Mortgage FAQ

The Mortgage Process
We know how important buying or refinancing a home is to you, your family and your future. That's why we streamlined the mortgage loan process into easy steps so once you have the financing you need, you can focus on what really matters...living in your home.

Select the Type of Loan You Want
By answering some simple questions in the online application or with your loan officer, you'll be able to preview a variety of loan programs and pricing options. Your DFCU loan options are based on:

• Your monthly income
• How much you owe
• How much you want to spend on your new house, or if you're refinancing, how much do you still owe
• How much you have to put down
• How long you're planning to stay in your new home
• How much flexibility you have with your monthly payments

Apply For the Loan - What You Can Expect
We pared down our loan application to only the most essential information. Here's what we need to know:

• Borrower Information--the basics about you.
• Property Information--the basics about the property you want to finance.
• Income--what you earn.
• Assets--what you plan to use for the down payment and closing costs.
• Liabilities--what you owe and to whom. We'll run a credit report to confirm liabilities and fill in that section of the application for you. (You'll have a chance to review and make any corrections.)
• Declarations--a few more questions to complete your application.

Once you have submitted your application, your loan officer will contact you with further details including the collection of an application fee.

Credit Approval - How It Works
In many cases, we can immediately credit-approve your loan request.
There's a difference. Our credit-approval is a true loan commitment, not just a pre-qualification typically offered by other lenders. It approves a specific loan amount and loan program based on your income and debts. It is, however, legally subject to underwriting the home you are financing and verifying the information you provided us on your application.

Processing Your Loan
Here's what happens when we process your loan:

• We verify the information you provided us on your loan application.
• We request minimum documentation to verify assets and income.
• We order an appraisal, title report and flood certification to review your new home, or existing home, if you're refinancing.
• We provide you all applicable disclosures for your review.

Final Loan Approval
Final loan approval involves underwriting your new home, or existing home if you are refinancing, and the information provided to us on your loan application.Once our underwriting review is completed, we'll give you a final approval and prepare your loan for closing.

Closing Details
Once we have final loan approval, the loan documents are prepared for your signature and then sent to a title agency for signing.

Upon receipt of the signed documents, we'll transfer the money to the escrow company for disbursement of the loan funds and to record the documents.
 

Fixed Rate Mortgages
The Fixed Rate Mortgage Loan maintains its original interest rate throughout the entire life of the loan.

• Any change in monthly loan payments will be due to increases in other charges like insurance or taxes that occur over the life of loan.
• Fluctuations in market rates won't have any impact on the amount of interest you pay because the rate is already "fixed."

A Fixed Rate Mortgage loan may be a good choice if you:

• Want the security of knowing your interest rate will not change, nor will your monthly payment, unless property tax and insurance amounts change
• Plan to stay in this home for several years
• Don't expect your income to increase significantly in the coming years

Fixed Rate Mortgage Loans come in various terms such as 10, 15 or 30 years. Consider this when determining the length of your loan:

• Total amount of interest you want to pay over the course of your loan:
  • For example, the total cost of a 30-year loan in terms of the interest paid on the loan is higher than the total cost of a 10 or 15-year loan. With a 30-year loan, you have the advantage of lower monthly payments due to the longer loan term.
  • With a 15-year loan, you have the advantage of repaying the loan more quickly with higher monthly loan payments.
• Your ability to make high monthly payment:
  • If you can afford to pay more per month, you reduce the number of months you have to pay. Also, choosing a 15-year term will save you thousands in interest charges vs. the typical 30-year term
• Decrease the amount of interest you pay over the life of a 30-year loan:
  • Pay a little extra each month towards the principal when you are able to do so.

Adjustable Rate Mortgages
Consider an ARM (Adjustable Rate Mortgage) if you:

• Want to maximize your buying power
• Want to keep your payments lower during the first few years of your loan
• Plan to move into a different home within the next ten years
• Plan to pay-off your mortgage within the next ten years
• If you expect your income to increase significantly in the coming years

Your Perfect Home
What's your perfect home look like?
Start by making a list that defines all the specific things you want in a home. Your real estate agent can help you find the perfect home once you determine what's important to you.
Consider some of the following things:

• Think about what you want on the outside of your home.
  • Will it have a yard? If so, what size?
  • Do you want an established garden or a chance to create your own?
  • Do you want a garage? Attached? Detached? One, two or three cars?
• Think about what you want on the inside of your home.
  • How many bedrooms do you need?
  • How many bathrooms? (Not just for the immediate future, but for those teenage years, as well.)
  • What about a den or office? A guest room for grandparents and out-of-town guests?

Do you want a basement or an attic?

