Planning for Homeownership Guide - SunTrust

Planning for

Homeownership

A Step-by-Step Guide

for Homebuyers

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A STEP-BY-STEP GUIDE FOR HOMEBUYERS

Planning for

Homeownership

Your Guide

We¡¯re here to guide you through the

mortgage financing process.

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

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

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Am I really ready

to buy a home?

You could be¡ªit 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:

Key Terms

? Enjoy a sense of pride and accomplishment

in owning your own home.

A mortgage is the agreement used

to pledge a home or other real

estate as security for a loan.

? 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.

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.

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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¨C16

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¡ªplus 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

Know that a down payment plays

a key role in monthly affordability.

Be knowledgeable about the fees

you¡¯ll pay.

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¨C20% of the cost of your home,

however a larger down payment may be

required in certain circumstances.

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.

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¡ªthe more you can afford

to put toward a down payment, the lower your

total loan amount becomes, which ultimately

means lower monthly mortgage payments.

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

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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.

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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.

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