Home Buyer GUIDE TO FINANCE
l l u F
OF POSSIBILITIES
Homeowner Benefits With today’s rent hikes, it’s usually the same or less per month to buy – plus every month all that money is going back into your pocket through the equity you’re building and the increasing value of your home. With renting, the cost may go up every year and when you’re a homeowner it does not. In fact, it may go down if you lower your interest rate, remove mortgage insurance or increase your loan to value. Additionally, you may qualify for tax write-offs. When we put all these numbers side by side, you are likely to save money every month just from owning. The primary benefit is you are building wealth through equity, especially if you keep your property long term. Beyond the financial benefits, you also gain freedom. The freedom to upgrade your home any way you choose. Whatever fits your lifestyle you can have – your favorite finishing touches to adding an outdoor kitchen or pool or maybe even expanding your floorplan. Your new home will be full of possibilities to fulfill your dreams! Highlights • Renting pays your landlord’s mortgage • Owning builds wealth through equity • Potential lower living costs or tax deductions • Become more active in your community • Opportunity to have the pets you would like • Freedom to remodel as desired
Pre-Approval Our current real estate market makes getting pre-approved a requirement. Although, many agents prefer this, because it’s in everyone’s best interest. Who wants to fall in love with a home only to find out you don’t qualify for it? Who wants to drive around looking at homes to find out you can afford more and have to start over? Getting pre-approved sets you up for greater success when you go into contract. You’ll already have most of your loan questions answered and your home loan specialist will have most of the information needed to tell you how much you qualify and what it will take to close your loan. Additionally, you’ll have a ballpark of how much you will need to close and what your estimated monthly payments will be so that you can be comfortable with the right price point for you. At this stage, the numbers are just an estimate because there are many variables as you move forward through the process. It’s helpful to stay flexible and understand that there are variables. Cash needed to close and monthly payments are a moving target so it can be challenging to predict exactly what those numbers are until you are closer to closing.
About Sanctuary Funding Sanctuary Funding is your local neighborhood lender that values partnership and integrity. One of our core beliefs is that everything is possible. Yes, everything. We understand that everyone has their own unique dream and desire. Our experienced and heart-centered team will help you create whatever possibility you desire. No matter how big or small your homeownership dream. We are passionate about helping you achieve it. Your goal is our mission. And wherever you are in the process, we will help you get there. That’s right! We are here for you every step of the way at Sanctuary Funding.
Home Loan Specialist At Sanctuary Funding, your home loan specialist is your own personal loan advisor who will provide impeccable service and clear, comprehensive information about your qualifications and loan requirements. They will offer you the best product for your qualifications and give you different options so you can choose the right loan for you. Furthermore, they will walk you through every step of the process – taking the time to answer every question you have so that you know what is expected of you and other important details about your loan – because we know peace of mind is priceless. Highlights • Experienced Experts • Heart-Centered Service • Quick Efficient Turn-Times • Competitive Rates
Types of Loans There are many types of loans available. And you may or may not know which one is right for you. Rest assured – your home loan specialist will identify a loan product that best serves you. Until then, here’s a brief introduction to the most common loan products: • Conventional Loans are typically best for those with good or excellent credit. • Jumbo Loans are loans above the conforming loan limits. • FHA Loans A government-insured loan may be a good fit for qualified buyers with less than perfect credit. Borrowers may only have one of this type of loan in their name. • VA Loans are reserved for only those who have served in our military. We are incredibly grateful for your service and this type of loan is one way we can give back to you.
Loan Estimate Once you’re in contract, your initial disclosures are emailed to you. There is a set of three pages included in the disclosure package that is your loan estimate. There are many pages in the initial disclosures document and the loan estimate is usually found between pages 8-15. These three pages estimate all of the costs and maybe even some credits for your loan. Your home loan specialist will be happy to walk you through your estimate and answer any questions. Here’s a brief summary on how to read them: Page 1 – covers basic high-level information such as loan amount, your rate and if it’s locked, your estimated monthly payments including all monthly costs and funds needed to close. Page 2 – itemizes all charges and possibly any credits. It groups them together in categories of (A-J). Many of these numbers are standard third-party fees; such as title, escrow, taxes and insurance. Box (A) shows you the loan cost(s) and if you’re paying points or have a lender credit. Page 3 – recaps the loan amount and how much you’ll need to close. Before you’re in contract, you may receive what is known as a fee sheet summary. Although, before you are in contract there are many unknowns about the property you may choose, so this is an estimate. It simply gives you an idea of what your loan and associated costs may be.
