First Time Home Buyer Guide

First Time HomeBuyer Buy a New Home inMaryland 1920 GreenspringDr. Timonium, MD21093 443-531-9715 www.marylandnewhomepurchase.com Guide Book 1

Table of Contents CreditScores HomeAffordability Steps to Buying aHome LoanTypes 2 Down PaymentHelp FAQ’s from HomeBuyers

Credit Scores Credit scores are an important factor for potential home buyers. Credit scores are used to determine both purchase loan eligibility and interest rate. The higher the credit score the higher the chance for loan approval and a lower overall interestrate. Are you trying to make a major purchase and are in need of improving your credit score to do so? Our team of licensed Realtors and Loan Oﬃcers have decades of experience helping people to repair their credit with the three major credit bureaus. Here are 13 credit repair tips that we have uncovered in our years of as- sisting others to improve their credit scores in order to get qualiﬁed to buy a home. These are all tried and proven methods for getting your credit scoresup. Your payment history to creditors that report to the credit bureausac- count for about 35% of your given credit scores. This is the most important part of starting to repair your credit. Make NO 30 day late payments to those creditors. This will begin to have a great impact on your credit score. If you have a bill due in a given month make sure that payment posts before the end of the month. Seriously consider setting up auto payments to your creditors through a checking account or debit card to assure that there will be no future 30 day late payments.

Account balances account for about 30% of your given credit scores. If you want to improve your credit score keep the balances owed on your credit card at about 30% or lower than your available credit limits. If you have a credit card with a $1,000 credit limit keep the balance at $333 or lower forexample. Establishing and then keeping accounts open accounts for about 15% of your given credit scores. Keep old accounts in good standing open. The older that your credit accounts are the better that they are for yourcredit. Establish different types of credit. This accounts for about 10% of your given credit scores. It is great to have revolving accounts and these help your credit significantly when managed well. However, establishing installment loans along with your revolving accounts demonstrates the ability to manage different types ofcredit. Do not take on more than you can reasonably manage to pay. All you really need is 3-4 accounts reporting on your credit that you are managing well. Ex- cessive credit too fast can have a negative effect on your credit scores. This accounts for about 10% of your given creditscores. 4

Open new trade lines. Credit cards are a great tool for improving your credit when they are managed correctly. There are several types of credit cards. Re- tail store credit cards, bank credit cards, secured credit cards. Applying for and being approved for 2 or 3 credit cards is a BIG step toward getting your credit scores up. If you do not have the best credit and know it, do not apply for credit cards designed for people with good credit. CapOne, First Premier(secured credit card), JC Penny are easier cards to get if you have challenged credit. Fin- gerhut reports payments to the credit bureaus and these accounts can help your credit too. We do not endorse nor make any expressed guarantees that you will be approved. But these are a good place to start if your credit is not the best. Applying for an auto loan, being approved, paying all payments on time, will also improve your creditscores. Being added as an authorized user on someone else's credit card whom is managing their card correctly can also improve your credit scores. The older the card and the higher the credit limit the more it will improve your credit scores. By being added as an authorized user that account would then begin reporting on your credit report each month. Of course you would only want to consider doing this with someone who pays their card on time each month. If they do not then that card would have a negative impact on your creditscores.

Increasing your credit card limits can also help improve your credit scores. After six months of on time payments credit card companies will often approve a credit limit increase. Doing this while maintaining a low balance will have a positive eﬀect on your credit scores. It signals that you have available credit yet are not in need of usingit. Get current on any reporting late payments and stay current. Credit reports only report payments that are late 30 days or more. If you have a 30+ days late report on your credit that will continue to report until you bring it current. This will kill your credit score. For example, if you did not make a payment in May on your credit card or card or car payment and then make a payment inJune. You have just made May's payment and June is still due. If you do not make an- other payment until July then you have what's called a running 30 day late payment. This will have an even worse aﬀect on your creditscores.

