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W E L C O M E T O T H E

b u t r e m e m b e r e v e r y o n e i n v o l v e d w i l l h a v e t h e s a m e g o a l a s y o u ; t o g e t y o u i n y o u r d r e a m h o m e . T h e f i r s t s t e p “ P r e - A p p r o v a l ” i s t h e m o s t i m p o r t a n t & r e q u i r e s s i n p l e i n f o r m a t i o n . A s k l o t s o f q u e s t i o n & f e e l c o n f i -d a n t i n y o u r s e a r c h . Yo u r d r e a m h o m e i s c l o s e r t h a n y o u t h i n k .

The Mortgage Process can seem daunting

TAKE THE NEXT STEP: CONTACT A LOAN PROFESSIONAL. 1.

MORTGAGE PROCESS

2.

For most of us, buying a house means we´ll be getting a loan. Even though you may have a good start on your down payment and are sure you can qualify for a mortgage on your perfect home, taking a few easy steps in the early stages of your new home search could easily save you thousands of dollars over the course of your new home loan! A lot of factors will contribute to finding that perfect home. But these easy steps will help determine when you´ll be ready to buy and what kind of loan you´ll get.

Step 1: Start LookingFirst, start looking online at new homes and new home communities. Nothing fuels the "new home" fire like looking for the home that will improve your life and the life of your family. Look online, watch videos, show your family the ones you like and starting thinking about how wonderful your life and the life of your family is going to be once you´re in your new home. Looking at homes, writing down what you like and want to include in your new home is the best motivation of all.

Step 2: Pay Down Your DebtSecond, pay down whatever debt you can. Credit cards can kill your dreams of a new home. Every dollar of debt you reduce gets you one step closer to your new home. Start this with a few "quick victo-ries." Rather than paying off the big credit card with a huge balance, start with some of the small ones and pay them off quickly. As these little victories start to mount, you´ll get a feeling of accomplishment and be able to devote more money towards reducing the larger ones. Reducing your debt in whatever manner you´re able will favorably impact the interest rate you get on your loan because paying down debts will improve your credit score.

Step 3: Shape Up Your Credit ReportThird, get your credit report into top shape. For some of us this may take a little more time than for others, as we´ve all had some challenging times, but even the worst credit can be improved! Any improvement on your credit report will help lower your interest rate and secure you a better loan. Here are a few simple things on which to focus. First, don´t make any more

late payments. If you are making late payments and you start paying these bills on time your score could improve 40-50 points in one year. Second, pay off collections. Negotiate a settlement with the collection agency, do your best to get them to report the bill as paid as quickly as possible and move on. Removing all unpaid debts from your report will help. Third, correct all errors on your credit report by writing a letter to the Credit Reporting Agency (CRA) and asking them to verify payments. If they´re unable to do so, they´ll remove the information from your report and your score will increase. And finally, if you have any information on your credit report older than 7 years that isn´t related to a bankruptcy, ask the CRA to remove it.

Working on paying down debt and getting your credit score into “new home shape” can be slow and frustrating. When steps two and three start to get a little depressing, go back to step one and look at beautiful new homes and get re-motivated. The excitement about finally getting the home of your dreams and improving your family´s life will get you re-energized and re-focused on the best move of your life!

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BEFORE YOU BUY

THREE STEPSTO GET YOURFINANCES IN ORDER

YOUR MORTGAGE

FREQUENTLYASKEDQUESTIONSWhat is Prequalification? A process by which a potential home-buyer qualifies for a home mortgage before making an offer on a house. A lending institution agrees to make a loan in the specified amount to the person it has pre-qualified.

What is a Pre-approval Letter? The lender gives a commitment letter that states the lender agrees to provide a mortgage to a homebuyer. Commit-ment letters help you set realistic goals while you’re house-hunting, provide the same negotiating ability as a cash buyer and enable you to move quickly once the perfect home is found.

When a Lenders Refers to “PITI” What are They Referring to?PITI is Principal, Interest, Taxes and Insurance. It is the components of a monthly mortgage payment.

What are “Points” or “Origination Fees?” One point is equal to one percent of the loan amount. Points and origination fees are used to buy down the interest rate and might be tax deductible on purchase transactions.

How Does the Annual Percentage Rate Differ From the Interest Rate? The annual percentage rate (APR) is the effective rate of interest for a loan if the calculation is based on the origi-nal loan amount less the closing costs. This is the rate that will appear on your preliminary Truth-In-Lending. Please note that the APR is higher than the interest rate on your Real Estate Lien Note.

