Plain English Mortgage Guide<br />Old Virginia Mortgage has put together a great briefing to help you gain a basic knowled...
 Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />2<br />
Times are drastically different TODAY than just one year ago.<br /> Home Mortgages:Adapting to a Changing Environment <br ...
Why?<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />4<br />
Four types of Mortgage Companies<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />...
Brokers<br />Shop lenders – do not have $$<br />Do not do their own underwriting<br />Do not necessarily have control on c...
“Big Boys”<br />Example: <br />Bank of America<br />USAA/NFCU<br /> Home Mortgages:Adapting to a Changing Environment <br ...
Internet <br />Lenders<br />Ditech, Quicken<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgag...
Correspondent <br />Lenders<br />Local Banks, oldvamortgage, etc<br /> Home Mortgages:Adapting to a Changing Environment <...
Five types of Loans<br /><ul><li>Conventional
FHA
VA
VHDA
Rural Development</li></ul> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />10<br />
New Loan Limits<br />FHA, VA & Conventional Loans:<br />Up to $458,850 loan amounts<br /> Home Mortgages:Adapting to a Cha...
Conventional Loans:<br />A variety of conventional loans are available from investors associated with Old Virginia Mortgag...
Conventional Loans:<br />20 % down with good credit<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldv...
Conventional Loans:<br />Types of Conventional Financing:<br />Fixed Rate: loans are those where the principal and interes...
FHA Loans:<br />The Federal Housing Administration (FHA) mortgage loan program was originally established in 1934 to assis...
FHA Loans:<br />General Information<br />The maximum base loan in the Hampton Roads area is $458,750. (may change 2010)<br...
FHA Loans:<br />Advantages of FHA Financing<br /><ul><li>Lower down payment
High qualifying ratios—31% and 43% of gross income
Gift 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.</li></ul> Home Mortgages:Adapting to a Changing Environment <br...
FHA Loans:<br />Sellers are allowed to contribute up to 6% of the Sales Price. <br />Seller may pay the following:<br /><u...
Prepaids
Discount Point
Buy-down Fees
Up-front MIP
First year advance payments of property taxes
Home owners Associations Dues</li></ul> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br /...
FHA Loans:<br />Enticement (concessions) value must be deducted from the sales price.  These may be:<br /><ul><li>Cars, bo...
Decorating allowances
Moving expenses
Excess rent credit</li></ul> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />19<br />
FHA Loans:<br />Occupancy requirements: <br />At least one borrower must occupy the property. Non-occupant co-borrowers mu...
FHA Loans:<br />Down Payment: <br />FHA requires a minimum 3.5% investment in the purchase transaction.  <br /> Home Mortg...
FHA Loans:<br />Terms:<br />15-30 years in 5 year increments<br /> Home Mortgages:Adapting to a Changing Environment <br /...
FHA Loans:<br />Mortgage Insurance Premium (MIP): Upfront MIP is required on all FHA loans regardless of the down payment....
FHA Loans:<br />Bankruptcy:<br />Buyers may be eligible for FHA financing depending on the circumstances and the amount of...
FHA Loans:<br />Seller Concessions: <br />The seller can pay up to 6% of the sales price towards the buyers’ closing costs...
VA Loans:<br />The Department of Veterans Affairs agrees to “guarantee” a portion of the loan in case of default.  Individ...
VA Loans:<br />General Information<br /><ul><li>The maximum VA loan is the same as the FNMA Conforming Limit of $458,750 f...
 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...
