An Easy Guide to

Buying a Home

Dear Future Homeowner,

You have just taken the first step on the road to realizing the American

dream. Choosing your home loan is one of the most important decisions

you will make.

Becoming a homeowner is an achievement everyone would like to attain,

and we will do everything we can to make this dream a reality. See for

yourself as you go step by step through this easy and useful homebuyer’s

guide.

We are here to help you select the ideal loan, which meets your objectives

and is tailored to your specific needs. Our innovative loan products, low

interest rates, and excellent personal attention makes it easy for you to

become a homeowner!

Sincerely,

Table of Contents

Before You Start Looking for a Home 4

Finding Your Dream Home 6

Selecting a Real Estate Professional 6

Making the Search Easy 7

Make Sure You Do a Thorough Home Inspection 8

Making an Offer 9

Purchasing Your Dream Home 10

Getting Your Loan 10

The Documentation You Need 10

Choosing the Ideal Loan 11

Reasons for Selecting Certain Loans 12

Processing Your Loan 13

The Closing 13

After You Move In 14

What You Need to Know 14

Commonly Asked Questions 15

An Easy Guide to Home Buying Terms 16-19

Comparison Chart to Help You in Your Home Search 20

BEFORE YOU START LOOKING

FOR A HOME

Before you begin the home buying process, it is essential to know how much you

can pay for a home. Your lender can make this easy for you, by pre-qualifying

you before you and your real estate agent begin looking for a home. A pre-qualification

is free and can usually be done in just one visit, or even in one

phone call. By getting pre-qualified, you will know what price home you can

afford and what your monthly payments will be. The best part of this step is that

we put everything in writing.

QUESTIONS COMMONLY

ASKED

What real benefits do homeowners have?

Being a homeowner gives one a sense of stability and permanence. It gives the flexibility

to make home improvements that meet your specific needs wherever and whenever you

want to. You are not subject to periodic rent increases, and the interest you pay may be

deductible from your taxes, in some cases up to 100%. Consult with your tax advisor.

How much of a down payment should I make?

The amount of down payment that you pay can vary. It depends on what you and your

home loan consultant decide is best. It is important that you know that the lower the

down payment, the more you will have to pay each month, that it will be more likely that

you will have to purchase home loan insurance*, and that your interest payments will be

higher as well.

*Insurance that prevents the lender against loss if the borrower should default on the

home loan.

What is the difference between applying for a loan and getting pre-qualified?

Before you begin to look for your home, it is important that you visit a home loan lender,

who will analyze your assets, debts, and sources of income. Based on the preliminary

analysis, they will tell you the amount of loan for which you qualify – this is called a pre-qualification.

Once you find the home you want to purchase, you can then formally apply

for your loan, and they will ask you to provide the necessary documentation (e.g.

paystubs, bank account information, etc.) to verify that the information you provided

during your pre-qualification is accurate.

What is a credit report?

A credit report contains your payment history, shows that you paid your debts on time, if

you have ever been late in making payments, or if you have ever failed to make

payments. Lenders use the credit report to determine a potential borrower’s ability to

make timely payments, and to judge whether or not the person would make a good

prospect for a loan. If you are thinking about buying a home, you will need to show us

that you can make your payments in a prompt and responsible manner. We recommend

that if you do not have any purchases on credit, that you at least get a credit card, in

order to establish a payment history. You can ask your home loan consultant for

suggestions as well.

How much money do I need for a down payment?

It all depends on how much you want to pay for a home and how much money you have

available. If you do not have much money available, there are government programs that

have been created to help first-time homebuyers. We offer a variety of loans that can

normally accommodate each borrower’s needs. Some of these programs have less

stringent qualification guidelines, while others require little or no down payment. In many

cases, the money needed for the closing can be incorporated into the loan amount,

reducing the amount of money a borrower needs to have on hand to purchase a home.

FINDING YOUR DREAM HOME

Selecting a Real Estate

Professional

Once you have been pre-qualified, it is time to find a real estate professional to

help you find the home of your dreams. A real estate professional is an expert

who knows exactly which homes are for sale and which ones can meet your

requirements and desires. Show your agent your pre-qualification certificate –

with it, your agent will be able to pre-select homes that are in your price range.

Additionally, your agent can provide you with information about different

neighborhoods where you might want to live, as well as suggestions that you

may not have considered. Your agent can also give you practical advice about

what you should look for in a home. And when it is time to make an offer on the

home you wish to purchase, your agent will be there to help.

How to select a real estate professional

A real estate professional plays a very important role in the homebuying process

and should be selected with care. Before selecting your agent, ask for

recommendations from family and friends and interview several agents, to have a

better idea of what each one is like and what each offers you. The relationship

between a real estate professional and a buyer should be one of mutual respect,

similar objectives, and, frequently, a written agreement which specifies the terms

and conditions of the agent’s representation of the buyer.

