Planning for Homeownership - SunTrust

Planning for Homeownership

A Step-by-Step Guide for Homebuyers

1

A STEP-BY-STEP GUIDE FOR HOMEBUYERS

Planning for Homeownership

Your Guide

Preparing for your home purchase

02 Am I really ready to buy a home? 03 Can I afford to buy a home? 05 Will I qualify for a loan? 07 What types of mortgages are available? 09 Which mortgage best fits my needs?

Shopping for your home

10 How do I start my home search? 11 I've found my home, what's next?

Buying and closing on your home

12 How do I apply for a loan? 13 What happens at closing? 14 What comes next?

Planning tools

15 Monthly household budget worksheet 17 Maximum loan amount worksheet

We're here to guide you through the mortgage financing process.

Owning a home is one of life's largest financial milestones. For many, it is the culmination of years of hard work and dedication. At SunTrust Mortgage, we're proud of what our skilled mortgage professionals have achieved for our clients as a part of that process. Our team is committed to more than just originating loans. We strive to understand and deliver on the unique financial needs of our clients.

This Planning for Homeownership Guide provides important information about some of the major steps in the home financing process. Buying a home isn't something you do every day, so it's no surprise that you may have a lot of questions. Even if you're an experienced buyer, you may need a refresher, since your personal situation and the market environment may have changed since your last move.

When you have questions, just call us. Our experienced loan officers help homebuyers become homeowners every day. They have the tools, training, experience and dedication to help you find the mortgage solution that best aligns with your goals.

PREPARING FOR YOUR HOME PURCHASE

2

Am I really ready

to buy a home?

You could be--it just takes some strategic planning.

There are many factors to consider when making a big investment like purchasing a home. You may need to make adjustments to your spending and saving and think about how owning a home will affect your long-term plans.

Sometimes the timing is right, and sometimes it isn't.

There are many rewards and risks that come with owning a home. Only you can decide whether or not buying a house makes sense in your situation.

Rewards:

? Enjoy a sense of pride and accomplishment in owning your own home.

? You could take advantage of significant tax benefits. Consult a tax advisor to discuss your specific situation.

? While rent may increase over the years, total monthly payments of principal and interest won't increase if you choose a mortgage program with a fixed-rate.

? Your home may increase in value over time.

Risks:

? You are responsible for maintenance and repairs.

? Your home may decrease in value over time.

? If you fail to make your monthly payments, you may risk foreclosure.

Key Terms

A mortgage is the agreement used to pledge a home or other real estate as security for a loan.

A fixed-rate mortgage has an interest rate that remains the same for the term of the loan. While the total monthly principal plus interest payment will stay the same on a fixed-rate loan, payments made earlier in the life of the loan will be made up of mostly interest and very little principal. This ratio shifts as the loan matures.

Foreclosure is a procedure in which a mortgaged property is sold to pay the outstanding debt in case of default.

3

PREPARING FOR YOUR HOME PURCHASE

Can I afford to

buy a home?

You can find out by assessing your income and spending habits.

Establishing a realistic budget can help you:

1. Determine what you can afford to pay monthly for a home.

2. Understand if you can afford the

upfront and ongoing expenses

associated with homeownership.

3. Develop a plan to save money to buy a home or for other financial goals, such as retirement or education expenses.

Use the budget worksheets on pages 15?16 to track your projected and actual monthly expenses.

Once you have a clear picture of your total monthly debt payment, you can then use the worksheet on page 17 to estimate the most you should spend on monthly mortgage payments, as well as the maximum amount you should borrow. The estimate is based on your current income and standard qualifying guidelines.

Be sure you understand the full cost of owning a home.

The total cost of homeownership includes one-time expenses such as the down payment, closing costs and moving costs--plus recurring monthly expenses like your mortgage payment, condo fees/homeowner association dues, utilities, interior/exterior repairs and general upkeep. Lastly, if you have a home to sell, additional expenses may include repairs or renovations to increase the value of your existing home and real estate agent commissions.

On the next page you will find more detailed information on these costs and how they affect the price of your home.

Key Terms

A down payment is equal to the difference between the sale price of the real estate and the mortgage amount.

Closing costs are fees paid to affect the closing of a loan. They include loan costs such as origination fees, discount points, title insurance fees, survey fees and attorney's fees; and other fees such as government fees, prepaids, initial escrow payment at closing and HOA dues, if applicable.

A typical mortgage payment is made up of principal + interest + escrows.

The principal portion of your mortgage payment is used to repay part of your outstanding principal balance (or loan amount), excluding interest.

The interest portion of your mortgage payment is the fee you pay to the lender for using the lender's money. Together, the principal and interest payment is referred to as "P&I."

The escrow portion of your mortgage payment is money collected by the lender that is deposited into an escrow account to pay the annual real estate taxes, property insurance and, if applicable, any mortgage insurance premiums or flood insurance. (See page 7 for more on mortgage insurance.) Together, the principal, interest, taxes and insurance payment is referred to as "PITI."

PREPARING FOR YOUR HOME PURCHASE

4

Know that a down payment plays a key role in monthly affordability.

Most mortgage programs require you to pay a percentage of the cost of the home upfront from your own cash or funds. The down payment amount will depend on the mortgage program that you qualify for. Typically, down payment requirements can range from 0?20% of the cost of your home, however a larger down payment may be required in certain circumstances.

The example below uses a $100,000 purchase price to illustrate how your down payment impacts the amount of money you will need to borrow for your home purchase. You'll notice there is a trade off--the more you can afford to put toward a down payment, the lower your total loan amount becomes, which ultimately means lower monthly mortgage payments.

Be knowledgeable about the fees you'll pay.

In addition to the down payment, there are other fees and expenses, called closing costs, that can add up. Once you have submitted your Loan Application, within three (3) business days your lender will issue a Loan Estimate, which is a list of most of the closing costs you'll have to pay. At least three (3) business days before closing, you will see these fees again on your Closing Disclosure, where they will no longer be estimates, but rather, final figures. On the next page, you'll find a list of typical closing costs.

Key Terms

A Loan Application is an initial statement of a borrower's personal and financial information which is used to review a request for credit.

A Loan Estimate provides borrowers with a good faith estimate of credit costs and loan terms, and is given to the borrower within three (3) business days after the lender receives a loan application.

The Closing Disclosure is a document that provides the actual terms and costs of the loan. The borrower receives it at least three (3) business days before the closing.

Percent Down

Multiplied by Purchase Price

Down Payment (DP)

Total Loan Amount

20%

$100,000 X .20

$20,000

$80,000

.............................................................................................................................................................

10%

$100,000 X .10

$10,000

$90,000

.............................................................................................................................................................

5%

$100,000 X .05

$5,000

$95,000

.............................................................................................................................................................

TIP Worried about finding the funds for your down payment? Talk to your SunTrust Mortgage Loan Officer to learn about smart ways to save, which programs allow third-party contributions or gift funds*, and whether or not you qualify for 100% financing** or state-sponsored down payment assistance programs.

* Gift funds may fund all or part of the down payment, closing costs or financial reserves subject to product requirements. ** 100% mortgage financing will result in no property equity until such time as the loan principal is paid down through regular mortgage payments and/or the property value appreciates.

If property values decline you could owe more than your property's value. A down payment may be required if the property is located in a declining market or if required by state regulations.

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download