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Plain English Mortgage Guide

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Basic Mortgage Information for the Buyer

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Plain English Mortgage Guide

  1. 1. Plain English Mortgage Guide<br />Old Virginia Mortgage has put together a great briefing to help you gain a basic knowledge of the mortgage industry, products, and eligibility requirements. <br />This is just a guide and you should consult a mortgage professional for your own answers.<br />Dennis Blackmore, REALTOR® 757-343-4949 – EMAIL: homes@757re.com<br />Chip Simkins, Senior Vice President<br />EMAIL: chip@oldvam.com<br />(757) 409-9079 Mobile<br />(757) 216-8245 Fax<br />1<br />
  2. 2.  Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />2<br />
  3. 3. Times are drastically different TODAY than just one year ago.<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />3<br />
  4. 4. Why?<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />4<br />
  5. 5. Four types of Mortgage Companies<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />5<br />
  6. 6. Brokers<br />Shop lenders – do not have $$<br />Do not do their own underwriting<br />Do not necessarily have control on closing<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />6<br />
  7. 7. “Big Boys”<br />Example: <br />Bank of America<br />USAA/NFCU<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />7<br />
  8. 8. Internet <br />Lenders<br />Ditech, Quicken<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />8<br />
  9. 9. Correspondent <br />Lenders<br />Local Banks, oldvamortgage, etc<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />9<br />
  10. 10. Five types of Loans<br /><ul><li>Conventional
  11. 11. FHA
  12. 12. VA
  13. 13. VHDA
  14. 14. Rural Development</li></ul> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />10<br />
  15. 15. New Loan Limits<br />FHA, VA & Conventional Loans:<br />Up to $458,850 loan amounts<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />11<br />
  16. 16. Conventional Loans:<br />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.<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />12<br />
  17. 17. Conventional Loans:<br />20 % down with good credit<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />13<br />
  18. 18. Conventional Loans:<br />Types of Conventional Financing:<br />Fixed Rate: loans are those where the principal and interest payments remain the same for the entire term of the loan.<br />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.<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />14<br />
  19. 19. FHA Loans:<br />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. <br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />15<br />
  20. 20. FHA Loans:<br />General Information<br />The maximum base loan in the Hampton Roads area is $458,750. (may change 2010)<br /> <br />FHA requires and “Upfront Mortgage Insurance Premium” (UFMIP). This MIP can be financed on top of the base loan amount.<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />16<br />
  21. 21. FHA Loans:<br />Advantages of FHA Financing<br /><ul><li>Lower down payment
  22. 22. High qualifying ratios—31% and 43% of gross income
  23. 23. Gift funds from a relative for the entire down payment and closing costs are acceptable.
  24. 24. Absence of non-occupant co-borrower restrictions. FHA allows unrelated co-borrowers and non-occupant co-borrowers.
  25. 25. Seller concessions of up to 6% of the sales price.
  26. 26. No restrictions on income, assets or prior home ownership.</li></ul> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />17<br />
  27. 27. FHA Loans:<br />Sellers are allowed to contribute up to 6% of the Sales Price. <br />Seller may pay the following:<br /><ul><li>Closing Costs
  28. 28. Prepaids
  29. 29. Discount Point
  30. 30. Buy-down Fees
  31. 31. Up-front MIP
  32. 32. First year advance payments of property taxes
  33. 33. Home owners Associations Dues</li></ul> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />18<br />
  34. 34. FHA Loans:<br />Enticement (concessions) value must be deducted from the sales price. These may be:<br /><ul><li>Cars, boats, lawn mowers, etc. given by the seller
  35. 35. Decorating allowances
  36. 36. Moving expenses
  37. 37. Excess rent credit</li></ul> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />19<br />
  38. 38. FHA Loans:<br />Occupancy requirements: <br />At least one borrower must occupy the property. Non-occupant co-borrowers must be blood relatives. <br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />20<br />
  39. 39. FHA Loans:<br />Down Payment: <br />FHA requires a minimum 3.5% investment in the purchase transaction. <br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />21<br />
  40. 40. FHA Loans:<br />Terms:<br />15-30 years in 5 year increments<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />22<br />
  41. 41. FHA Loans:<br />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. <br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />23<br />
  42. 42. FHA Loans:<br />Bankruptcy:<br />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. <br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />24<br />
  43. 43. FHA Loans:<br />Seller Concessions: <br />The seller can pay up to 6% of the sales price towards the buyers’ closing costs, prepaids points, buydowns, etc. <br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />25<br />
  44. 44. VA Loans:<br />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. <br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />26<br />
  45. 45. VA Loans:<br />General Information<br /><ul><li>The 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.
  46. 46.  Maximum term is 30 years.
  47. 47.  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.
  48. 48.  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.</li></ul> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />27<br />
  49. 49. VA Loans:<br />Advantages of VA Financing<br /><ul><li>100% Financing
  50. 50. VA credit underwriting criteria is among the most liberal in the industry.
  51. 51. Closing costs payable by the veteran are strictly regulated and are generally less than those associated with alternative financing forms.