Closing Costs Every loan includes closing costs. These are paid either out of pocket, with a loan credit or through a higher interest rate. Sometimes it’s a combination of these things. Closing costs typically include: loan origination fees, title and escrow fees, pre-paid taxes and insurance, prorated interest and other costs associated with closing a loan. If you are putting less than 20% down, you will also have a mortgage insurance premium (MIP). If you qualify for a VA loan, you may have a VA funding fee. If you’re buying down your interest rate, you’ll have a points fee. If you’re receiving a credit, it can only go towards closing costs – not a down payment. Closing costs are usually paid at the close of the loan. Possible exceptions are refinances with more than 20% equity and VA loans because you may be allowed to add these costs into the total loan amount.
Mortgage Payment Every mortgage payment has a principal and interest payment. At first, the payment towards the interest is larger and over time the principal becomes the larger portion of the payment. If you have less than 20% equity, you’re required to have your taxes and insurance paid through an escrow impound account. Impounds are bundled with your monthly mortgage payment (mortgage premium). Additionally, if you have less than 20% down payment or equity, you must pay mortgage insurance. This insurance is to protect the lender if you default on your loan. Depending on your property you may have fire, flood or other additional insurance. Everything above is often abbreviated as PITI – Principal, Interest, Taxes and Insurance. Some properties have homeowners association dues (HOAs) – this can apply to any type of home or condominium, because it’s for the neighborhood where it was built. This cost is often paid separately, although, in some cases is included in the monthly mortgage payment. Typically, your first payment is due the month following your close date. Let’s say you close on December 25th – your first payment is due February 1st. You may be thinking, well then, I’d like to close December 1st. If so, prorated interest is accrued and prepaid, so whatever day you close, that cost will be factored into your closing costs. The first payment is usually paid to the loan company you closed through, then the following payments are paid to your loan servicing company.
Real Estate Agent Your Real Estate Agent (REALTOR®) will guide you through the home buying process and help you find your dream home. Once they know what purchase price you’re prequalified and have some knowledge of what lifestyle, location and must have features you desire – they coordinate available properties that are a match for you. With the convenience of technology, you can see information about the property online – such as virtual walk-through tour, videos and photos. Once you’ve narrowed the list, your agent can schedule virtual or in-person tours, so you can take a closer look. Depending on the area you choose, your agent will know what is common to expect. Their guidance and knowledge is invaluable in helping you choose the right property.
Making Offers When you choose a property that you would like to make an offer on your agent will make recommendations so that you can make the best offer based upon your goals and the current market. Once you’re in contract, your agent will help you navigate and negotiate if appropriate based upon the home inspection and appraisal. As your offer and potential negotiation pertains to your home loan, if for any reason your agreed purchase price is above the appraised value or above what you qualify, that difference must be paid at closing.
Property and Location Your agent will help you identify the type of property and its location depending on your desired lifestyle and goals. What makes your heart sing? What lifestyle are you dreaming of? Does factors like proximity of schools or work matter? Everything is possible – so be sure to take the time and find the right match for you. Property Types Common Dwellings
Proximity To
• Single-Family
• Primary Residence
• Schools
• Multi-Family
• Vacation Home
• Work
• Condominiums
• Rental Property
• Activities
• Townhouse
• Investment Property
• Other
Inspection The inspection provides details about the integrity of the structure and property so that you are comfortable with needed repairs that may have a limited warranty or life span or is a potential hazard. This typically happens after the property is in contract and is paid out-of-pocket by the buyer. Sometimes, the inspection is completed in advance by the seller because it tends to make the selling process easier. Either way, an inspection is essential so that you know what extra costs may be involved in purchasing the property. This can be an opportunity to request items be repaired, to negotiate the agreed price or a seller credit and make an informed decision on how to proceed.
Appraisal The appraisal usually happens after the inspection and its purpose is to document the perceived value of the property. Usually, this is done through comparative analysis. Although, with unique properties other approaches are required to appraise the property’s value. This detailed document is approximately 30 pages and illustrates the approach to its perceived value. The report includes photographs of the home and property, information and map of the neighborhood and more. It also notes any repairs that are required based upon the borrower’s loan type or state building codes. If the appraised value is lower than the purchase price, the buyer may negotiate with the seller to lower the price. If both parties agree on a price that is higher than the appraisal – that difference must be paid out-of-pocket at closing.