Settle collection accounts and charge offs. The goal is to have all your past due accounts marked paid, current, or settled. When it comes to mortgage loans the extent to which this must be done varies. Contact us for more details. Some debts do not necessarily have to be paid off to qualify for a mortgage loan. Settling these accounts will improve your credit scores. Collection that are 180 days late or more usually go into charge off status. This has a worse impact on your credit then a collection does. If you have collections try and re- solve them before they go to charge off. You can usually negotiate the debt with the creditor and often offer a lower agreeable settlement offer. If you settle a debt make sure to get a letter from the creditor or collection company stating that your account has been settled with a 0 balance. You will need that letter to get that negative account off of your credit report. The older the charge off is the lesser affect it has on your credit scores. Do not attempt to settle these accounts if it will cause you to become late on your accounts in good standing. It is critical that you keep your current accounts paid ontime. Remove old delinquent accounts that have reached 7 years since their reporting date on credit. Old delinquent accounts greater than 7 years old can usually be removed at your request to the credit bureaus. Removing these will improve your creditscores.

13- Review your credit report and work to fix errors found on it. Errors do hap- pen on credit reports. After review of your report inaccuracies can be disputed with the 3 major credit bureaus. Just keep in mind that the credit bureaus will personally contact the creditors involved and find out their side of thestory. Disputes that are not answered within 30-45 days which happens sometimes but not often will be removed from your credit report. However, if the creditor sticks by the reported debt then the credit bureau will note that on your credit and the debt will remain. You will then have to back up your dispute with proof that the debt is reported inaccurately. Some credit repair companiespromise to improve your credit and what they do is simply write the credit bureaus a dispute letter for all your negative collections and charge offs hoping thatthe creditor does not reply. However, usually they do. If you are trying to buy a home your credit report cannot have any unresolved disputes on it. Keep this in mind if you choose to dispute an account have proof to back it up. If not, then any temporary increase in your credit score will be lost when the lender forces you to remove unresolved disputes from your creditreport. Source: Credit RepairTips

HomeAffordability Considering the major housing bust that the economy is still attempting to recover from it is critical that home buyers seriously consider the affordability of a home purchase forthem. Buying a home is an exciting experience, a great accomplishment. For many it is in fact the fulfillment of the American dream. That dream can become a nightmare if you do not buy within yourmeans. As you consider purchasing a home be careful not to bite off more of a mortgage payment than you can easily afford. Because at the end of the day that is what you own in the beginning a mortgage payment. The house belongs to the bank if you do not keep up with yourpayments. You may be told by your lender that you qualify for a very large home loan. That does not mean that you should shop in that price range. Most Financial Advisors suggest that you do not go over a total debt to income ratio of 43. Your lender can tell you what your debt ratio is for any given loan amount. Shop within a reasonable total debt to income ration. If the 350,000 purchase price that you may qualify for puts you over a com- fortable debt to income ration then maybe you should be shopping for a home below 300,000. Be practical do not fall in love with a home that you will struggle hard to pay for. You do not know what emergency financial situations may loom in thefuture. It is also advised that you should try and have a savings after the purchase equivalent to 6 full months of your normal monthly debts before going into a home purchase.

Steps to Buying aHome Contact a Mortgage Lender to get a credit and affordabilityanalysis. Get a pre-qual letter from the Lender. This is necessary in order to get a real estate agent to represent you and make an offer on ahouse. Connect with a Realtor to assist you with finding the type home you are interested inbuying. Search until you find the right home. Decide what areas you would be interested in buying a home in. Consider the crime, schools, property tax, and likely appreciation of theareas. Make an offer on a house. Your Realtor will draw up the purchase offer foryou. Negotiate and agree on all terms between you and the seller. Negoti- ate the price, seller's closing cost assistance, and whether items in the home will be leftbehind. Arrange for the home inspection and appraisal. The lender will order the appraisal foryou. Provide all necessary documents requested by your lender so you will get the official loan approval and clear toclose. Go to the settlement table, sign all final purchase documents,and close on thehome. Get the keys to the house and move in. Source: Steps to Buying aHome