  52. 52. Seller concessions can go up to 4%. Normal discount points and closing costs paid by the seller are not considered a concession.</li></ul> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />28<br />
  53. 53. VA Loans:<br />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:<br /><ul><li>VA Funding Fee
  54. 54. Prepaids
  55. 55. Buy Downs
  56. 56. Gifts, such as television or microwave
  57. 57. Payoff of credit balances on behalf of the buyer</li></ul> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />29<br />
  58. 58. VA Loans:<br />Funding Fee:<br /><ul><li>100%-95.01% LTV…2.15% FOR 1ST time</li></ul> …3.3% Subsequent use<br /><ul><li>95%-90.01% LTV….1.5%
  59. 59. 90% or less LTV…1.25%</li></ul> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />30<br />
  60. 60. VA Loans:<br />Bankruptcy or CCCS (Consumer Credit Counseling Service) Plans:<br /><ul><li>Buyers who have declared bankruptcy may still be eligible for VA Financing depending on the time since discharge and the circumstances
  61. 61. 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
  62. 62. Chapter 13 & CCCS Plans: Acceptable if 12 consecutive payments have been made on the repayment plan. </li></ul> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />31<br />
  63. 63. VA Loans:<br />MAY have more than one VA home loan<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />32<br />
  64. 64. VHDA Loans:<br />Income Limits:<br /><ul><li>2 or less in a household $63,000
  65. 65. 3 or more in a household $73,000</li></ul> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />33<br />
  66. 66. VHDA Loans:<br />Borrower may not have owned property in the last three years.<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />34<br />
  67. 67. VHDA Loans:<br />FHA Plus (a VHDA product):<br /><ul><li>Two loans provide financing: FHA 1st mortgage PLUS a 2nd mortgage for down payment and closing costs
  68. 68. 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</li></ul> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />35<br />
  69. 69. VHDA Loans:<br />Federally Targeted Areas in Virginia<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />36<br />
  70. 70. USDA Program<br />Guaranteed Rural Housing Loans<br />USDA Loan Program Benefits:<br /><ul><li>Financing – No down payment
  71. 71. Term – 30 year fixed
  72. 72. Mortgage Insurance – No monthly mortgage Insurance
  73. 73. Typical Closing Costs – May be financed if supported by appraisal
  74. 74. First Time Homebuyer – No first-time homebuyer requirement
  75. 75. Maximum income – Use Rural Development Moderate Income Limits</li></ul> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />37<br />
  76. 76. USDA Program<br />Guaranteed Rural Housing Loans<br />Credit Information:<br />Credit Score – Will consider extenuating circumstances for adverse credit history, with adequate supporting documentation.<br />Collections and Charge Offs – Do not need to be paid if credit score is 620 or higher <br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />38<br />
  77. 77. USDA Program<br />Guaranteed Rural Housing Loans<br />Funds for Closing:<br />Seller Concessions – All closing costs and prepaids may be paid by seller concessions, up to 6%.<br />Gifting – 100% gifting acceptable from disinterested third party (family, friend, employer)<br />Cash Contribution – No minimum cash contribution from borrowers.<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />39<br />
  78. 78. USDA Program<br />Guaranteed Rural Housing Loans<br />Property Requirements:<br />Eligible Areas – Property must be located in a Rural Development eligible area.<br />Occupancy – Primary residence only & no Income Producing Properties<br />Property Type – Single family or Rural Development eligible condo/PUD.<br />Manufactured Homes – Manufactured homes must be new and meet FMHCSS.<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />40<br />
  79. 79. USDA Program<br />Guaranteed Rural Housing Loans<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />41<br />
  80. 80. Niche Programs<br /><ul><li>Credit scores as low as 550
  81. 81. 203K Streamline (rehab loan)—Perfect for bank owned properties
  82. 82. Stated income loans with large payments
  83. 83. Non-traditional credit accepted</li></ul> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />42<br />
  84. 84. $8000<br />First time homebuyer tax credit<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />43<br />
  85. 85. $6500<br />Non-First time homebuyer tax credit<br /> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />44<br />
  86. 86. What does OVM do for the homebuyer?<br /><ul><li>Credit “clean up”
  87. 87. On Time Guarantee for all Closings
  88. 88. Closing Binders – a record of all your papers for the transaction
  89. 89. Builds relationship for future referrals</li></ul> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />45<br />
  90. 90. How can OVM work for YOU?<br /><ul><li>Open House Marketing Materials
  91. 91. Payment Options
  92. 92. Promotions
  93. 93. On site presence
  94. 94. Email and Internet Marketing
  95. 95. FaceBook
  96. 96. Twitter
  97. 97. LinkedIn
  98. 98. Text 2 Sell
  99. 99. Broadcast Emails
  100. 100. Rate notifications
  101. 101. Co-op Gifts to Buyers</li></ul> Home Mortgages:Adapting to a Changing Environment <br />www.oldvamortgage.com<br />46<br />
  102. 102.  Thank you for joining us today. We look forward to working with you and your clients.  <br />www.oldvamortgage.com<br />47<br />

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