The ideal real estate professional…

a. Understands your needs and objectives.

b. Is professional and dedicated to doing a good job.

c. Knows the area where you want to live.

d. Knows how much you can spend on a home.

e. Has a valid real estate license or certificate.

f. Has excellent references from other clients.

g. Treats you with the respect that you deserve.

Making the Search Easy

Location, location, location

To reduce the number of homes that you visit, you should begin by deciding what factors

are important to you, such as the approximate cost of the home and the location, and

then you can begin to determine more specific details, such as the neighborhood, the

characteristics of the home, and the type of dwelling (i.e., condominium, town home, or

traditional single-family home). The location is the factor that most affects the value of

the home. The majority of homebuyers are prepared to sacrifice certain characteristics

and preferences of their home, in order to be able to purchase a home in the area or

neighborhood that they most prefer. This is a very important insight, because you can

almost always make some adjustments or do some remodeling, such as adding on

another room or putting in a pool in the backyard, to have everything you desire in your

home. But once you have moved into your home, it does not matter how many

improvements you make, you will not be able to move this home from the city to the

suburbs, or from the west side to the east side of the city!

What should I look for in my neighborhood?

Here is a list of the top seven questions potential buyers ask about a neighborhood:†

1) Does it have good schools?

2) Is it a nice neighborhood?

3) Is it in a good shopping district?

4) Is it near my/my spouse’s office/work location?

5) Is it near my/my spouse’s family and friends?

6) Does it have a low crime index/how safe is it?

7) Is it close to parks and recreation areas?

What should I look for in a home?

Before you begin searching for a home, it is important that you decide what

characteristics you want in your home. Use the handy Evaluation Chart provided on

page 20 to note down the desired characteristics of your dream home, and use it to

evaluate how the different homes you look at meet your desires. Make several copies of

the chart and carry them with you as you search for the ideal home, keeping in mind

which characteristics you consider essential in the home you purchase. If you fill in the

information as you look at homes, you will be able to remember the pluses and minuses

of the different homes you see, and can evaluate the homes fairly, using the same

criteria regardless of when you see them.

Suggestions for evaluating the homes you see

Once you have decided which characteristics you want your dream home to have, and in

which neighborhoods you are interested in living, you should begin to view homes for

sale with your real estate agent. During this period, it is important that you make a

thorough evaluation of the properties that you visit.

Get accustomed to viewing properties with a critical eye. Inspect each home thoroughly,

making sure you look at and evaluate each area that you consider important in your

home. Feel free to take pictures or video so that you can remember what you liked or

disliked in each home, and make sure that you keep detailed notes on your Evaluation

Chart.

†These data are provided as a courtesy from a recent study. Source: American Diary Association

Making a Thorough Inspection

Prior to Making a Final Decision

When you finally find the home of your dreams, it is very important that you

inspect it “from top to bottom,” to make sure you do not fall in love too quickly.

Sellers sometimes cover major flaws with paint or wallpaper, so that people who

do not do thorough inspections will not notice the damage. These flaws

frequently cost a great amount to repair once you have bought the home, so you

should do your best to inspect the home very carefully prior to purchasing it.

Before making an offer on a home, you should get to know the neighborhood.

Visit the area during different times of day and night. Meet your potential

neighbors and ask them about the neighborhood. Reconsider the amount you

are willing to offer to purchase the home, so that you are really sure that it is

worth the price.

Once you have done all of this, you can go ahead and make your offer! Good

luck!

Check the pipes and plumbing

Flush the toilets, turn on all the lights, open all the windows. Ask about the

condition of the electrical system, the plumbing, the heating and air conditioning,

and any other important features such as the pool, the irrigation system, etc.

Analyze the physical characteristics of the homes you visit

Thoroughly inspect the physical condition of the home, looking for any repairs

that need to be made, as well as whether the house is new, several years old, or

fairly old. It is also important to feel confident that there are enough bedrooms

and extra space to meet your needs. Make sure that you really like the design of

the home as well.

It’s Time To Make an Offer

When you are ready to make an offer, your real estate agent should prepare a

Purchase Contract, which is the document that you will present to the seller, and

where you offer a price and any conditions you have for the purchase.

Before presenting this document, check to see that your contract includes a

clause that stipulates that the purchase depends on a satisfactory professional

inspection. Ask your real estate agent to recommend a professional inspector

with many years of experience. The inspector should give you a written

evaluation of the home and make any repair recommendations that are

necessary. If you have any doubts about the inspection, ask for a second one.

