First-time
Homebuyer
MB Financial Bank
means
business
®
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MB Financial Bank NMLS: 401467
First-time Homebuyer
The advantages of buying a home versus renting.
Are you ready to buy? Use the chart below for an overview of the advantages and considerations of
owning your first home.
Buying
Advantages
Renting
Considerations
Building Equity
Responsible for
maintenance/
utilities
Possible income tax
benefits
Cost of property
taxes and
homeowners
insurance
Independence and
pride of ownership
(no landlord)
Advantages
Little to no
responsibility for
maintenance
Considerations
No tax benefit or
equity
Restriction
governed by
landlord, i.e. no
pets, painting,
decorating, etc.
Easier to move
Less mobility than
renting
Flexibility to decorate, remodel, and
update your style
No control over rent
increases
Less privacy
How much can I afford?
Before you shop for your new home, it is important to find out how much home you can afford.
What is my mortgage payment?
• Principal and interest
• Escrows (can include the following monthly amounts)
-- Taxes
-- Homeowners insurance/HO-6 (for condos)
-- Mortgage Insurance (required for all FHA loans or if you have less than 20% of the purchase price
for down payment)
Flood insurance (if property is in a flood zone)
•
2
-HOA fees (condo or PUD maintenance fees, if applicable)
To learn more, visit mbmortgage.com.
First-time Homebuyer
The Four Cs
Capacity
The borrower’s ability to repay the loan. Lenders look for:
•
Housing ratio: Your total monthly payment (including escrows and HOA fees) divided by your
pre-taxed monthly income
•
Total ratio: Includes the above housing payment, plus any liabilities appearing on credit
(auto loans, student loans, minimum credit card payments, etc.) or payments deducted from
your paycheck (garnishments, child support, allotments). Terms and conditions including the
payment of any new loan not showing on the credit report is required.
Credit
Predicts the borrower’s future payment likelihood by reviewing past factors. FICO scores determine
rate and product availability. Minimum FICO score for FHA loans is 600, minimum score for VA loans
is 600 with AUS (automated underwriting system) approval, minimum score for Conventional is 620
with AUS approval.
FICO Score Range
Analysis
Below 600
Review opportunity to improve score with your loan officer.
600-619
Limited products available, but feasible.
620-659
Availability of products expanded, but higher interest rates and mortgage
insurance due to increased risk. May have restrictions for obtaining PMI
(private mortgage insurance).
660-719
More products available and fewer underwriting restrictions.
720+
Full range of products available, best rates, and lower down payment
requirements.
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First-time Homebuyer
The Four Cs
Cash
Includes cash for the closing and cash in reserves.
•
Remember, the closing is not just the amount of the down payment, but also your closing costs
and escrow reserves.
•
The higher the down payment, the less risk (you are less likely to default if you have more
money invested in the home).
•
Cash reserves refers to the amount of money you will have available after your loan closes.
Some loan scenarios require that you have two or more months of your total house payment
in reserves.
Collateral
Otherwise known as the appraisal of your home.
•
The appraised value is based on several factors, including:
-- Recent closed sales in the area
-- Size, style, and condition of the home
-- Location, district, and view
--
•
Cost to rebuilt
Lenders do not want to foreclose (we’re not in the business of buying and selling homes), but in
the event of a default, the lender wants to ensure that it has sufficient collateral to secure the lien.
Pre-qualification process
To begin the process, you’ll need to gather the following information for your loan officer:
•
Income and employment history
•
Assets
--
•
Authorization to pull credit
--
Needed to determine current liabilities, credit history, and FICO score for loan eligibility
•
Desired location and property type
•
Occupancy type
--
•
Primary, vacation, rental
Timeframe for closing
--
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What funds will you use for closing/reserves? Your checking/savings? 401k? Gift funds?
Do you want to close in 30 days or 30 months?
To learn more, visit mbmortgage.com.
First-time Homebuyer
How the pre-qualification process works
1. Loan officer gathers all information provided to create loan application.
2. Once credit is pulled, loan officer will analyze it to determine eligibility. He or she will structure
the loan based on your individual needs and available programs.
3. Loan officer runs completed loan application through an Automated Underwriting Engine (AU),
which looks at specific data within your application and credit file to determine eligibility for
requested products.
4. AU results are available within a few minutes and the initial underwriting decision will be
communicated to you at that time. The loan officer generates a pre-qualification letter based
upon credit, stated income and assets, and AU results. Note: for final approval, you will need to
provide documentation for income, assets, etc.
Loan products
Use the chart below for an overview of current loan products.
