MWF Home Loan Trail Guide

Home Buyer’s Guide

The idea of purchasing a home, whether it is your first home or your last, is bound to bring many questions to mind. This is a natural reaction, as it is one of the biggest decisions you will ever make. Rest assured, my team and I are here to assist you in understanding the loan process. Our goal at Mountain West Financial, Inc. is to treat you with integrity, dignity and respect. Without compromise, Mountain West Financial is committed to providing the loan that is in the best interest of our clients, not our bottom line. We will continue to educate the

community to empower our clients to make responsible and informed fiscal decisions that will result in greater financial peace of mind.

This book covers the basics about buying a home. It is designed to answer commonly asked questions and provide clear definitions of terms you may be unfamiliar with, even if you have been through the home-buying process before. Keep this book handy as you progress through the journey of homeownership. And reach out with any questions you may have.

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I have experience with many different loan scenarios and within that depth of knowledge, I am able to ensure that I provide my valued clients with the best option for their home financing needs. My clients’ goals are at the forefront of the home loan process. My promise to my clients is that I focus on three core areas:

- Availability -

I am accessible for my clients every day of the week, to field any questions that arise.

- Expertise -

I pride myself on remaining at the forefront of the lending industry in order to present my client with every option available.

- Value -

Knowing that every client has their own financial goals, I work to find the right loan to fit the personal needs of each client I serve.

Personal Information

The name, address and Social Security Number of each person applying for the loan

Assets

The source(s) of funds for down payment and closing costs

Income

Employment information covering the past two years

Gross monthly income

Two years most recent tax returns with W2s and 1099s

Other income received

Liabilities

Credit cards and installment loans

Information about any other properties owned, including rentals, second home and investment properties

Alimony and/or child support payments, if applicable

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Understanding

Loan Process

WE’RE HERE TO HELP

Purchasing a home can be confusing and overwhelming. It’s also one of the most exciting times in anyone’s life and we’re here to help guide you through the process worry and stress free.

Here is just a little explanation of the process and who is involved in which step to help you feel more comfortable while we are working together.

Pre-Approval:

We gather information on income, credit, and debts and make a determination about how much house you may be able to afford. Different loan programs may be discussed, and a pre-approval letter is issued.

Home Shopping:

With your pre-approval in hand, you and your Realtor can start searching for homes. Your Realtor will help structure your offer including contingencies and submit it to the Seller & Listing Agent.

Offer Accepted:

When the terms are approved by both parties, a purchase agreement is executed. You can move forward to finalize the loan.

Application:

You, the buyer, now referred to as a “borrower”, complete a mortgage application and supply all of the required documentation for processing. Various fees and down payments are discussed at this time, initial disclosures are issued and the loan is moved to Processing.

Underwriting

Your Underwriter is a key decision maker. They review your loan package, income, assets, debt, property appraisal, credit and employment history to ensure it meets guidelines and they evaluate your ability to repay the mortgage. Your interest rate needs to be locked if it hasn’t already.

Condition Set Two:

Your Underwriter will request any additional documentation to issue an approval such as written explanations, supplements, and verifications.

Clear to Close:

When all conditions have been received and reviewed, your Underwriter will issue a Clear to Close. At this time your final disclosures will be drafted to detail the terms and conditions.

Final Docs:

Your loan documents (Loan Docs) are printed and sent to the Closing Agent where the closing meeting takes place. Your docs will include a final Closing Disclosure, Promissory Note, Deed of Trust, Certificate of Occupancy and other documents that will need to be reviewed and signed.

Closing:

Loan documents are reviewed by a Closer and funds are wired to Escrow. CONGRATULATIONS

YOU ARE A HOMEOWNER!

Think of Time Frames:

While you are in the process of buying a home, you must also consider time frames. You want to consider when you need to be out of your current place and come up with a back up plan if you are not able to find your new home within a certain time period.

HOME SHOPPING

LENDER

CONDITION

ONE

SET TWOUNDERWRITING

CLOSE

Pre-Qual Vs. Pre-Approval

For most of us, buying a home will be the biggest, most important purchase we will ever make. That is why it’s crucial to leave no stone unturned in knowing the challenges that lie on the mortgage approval landscape.

One common mistake homebuyers make is failing to distinguish the difference between being pre-qualified for a mortgage and being pre-approved for one.

Pre-Qualification is a lender’s estimate of how much you could be eligible to borrow based on information you supply. Pre-qualification does not mean you will get the loan. Pre-qualifications are usually free.