Once your offer has been accepted, you will need to provide earnest money (or a

good faith deposit). This is a cash deposit (several hundred dollars to several

thousand depending on the value of the home and the market) towards the down

payment that shows your commitment to buying the home. Ask your real estate

agent how much money is needed for a deposit, and use your pre-qualification

certificate to back up your offer to the seller.

How do I determine the real value of the home?

Before you make an offer, you need to determine how much the home is really

worth. Your real estate agent can help you by providing information about other

homes in the neighborhood that have recently sold. This way, you can compare

the selling prices of the different homes to feel confident that you are offering a

fair and sufficient amount. There are also a number of other services available

on the Internet that can provide estimated property values and recent sales

within the general area.

PURCHASING THE HOME OF YOUR DREAMS

Applying for a Loan

Congratulations! You are only a few steps away from realizing your dream of

homeownership. When the offer you make on the home of your dreams is

accepted and you have a signed purchase contract in your hand, call us

immediately. As of that moment, your interest rate protection will be extended for

45 more days (or for up to 60 days in the case of government loans), giving us

enough time to completely process your loan.†

The Documentation You Will Need

To be approved for a loan, we need to know about your sources of income, your

debts, and your credit history. You have already given us the necessary

information to at least pre-qualify you for a loan. Now is the time to apply

formally for a loan, filling out a complete application, and supplying us with

documents that verify the information that you have given us. Having the proper

documentation makes the loan process much quicker and easier for everyone.

Below you will find the documentation that you should bring with you when you

are applying for a loan:

If your income comes from a salary: . Original W-2’s for the past two years. Original paycheck stubs covering most recent 30 days

If you are self-employed: • Tax forms for the past two years

• Your current account balance

• Declarations of Gains and Losses from the beginning

of the year.

If you have income from other sources: • Pensions, etc.- Authorization letter(s)

• Real Estate Properties - Tax forms for the past two years

- Rental contract(s)

• Other - Any proof that you are receiving other sources

of income

If you have checking or savings accounts: • Past three months’ statements

If you have co-borrowers who would like to be

approved together with you for the loan, please

bring: • The name(s) of the co-borrower(s)

If you do not have a credit history, do not give up. Our Home Loan Consultants will do everything

possible to help you get a loan.

Please bring: • Gas and electricity payment receipts

• Telephone payment receipts

• Rent payment receipts

• Any evidence of regular and timely monthly

payments you have made. This can include auto

of life insurance payment receipts, furniture or

jewelry payment receipts, catalog purchase

payments, computer payments or encyclopedia

payments.

† If you are not sure what a word means, go to our Easy Guide to Homebuying Terms (pages 16-19)

Choosing the Ideal Loan

In the home loan world, there are two types of loans -- those with fixed interest rates,

and those with variable interest rates. We offer a large variety of fixed-rate and variable-rate

loans to accommodate each borrower’s needs and preferences. Of course, we will

also help you choose the ideal loan for you, but it is important that you know the

difference between these loans.

Fixed-Rate Home Loans

The most popular home loan is the traditional fixed-rate mortgage. Generally this interest

rate is a little higher that the initial rate you receive with a variable-rate mortgage. But

what makes this loan so popular is that with a fixed-rate loan, you have the assurance

that your interest rate will never rise. Also, your monthly payments of interest plus

principal will always remain the same. If you are the kind of person who prefers the

stability of knowing exactly how much you will pay each month, this could be the ideal

loan for you.

Why are down payments so low on some properties?

These are offers that lenders make, but they are not ideal for everyone. A borrower

must qualify for the exact loan offered. Remember that in many cases, the lower the

down payment, the higher the monthly payment, and the higher the probability that the

borrower needs to purchase mortgage insurance. If you are interested in a loan with a

low down payment, ask us about getting one. We offer many types of loans with low

down payments and less stringent qualification guidelines.

Variable-Rate Home Loans

In recent years, the Adjustable-Rate Mortgage (or ARM) has become famous for its low

initial interest rate. The primary advantage of this loan is that it permits you to qualify

more easily for a loan, or to get a larger loan. Due to the fact that the variable-rate home

loan is based on a published rate called an Index*, your interest rate can rise or fall,

meaning that your monthly payments can also increase or decrease. Variable-rate

home loans can even save you money in the long run, if interest rates remain constant

or fall.

*Indexes are published in the financial section of many newspapers and are also

available on the Internet.

Additional Types of Loans

In addition to offering you home loans, we also offer a variety of loans for home

improvement, to help you save energy, and to consolidate your debt. Ask us how we can

help.

Special Loan Programs

We offer special types of loans that cover the cost of the home, as well as the costs of

needed repairs or improvements. This type of loan is based on the value of the home

after the repairs/improvements are made.