Do I Need to Have a Certain Amount of Money Left After I buy my Home? Most loan programs require a cash reserve sufficient enough to make the first two mortgage payments (PITI).

Will I get a Copy of my Appraisal? The appraisal will be sent to the customer before closing.

What is Private Mortgage Insurance (PMI)? PMI is insurance required to cover the lender should the borrower default on the loan. PMI is now tax deductible. PMI can be eliminated by having a down payment of at least 20%.

How do I Know What my Interest Rate will be? Upon your request, your loan officer will search for the lowest rate and “lock” your rate. The “lock-in” guarantees the home-buyer an interest rate provided the loan closes with that buyer and specified prop-erty within a set period of time. The prop-erty lock-in also specifies the number of points to be paid at closing.

What is the Debt-to-Income Ratio? A ratio used by lending institutions to determine whether a person is qualified for a mortgage. Debt-to-income is the total amount of debt, including credit cards and other loans, divided by total gross monthly income.

What is the Difference Between a FHA and a VA Loan? A FHA loan is a loan guaranteed by the Federal Housing Administration. FHA issues specific guidelines for mortgages. A VA loan is a loan guaranteed by the Veterans Administration. To obtain a VA loan, the borrower must have served in the Armed Forces.

Why did I receive a Truth-In-Lending? Truth-In-Lendings are sent to all borrow-ers after a loan application has been made, regardless of whether they have a

contract on a property. The Truth-In- Lending Act is a federal law requiring lenders to reveal all of the terms of a mortgage. The APR that appears on the Truth-In-Lending will be higher than the interest rate on your Real Estate Lien Note.

What Inspections are Required by the Lender? The lender requires an appraisal on all transactions. A clear termite report is only required by FHA if the contract being signed calls for it. Otherwise, it is not required. If the appraiser recommends repairs or if repairs are mentioned in the contract, the lender will require that those repairs be done before closing. The appraiser will then perform a final inspection to ensure that the repairs were completed. Appraisers seldom require repairs. If the termite report recommends treatment, treatment is required.

Where do I go for Closing?Your closing will take place at the title company. The name and address will be given to you by your loan consultant and/or attorney when your loan is clear to close.

Where do I Send my First Mortgage Payment?Refer to your “First Payment Letter” in your closing documents to deter-mine where to send your first mort-gage payment. If you receive a state-ment from your new lender prior to the due date of your first payment, send your payment to the new lender.

3.

WHY YOU SHOULD PURCHASE A

The biggest reason to buy a new home, especially if you´re currently renting, is pride of ownership. Stepping out of an apartment or leased property and into your own home is the first step toward building your personal or family wealth. For most families, their home and other real estate holdings account for as much as 84% of their total wealth. Buying a home gives you the peace of mind that you´re doing the right thing for your family, gives your children a place to set roots and grow up in and lets you start making the memories you and your family will hold for years to come. In addition to the good home ownership does for your heart, it makes sense for your head and bank account too!

The second reason to buy a new home is purchasing power. Today you´ll get more home for the money than you did as recently as a few years ago! The recent glut of developed home sites coupled with relatively few builders capable of building homes on them has made home sites less expensive. Lower home site cost means you´ll spend less on the same size home sitting on that lot than you would two years ago. Also, the cost of

labor in some areas has fallen, and builders have passed these savings on to you. Finally, builders with available inventory have gotten very aggres-sive in their base pricing, upgrade pricing and many are offering significant new home discounts and home buyer incentives saving you thousands.

Energy efficiency is the third reason to purchase a new home. Comparing the energy saving features in today´s homes like radiant barri-er, programmable thermostats, added insulation, vinyl windows and the higher SEER air condition-ing and heating systems can save 30-40% on utility bills compared to a used home that was built as recently as four or five years ago. This benefits you in several ways. You´ll have more money each month to save or spend on things like vacations or education. You may decide to use those monthly savings to get a bigger or better home. Every $100 per month increase in your mortgage payment allows you to get $20,000 more new home! Also, when it comes time to sell your home, these energy saving features will become very important. In five years buyers will expect energy saving features in their home purchases, new or used, and refitting a

At first glance, there seems to be one big reason to buy a new home instead of a used home: it´s new! Most of us like new things like cars, clothes and shoes! The real benefits of purchasing a new home lie just below the surface.

New Home Instead of a Used Home.

5.

home that doesn´t have these features could cost thousands. Energy saving features are standard in new homes today and can save you thousands of dollars a year.