Pre-Approval, although never guaranteed, usually means that the lender has taken extra steps in qualifying you to ensure that you will be approved for that specific loan type and purchase price with the information that you provided. Pre-approvals typically involve a more thorough look into your income, expenses and credit scores and may also include running AUS* (Automated Underwriting System).

The pre-approval will say how long it is valid for and may contain some other conditions for you to get the loan. Your lender may not require that you pay any fees except the cost of a credit report at this time.

In short, being pre-qualified for a mortgage doesn’t mean you will get one. But with pre-approval, you’re much more likely to get the green light from your lender.

T h is Wa y T o PREAPPROVAL

Do’s & Don’ts

While you have a loan in process

DO’S DON’TS

1. Document large deposits or withdrawls with receipts and bank statements ($300 or more).

2. Limit the number of transfers of funds from institution to institution and keep clear records (a “paper trail”) of such transfers.

3. Limit the number of credit inquiries during the loan process; multiple inquiries can hurt your credit score.

4. Consider minimizing spending that might affect your credit score or your income to debt ratios

5. Make timely payments on existing accounts and financial obligations.

6. Do respond to questions upon request.

7. Do submit necessary information upon request.

8. Do notify us if you leave town.

9. Do provide the most current and accurate information on all your documents and paperwork.

10. Contact your insurance agency if your loan process requires applying for a new or revised insurance policy.

11. Do refer us to your family, friends, and co-workers.

1. Don’t make any changes to your income or employment during your loan process.

2. Refrain from making “big-ticket” purchases during your loan process, these would include autos, boats, trailers, motor homes, large household electronics or appliances and large home furnishings; such purchases could affect your income to debt ratios or negate your loan qualification.

3. Don’t provide access to your social security number to anyone other than those involved with your loan process.

4. Don’t pull money out of your equity line of credit (if applicable).

5. Don’t make any major financial decisions without consulting a member of my team while your loan is in process.

6. Do not apply for more credit or close any accounts.

EVERYTHING YOU DO WILL AFFECT YOUR LOAN PROCESS.

Loan

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Affordable Housing

The Mountain West Financial Mobile App is the best all-in-one resource for anyone looking to buy a home. It contains a wide variety of mortgage tools including calculators to estimate affordability and mortgage payments, step-by-step guides that’ll walk you through the mort gage process, a secure platform to send documents, and more.

App Features

Calculate estimated payments with 13 precise Calculators

Estimate Home Affordability

Learn whether or not a Refinance is right for you

Step-By-Step Guides

Learn and Identify the loan programs that’ll work best for you

Track your progress with interactive Checklist

Connect instantly with your Loan Officer via Messaging and Push Notifications

Download The App

Visit Your Loan Officer’s website and click on: Calculator or Search for Mountain West Financial in your app store

What Makes Up My FICO SCORE?

Credit scores range from 300 to 850 and are designed to predict risk, specifically, the likelihood that you will become seriously delinquent on your credit obligations in the 24 months after scoring. Your credit score is one of the determining factors when qualifying for a mortgage. You want to make sure to review your credit report for any discrepancies ahead of time to make sure your score is at the best it can

be for your home loan process.

Many people are under the impression that checking your credit in any capacity impacts your score. In fact, data from your credit report falls into five major categories that make up a FICO score. The scoring model weighs some factors more heavily such as payment history and debt owed:

10%

10%

Type of Credit: mortgages, installment loans, revolving, etc.

15%

Length of History: time elapsed since each account was opened

Inquiries: records of inquiries logged when you apply for credit

35%

Payment History: the record of your on-time and late payments

30%

Available Credit: proportion of balance to your credit limit

Mortgage Lenders use your credit scores to see your full financial profile, determine your credit risk and then establish the interest rate you will be charged for your home loan. A mortgage credit report may be different than credit reports used by auto financing companies and free credit report monitoring. With a mortgage credit report, you have three FICO scores, one for each of the three credit bureaus - Experian, TransUnion and Equifax. All three bureaus grade your credit history, however, your score will be different from each one because

not all creditors will report to all three companies. The Lender will then take the middle score to evaluate your loan. Lenders will look for:

• Delinquent accounts, meaning those paid more than 30 days late

•

Unpaid collection accounts

• A past bankruptcy

• Foreclosures

• Tax liens or civil judgments

• The number of recent applications for credit

• Outstanding debts

BUYING

Critical Dates Checklist

Use this to track requests from your Loan Officer and Realtor as well as critical dates.