Buying a home is one of the biggest decisions we make in life, so take your time.
Where you live influences every aspect of your daily life. Think about schools, shopping, traffic, proximity to work, parks, coffee shops, restaurants--all aspects of daily life. 

Here are some ideas as you begin your search.

Where To Live
Location. Location. Location

• Concentrate your search in areas where houses are in your price range:
  • Work with a qualified real estate agent
  • Search online at various real estate sites
• Choose where you'd like to live. Demographic, employment and community information is online, often on the same sites where you'll search for a home.
• Drive through the neighborhoods you've chosen. Starting with your top two, drive to your place of work, both in the morning and the evening. How long is the commute? Is the time commitment reasonable? Are there alternative forms of transportation (bus, ferry, train) that you could use?
• Visit the neighborhood you've chosen. Drive through the neighborhood where you plan to live at different times of the day and at night (especially late night if you're a light sleeper) to check traffic and noise levels. Listen for:
  • Airplane traffic/noise (This information is available on a hazards report if you decide to get one.)
  • Foot traffic
  • Trains
  • Car traffic
  • Is it quiet/peaceful?
  • Look at nearby businesses. What places are open at night that you wouldn't notice during the day (dance clubs, late night restaurants)
• Think about this: what are your chances of staying in the job you have now, for the length of time you'll be living in the house? If changing work locations is a possibility, you may not want to pick a house just because it's near your current job.

Consider the Schools
School districts may influence the value of your property.
The quality of your children's education may determine the quality of their future and the future value of your property. Call and visit the local school district. Conduct online research as well. Most school districts have websites; they are a good place to being your inquiry.

Here are some suggested questions to think about:

• How do students score on statewide and national tests?
• How many students go on to college?
• What colleges do they attend?
• What are some of the problems facing the schools in this area?
• What about drug use and the incidences of violence?
• What about their 'weapons in school policy' (Zero tolerance is best.)
• What is the student/teacher ratio?
• What about art, music, drama and sports programs?
• What are the ages of their facilities? Old, new?
• What is the student/computer ratio?
• At what grade level do they start teaching computer skills?
• What is their language program like?

Consider The Community
Community for qualify living.

• Look at the local Chamber of Commerce website to get a feeling for the type of community you'll be joining. They'll be happy to talk with you and mail any information you need.
• Take a drive around the adjoining shopping areas and take notes on what you find. Will you have easy access to your:
  • Grocery stores
  • Dry cleaners
  • Doctors
  • Hospital
  • Fire station
  • Police station
  • Dentists
  • Place of worship
  • Restaurants

Being that you'll be building from the ground up vs. assuming and existing dweling, quite a bit. We offer a variety of Construction Loan programs, which enable borrowers to finance the construction of a new home. Construction Loans offer the convenience of a one time loan application, loan approval, processing documentation and loan closing covering both the Construction Loan and the Permanent Mortgage Loan. See our Learn Section for additional information on the variety of loan products offered.

The Construction Loan offers a Construction Draw Period, which enables the lender to disburse loan funds during the course of construction based on inspection of the property and on the percentage of completion of the home. Interest only payments are required during the construction draw period. Upon completion of construction and receipt of final inspection and a certificate of occupancy, the loan transitions into the permanent mortgage loan. At that point, standard mortgage payments based on the permanent loan interest rate and the loan term begins.

Borrowers may apply and receive on line approval for our construction permanent loan programs. Special Construction loan documentation is required. 

Our one-time close construction loan offers you a choice of a 6, 9, or 12 months draw period and a maximum of 5 draws during the construction period.  When construction is completed, a final inspection and certificate of occupancy will be required. Once those documents are obtained, your loan will be modified to the permanent 7/6 Adjustable Rate Mortgage terms with a 30-year amortization term.

Construction Permanent Documents
Construction loans require additional loan documentation and review. We will require documentation on the home being built and the builder contracted to do the work.
Examples of additional documentation that may be required:

• Building Permit
• Construction Contract
• Construction Cost Breakdown
• Material Specifications
• Plans and Specifications
• Septic Percolation Test (Perc Test)
• Soil Test
• Survey/Plot Plan
• Utility Permits

Examples of information related to your builder may be required:

• Articles of Incorporation, if applicable
• Contractor's License
• Financial Statement
• Proof of Liability Insurance
• Proof of Workman's Compensation Insurance
• Resume
• Tax Return

Please contact our mortgage loan department for a construction loan checklist of required documentation.
 

Making Your Offer
You've found a house you love. Now what?

First you have to make an offer, in writing, and submit it to the sellers. This is usually done through your agent and is accompanied by your earnest money, which is a pre-determined amount of money, demonstrating that your offer is "in earnest".