Neighborhood amenities are the fourth reason to buy a new home. Today´s neighborhoods are carefully designed with your lifestyle in mind. Many communities feature amenity centers, pools or splash parks, workout rooms, theaters and family fun nights all designed to improve the quality of a family´s life. These lifestyle elements not only enhance your life, but will make your home easier to sell when the time comes for your next new home.

Today´s new homes are also often built near new schools. These new schools often have a strong community identity, are often staffed by neighbor-hood residents and many times have exceptional funding and modern facili-ties and equipment. The student body draws heavily from the neighborhood and sending your children to these new schools prepares them both socially and academically for their future. Nearby schools also create resale value and can accelerate the sale of your home when you´re ready to move. Schools are the fifth great reason to buy a new home!

Safety is the sixth reason to purchase a new home. Today´s new codes insure that your new home will be built out of the safest building materials available today. These new highly developed "green building" materials will save you money, will not harm your family or the environment and help you with resale in the future. Today´s building codes regarding structure, plumbing, venting and electrical wiring also insure that your home is being built using the safest techniques

currently known, giving you the peace of mind that you´re giving your family the safest and most secure environment available today.

Other reasons to purchase a new home instead of a used home include the new security systems available or included in many new homes, the technological connectivity that is wired into today´s homes, the lower maintenance cost of new homes today and finally, the exciting style and design options you´ll enjoy in your new home. We´ve all known for years that new is better than used- now we just have a few more reasons why!

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The first term you'll hear as you're walking up to a home is "elevation." It refers to how the home looks from the front. The elevation of a home is the façade of a home. New Home Builders will offer several different "elevations" for the front of your new home. In most cases, one or two of these "elevations" are included in the base price of the home, and there are others that you can add for a price.

NEW HOMEVOCABULARY ELEVATION

/ el-uh-vey-shuhn / .n 1.

1. Pride of Ownership 2. Purchasing Power 3. Energy Efficiency 4. Neighborhood Amenities 5. Built Near Schools 6. Safety 7. New Security Systems 8. Technological Connectivity 9. Lower Maintenance Cost 10. Exciting Style & Design Options

1. Copies of your W-2s and Tax Returns for last two years.

2. Copies of paycheck stubs for last 30 days (most current).

3. Copies of checking and saving account statements for last two months.

4. Copies of quarterly or semi-annual statements for checking, savings, IRAs, CDs, money market funds, stock, 401K, Profit Sharing etc.

5. Copy of Sales Contract when available.

6. Employment history last two years (address any gaps)

7. Residency history last two years, with phone number, address and account number of Land-lord or Mortgage company. Copies of leases or mortgage info.

8. Canceled earnest money check or corresponding bank statement.

9. Refinance Copy of Note, Deed of Trust, Settlement Statement, Survey.

10. Any assets used for down payment, closing cost and cash reserves must be documented.

11. If paid off mortgage in the last year, need copies of HUD1.

12. If own 25% or more of a business, need company tax returns for last 2 years.

13. Copy of social security card and drivers license.

Documents which may be required:

Documents Needed for FHA/VA Loans:

DOCUMENTS NEEDED FOR L O A N A P P L I C A T I O N S

1. Relocation Agreement if move is financed by employer, i.e. buyout agreement plus documentation outlining company paid closing costs benefits.

2. Previous bankruptcy, need copies of petition for bankruptcy and discharge, includ-ing supporting schedule.

3. Divorce Decree if applicable.

4. Documentation supporting moneys received from social security & retirement trust income, i.e. copies of direct deposit bank statements, awards letter, evidence income will continue.

1. FHA: Copy of Social security card & drivers license of applicant and co-applicant.

2. VA: Original Certificate of Eligibility & copy of DD214 Discharge Paper.

3. VA: Name and address of nearest living relative.

6.

7.

Also, check the policy's legal description of the land against your survey and your earnest money contract. Title insurance generally does not protect against boundary disputes with neighbors. However, this coverage is available for purchase for an additional premium.

WHAT A TITLE POLICY DOESN’T COVER In general, a title policy won't cover problems with your title that occur after the date you purchased the policy, nor will it protect you from problems that you create or from problems unrelated to your or the lender's property interests. Your policy also will not cover any special exceptions - such as a public utility easement - added by the title company during the title examination process. These exceptions must be listed in Schedule B of your policy. The company must make you aware of each exception and describe it using common language so that you can easily locate the reason for the exception in public records.

