plain english mortgage guide

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Plain English Mortgage Guide• Old Virginia Mortgage has put together a great briefing to

help you gain a basic knowledge of the mortgage industry, products, and eligibility requirements.

• This is just a guide and you should consult a mortgage professional for your own answers.

• Dennis Blackmore, REALTOR® 757-343-4949 – EMAIL: [email protected]

• Chip Simkins, Senior Vice President• EMAIL: [email protected]• (757) 409-9079 Mobile• (757) 216-8245 Fax

mailto:[email protected]

mailto:[email protected]

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Home Mortgages:

Adapting to a Changing Environment

www.oldvamortgage.com

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Home Mortgages:

Adapting to a Changing Environment www.oldvamortg

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Times are drastically different TODAY than just

one year ago.

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Why?

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Four types of Mortgage

Companies

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BrokersShop lenders – do not have $$

Do not do their own underwritingDo not necessarily have control on closing

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“Big Boys”Example:

Bank of AmericaUSAA/NFCU

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Internet Lenders

Ditech, Quicken

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Correspondent LendersLocal Banks,

oldvamortgage, etc

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Five types of LoansConventionalFHAVAVHDARural Development

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New Loan LimitsFHA, VA & Conventional

Loans:Up to $458,850 loan

amounts

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Conventional Loans:A variety of conventional loans are available from investors associated with Old Virginia Mortgage. Attempting to cover all the “niche programs” would be overwhelming. The material included in this section provides you with the basics of commonly requested conventional loans.

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Conventional Loans:

20 % down with good credit

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Conventional Loans:Types of Conventional Financing:Fixed Rate: loans are those where the principal and interest payments remain the same for the entire term of the loan.Adjustable Rate (ARM): the interest rate adjusts at established times during the life of the loan. Tied to an index, the new rate will be determined by adding a “predetermined margin (usually 2-3% to the current index. Most ARMs have “caps” and come in a wide variety of adjustment periods: once per year (1 year ARM) or longer periods, such as ten years (10-1 ARM). * Ideal for Military or short term transfer.

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FHA Loans:The Federal Housing Administration (FHA) mortgage loan program was originally established in 1934 to assist homebuyers with a low down payment. The Department of Housing and Urban Development (HUD) regulates all FHA mortgage loan programs. FHA insurance insures the lender from default and foreclosure.

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FHA Loans:General InformationThe maximum base loan in the Hampton Roads area is $458,750. (may change 2010) FHA requires and “Upfront Mortgage Insurance Premium” (UFMIP). This MIP can be financed on top of the base loan amount.

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FHA Loans:Advantages of FHA FinancingLower down paymentHigh qualifying ratios—31% and 43% of gross incomeGift funds from a relative for the entire down payment and closing costs are acceptable. Absence of non-occupant co-borrower restrictions. FHA allows unrelated co-borrowers and non-occupant co-borrowers. Seller concessions of up to 6% of the sales price.No restrictions on income, assets or prior home ownership.

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FHA Loans:Sellers are allowed to contribute up to 6% of the Sales Price. Seller may pay the following:Closing CostsPrepaidsDiscount PointBuy-down FeesUp-front MIPFirst year advance payments of property taxes Home owners Associations Dues

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FHA Loans:Enticement (concessions) value must be deducted from the sales price. These may be:Cars, boats, lawn mowers, etc. given by the sellerDecorating allowancesMoving expensesExcess rent credit

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FHA Loans:Occupancy requirements: At least one borrower must occupy the property. Non-occupant co-borrowers must be blood relatives.

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FHA Loans:Down Payment: FHA requires a minimum 3.5% investment in the purchase transaction.

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FHA Loans:Terms: 15-30 years in 5 year increments

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FHA Loans:Mortgage Insurance Premium (MIP): Upfront MIP is required on all FHA loans regardless of the down payment. The insurance remains in effect for as long as the mortgage exists. The premium must be 100% financed or paid in cash.

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FHA Loans:Bankruptcy: Buyers may be eligible for FHA financing depending on the circumstances and the amount of the time that has elapsed since the bankruptcy discharge. Credit must have been reestablished for at least two years following a Chapter 7 and for a Chapter 13, one year of payments must have been made on time and the Trustee must approve of the home purchase.

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FHA Loans:Seller Concessions: The seller can pay up to 6% of the sales price towards the buyers’ closing costs, prepaids points, buydowns, etc.

