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Home Buyers Field Guide

Companion Workbook to Home buyers blueprint

Copyright © 2016 Smart Consumer Solutions Home BuyerS Field Guideii

Table of ConTenTs

introduCtion 1

keeping sCore: understand your Credit in tHe loan proCess 4

documenting your Current and Proposed Spending 7

Calculating your maximum mortgage Amount 12

intervieWing a lender: WHat to knoW, WHat to ask 13

lender Comparison Worksheet 16

Finding tHe rigHt loan For you 28

loan evaluation Worksheet 31

pre-approval and WHat it means For you 33

Completing the uniform residential loan Application 35

loan Processing: items Needed Checklist 44

Gift Letter Form/Certification 45

tHe House Hunt 46

realtor interview Worksheet 49

House Hunting Features Checklist 51

Formal loan appliCation/Commitment 63

you’ve made it: Closing day 65

glossary oF important terms 67

about tHe autHor 97

notes 98

Copyright © 2016 Smart Consumer SolutionsHome BuyerS Field Guide 1

InTroduCTIon

IT IS A FACT . . . many people will fail to get the best deal possible when shopping

for a home loan. This is primarily because they don’t know the proper questions to ask

lenders, real estate professionals, and other individuals they work with throughout

this process. it’s vitally important to do your homework!

This workbook is designed to accompany Home Buyer’s Blueprint. my goal is that it will

be a resource to take with you during visits to various lenders. i’ve included check-

lists and sample forms that you can use to compare lender’s rates, fees and products.

i want you to be assured that you’re comparing apples to apples and getting all of

your important questions answered during this process. I filled this book with only

the most vital details you need to know as it leads you step-by-step to accomplishing

your goal of obtaining your right Fit mortgage®.

The exercises and worksheets in this book are not based on the technical aspects

of each loan product, but on what’s most important to you—the home buyer—and

designed to help save time, money and stress while shopping for and closing on your

right Fit mortgage®. it is my objective to help you become as knowledgeable as pos-

sible before you go house hunting, start shopping for that mysterious mortgage, or

sign on the dotted line.

Home BuyerS FIeld GuIde

Copyright © 2016 Smart Consumer Solutions Home BuyerS Field Guide2

Whether you’re securing a first mortgage, looking to refinance an existing mortgage,

interested in building your dream home or pulling out some equity for home improve-

ments, this workbook will help you:

• Ask the right questions of every potential lender

• Know what supportive documentation you need to give your lender

• Negotiate and lock-in the lowest possible interest rate

• Save on closing costs to ensure confidence the loan supports your long-term

financial health

Obtaining a mortgage can impact all of your financial goals and I want to help ensure

that your new home loan fits comfortably into all areas of your life. I understand that

it’s not just a house; it’s your home and one of the biggest investments that you’ll make

throughout your lifetime.

Next, let’s look at an overview of the loan process . . .

InTroduCTIon


Searches m ark et for h om es

REALTOR

Searches market for

homes

Obtains buyer pre approval


KeepIng sCore: undersTand Your CredIT

In The loan proCess

It can be very confusing and difficult to know what credit score pricing

adjustments will be required on your loan and the lender usually will NoT tell you. That’s

why it’s important to know where you stand BeFore you speak to lenders regarding

your home loan. if your credit score is less than 700, it’s a good idea to get some credit

coaching to analyze your score and borrowing power prior to applying. it’s important to

know what potential ‘red flags’ may become an obstacle, how you can work to correct

them, and how these actions will improve your overall borrowing power.

if you feel like you have no idea where to begin or are overwhelmed with questions

about the loan process, please don’t throw your hands up in frustration. Home owner-

ship is within reach when you know how to navigate your way through this process.

Obtain 3 credit reports & scores, review for errors.

Prepare a budget and review your

monthly expenses.

Determine a comfortable

payment.

6 MONTHS OUT

KeepInG SCore: underSTAnd your CredIT In THe loAn proCeSS


your Home buyer CHeCklist

Calculate your monthly spending on the worksheet in this section.