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THE TWO PARTS OF TITLE INSURANCE:

WHAT IS T I T L E I N S U R A N C E ?

MORTGAGEE AND OWNER POLICIES The two most common types of title policies are "mortgagee policies," which protect lenders, and "owner policies," which protect property buyers. Most lending institutions won't loan you money to buy a house or other property unless you purchase a mortgagee policy. This policy will repay the balance of your mortgage if a claim against your property voids your title. Mortgagee policies remain in effect until the loan is repaid.

Owner polices insure property owners against specific kinds of claims listed in the policy. When you buy a house and purchase a mortgagee policy, a title company will automatically issue an owner policy - for a set premium - unless you specifically reject it in writing.

An owner policy remains in effect as long as you or your heirs own the property or are liable for any title warranties made when you sell the property. You should keep your owner policy, even if you transfer your title or sell the property.

Different companies may describe their coverage exceptions differently. It's important for you read your policy carefully. Pay special attention to "Schedule B" of the policy, which explains any limitations, exclusions, exceptions, and special conditions. You may want to discuss these excep-tions with an attorney before you close on a real estate deal.

Title insurance provides protection against title defects that were unknown at the time of policy purchase. The term "title" refers to the collected ownership records of a piece of real estate, including the transfer of property rights and loans using the property as collateral. A clear line of title makes you much less vulnerable to ownership claims from other parties and to outstanding debts of previous property owners. Before writing a policy, a title com-pany will check for defects in your title by examining public records, including deeds, mortgages, wills, divorce decrees, court judgments, tax records, liens, encumbrances, and maps. The title company will defend in court any claims to the property that are covered by your policy. If the company loses, it will pay you for covered losses up to the amount of your policy. Title companies handle the home closing and hold the earnest money in a trust account until the purchase is complete.

What Does a New Home Cost? One question that seldom gets asked before you start shopping is "What does a new home cost"? The first thing to do is clear up the confusion that exists between the price of a home and the cost of a home! The price of new homes in most cities gener-ally ranges from the low $100,000´s to several million dollars. Since very few people buy houses for cash, you´ll most likely be getting a loan (mort-gage) for your home and paying a monthly payment, so the price of a home and the monthly cost of a home are two very different things. Most of us will concentrate on how well a monthly payment fits into our family budget. Depending on your loan´s interest rate, new home monthly payments range between .75% to somewhere around 1.15% of the purchase price of the home. So, on a $200,000 home your monthly payment could range from $1,500 to $2,300 every month. You´ll also have to add insurance and local taxes to this number to get the final payment. One way to dramatically reduce your down payment is to put more money down on your home. The bigger the down payment, the lower your monthly payments will be.

How Much Money is Required Upfront? There is some upfront money you´ll need to collect to purchase your new home. The down payment is the amount of money you´ll need to provide at the onset of the transaction. A down payment demonstrates your ability to obtain funds to start the transaction and insures the lending institution that there is some collateral they can retain in the event that that you default on the loan. A down payment will be between 3% and 20% of the purchase price of your home.

Putting as much money down as you can on a new home has a dramatic effect on your monthly home payment because it reduces the amount of the loan and will most likely get you a lower interest rate. These two factors along could save you hundreds of dollars each month. You´ll also need to have to pay closing costs. These costs include attorney´s fees, brokerage commissions, title service cost, recording fees, survey fees, mortgage, appraisal and inspec-tion fees and some taxes and home owner´s associa-tion dues, if applicable. These costs will total between 1% and 8% of the total price of the home, though they generally total between 2-3%.

Now that you´ve decided that it´s time to buy a new home where do you start? A great place to begin is to sit down and determine how much home you can afford and what it takes to purchase a home. Buying a new is home is an easy and exciting process once you know your perfect price!

8.

MODEL HOME / mod-l . hohm / .n

NEW HOMEVOCABULARY

4.

A Model Home is built as an example of what your new home could look like. Model Homes are created as show pieces to let you fall in love with the possibilities of your new home. The new home builder lays out several different choices for you to consider. Usually the model is built with all the options included and with a popular floor plan, but your new home will be all yours with the options & floor plan you want.

How Much Should I Put Down? There are some quick "rules of thumb" which can get you in the ballpark, but should not replace a detailed meeting with your financial analyst. Most people can afford a home priced at three times their annual household income. If you have little or no debt, and can put 20% down on your home, you may be able to afford a home valued at 4X your annual income. Finally, you´ll need to show the bank that you´ve got a solid employment history.

