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A Guide to Home Financing

Lori

Customer

Table of Contents

Before You Look

4

The Costs of Purchasing a Home

4

Getting a Head Start: Prequalification

6

Choosing a Mortgage

7

Qualifying for a Mortgage

9

The Home Financing Process

11

Homeownership and Beyond

13

Loan Documentation

14

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We're here to help open the door to possibilities.

We know that there's a lot of pride and satisfaction that comes with owning your own home. It's a long-term investment that's at the center of your life, giving you a sense of stability and security. But we also know that buying a home can sometimes feel a little overwhelming. Which is why at Citizens One Home Loans?, we've dedicated ourselves to making home financing clear and easy to understand, so you can see your way forward with confidence.

We'll walk you through, step by step.

We'll guide you through the home financing process and provide you with all the information you need to make smart, informed decisions. We want to help you better understand the mortgage process and the types of financing options available to you, whether you're a first-time homebuyer or just haven't been through the mortgage process in a while. If you have questions about the information in this booklet or about home financing, speak with one of our mortgage loan officers. We're here to help you along the way to successful homeownership. It's never too early to explore your options.

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Before You Look

Financial preparation is the first ? and perhaps the most important ? step in the home buying process. And one of the first questions you'll need to answer is how much home you can afford. Your Citizens One loan officer can tell you how much financing you may be able to qualify for, but only you can decide how much you feel comfortable paying each month. Begin by taking a careful look at your household finances, including your savings, credit, income and debt. It's helpful to develop a monthly budget based on your current income and expenses so you can determine a realistically affordable mortgage payment. There are many useful tools and calculators available online, or you can ask your loan officer for assistance. Documenting your expenses and income will give you a clearer picture of your financial situation and help you prepare for the home buying process when the time comes to find a home loan.

The Costs of Purchasing a Home

Once you've taken a look at your monthly expenses, it's time to consider the actual costs of purchasing and maintaining a home.

Upfront Costs

Your upfront costs will typically include your down payment, the cost of the home inspection, your closing costs and moving expenses. The property listing agent may also ask you to put down a deposit, or earnest money, when you sign the purchase contract. This money will be credited back to your transaction at closing, but if you back out of the contract, you risk losing your deposit.

Down Payment Generally, down payment requirements range from 5% to 20% of the cost of the house, although some loan programs may offer smaller down payment requirements. However, for down payments less than 20%, you may also be required to pay mortgage insurance. If you are able to make a larger down payment, the initial equity you'll have in your home will be greater. Home Inspection A critical step in the home buying process is a home inspection. This is where you'll get a full picture of the home you are considering ? any possible defects or what repairs it may require. The cost of a home inspection may range from $200 to $900, depending on the rates where you live, but this unbiased examination of your potential new home is invaluable.

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Closing Costs Closing costs typically range from 2% to 6% of the loan amount depending on your area. These costs include fees charged by your state and local governments for the recording of documents as well as fees associated with origination and settlement of your mortgage. Some fees, like the cost of the appraisal, may be charged upfront by a lender before the loan closes. Moving Costs There are also costs associated with moving your household. Having your friends and family help you move can minimize the expense, but be prepared to pay for other things like the set up of new utilities such as cable and internet access.

Ongoing Costs of Homeownership

Homeownership truly does have some wonderful advantages. However, there are additional costs associated with being a homeowner that you may not incur as a renter. Be sure to consider these expenses in your monthly budget when deciding if owning a home is right for you. Your ongoing housing costs may include some or all of the following:

Monthly Mortgage Payment Your monthly mortgage payment will typically consist of principal, interest, and escrow. Escrow is money collected by the lender in order to pay your real estate taxes, homeowners hazard insurance, and if applicable, any flood insurance, mortgage insurance premiums, homeowner association dues or condo fees.

Real Estate Taxes A real estate agent or your locality's tax assessment office should be able to give you an idea of what the annual real estate tax would be on a home in your price range. Keep in mind that real estate tax rates and the home's assessed value can change from year to year, which could impact how much escrow you pay. The good news is real estate tax payments are often tax deductible, so remember to consult a tax advisor to determine your eligibility. Homeowners Hazard Insurance Homeowners hazard insurance coverage, also known as homeowners insurance, is required by all lenders to protect your home against loss due to legal liability, fire, theft, or natural causes. Not all types of peril are covered, so make sure you know what coverage your policy does provide. And, as you would for car insurance, shop around for the best rates and coverage that is right for you.

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