Follow the advice of your agent or lawyer when deciding how best to make your offer. Here are examples of some things your offer should include:

• The price you're willing to pay
• When you want to move in
• What kind of inspections you'd like to have (structural, electrical, plumbing)
• If your ability to buy the house depends on your ability to get financing (which is taken care of if you're pre-approved by us)
• The amount of time both you and the seller have to make all these things happen (usually 30 to 60 days)

The seller usually has 24 to 48 hours to consider your offer or make a counter offer, which means, under the terms you offered, they want to sell you their house, but they want a change.

Inspections
It is always wise to make your offer "contingent on inspection". That means your offer isn't really valid until the home has been carefully examined by a qualified (licensed) home inspector, trained to assess various aspects of the home including:

• Foundation
• Plumbing
• Heating and cooling system
• Electrical system
• Roof
• Windows and doors
• Siding
• Exterior grading (to make sure water drains away from house)

At your closing, you'll meet with a representative of the title agency who is handling your loan. Once the title is recorded, ownership will transfer to you.

FEES and CLOSING COSTS: to gain a good understanding of the fees you (and the seller) will be responsible for paying at closing, click the options below.

Fees At Closing

Buyer's Fees
Here is a list of fees you should typically expect to pay at closing; there may be more or fewer:

• Credit Report done by an independent credit association, to establish your credit rating
• Appraisal done by an independent appraiser, to establish the value of the house
• Inspection done by an independent home inspector, to provide information about the integrity of the house (typically not required by the lender)
• Title to disclose whether there are any liens and encumbrances
• Recording Fees to record the transfer of property with the appropriate government bodies
• Courier Fees to cover the cost of transporting documents between the escrow service and various other entities
• Loan Origination Fee this is a fee that may be imposed by some lenders to cover certain processing expenses when making a real estate loan
• Discount Points prepaid finance charges tied to interest rate (the higher the interest rate, the lower the discount points)
• Escrow Services (DFCU does not charge for escrow services)

Seller's Fees
Here is a list of fees the seller may be expected to pay:

• Title Insurance (based on purchase price)
• Recording fee
• Real estate commissions

As part of your Purchase and Sale Agreement, you can ask the seller to pay your closing costs and prepaid items. Please be aware that lenders may have limitation on the amount of seller contributions typically 3% to 6%, depending on the loan to value.

Some things that may be required at closing, but not always:

• Water and sewer certification (if your new home is not on municipal and sewer facilities a certification may be ordered through your local health department to save you money)
• Building code compliance letter
• Mortgage insurance
• Survey

Buying your first home is a big deal. We understand that the more you know about the home buying process, the more confident you'll feel about making important financing decisions. 

That's why we're here for you every step of the way--from application, to closing and for all your loan serving needs for years to come. 

It's the DFCU difference. 

It's A Process 
Financing the purchase of your home is all about finding the loan options that fit your budget and lifestyle. 

Financial Fitness 
A good place to start your financing process is to evaluate your financial fitness or readiness to purchase a home at this time. Ask yourself if you can pay the up-front costs of purchasing a house--and manage the ongoing monthly mortgage payments and other living expenses? 

Only you can answer this question, but DFCU can help. We have a wide range of calculators designed to help you make these determinations just by plugging in figures. 

Which Loan Is Right For You? 

There are so many loan options out there, fixed vs. adjustable rate, 15 year vs. 30 year, traditional vs specialty product, you may be uncertain which one is right for you. That's where we come in. The DFCU team is here to take the guesswork out of your mortgage decisions so talk to your local DFCU Loan officer to discuss your specific needs and let them help you decide what's right for you. 

Pre-Qualified
Pre-qualified for a loan is like getting an estimate from a lender detailing how much of a loan you can likely afford. It serves more as a guide to what a lender may require to approve you for a loan, rather than as any official approval by them.
Pre-Approved
Pre-approval means that you fill out a loan application and provide all your salary and credit information. The lender then checks your assets and pre-approves your capability to get a loan. It's a commitment for credit.

Getting Pre-Approved, it makes a difference.
You find your dream home, and now you can present the seller with your pre-approval letter, showing them you're serious about buying their house because your financing is already pre-approved.
A pre-approved status could make the difference between getting the house you want, or watching some other bidder get the house you want.

Our pre-approval is good for 120 days subject to a qualifying appraisal and title insurance.
NOTE: fees, such as credit reports, may apply.

It's important to find and organize some basic financial information before you start looking for a loan. Once you've collected all the details and documentation listed below, you're ready to begin the application process. 