With the increasing price of rental property today, getting a house at the above prices is a great deal, but new home builders are consistently sweetening new home deals with steep discounts and very aggressive incentives. If you can find a home that has a builder discount or special included, you´ll do even better. Builders are also often willing to assist with your closing costs, and may have their own mortgage companies that will help you through the process. It´s always a good thing to start working with a mortgage company as soon as possible on your purchase so they can exhaust all avenues to make sure you get the best deal on your new home.

Finding the perfect home starts with finding the perfect payment!

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“We recommend it to everybody because it really is a way to visually identify the things I would want to see in a home.”

“The kinds of homes, I thought, I would never ever live in. Always would dream of, but never thought I could actually work hard enough to live in a home like that.”

”When we saw the neighborhood, I thought well let me go look at this online, on the Hot On Homes website. It was really easy to use. We picked out a number of different things we would want in a home and it pulled up a number of different build-ers. That’s what really drove it home for us, that sealed the deal.”

“Using Hot On! Homes was the best move of my life.”

- Er ic Houston

Joined & Found his home with hotohomhomes.com

I found my home on Hot On! Homes and so can you.

“”

E R I C H O U S T O NHOME SHOPPER CLUB MEMBER

9.

MORTGAGED I C T I O N A R YADJUSTABLE—RATE MORTGAGE (ARM)Mortgage in which the rate of interest is adjusted based on a standard rate index. Most ARM’s have a cap on how much the rate may increase.

AMORTIZATIONThe process through which the mortgage debt is altered, usually declining, as payments are made to the lender. Negative amortization” occurs when monthly payments are too small to cover either the principal or interest reductions.

ANNUAL PERCENTAGE RATE (APR)The rate of interest to be paid on a loan projected life; sometimes referred to as the “true” rate of interest.

APPRAISALA professional evaluation of the value of a home or other piece of property. It is often required by the lender.

BALLOON MORTGAGEA real estate loan in which some portion of the debt will remain unpaid at the end of the term of the loan. A balloon will usually result in a single large payment due when the loan ends.

CAPA limit on how much a mortgage interest rate may increase or decrease for an adjustable rate mortgage.

CONVENTIONAL MORTGAGEA home loan that follows a fixed rate.

DEBT-TO-INCOME RATIOA ratio used by lending institutions to determine whether a person is qualified for a mortgage. Debt-to income is the total amount of debt, including credit cards and other loans, divided by the total gross monthly income.

DEFAULTFailure to pay the mortgage payments over a specified period of time.

DISCOUNT POINTSA percentage of the mortgage paid to the lender to lower the interest rate on a loan. One point equals one percent of the mortgage.

EQUITYThe difference between the market value of a house and the amount still owed on the mortgage.

ESCROWMoney and documents deposited in a trust account to be held by one party for another. Often used by brokers to hold deposit money prior to closing. Also used by lenders to hold money for taxes and insurance on a home.

FHA LOANA loan guaranteed by the Federal Housing Administration. FHA issues specific guidelines for mortgages.

LOAN-TO-VALUE RATIO (LTV)The amount of the loan divided by the purchase price of the house. If a refinance, the loan is divided by appraised value.

MARGINA set number of percentage points a lender adds to the index to determine the interest rate for an ARM.

MORTGAGE INSURANCE (MI)Insurance designed to cover the lender should the borrower default on the loan. Depending on the loan to value, this may be required by the lender.

PAPER TRAILCopies of all paperwork to cover the lender should the borrower default on the loan.

PITIPITI stands for principal, interest, taxes and insurance. These are the four mortgage categories in which money is held in escrow.

POINTSAn interest fee charged by the lender. One point is equal to one percent of the mortgage. The use of points allows the lender to raise its yield above the apparent interest rate.

PREPAYMENT PENALTYA fee imposed on a borrower who pays off a mortgage before it is due.

PREQUALIFICATIONA process by which a potential homebuyer qualifies for a home mortgage before making an offer on a house. A lending institution agrees to make a loan in a specified amount to the person it has prequalified.

PRINCIPALThe amount of the loan.

SECOND MORTGAGEAn additional mortgage on a property. It often carries a shorter term and a higher interest rate than the original mortgage.

TITLE COMPANYA company that searches for titles and insurance claims. Your loan will close at a title company.

TRUTH IN LENDING ACTA federal law that requires lenders to reveal all the terms of the mortgage.

VA LOANA low income loan guaranteed by the Veterans Administration. To obtain a VA loan, the borrower must have served in the Armed Forces.

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