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VA Loans:The Department of Veterans Affairs agrees to “guarantee” a portion of the loan in case of default. Individuals serving in the Air Force, Army, Navy, Marine Corps and Coast Guard are candidates for VA Entitlement benefits.

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VA Loans:General InformationThe maximum VA loan is the same as the FNMA Conforming Limit of $458,750 for 100% financing. The maximum loan amount includes the VA funding fee and cannot be exceeded for any reason. Maximum term is 30 years. Owner occupancy is a mandatory requirement. A veteran may purchase a 2-4 family dwelling but must occupy one of the units as his primary residence. The income of a co-borrower, if not the veteran’s spouse, cannot be considered for qualifying unless he or she also has VA Entitlement.

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VA Loans:Advantages of VA Financing100% FinancingVA credit underwriting criteria is among the most liberal in the industry.Closing costs payable by the veteran are strictly regulated and are generally less than those associated with alternative financing forms.Seller concessions can go up to 4%. Normal discount points and closing costs paid by the seller are not considered a concession.

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VA Loans:The seller can pay ALL of the veteran’s closing costs and normal discount points; however, VA limits the seller to 4% of the appraised value for seller concessions. Seller concessions include but are not limited to:VA Funding FeePrepaidsBuy DownsGifts, such as television or microwavePayoff of credit balances on behalf of the buyer

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VA Loans:Funding Fee:100%-95.01% LTV…2.15% FOR 1ST time

…3.3% Subsequent use95%-90.01% LTV….1.5%90% or less LTV…1.25%

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VA Loans:Bankruptcy or CCCS (Consumer Credit Counseling Service) Plans:

Buyers who have declared bankruptcy may still be eligible for VA Financing depending on the time since discharge and the circumstances

Chapter 7: Under 2-3 years, the VA borrower must have re-established credit with no late payments. The bankruptcy must have been caused by events beyond the Veteran’s control

Chapter 13 & CCCS Plans: Acceptable if 12 consecutive payments have been made on the repayment plan.

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VA Loans:MAY have more than

one VA home loan

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VHDA Loans:Income Limits:2 or less in a household $63,0003 or more in a household $73,000

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VHDA Loans:

Borrower may not have owned property in the last three years.

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VHDA Loans:FHA Plus (a VHDA product):Two loans provide financing: FHA 1st mortgage PLUS a 2nd mortgage for down payment and closing costs 1st mortgage is a maximum FHA loan; 2nd mortgage is limited to 5% of the lesser of the sales price or appraised value. The combined value and any financed UFMIP may not exceed VHDA’s sales price limits

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VHDA Loans:Federally Targeted Areas in Virginia

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USDA ProgramGuaranteed Rural Housing Loans

USDA Loan Program Benefits:Financing – No down paymentTerm – 30 year fixedMortgage Insurance – No monthly mortgage InsuranceTypical Closing Costs – May be financed if supported by appraisalFirst Time Homebuyer – No first-time homebuyer requirementMaximum income – Use Rural Development Moderate Income Limits

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Credit Information:Credit Score – Will consider extenuating circumstances for adverse credit history, with adequate supporting documentation.Collections and Charge Offs – Do not need to be paid if credit score is 620 or higher

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Funds for Closing:Seller Concessions – All closing costs and prepaids may be paid by seller concessions, up to 6%.Gifting – 100% gifting acceptable from disinterested third party (family, friend, employer)Cash Contribution – No minimum cash contribution from borrowers.

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Property Requirements:Eligible Areas – Property must be located in a Rural Development eligible area.Occupancy – Primary residence only & no Income Producing PropertiesProperty Type – Single family or Rural Development eligible condo/PUD.Manufactured Homes – Manufactured homes must be new and meet FMHCSS.

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Niche ProgramsCredit scores as low as 550203K Streamline (rehab loan)—Perfect for bank owned propertiesStated income loans with large paymentsNon-traditional credit accepted

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$8000First time

homebuyer tax credit

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$6500Non-First time homebuyer tax

credit

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What does OVM do for the homebuyer?Credit “clean up”On Time Guarantee for all ClosingsClosing Binders – a record of all your papers for the transactionBuilds relationship for future referrals

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How can OVM work for YOU?Open House Marketing Materials

Payment Options Promotions On site presence

Email and Internet Marketing FaceBook Twitter LinkedIn Text 2 Sell Broadcast Emails

Rate notificationsCo-op Gifts to Buyers

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Thank you for joining us today. We look forward to working with you and

your clients.

www.oldvamortgage.com

plain english mortgage guide

Real Estate