Calculate your maximum mortgage payment by utilizing the worksheet in this

section.

obtain a copy of your three credit bureau reports and scores.

review each credit report and score for errors.

as a consumer, you are allowed one free credit report each year. to obtain your report go to www.annualcreditreport.com. this credit report will not include your credit scores. to obtain your credit scores, there will be an additional fee charged.

Credit scores range from a low of 300 to a high of 850 points. (a 740 or higher score is target for optimal pricing.) lenders have products and pricing available for credit scores 660 and higher, but there will be considerable pricing add-ons for conventional loans. government loans (FHa, va, and usda) have products available for credit scores as low as 600, but again there will be large price adjustments for the additional risk.

your Credit

identify any problem areas or errors on your credit report and correct them.

Begin the dispute process and keep a paper trail. Consider following the steps

below:

• dispute the error in writing. The consumer must write a letter of dispute

regarding a specific piece of information by a specific CRA referencing the

trade line, account numbers, and what is being disputed. Send the letter over-

night mail, with a return receipt requested, or file it online at the CRA website,

so there is a date indicated when the 30-day investigation timeline begins.

• Provide very specific information. Your name, address, social security number

for each item of dispute, along with a request for deletion or correction, and

copies of the supporting documentation. Keep copies of your letter of dispute

and supporting documentation.

http://www.annualcreditreport.com



• Submit a dispute letter on each specific item to the corresponding creditor.

Information that cannot be verified must be deleted from your credit file.

Equifax (800-685-1111)

Attn: Consumer Services

P.O. Box 740241

Atlanta, GA 30374

Experian (888-397-3742)

Attn: Consumer Assistance

P. O. Box 4500 Allen,

TX 75013

TransUnion (800-916-8800)

Attn: Consumer Assistance

P. O. Box 2000

Chester, PA 19022-2000



Documenting Your current anD ProPoseD sPenDing

Category Current monthly proposed monthly

Gross monthly income $ $

taxes

Federal Taxes $ $

Social Security Taxes $ $

State and local Taxes $ $

Housing expenses

Property Taxes $ $

Home insurance $ $

Gas/electric/other $ $

Water/Garbage $ $

Phone $ $

TV Cable $ $

maintenance $ $




repairs $ $

Food

market $ $

restaurants/Takeout $ $

Household

Clothing/Shoes $ $

dry Cleaning $ $

Haircuts $ $

miscellaneous $ $

Consumer debt

Auto loans $ $

Credit Cards $ $

Student loans $ $




miscellaneous $ $

Fun/entertainment

entertainment $ $

Vacation/Sports $ $

Gifts $ $

Pets/Animals $ $

Health Club/Gym $ $

Charity $ $

Healthcare

doctors/Hospitals $ $

Prescriptions $ $




dental $ $

insurance

Auto $ $

Health $ $

life/disability $ $

miscellaneous $ $

education

Classes $ $

Books $ $

Supplies $ $

kids

day Care $ $

Sports/Toys $ $

Child Support $ $




other $ $

auto/transportation

Gasoline $ $

maintenance/repairs $ $

other Transportation $ $

total expenses $ $

savings emergency Fund

$ $

amount available formortgage payment

$ $

Follow this mathematic formula to calculate:

gross income (minus) total expenses (minus) amount saved (equals)

the amount available for mortgage payment.



calculating Your maximum mortgage amountTo compute your maximum mortgage amount for a loan, you must use the lenders spe-

cific qualifying ratios. But for our example, we will be using the default ratios of 28/36.

Housing eXpense ratio

Total Gross Monthly Income $

Times 28 percent x 0.28

Maximum allowable for PITI plus HOA fees $ (1)(principle, interest, taxes, insurance plus Homeowner Assoc. fees)

total debt ratio

Total Gross Monthly Income $

Times 36 percent x 0.36

Maximum allowable for PITI plus HOA fees andother monthly debts $

Minus total monthly consumer debt payments $ (— )

Maximum allowable for PITI plus HOA fees $ (2)

Choose the lower of (1) or (2) $

This figure represents the maximum allowable for PITI given your current gross monthly income and debts.