Here's what you need: 

• Name, current address, social security number 
• Name(s), and work number(s) of employer(s) for the past two years 
• Monthly income for you and your co-borrower (most recent pay stub(s) with year-to-date income) includes bonuses, commissions and overtime income for the past two years (this information is on your tax return) 
• If you are self-employed, you will need the last two years' tax returns for the type of business you own: Sole Proprietorship (Schedule C), Partnership (From 1065), or Corporation (Form 1120 or 1120s). In addition, the last two years' personal tax returns (including K-1s) 
• Documentation to support credit history problems (if applicable), which can be a written explanation of late payments, bankruptcy (petition and discharge papers), defaults, judgments, and/or liens 
• As part of closing, we will have to verify all funds that you receive; so it's a good idea to get together any documents that will verify proof of receipt or deposit for funds, like gifts and trust accounts 

The UP-side of Down Payments 
Saving for a down payment is probably the biggest hurdle for many first-time home buyers, but you may already be worth more than you realize. 

Knowing your assets is the first step in coming up with the amount of money you need to secure your interest in the home and the loan you want. When calculating your assets, be sure to include ALL of the following sources: 

• All checking and savings accounts 
• Stock, bonds, stock options, 401k value 
• 401k loan 
• Gifts from family 

The DOWN-side of Down Payments 
 If your asset position doesn't add up to the right amount, don't give up. Here are a few ideas for you: 

• Ask your lender about loans that requires less money down.  
• Ask us about getting Private Mortgage Insurance (PMI): 
  • Allows for a lower down payment 
  • Lenders use PMI because it protects lender in case you default 
  • You can pay for it on a monthly basis 
  • You can drop it once you reach 20% equity  

Homeowners Insurance
Homeowners Insurance covers fire, theft, certain natural disasters and personal liability if someone is injured on your property. It protects the lender against the loss of the property securing your mortgage. You'll have to prove that you have adequate homeowners coverage as a condition of obtaining a mortgage.

Title Insurance
Several things happen behind the scenes when you buy a house. For example, we will have someone perform a title search to make sure the seller has a legal right to transfer ownership, and to see if there are liens or restrictions on the property. A lawyer, abstractor or employee of the title company does the title search.
Title insurance provides protection against financial loss in case of a defect in the title turns up at some future date. Possible defects include:

• Flawed information in deeds or mortgages (like an incorrect name)
• Liens or claims against the property or property owner (unpaid taxes or bills for water service)
• Claims to ownership from a former owner or spouse
• Invalid deeds (from a past sale or transfer by a party who didn't actually own the property)

....May Be Required
Private Mortgage Insurance
When you acquire a mortgage with less than a 20% down payment, we may require you to buy mortgage insurance. This coverage helps protect the lender in case you can't make your payments and default on the loan. Your Lender isn't the only beneficiary. Mortgage insurance makes it possible for people with small down payments to buy the home of their choice.

Flood Insurance
Flooding is not covered by a standard homeowners insurance policy. To determine if you need flood insurance, ask your insurance professional about the flood history in your area.
If there is a potential for flooding, you will be required to purchase a policy that covers the structure and your personal belongings.

Flood insurance can be purchased from an insurance agent or company under contract with the Federal Insurance Administration (FIA), part of the Federal Emergency Management Agency (FEMA). Flood insurance is only available where the local government has adopted adequate flood plain management regulations under the National Flood Insurance Program (NFIP).

Effective January 1, 2016, regulatory changes were made that require flood insurance premiums to be placed in an escrow account for payment through your lender.
 

Escrow Accounts
Escrow accounts were originally established during the Great Depression of the 1930s, when Americans were unable to pay their property taxes because they were unemployed.

The government and lenders worked together to establish a way to keep people in their homes by attaching an extra payment every month to their mortgage payment. Escrow accounts were set up to hold that money in reserve, until it was time to pay taxes.

Collections for insurance were also added so that all houses would be covered in the event of fires or other hazards.
That practice continues today, if required by your lender to ensure that:

• Homeowners are protected from the possibility of losing their homes for missing tax payments

The escrow account will advance the funds to cover any unexpected increase in tax or insurance payments, which may result in higher monthly payments.

More information about escrow accounts can be found in our Escrow FAQ

If you can lower your interest rate or if the value of your home has increased, it may make sense to refinance. It's a simple process to lower your monthly payment, to fund home improvement, projects or consolidate debt.
Reasons to refinance:

• Switch from an adjustable rate loan to a fixed rate mortgage
• Change from one adjustable rate loan to another to lower your monthly payment
• Reduce your interest rate and your monthly payment
• Build equity faster by shortening the term of your loan to 15 or 20 years