LoanTypes When attempting to buy a home an individual should learn about all available loans that there are to do so. There are many different loan programs available to buy a home and each has it’s plus and minuses. By evaluating each of these loan programs you will be able to find the loan program that best fits your uniquesituation. Coventional Loans: Conventional loans are a great option for financing a new home purchase. Conventional loans extend up to 97% financing opportunities for home buyers. There are however some banking institu- tions and credit unions that will go 100% financing on a conventional loan. However, with enrollment in one of the down payment assistance programs available it could cover much of any necessary down payment. Conventional 1st time home buyer loans approval guidelines are a little more restrictive than other loan programs. With conventional loans their is no upfront funding fees like USDA, VA, FHA Loans. Although these upfront fess can be financed into the home purchase they nonetheless are being paid for by the home buyer. With Conventional loans the monthly mortgage premium can be avoided with a 20% down payment on a home. If you choose conventional financing but do not put 20% down there will be a mortgage insurance. However, that mortgage insurance premium can be requested removed once the home buyer reaches a 80% LTV. Once the loan balance equals only 80% of the homes appraised value it can beremoved.

Veteran Loans (VA): Veteran Administration loans are a great option for financing a new home purchase for Veterans. Veteran home loans extend 1OO% financing opportunities for Veteran home buyers.Veterans affairs home buyer loans are by far the one of the best new home purchase program available. To qualify for a Veterans Home Purchase Loan, you must be an active or honorably discharged veteran of the armed forces. You must apply for a Certificate of eligibility, which our team can help you do. Veteran loans do have an upfront fee which can be substan- tial. That upfront funding fee can be avoided only if the Veteran has an service related disability percentage of 25% or more. Benefits of a VA home loan, includes; Low&Affordable fixed interest rates No monthly mortgageinsurance 0 downpayment. Large loanlimits Gift funds and grant funds accepted Seller concessions areallowed Eligible properties include new construction, existing homes, manufac- tured homes, condos, PUD's, and new manufacturedhomes

FHA Loans: FHA first time home buyer programs are a great option for financing a new home purchase. FHA loans extend 96.5% financing opportunities for home buyers. However, with enrollment in oneof the down payment assistance programs available it usually covers much of the necessary down payment. FHA 1st time home buyer loans are the easiest of all purchase loans to qualify for. The credit score and income requirements for FHA loans are less restrictive than any other first time home buyer loan program. The FHA has a 203K Loan option which is a re- hab loan that can provide up to $30,000 in home improvements on your new home purchase. FHA Loans have both upfront funding fees and lifetime monthly mortgageinsurance. Some of the reasons why an FHA loan in Maryland is a great choice, includes; Low&Affordable fixed interest rates Only a 3.5% downpayment. Large loanlimits Gift funds and grant fundsaccepted Down payment assistance programs allowed Seller concessions areallowed Eligible properties include new construction, existing homes, manufac- tured homes, condos that are FHA approved, PUD's, and new manufacturedhomes

USDA Loans: USDA loans are a great option for financing a new home purchase. USDA loans extend 100% financing opportunities for home buyers. USDA Loan programs were started to encouragedevelopment in rural areas of the USA. The USDA loan assists low to moderate income families in achieving their homeownership dreams. To qualify, the borrower must meet USDA minimum income and credit score standards, and purchase a home in one of the USDA eligible rural areas in their state. USDA Loans so have an upfront funding fee and a lifetime monthly mortgageinsurance. Some of the reasons why a USDA loan is a great choice, includes; Lower mortgage insurance premiums thanFHA Affordable fixed interest rates 0 downpayment. No maximum purchaseprice Gift funds and grant funds accepted Seller concessions areallowed Eligible properties include new construction, existing homes, manufac- tured homes, condos, PUD's, and new manufacturedhomes Not limited to first time homebuyers.