Propert y Address:

Escrow Company: Escrow Officer: Realtor’s Name: Assistant’s Name: Loan Officer’s Name: LO Assistant’s Name:

Actions

Notes

Phone: Email: Phone: Email: Phone: Email: Closing Date:

Congratulations - Move in Day

Congrats on your new home! We were so honored to have been a part of making your dream of homeownership a reality! We love hearing move-in day stories!

Share your favorite photos of your family and your home on your social media pages with our hashtag #MWFmoveinday for a chance to be featured on our Facebook page!

Make sure you also ”like” your Loan Officer’s Facebook Page for home remodel tips, Company announcements, and mortgage trends throughout the coming years.

*By using the hashtag, you are providing Mountain West Financial, Inc. permission to use your photo in our future posts.

Important Documents

Key documents to keep after closing:

Your first payment letter

The payment coupon detailing when and where to mail your first payment

Copy of your loan closing package

Home Warranty, if any

Key documents to keep for tax purposes:

Closing Disclosure (CD)

Form 1098, your mortgage insurance statement sent annually from your mortgage servicer

Costs of energy efficient updates

MOVE PREP

• Confirm all moving details Reconfirm your team and methods of moving. Also be sure you have the necessary paperwork a few days prior to the move.

• Make a schedule for the day of the move Such as pick up the truck early in the morning, grab snacks for yourself and any volunteers, manage where boxes should go and triple check for belongings left behind

• Clean the house as you pack Cleaning as you go will make the job much easier at the day’s end. It’ll just need a quick sweep and emptying of trash cans and you’ll be ready to enjoy your new home

• Take furniture apart Do as much prep work as possible before hand i.e. desks, shelves, etc.

• Make sure essential tools are handy for moving day Such as screwdrivers, packing tape, markers, wrench, pliers, etc.

DAY OF THE MOVE

• Verify that your utilities are working Especially power, water, heater and cooling.

• Take Movers & Helpers through the house Guide them through the home and show them where items should go.

• Be sure the new home is completely empty It’s common for people to leave things behind doors.

• Begin unpacking with the kitchen Then work on the bathrooms. Focus on the rooms you use most first.

• Make a critical items box Put items such as your chargers, phones, ipads and devices, TV remotes, car keys, wallets, daily medicine, etc in the box. You want all the items you touch daily that you don’t want to have to dig for later on in one central location.

Getting More Out of Your Mortgage

Paying off your mortgage might sound ambitious, especially if you have recently purchased or refinanced into a 30-year term. But it’s still smart for homeowners to give some serious thought as to how they’ll pay off their home loan. An early mortgage payoff can net substantial interest savings compared to making scheduled payments for 15 or 30 years. Contact your home loan servicer to get set up on one of the options below.

Bi-Weekly Payments

A bi-weekly mortgage is a mortgage in which one-half payment is made every other week instead of a “full payment” made once per month. The homeowner makes 13 payments per year instead of the usual 12, which accelerates the loan’s payoff schedule by up to 6 years.

Paying Extra Towards Principal

Paying a little extra every month on your home loan is a way to make that dream of owning your home free and clear a reality faster than you thought, and with today’s historically low savings rates, it could make more sense than ever. Rather than letting money languish in a CD, money market or savings account that pays practically nothing, many homeowners might be better served by paying down their mortgage. Doing so can save tens of thousands of dollars in interest and shave years off your loan. Our accelerated mortgage payoff calculator can help you figure out how quickly you can pay off your loan and how much you’ll save.

Helpful Homeowner Tips

Supplemental Taxes

The supplemental assessment tax reflects the difference between the new assessed value and the old or prior assessed value. It is in effect from the close of escrow, can take up to 24 months before you receive the invoice and billed by the county controller/tax collector office. You will be responsible for this one-time supplemental tax bill, however, you will be given the option to pay in two equal payments. It is important to note that if you receive an escrow analysis refund check from your loan servicer, it would be in your best interest to hold onto those funds until after the county reassesses your property.

HERO/PACE Information

If you have been thinking of getting energy improvements (solar, new windows, etc) on your home, we know that many homeowners consider the HERO or PACE programs. This is a notice to inform our clients so that you can make informed decision when presented with these programs from contractors. Mountain West Financial does not offer HERO or PACE Loans.

Downsides of PACE Loans (Property Assessed Clean Energy):

• PACE loans are secured by a priority tax lien against your property and payments are collected by the real estate taxing authority.

