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Frequently Asked Mortgage Questions

If you're thinking about buying a home, get started with this general mortgage information, including definitions of mortgage terms and helpful tips from SLFCU loan officers. Then call 505.293.0500 or 800.947.5328 to discuss your specific needs.

What advice does SLFCU have for first-time homebuyers?
"Do your research. Use HomeAdvantage® to choose a real estate agent who matches your personality. Look at other loan programs, too. You have to feel comfortable with your loan. I'll look over your other loan offers and answer your questions about them. Don't jump on the first thing you see. This is a big decision."

-Amy, SLFCU Home Loan Officer since 2012

"Don't let anyone pull your credit report until you are ready to apply for your loan. I tell members, 'I gave you a quote with a payment, rate, and closing costs without pulling your credit. Other financial institutions should be able to do that, too.'"

-Ciara, SLFCU Home Loan Officer since 2012

"Come to SLFCU with all of your questions. We make it easy for you. We are with you for the whole process."

-Jenna, SLFCU Home Loan Officer since 2014

How do I apply?

how do I apply?title="how do I apply?" />Apply online, in person, or by phone. We strongly recommend that first-time homebuyers meet with a home loan officer. Call 505.293.0500 or 800.947.5328 for an appointment.

How much can I borrow?

How much can I borrow?title="How much can I borrow?" />To determine how much you can borrow, we look at your credit score, debt-to-income ratio, and down payment.

In most markets, for a credit score of 680 or above, we lend up to 95% of the purchase price or the appraised value of the home, whichever is lower. For credit scores lower than 680, we lend up to 90%.

To determine your debt-to-income ratio, we look at your income and monthly obligations, such as credit card debt, vehicle loans, and student debt. See a list of documents we’ll need to verify your income.

In most markets, we require a 5% minimum down payment; the average down payment is 5-10% of your loan.

"People often have a good idea of how much they can afford for a monthly payment. They say, ‘I pay this much in rent, so this is my budget.’ And remember that you don’t want to be ‘house poor.’ Don’t spend so much on your new home that you don’t have money for anything else."

-Amy, SLFCU Home Loan Officer since 2012

"Consider the cost of the house as well as the price of the house. Don’t forget to budget for utilities, insurance, repairs, and furnishings, as well as mortgage payments."

-Penny, SLFCU Home Loan Officer since 2008

Do I need a 20% down payment?

No. With a good credit history, you can put down as little as 5% in most markets; for lower credit scores, a 10% down payment is required. Qualified first-time home buyers have the option of putting down as little as 3%.

SLFCU can loan 80% on a first fixed-rate mortgage and finance the rest with an adjustable rate second mortgage. With this loan structuring, you avoid paying Private Mortgage Insurance (PMI).

What are closing costs?

What are <span class=closing costs?" src="/files/slfcu17/1/image/FAQs/Key.gif" style="margin-left: 10px; margin-right: 10px; float: left; width: 72px; height: 72px;" title="What are closing costs?" />When you finalize your mortgage, you pay the down payment, lender’s fees (including points for a fixed rate and origination fees), and third-party fees. Get specifics about your potential closing costs with a personalized quote.

The earnest money you paid when you signed a purchase agreement is subtracted from your down payment. Closing costs are usually paid by cashier’s check.

"I pull a detailed list of closing fees and explain the difference between third-party fees and origination fees. Compare these origination fees when shopping for your mortgage."

-Ciara, SLFCU Home Loan Officer since 2012

"You can – and should – negotiate closing costs when you are purchasing a home. The seller generally pays for the costly things like the appraisal and title fees, but you have to ask for it. This can make a big difference to your total closing costs."

-Jenna, SLFCU Home Loan Officer since 2014

"Points are pre-paid interest, used to buy down the interest rate by paying that amount up front. One point equals 1% of the loan. There are no points on SLFCU’s adjustable rate loans."

-Andrea, SLFCU Home Loan Officer since 2011

Does SLFCU have fixed rate mortgages?

Does SLFCU have <span class=fixed rate mortgages? " src="/files/slfcu17/1/image/FAQs/CreditUnion.gif" style="margin-left: 10px; margin-right: 10px; float: left; width: 72px; height: 72px;" title="Does SLFCU have fixed rate mortgages? " />

Yes, SLFCU has fixed rate mortgages with term options that fit your budget.

You may choose to pay points to lower your interest rate, but you won’t pay Private Mortgage Insurance, or PMI. Instead, we can loan you 80% on a first, fixed rate mortgage and finance the rest, up to 95%, with an adjustable rate second mortgage.