Loan Process ✔ Create Application Step one is to apply. You or your home loan specialist will complete an application with your pertinent information. Such as your personal info, employer, expenses, assets and permission to request credit – plus the property details if known.
✔ Documentation Next, you must provide all the required documentation from the guidelines based upon the type of loan. Items such as driver’s license, two years W2s or other income documentation and two months of statements showing funds to close. You may need two years’ tax returns, other asset documentation, reserves and more depending on the loan.
✔ Verification Everything you’ve provided is verified, such as your credit score, credit history, income, assets and more. This includes reviewing all your documentation and contacting your employer. Once you’re in contract, also verifying your earnest money (EMD) funds and wire.
✔ Initial Disclosures These are sent within three days after all parties sign the purchase contract. This document discloses preliminary information about your loan and the property. Including the loan estimate. Note, this step may overlap others. The full document is emailed and signed electronically. Once signed your appraisal is ordered.
✔ Underwriter Review Underwriting (UW) reviews your entire loan package in detail to determine eligibility or if there is anything else needed that is required by the guidelines.
✔ Loan Conditions The underwriter provides a list of conditions – items needed for the loan approval. This could be more documents, letters of explanation (LOE/LOX) or verifications. These items may create other conditions depending on the scenario.
✔ Loan Approval There are two types of approval. There’s a conditional approval (see loan conditions above) and there is a full approval (no more conditions required). Most loans have conditional approval before full approval.
✔ Closing Disclosures CD for short – this document is usually emailed and signed electronically. It has updated numbers in the loan estimate pages and other information that needs disclosing about the loan or property. Once they are signed, there is a federally required three business day waiting period before signing closing docs.
✔ Draw Docs and Sign Once all the previous steps are complete, the loan is cleared to close (CTC). Documents are emailed to Title so they can draw docs and call you to schedule signing. At your signing, you’ll receive a printed set of the loan documents. Plus, wire instructions for any remaining down payment or closing costs. Afterwards, everything is sent over for a final review.
✔ Fund and Record It’s almost time to celebrate! Lastly, Title will record your loan with the County and give permission to release funds. Then your REALTOR® gives you the keys to your new home or investment. CONGRATULATIONS!
Glossary of Terms
Many terms are explained in this guide. Here are a few more: Annual Percentage Rate (APR) is the interest rate for a whole year (annualized), rather than just a monthly fee/rate Cleared to Close (CTC) is when all your loan conditions and product guidelines are met, then your loan has UW approval and is ready for the closing stages Cash to Close (CTC) this is any funds needed to close your loan, either down payment or closing cost or other requirements to be paid at closing Debt to income (DTI) ratio establishes the difference between your total monthly income minus monthly debt and expenses Earnest Money Deposit (EMD) is deposit wired to Title once you are in contract Escrow creates and manages your impound account that distributes your taxes and insurance Equity is the difference between what your property is worth (fair market value) and how much you owe – if you owe less than it’s worth, then that difference is your equity Loan Estimate (LE) is the written estimate of known settlement costs Loan to Value (LTV) ratio is the difference between the total mortgage owed and the fair market or appraised value of the home Mello Roos are additional taxes on a property when it’s in a neighborhood that required additional infrastructure to be developed – these property taxes are paid over-time and passed to new owners Mortgage Insurance Premium (MIP) is the upfront premium paid for mortgage insurance that is required when the borrower does not have 20% down or equity Title is the third-party company that ensures that the Title is clear and facilitates the recording to the properties title at the County
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Must-Haves & Notes Number / Size Address
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Garage Spaces
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Lot Size
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Year Built
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Formal Dining Room
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Office
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Pool
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Hot Tub
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Fireplace
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Home Gym
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Theater Room
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Bonus Room
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Outdoor Kitchen
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Natural Lighting
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High Tech Lighting/Electrical
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RV Parking
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Gated
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Golf Course
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Private Street
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Waterfront
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View
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Mature Trees
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Low Maintenance Yard
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Small/Large Front Yard
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Small/Large Backyard
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Community Pool
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Community Gym
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C O M M E R C I A L R E A L E S TAT E
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May a world that affirms in
oneness—health as the highest
gain, contentment as the highest wealth, awaken its note of joy in the human kingdom. – Dr. Jayanath Abeywickrama
CHASE GLOBAL INITIATIVE
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Everything IS POSSIBLE Sanctuary Funding 915 Highland Pointe Drive, Suite 190 Roseville, California 95678 For more information contact your Sanctuary Funding home loan specialist today.