Reasons to Select Certain Loans

Your Homeownership Objective Your Home Loan Strategy

If you plan to live in this home for many

years...

If you plan to sell or refinance your home in

several years...

If you want to pay off the loan before your

children go to college...

If you want to budget a fixed payment each

month...

If you are comfortable knowing that there

may be periodic changes in your interest

rate, because you know that this way you

can buy a better home now…

The Wait

Processing a loan normally takes several days. Do not give up!

During this period, you, the seller, and the lender should be making sure that all

obligations related to the purchase and the home loan are complete prior to the signing

of the final documents. Some examples of these obligations include: a final and

satisfactory home inspection, confirmation of the purchase of homeowner’s insurance, a

satisfactory termite inspection, and a satisfactory title investigation to verify that there are

no liens on the property.

The Closing/Settlement

The closing (or settlement) is the meeting at which you sign all the paperwork and make

the payments needed to become an official homeowner. The title company, which issues

the title insurance, usually provides a forum for the exchange of documents and the

releasing of funds during the closing. In several Western states, the closing is known as

an “escrow closing,” and the title or escrow company acts as a third party for the benefit

of the buyer and the seller.

Prior to the closing meeting, your title company, escrow company or attorney will review

with you a copy of the HUD-1 Settlement Statement. This document will provide the final

total for your closing costs. It establishes the total funds you must bring to closing. Once

the loan is approved, we will call you to come in and sign the closing documents, as well

as the final documentation required to make you a homeowner.

There are many documents that need to be signed prior to receiving the keys to your

home. For this reason, a closing typically takes one or two hours. The three most

important documents you will sign are the note, the mortgage (deed of trust), and the

deed. The mortgage (promissory) note represents your promise to pay the lender

according to the agreed terms, including the dates on which your home loan payments

must be made and the location to which payment must be sent.

The mortgage, also known as a deed of trust or a security instrument, is a contract that

makes your home the security on the loan or guarantees its repayment. And the deed is

the document that transfers the ownership of the property from the seller to the buyer.

You will also need to obtain a certified or cashier's check to pay the closing costs. Once

these documents are signed and the closing costs are paid, you are a homeowner! Go

ahead and call the movers!

Moving in to your own home is an unforgettable experience. Perhaps you will soon be

enjoying your own home together with your family and friends. We know that the

American dream is not just a dream!

AFTER MOVING IN

What You Need to Know

How to make your monthly loan payments

Within a few days of the closing and the receipt of your loan, you will receive a letter

from your lender with monthly payment instructions and an explanation of your

responsibilities as a borrower.

When making a payment, make sure you…

• Send your payment so that it arrives on or before the first of each month.

• Never send cash in the mail.

• Write down your account number on your check or money order.

What your monthly payment includes

Your monthly payment includes the principal payment, interest, and private mortgage

insurance (PMI), if required. In the majority of cases, your monthly payment will also

include federal (property) taxes and liability (homeowners) insurance so that you do not

have to worry about making these payments on time. You will receive a detailed

description of your monthly payment in the instructions that we will mail to you.

What to do if you have problems making your payment

The first thing that you should do is call the lender. Representatives are there to listen to

you and to try to help however possible. But remember, it is very important to make your

payments on time and for exactly the amount due, if you want to protect your credit. And

if in the future you decide to buy another home, a good credit history will be very useful.

What to do if your home is damaged

If your home is damaged by a fire or by some other occurrence that is covered in your

insurance policy, call your insurance agent and fill out a claim immediately. A claims

adjustor will do an inspection of the property to determine the cash value of the

damages. Once this has occurred, the insurance company will make out a check, jointly

issued to you and to the lender. Call the lender’s claims department to ask about the

proper procedure for funds distribution.

Your other obligations as a borrower

Your loan or deed of trust requires that you maintain your property in a good state. This

requirement exists to protect your investment and to increase the value of your property,

if you decide to sell it one day. When you make any repairs or improvements, make

sure to always use licensed contractors.

Additional costs

When you buy a home, be prepared for certain additional costs that all homeowners

have, such as monthly mortgage payments, annual property tax payments,

homeowner’s insurance, electricity, gas, trash collection, water and sewer service, home

maintenance and gardening.

Questions Commonly Asked

What are points?

Points are the costs to secure a lower interest rate. One point is equivalent to 1%

of the dollar loan amount. The more points you pay on a loan, the lower your

interest rate.

Are the requirements for the purchase of a condominium the same as for a

house?

The necessary documentation to qualify for a loan is the same for condominiums

as for houses, no matter what size they are. Whenever you go apply for a loan,

make sure to take your last three bank statements, your tax declarations for the

past two years, and your last two paystubs.