Your fixed rate loan – from application to loan origination and beyond – is serviced by SLFCU. When you make a payment or have a question, you’ll talk to the professional, friendly staff at SLFCU.

How can I compare fixed rate mortgage options?

Beyond the amount you’re borrowing, the biggest factors impacting the cost of a fixed rate mortgage are your rate and closing costs. You can’t simply compare one financial institution’s fixed rates against another’s; the advertised rate could include the cost of points, which lower the rate but increase your closing costs.

If you’ve gotten loan estimates from more than one lender, compare the rates and fees, including closing costs, on each document. If you expect to stay in your home (without refinancing) for a long time, it might make sense to lower your rate by paying points.

"We can help you by calculating how long it will take to make up paying for discount points."

-Terri, SLFCU Mortgage Loan Manager since 2008

What are the advantages of an SLFCU adjustable rate mortgage?

What are the advantages of an SLFCU <span class=adjustable rate mortgage?" src="/files/slfcu17/1/image/FAQs/Percent_MyriadPro.gif" style="margin-left: 10px; margin-right: 10px; float: left; width: 72px; height: 72px;" title="What are the advantages of an SLFCU adjustable rate mortgage?" />Make an appointment with a loan officer to discuss your specific situation and learn the differences between SLFCU's fixed rate mortgages and SmartValueTM 5/5 adjustable rate mortgage (ARM). Call 505.293.0500 or 800.947.5328.

With a fixed rate, your rate and principal payment won’t change for the life of the loan, but closing costs are higher. With the SmartValue 5/5, rates and payments are locked for five-year periods.

SLFCU’s adjustable rates are not tiered, and as such, we don’t advertise low rates for which you may not qualify. We have one rate for all of our members, as long as you are approved for the loan. 

Most people refinance or sell their home and buy another one within five to seven years, so high closing costs can add up quickly. With the SmartValue 5/5, your rate and payment would adjust only once during this period, and you’d minimize closing costs.

In these common situations, members often choose the SmartValue 5/5 to take advantage of the competitive interest rate, low closing costs, and rate adjustments at five-year intervals:

  • You are a first-time homebuyer. Is this a starter home? Will there be enough room in your new home if your family grows? Is there a chance you will relocate for work?
  • You intend to pay off your loan early. If you have funds from the sale of your previous home, an inheritance, or high income, you may pay off your balance sooner.
  • You are refinancing. Perhaps you need to use the equity in your home for college tuition, renovations, or debt consolidation.
"Think about your future. Do you plan to live in this home more than five or ten years?"

-Carol, SLFCU Home Loan Officer since 2001

"Everyone starts out thinking they want to lock in a fixed rate, but don’t forget about those high closing costs. We’re happy to talk about what works best for you."

-Denise, SLFCU Home Loan Officer since 2011

What is an escrow account?

What is an escrow account?title="What is an escrow account?" />An escrow account is established when you originate a first mortgage loan in which money for insurance and tax bills are held by SLFCU. When those bills are due, we’ll pay them on your behalf. Here’s how it works:

  1. We add together the annual amount of any required insurance premiums (such as homeowners and flood insurance, if applicable) and an estimated annual amount of property taxes that will be due for the year.
  2. This amount is divided into twelve equal payments, and that amount is added to your monthly mortgage principal and interest payment. Depending on the timing of your closing and your insurance and tax payments, you may need to make an initial escrow deposit at closing.
  3. When you pay your monthly mortgage payment, SLFCU will separate the amount to be paid to your mortgage loan and the amount that will go into your escrow account.
  4. When an insurance or tax bill is due, SLFCU pays each bill on your behalf using the funds in your escrow account.

Most members find it helpful to have SLFCU escrow these costs. There’s no worry about missing a payment or paying a large bill that is only due once or twice a year. And members earn interest on the funds held in their escrow accounts.

If you prefer to manage these bills on your own, you may choose to do so if you meet certain qualifications. Contact us for more details.

"Having an escrow account tied to your mortgage alleviates the stress of saving for and paying your taxes and insurance, with less paperwork. Think of it like an automatic deposit you make each month into a savings account that is just for taxes and insurance."

- Susan, Mortgage Lending Supervisor since 2015

What are the major steps of a mortgage?

What are the major steps of a mortgage?title="What are the major steps of a mortgage?" />After you have decided which mortgage product works best for you, it’s time to apply for your loan.