• The PACE lien doesn’t always show up on the tax rolls right away leading to an under-collection of your escrow account which can translate to a higher monthly escrow amount due.

• PACE loans can be more expensive in terms of interest rates and fees (processing, annual administrative and prepayment penalties) than a conventional mortgage loan.

Complications when selling your home with a PACE/HERO lien:

• Improvements may not result in a dollar for dollar increase to your home’s appraised value.

• Many lenders will not make a loan to the buyer if the lien remains intact. In many cases, the PACE loan would need to be paid in full in order for the new buyer to purchase the home.

Talk to your attorney, ask repayment questions, research financing options and/or speak to a HUD approved housing counselor before making any final decisions.

Glossary of Terms

Adjustable Rate Mortgage (ARM)

A mortgage in which the interest rate is adjusted periodically based on a pre-selected index and margin.

Amortization

Means of loan payment by equal periodic payments calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance.

Annual Percentage Rate (APR)

The interest rate that reflects the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows home buyers to compare different types of mortgages based on the annual cost for each loan, however not all lenders calculate APR the same way.

Buy-down

This is when the lender and/or home builder subsidizes the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they increase when the subsidy expires.

Debt-to-Income Ratio

Debt-to-Income (DTI) ratio is where all of your monthly debt payments are divided by your gross monthly income. In cases where your potential new home has multiple offers, a bidding war may occur at which point you will need to either increase your bid, or let the home go. You will want to make sure your DTI ratio doesn’t go beyond what you can reasonably afford.

Discount Points

Prepaid interest assessed at closing by the lender. Each point is equal to 1% of the loan amount, i.e., two points on a $100,000 mortgage would equal $2,000. Discount points are charged to reduce the interest rate.

Down Payment Assistance Program (DPA)

Down Payment Assistance Programs are funds given to buyers to assist with the purchase of a home. Buyers do not have to repay these funds. To learn what types of DPA Programs are available, ask your lender about local program options in your area.

FHA Loan

A loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans, they are generous enough to handle moderately priced homes almost anywhere in the country.

FHA Mortgage Insurance

All types of Mortgage Insurance protect the lender in the event of default. There are two types of FHA Mortgage Insurance that must be paid on all FHA loans - an Up Front Mortgage Insurance Premium (UFMIP), which is generally financed into the loan, and an additional monthly mortgage insurance premium, paid as a part of your normal monthly mortgage payment. The upfront premium is 1% of the loan amount and monthly premiums are generally .9% divided over each monthly payment, but may vary based on the term of the loan and the loan to value.

Glossary of Terms (cont.)

First Time Home Buyer Program

Mortgage loans with special qualifying terms for those who have never owned real estate or have not in the previous three years. Although the programs and terms vary by state, they often offer down payment and closing cost assistance

Impound/Escrow Account

That portion of a borrower’s monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.

Margin

The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate.

Mortgage Broker

This company assists in arranging funding or negotiating contracts for a client. Brokers usually charge a fee or receive compensation for their services.

Mortgage Insurance (MI)

Money paid to insure the mortgage when the down payment is less than 20%. See Private Mortgage Insurance or FHA Mortgage Insurance.

Origination Fee

The origination fee incorporates any fees from the lender required to fund the loan that are paid to the lender or mortgage broker. This can also include processing, underwriting, administrative fees and Yield Spread Premium paid by an investor to a mortgage broker.

Private Mortgage Insurance (PMI)

In the event that you do not have a 20% down payment, the lender may allow a smaller down payment, sometimes as low as 3.5%, or less with loans guaranteed through the VA or USDA. However, with a smaller down payment, borrowers are usually required to carry private mortgage insurance on the loan. Private mortgage insurance comes in several forms: upfront, paid at closing, and monthly. A lender may require some combination of both upfront and monthly mortgage insurance. The amount required is determined based on program type, property type, credit score and loan-to-value.

Title Insurance

Title insurance protects a real estate owner or lender against any loss or damage they might experience because of liens, encumbrances, or defects in the title to the property, or the incorrectness of the related search. It protects against claims from various defects such as another person claiming an ownership interest, improperly recorded documents, fraud, forgery, liens, encroachments, easements and other items that are specified in the actual policy.

Underwriting

Approves (or declines) funding to potential home-buyers, based upon factors such as credit, employment, assets, etc., and matches approved risks with appropriate rates, terms and loan amounts.