Loan Type
Minimum Credit
Score
Minimum Down
Payment
Conventional
620
3.00%
FHA
600
3.50%
VA (must be an eligible Veteran)
600
0.00%
USDA (specific rural areas)
600
0.00%
IHDA - FHA (see guidelines for more information)
660
3.50%
IHDA - Conventional (see guidelines for more information)
680
3.00%
Community Seconds (available for Conventional or FHA, see
guidelines for more information)
600 - 620
0 - 3.00%
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First-time Homebuyer
Amortization
Pros
Cons
Fixed-rate
Rate never changes (despite market
conditions). Most stable mortgage
type.
Refinance required to lower rate
and payment if market
decreases.
ARM (adjustable rate)
Lower rate and payment for a fixed
period upfront.
Payment may increase in the
future with market fluctuations.
Conventional vs. FHA
Loan Type
Pros
•
•
•
Conventional
•
•
•
•
•
•
FHA
•
•
Cons
No upfront mortgage insurance
Good for purchases with 20% down
payment (due to monthly PMI)
More loan terms available (including
30-, 25-, 20-, 15-, and 10-year fixedterms)
Adjustable-rates available
Allows you to purchase a primary,
secondary/vacation, or investment
property
Once your LTV reaches 78%, PMI is
dropped
Option for lender paid mortgage insurance with minimum 680 credit score
•
•
Lower down payment and credit
score requirements
Lower interest rates (rate is not
based upon credit score, down payment amount, or property type)
Primary residence only
Higher debt-to-income ratio
allowed
•
•
•
•
•
•
•
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Credit guidelines are more strict
Higher down payment and reserve
requirements
Higher interest rates (credit score,
property type, subordinate financing, occupancy type, and other
factors can affect the interest rate)
Depending on credit score,
monthly mortgage insurance can be
higher than FHA
Requires both upfront and monthly
mortgage insurance (regardless of
LTV)
Monthly mortgage insurance now
required for life of loan
Condos must be FHA-approved
Taxes and insurance must be escrowed
Second home and investment
properties not allowed
To learn more, visit mbmortgage.com.
First-time Homebuyer
Costs of purchasing
Upfront costs
Paid prior to closing. Must show proof of payment.
•
Earnest Money Deposit: paid to seller to secure the purchase contract
•
Home inspection: not required, but highly recommended
•
Appraisal fee
•
One year Homeowners Insurance premium: paid to insurance agent
•
Pest inspection: VA loans only
•
Well inspection: VA loans only
•
Survey: certain states only
Costs paid at closing
•
Down payment: less earnest money
•
Lender fees: credit report, flood cert, admin fee, points, etc.
•
Pre-paid Interest
•
Escrow reserves: the amount needed to establish your escrow for taxes and insurance
•
Title fees
•
Tax Transfer Stamps: may be required in certain states, cities, or counties. May be seller-paid,
buyer-paid, or split.
•
Attorney fee: certain states only
Home loans with DACA (Deferred Action for Childhood Arrivals)
Bi-lingual loan officers are available to assist you in your community! With DACA, you may be able
to own a home for less than you rent. Use the requirements below as a guide and speak with your
loan officer for more information.
You may be eligible for a home loan if you meet the following requirements under DACA*:
•
Valid social security number
•
Employment Authorization Document** (EAD card)
•
Form 1-797*** DACA approval notice
•
Minimum two years verifiable work history within the U.S.
•
Two year most recent IRS Tax Transcripts, reflective of your social security number
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First-time Homebuyer
What’s next?
Next steps in the mortgage process.
1. Find a realtor
--
Ask your friends, family, or lender for a recommendation
--
Find a realtor who is familiar with the area in which you wish to buy
--
Realtor’s commission is paid by the seller
2. Provide realtor pre-qualification letter from your lender in order to begin your home search
3. Once you find a property and an offer to buy is accepted by all parties, contact your loan officer
A glossary of common mortgage terms, list of MB Home Loan Center locations, a mortgage
calculator, and more can be found at mbmortgage.com.
Please note that the loan documents, disclosures, and other materials related to any mortgage loan offered by MB Financial Bank, N.A. will be
in English and that negotiations about any such loans will also be conducted in English. If you have difficulty understanding or communicating
in English, please consider obtaining appropriate assistance from a trusted translator/interpreter. Actual payments and terms will vary based on
individual situation and current interest rates. Ask for our current interest rates. All loans subject to credit approval. Program guidelines and loan
terms are subject to change at any time. *Deferred Action for Childhood Arrivals (DACA) allows certain people who came to the United States
as children to request consideration of deferred action and work authorization for a renewable period of two years, as long as certain guidelines
are met. DACA Program available for FHA loan(s) only. This does not include any state housing programs. **If your EAD Card or DACA will expire
within one year of closing, evidence of approved renewal must be provided.
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To learn more, visit mbmortgage.com.