  1. Gathering Your Information and Documents (Preparation time approximately 1 hour)
    Use this checklist to make sure you have everything you need.
     
  2. Apply for a Mortgage (30 to 90 minutes)
    Apply online, in person, or by phone. We strongly recommend that first-time homebuyers meet with a loan officer. Call 505.237.7161 or 800.947.5328 for an appointment.
     
  3. Processing the Loan (5 to 7 weeks)
    Title work and the appraisal are normally ordered at this time, and you will need to provide your homeowner’s insurance information. Your loan officer and processor will verify information such as:
    • Employment or income
    • Funds for a down payment
    • Explanations for late payments or a gap in employment history
    • Tax liens or other negative credit issues
    • Past collections issues

    Don’t worry if we call to get more information; this is normal. Application information is updated throughout the entire process.

    The mortgage loan processor reviews your application to make sure that it paints an accurate picture of your financial situation and submits your application to the underwriter.

  4. Final Underwriting Approval (3 to 5 days)
    The underwriter reviews your loan documents in order to make a decision about approving your loan. If your loan officer tells you there are conditions – requests from the underwriter for additional information – and asks for additional information, don’t delay. This can be the stage that slows the loan process, often because information must be retrieved from various sources. After final underwriting, the loan is prepared for closing. Scheduling and coordinating the closing with you and the title company is the next step. Gathering final documentation from the title company will be completed right before your closing.
     
  5. Closing and Funding (8 to 10 days; depending on type of loan)
    Closer prepares the loan documents for signing, Borrower reviews and signs the paperwork at the title company, and then the Closer funds the loan transaction.
What information do I need to provide?

Documents and information you'll need to provide to your SLFCU loan officer:

  • Most recent pay stubs covering 30 days of earnings
  • W-2s and/or 1099R from most recent year
  • Most recent 2 months' bank statements (excluding SLFCU accounts)
  • Purchase Agreement, completed and signed by all parties
  • Homeowner's Insurance Agent contact info
  • Title Company's Escrow Officer contact info

Pension or Social Security Income:

  • Letter of Benefits from Social Security Administration
  • Pension Award letter or any pay stub from a retirement company
  • 1099Rs from most recent year

Self-Employment or Commission Income

  • 2 years of federal income tax returns for both individual and business, with all schedules
  • Year-to-date Profit & Loss Statement, signed and dated

Additional documents may include:

  • Trust Agreement
  • Divorce Decree (Child Support and Marital Settlement Statement)
  • For Rental Property Income, last two years of tax returns with all schedules and a current lease agreement
What is the purpose of an appraisal?

The purpose of an appraisal is to ensure that we’re making a loan based on the true, current market value of the home or the purchase price, whichever is lower. An appraiser looks at similar properties that have sold recently in the area and makes adjustments for specific features or upgrades of the home being appraised.

If the appraised value is lower than the purchase price, generally the seller will renegotiate the price, or the buyer could pay more than the appraised amount (making a larger down payment) or cancel the purchase agreement.

"We don't want you to pay too much for your new home. There's usually an appraisal contingency in the purchase agreement that allows you to renegotiate your offer if the appraisal value comes in low."