Down PaymentHelp There are various down payment assistance programs for first time home buyers in the US. There are also some forgivable grants for down payment assistance and closing costs for first time home buyers in various states in the US. One of the biggest obstacles tohome-ownership is coming up with a required down payment. Down payment assistance programs and grants help many achieve their home-ownership dreams that otherwise would not. State or Local County Employees may be eligible for additional down paymentassistance. Not every first time home buyer qualifies for down payment assistance or grants. There are statewide down payment assistance programs and there are sometimes county or city specific programs within states. Here is a great resource if you are looking to apply for a down payment assistance program within you state. http://downpaymentresource.com/are- you-eligible/

FAQ from HomeBuyers How much money will I need to buy ahome? The overall money that will be needed by a person to buy a home depends upon several factors. There are basically three separate categories of costs that a home buyer is expected to pay for in someway. First off there is the down payment. The down payment could be up to 10% of the purchase price. This depends upon what loan they are offered or qualify for. VA and USDA Loans offer 100% financing, eliminating the need for a down payment. FHA Loans for first time home buyers require 3.5% down. Conventional loans usually require 10% down. However, there are many down payment assistance programs that are available that can reduce or eliminate the down payment cost to the homebuyer. Secondly, there is the buyer's portion of closing costs that must be paid. Title fees, state taxes, stamps, title fees, home owner's insurance, etc. These fees, although they are the buyers, can be covered by a negotiated closing cost percentage agreed to by the seller. Generally up to a 6% seller's assistance is allowed with most loan types. If enough seller's contribution is negotiated as part of the purchase contract, generally most or all of the buyer's portion of closing cost fees can becovered. Lastly, there is the cost of the appraisal, optional home inspection, termite inspection. These services if chosen or necessary, must be paid in advance of loan settlement. If the home buyer chooses an experienced lender with first time home buyer programs, down payment assistance programs, they can often buy their home with very little out of pocketcosts.

FAQ from HomeBuyers Do I really need to use a Real Estate Agent as homebuyer? Buyers do not have to use a Real Estate Agent of their own to buy a home. However, here is a list of good reasons to hireone. 1-A real estate buyer's agent represents the home buyer's interest while the home seller's realtor is trying to get the best deal for theseller. 2-The buyer's agent is paid from the real estate fees charged to the home seller. Buyer's do not pay anything for the services of theirrealtor. 3-A buyer's real estate agent can assist the home buyer with ﬁnding the type home they are lookingfor. The buyer's agent will help a home buyer get a fair price on a house, negotiating with the seller's realtor in behalf of the homebuyer. The buyer's realtor will prepare the necessary purchase contract that gets pre- sented to the home seller by theirrealtor. The buyer's realtor will set up appointments for the home buyer, accompanying them in seeing the home's they are potentially interested inpurchasing. The buyer's realtor oﬀers their experience and advice about the home buying process to theclient.

FAQ from HomeBuyers What is private mortgage insurance(PMI)? Private mortgage insurance often referred to as PMI, is an insurance policy that pro- tects the lender in the case of a borrower defaulting on their loan. The home buyer pays the annual premium in 12 equally divided payments added to the mortgage payment. The lender is the beneﬁciary of thepolicy. PMI is required on all FHA and USDA Loans. At one time PMI insurance ended on FHA loans once the borrower's loan to value reached 80%. That policy has changed. FHA PMI remains for the life of the loan with FHA Loans except for homebuyer's that take out a 15 year loan when they buy their home. In this case, once the loan to value reaches 78% the home buyer can request the PMI to beremoved. USDA Loan PMI remains for the life of the loan. However, the PMI insurance is only about 1/3 the cost of FHA and Conventional Loan PMI. VA Loans have no PMI insurance requirement. Conventional Loan PMI can be removed once the loan to value reaches80%.

FAQ from HomeBuyers Should I get a homeinspection? If you are thinking about buying a home one of the decision you will face is whether or not you should get a home inspection done on the house you are interested in buying. Home inspections are not actually required in order to buy a home. Unless you are applying for a down payment assistance program and that program requiresone. Although home inspections may not be required they are generally suggested by realtors and lenders as a precaution against buying a home that has serious issues that cannot be easily seen. So although maybe not required, a home inspection is worth the extra cost to assure you are buying a soundhome. Home inspectors will do a complete inspection of the home, including; Plumbing Rooﬁng Siding Electrical Foundation Gutters and Downspouts Furnace Insulation

First Time Home Buyer Guide