InTervIewIng a lender: whaT To Know, whaT To asK

one of the biggest decisions that you will make in the Home Buying Process

will be choosing and working with a lender. Not only picking a reliable financial insti-

tution, but more importantly a knowledgeable, experienced loan officer within that

financial institution…and that usually is where it gets tricky!

Consumers have always been led to believe that the lender controls the mortgage

application process, but that’s just not true! you have options . . . lots of options! did

you know…

• most people fail to get the best deal possible when shopping for a home loan.

• 80% of your resulting mortgage experience is based on your loan officer’s own

personal knowledge and organizational skills.

• There are 9 critical questions to ask any loan officer in the interview process! A

mistake here can get your loan “denied” at the last minute.

Choosing the wrong lender or loan officer can potentially be the biggest headache in

the mortgage process. This one wrong choice can leave behind detrimental ramifica-

tions that can last the entire life of your loan.

Bust through the bull and lingo of the real estate industry that is costing you big! Take

the first step and empower yourself to achieve financial peace and security when

buying the home of your dreams.



Visit NAMB.org and click ‘Find a Broker.’

Find your broker or lender by asking amily or friends for

potential prospects.

Interview every potential loan offi cer

or lender.

3 MONTHS OUT


Ask family and friends for potential lender prospects.

Pull other potential lenders from NAmB.org by clicking the ‘Find a Broker’ link.

rememBer: you do NoT want to shop for lenders online.

Find out if the Broker or Loan Officer has to be licensed in your state? Find out

who the licensing authority is and get a license number for each lender to check

for claims.

Schedule appointments with at least three potential lenders and ask the fol-

lowing important questions. use the lender Comparison Worksheet for notes

and do not allow the lender or loan officer to pull another credit report at this

time.

InTervIewInG A lender: wHAT To Know, wHAT To ASK


• How does their pre-approval process work? do they offer a formal credit approval or just a pre-qualify process?

• do they actually provide a Credit approval letter? Will they ‘customfit’thelettertoyouroffer,evenifitneedstobere-issued many times?

• How long does it take to get credit approval subject to an appraisal?

• Howlonghasthemortgageprofessionalorloanofficerbeeninthe business? How long has their company been in business? is the company well known? How long have they worked for their current company?

• do they have references? What is their nmls number and nmls company number? (check their status: nmlsconsumeraccess.org)

• When do they lock-in the interest rate? How long will they guarantee their rate and fees once the loan has been locked? are there different locking options? if the interest rate goes down before closing on a home, do you get the lower rate?

• do they provide weekly status updates for their clients?

• Doestheloanofficerormortgageprofessionalworkoncommission?

• Istheloanprocessinghandledinthelocallendingofficeoroffsite? the lender should offer local processing of the paperwork throughout the loan process. this will insure that your loan officerismoreinvolvedinthedaytodayprocessofferingbetter customer service.

lenderQ & a

http://nmlsconsumeraccess.org



lenDer comParison Worksheet

leNder:

loAN oFFiCer:

PHoNe NumBer: emAil:

Do the offer full credit pre-approval?

Will they create a ‘custom fit’ Credit Approval Letter?

How long does credit approval take?

How long has the lender/loan officer been in business?

Ask for the NAme and CoNTACT iNFormATioN of three references:

What is the NMLS Number for loan officer/company?

State license number(s) (if applicable)?

What is their Rate Lock-in Period?

Do they provide weekly status updates for clients?

Does the loan officer or mortgage professional work on commission?

Is the loan processing handled in the local lending office or off site?



Does the mortgage broker/loan officer attend their closing appointments?

How much commission do they want to make on each loan?

Who pays the Loan Origination Fee?

How does their interest rate lock policy work? Do they offer Lock Extensions?

How do they as an individual, keep track of the financial markets?

do they actively participate in the locking of the loan, pricing, and what time period

it is locked for?

Additional Notes for this lender: