Basic Mortgage Information for the Buyer

1. Plain English Mortgage Guide Old Virginia Mortgage has put together a great briefing to help you gain a basic knowledge of the mortgage industry, products, and eligibility requirements. This is just a guide and you should consult a mortgage professional for your own answers. Dennis Blackmore, REALTOR® 757-343-4949 – EMAIL: homes@757re.com Chip Simkins, Senior Vice President EMAIL: chip@oldvam.com (757) 409-9079 Mobile (757) 216-8245 Fax 1

2. Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 2

3. Times are drastically different TODAY than just one year ago. Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 3

4. Why? Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 4

5. Four types of Mortgage Companies Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 5

6. Brokers Shop lenders – do not have $$ Do not do their own underwriting Do not necessarily have control on closing Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 6

7. “Big Boys” Example: Bank of America USAA/NFCU Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 7

8. Internet Lenders Ditech, Quicken Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 8

9. Correspondent Lenders Local Banks, oldvamortgage, etc Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 9

11. FHA

12. VA

13. VHDA

14. Rural Development Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 10

15. New Loan Limits FHA, VA & Conventional Loans: Up to $458,850 loan amounts Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 11

16. Conventional Loans: 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. Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 12

17. Conventional Loans: 20 % down with good credit Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 13

18. Conventional Loans: Types of Conventional Financing: Fixed Rate: loans are those where the principal and interest payments remain the same for the entire term of the loan. 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. Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 14

19. FHA Loans: 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. Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 15

20. FHA Loans: General Information The maximum base loan in the Hampton Roads area is $458,750. (may change 2010) FHA requires and “Upfront Mortgage Insurance Premium” (UFMIP). This MIP can be financed on top of the base loan amount. Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 16

22. High qualifying ratios—31% and 43% of gross income

23. Gift funds from a relative for the entire down payment and closing costs are acceptable.

24. Absence of non-occupant co-borrower restrictions. FHA allows unrelated co-borrowers and non-occupant co-borrowers.

25. Seller concessions of up to 6% of the sales price.

26. No restrictions on income, assets or prior home ownership. Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 17

28. Prepaids

29. Discount Point

30. Buy-down Fees

31. Up-front MIP

32. First year advance payments of property taxes

33. Home owners Associations Dues Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 18

35. Decorating allowances

36. Moving expenses

37. Excess rent credit Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 19

38. FHA Loans: Occupancy requirements: At least one borrower must occupy the property. Non-occupant co-borrowers must be blood relatives. Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 20

39. FHA Loans: Down Payment: FHA requires a minimum 3.5% investment in the purchase transaction. Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 21

40. FHA Loans: Terms: 15-30 years in 5 year increments Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 22

41. FHA Loans: 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. Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 23

42. FHA Loans: Bankruptcy: 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. Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 24

43. FHA Loans: Seller Concessions: The seller can pay up to 6% of the sales price towards the buyers’ closing costs, prepaids points, buydowns, etc. Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 25

44. VA Loans: 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. Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 26

46. Maximum term is 30 years.

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. 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. Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 27

50. VA credit underwriting criteria is among the most liberal in the industry.

51. Closing costs payable by the veteran are strictly regulated and are generally less than those associated with alternative financing forms.

52. Seller concessions can go up to 4%. Normal discount points and closing costs paid by the seller are not considered a concession. Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 28

54. Prepaids

55. Buy Downs

56. Gifts, such as television or microwave

57. Payoff of credit balances on behalf of the buyer Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 29

59. 90% or less LTV…1.25% Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 30

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. Chapter 13 & CCCS Plans: Acceptable if 12 consecutive payments have been made on the repayment plan. Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 31

63. VA Loans: MAY have more than one VA home loan Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 32

65. 3 or more in a household $73,000 Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 33

66. VHDA Loans: Borrower may not have owned property in the last three years. Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 34

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 Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 35

69. VHDA Loans: Federally Targeted Areas in Virginia Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 36

71. Term – 30 year fixed

72. Mortgage Insurance – No monthly mortgage Insurance

73. Typical Closing Costs – May be financed if supported by appraisal

74. First Time Homebuyer – No first-time homebuyer requirement

75. Maximum income – Use Rural Development Moderate Income Limits Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 37

76. USDA Program Guaranteed Rural Housing Loans Credit Information: Credit Score – Will consider extenuating circumstances for adverse credit history, with adequate supporting documentation. Collections and Charge Offs – Do not need to be paid if credit score is 620 or higher Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 38

77. USDA Program Guaranteed Rural Housing Loans Funds for Closing: Seller Concessions – All closing costs and prepaids may be paid by seller concessions, up to 6%. Gifting – 100% gifting acceptable from disinterested third party (family, friend, employer) Cash Contribution – No minimum cash contribution from borrowers. Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 39

78. USDA Program Guaranteed Rural Housing Loans Property Requirements: Eligible Areas – Property must be located in a Rural Development eligible area. Occupancy – Primary residence only & no Income Producing Properties Property Type – Single family or Rural Development eligible condo/PUD. Manufactured Homes – Manufactured homes must be new and meet FMHCSS. Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 40

79. USDA Program Guaranteed Rural Housing Loans Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 41

81. 203K Streamline (rehab loan)—Perfect for bank owned properties

82. Stated income loans with large payments

83. Non-traditional credit accepted Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 42

84. $8000 First time homebuyer tax credit Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 43

85. $6500 Non-First time homebuyer tax credit Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 44

87. On Time Guarantee for all Closings

88. Closing Binders – a record of all your papers for the transaction

89. Builds relationship for future referrals Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 45

91. Payment Options

92. Promotions

93. On site presence

94. Email and Internet Marketing

95. FaceBook

96. Twitter

97. LinkedIn

98. Text 2 Sell

99. Broadcast Emails

100. Rate notifications

101. Co-op Gifts to Buyers Home Mortgages:Adapting to a Changing Environment www.oldvamortgage.com 46

102. Thank you for joining us today. We look forward to working with you and your clients. www.oldvamortgage.com 47