-Jenna, SLFCU Mortgage Operations Supervisor since 2016

Glossary
Adjustable rate mortgage
A mortgage with an interest rate that can change at designated intervals; most such mortgages change based on a published financial index.
Appraisal
An estimation of the value of the property by a qualified professional.
Closing costs
Fees you pay at the time of purchase. Closing costs may include an appraisal fee, title search, and attorney’s fees as well as points and other fees.
Credit score
A number based on an analysis of your credit report that helps lenders decide whether to lend you money, at what rate, and at what credit limit.
Debt-to-income ratio
Debt-to-income ratio (DTI) is the amount of your monthly gross income that goes toward paying debts. DTI is a tool that helps lenders determine how much it would be prudent to lend you given your income and existing debt obligations. To find your DTI, divide your total monthly debt by your total monthly income.
Down payment
An amount you pay at the time of purchase to reduce the total amount you have to finance.
Earnest money
A security deposit you provide when you make an offer or purchase agreement on a home. It shows the seller that you are serious about buying the home. If you do buy the home, this earnest money is considered part of your down payment.
Equity
Home equity is the difference between your home’s market value and the outstanding balance of your mortgage. Over time, the value of your home generally increases as the amount of your loan decreases, increasing the equity in your home.
Fixed rate mortgage
A mortgage that carries the same interest rate throughout the life of the loan.
Homeowner's insurance
This insures your property against loss and damage. It may cover damage/destruction caused by fire, tornado, etc.; liability if someone is hurt on your property; and loss/damage to the contents in your home.
Lien
A legal claim that gives a lender or service provider the right to an asset if you default on the loan.
Loan-to-value ratio
A ratio determined by dividing the amount of the mortgage by the value of the home.
Origination fee
A fee that covers the lender's administrative costs to process the loan.
Points
Also called "discount points," these are a form of pre-paid interest. Each point is equal to 1% of the mortgage amount. Points are optional, but you may opt to pay for points if you are trying to "buy down" or reduce the interest rate below the current market rate. Some mortgage lenders' advertised fixed rates presume you will buy points.
Private Mortgage Insurance
Insurance you carry to guarantee that the lender is paid if you fail to pay on your mortgage. It is generally required for all mortgages with less than a 20% down payment.
Purchase agreement
A written document in which you agree to buy certain property and the seller agrees to sell under stated terms and conditions. Also called a sales contract, earnest money contract, or agreement for sale.
Second mortgage
A mortgage loan registered on a property after another mortgage (the first mortgage).
Third-party fees
Fees that will be distributed to outside parties, such as the appraiser and title company.
Title
Rights to a property; also, the document proving ownership of a property.
Underwriter
The person who reviews your loan for approval.


Some definitions from CUNA Home & Family Finance.

Mortgage Disclosure: Maximum loan-to-value is 80%. Rates subject to change; check with SLFCU for current rates. If loan does not close, fees incurred will be charged to the member. A $35 initial credit report fee applies to all loans. All loans subject to credit approval. Contact SLFCU for details.

SmartValue 5/5 Adjustable Rate Mortgage Disclosure: Rate for the remaining term adjusts every five years and is based on the then-current index plus margin, rounded to the nearest eighth of a percentage point, and subject to the floor rate.

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Adjustable rate mortgage
A mortgage with an interest rate that can change at designated intervals; most such mortgages change based on a published financial index.
appraisal
An estimation of the value of the property by a qualified professional.
Closing costs
Fees you pay at the time of purchase. Closing costs may include an appraisal fee, title search, and attorney’s fees as well as points and other fees.
credit score
A number based on an analysis of your credit report that helps lenders decide whether to lend you money, at what rate, and at what credit limit.
Debt-to-income ratio
Debt-to-income ratio (DTI) is the amount of your monthly gross income that goes toward paying debts. DTI is a tool that helps lenders determine how much it would be prudent to lend you given your income and existing debt obligations. To find your DTI, divide your total monthly debt by your total monthly income.
Down payment
An amount you pay at the time of purchase to reduce the total amount you have to finance.
Earnest money
A security deposit you provide when you make an offer or purchase agreement on a home. It shows the seller that you are serious about buying the home. If you do buy the home, this earnest money is considered part of your down payment.
Equity
Home equity is the difference between your home’s market value and the outstanding balance of your mortgage. Over time, the value of your home generally increases as the amount of your loan decreases, increasing the equity in your home.
Fixed rate mortgage
A mortgage that carries the same interest rate throughout the life of the loan.
Homeowner's insurance
This insures your property against loss and damage. It may cover damage/destruction caused by fire, tornado, etc.; liability if someone is hurt on your property; and loss/damage to the contents in your home.
Lien
A legal claim that gives a lender or service provider the right to an asset if you default on the loan.
Loan-to-value ratio
A ratio determined by dividing the amount of the mortgage by the value of the home.
Origination fee
A fee that covers the lender's administrative costs to process the loan.
Points
Also called "discount points," these are a form of pre-paid interest. Each point is equal to 1% of the mortgage amount. Points are optional, but you may opt to pay for points if you are trying to "buy down" or reduce the interest rate below the current market rate. Some mortgage lenders' advertised fixed rates presume you will buy points.
Private Mortgage Insurance
Insurance you carry to guarantee that the lender is paid if you fail to pay on your mortgage. It is generally required for all mortgages with less than a 20% down payment.
Purchase agreement
A written document in which you agree to buy certain property and the seller agrees to sell under stated terms and conditions. Also called a sales contract, earnest money contract, or agreement for sale.
Second mortgage
A mortgage loan registered on a property after another mortgage (the first mortgage).
Third-party fees
Fees that will be distributed to outside parties, such as the appraiser and title company.
Title
Rights to a property; also, the document proving ownership of a property.
Underwriter
The person who reviews your loan for approval.