan, excluding interest. Also, the part of themonthly payment that reduces the remainingbalance of a mortgage.FAQsWhat is a prequalification letter and why should I have one?A prequalification letter comes from the lender and states that the lender agrees to provide a mortgageto you, the homebuyer, under certain conditions. Prequalification letters help you set realistic financialgoals while you’re house hunting. Additionally, they can provide you with the same negotiating abilityas a cash buyer and enable you to move quickly once you find the perfect home.What will my monthly payment be?That depends on several factors, but every mortgage payment is part principal, interest, and taxes andinsurance (or PITI).What are closing costs?Closing costs are expenses that fall above the price of the property that are incurred by buyers andsellers in the process of transferring ownership of a property. These costs usually include an originationfee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, creditreport charge and other costs assessed at settlement. Closing costs will vary according to the area ofthe country; your loan officer is able to provide estimates of closing costs for you.How much will my down payment be?Depending on your situation and eligibility, we have several down payment options. Your PrimeLendingloan officer will be able to help you find a loan program that best fits your financial goals and needs.10 First Time Home Buyer Guide

Home Loans Made Simple PrimeLending is a proven powerhousein the mortgage industry, providingprofessional service, personal guidance, clearcommunication and timely results at every stepthrough our simple and stress-free home loanprocess. We’ve been relentlessly perfectingthe mortgage experience for our customers formore than three decades, delivering ideal homeloan solutions for just about every situation.Unlike other lenders, we’re solely focusedon closing loans on-time so you can get tocelebrating your new home faster.11 First Time Home Buyer Guide