Mortgage Loans

Prepare to Shop

Buying a home is exciting! It's also one of the most important financial decisions you'll make. Choosing a mortgage to pay for your new home is just as important, so don't rush into it! Before you start shopping for a home and a mortgage, set yourself up for success by taking some time to prepare.  Below are some recommended steps to prepare for the home buying process. 

Steps for Action

1. Check Your Credit

CFCU Community Credit will use your credit scores and the information on your credit report to determine whether you qualify for a loan and what interest rate to offer you. Check your own credit reports early on to prevent unpleasant surprises and correct any mistakes. In addition, having a good idea of your credit scores will allow you to make the most of our budgeting and planning tools. 

Get copies of your credit reports. There are three major credit reporting companies-Equifax (http://equifax.com), Experian (http://www.experian.com), and TransUnion (http://www.transunion.com). You can get a free copy of your credit report once per year from all three companies at www.annualcreditreport.com (http://www.annualcreditreport.com). 

Check your credit reports carefully for errors. Look on your credit reports for any debts or credit cards you don't recognize. Also check for disputed items that still show up even though they were resolved in your favor. A late or missed payment isn't an error if it actually happened. If you find any errors on your reports, file a dispute to get them corrected as soon as possible. 

All About Credit Scores

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2. Assess Your Spending

Before you start home shopping, take a close look at your current spending. For most people, buying a new home means taking on new expenses-whether you are currently renting or already own a home. You need a clear understanding of how much you're currently spending to decide what you can comfortably afford to spend on a new home. 

Take a realistic look at your current spending patterns. There are several ways to look at your current spending. Choose what works best for you, and consider one or more of the following: 

• Look at your checking account and credit card history for the last several months
• Consider signing up for a personal financial management tool to help track your spending if you don't currently use one. CFCU's MyMoney tool is great option.
• Save your receipts or use a small notebook to record all of your expenses. Do not leave anything out. 

Draw up an as-is monthly budget that accurately reflects your current spending. 

• Make sure to include a "miscellaneous" category. Whether it is a brake replacement for the car or plane tickets to a best friend's wedding, there's always something out of the ordinary. 
• If you make regular savings contributions to an emergency fund or other savings goal, include these in your budget.
• Look back over several months to make sure you don't miss less frequent expenses like insurance payments, medical expenses, school clothes, tuition, support for family members, seasonal and recreational costs, gifts, donations to charity, and vacations. 

Add up all the categories and compare this budget to your monthly take-home pay. Check your bank statements carefully to see whether your budget is realistic. If the amount you typically have left over in your bank account each month doesn't match the amount your budget says should be left over, re-examine your spending patterns to see if you need to adjust the numbers in your budget. 

What to Know About Budgets

3. Budget For New or Changed Expenses

Now that you have a clear picture of your current spending habits, you can develop a forward-looking budget for how you'll spend your money once you've bought a new home. This lets you decide on a target monthly home payment. 

Decide how much you can afford to spend on a total monthly home payment. Your total monthly home payment includes mortgage principal, interest, property taxes, homeowner's insurance, and any mortgage insurance. Estimate expenses for electricity, gas, cable, water, and other required monthly costs of home-ownership such as condo or Homeowner's Association (HOA) dues. Also estimate expenses for home maintenance, improvements, and make sure you will have enough money to pay for these costs in addition to your total monthly mortgage payment. Think about what your budget will be once you have bought your home, and decide how much you want to be saving each month for emergencies and other goals. 

Make adjustments. If you are considering cutting back on some of your discretionary spending in order to be able to comfortably afford the kind of home you want, take a second look at your budget and make realistic adjustments. Make sure your adjusted budget adequately accounts for all of the new costs of home-ownership. 

What to Know

4. Determine Your Down Payment

Now that you have a good sense of what you can comfortably afford on a monthly basis, it's time to look at your savings and determine how much you can afford for a down payment.

Determine how much money you are able to spend upfront on your home purchase. 

• Gather your savings and investment statements and add up your total available funds.
• Decide how much you want to set aside for other savings goals, moving costs, and any renovations for your new home. Subtract these amounts.
• Now, subtract an additional amount for an emergency cushion. A good rule of thumb is at least three to six months' worth of expenses. 
• The result is your possible maximum available cash for closing-how much you can contribute out of pocket at the time you close on your loan.

Estimate your costs to "close". In addition to your down payment, there are many costs associated with "closing" or finalizing your loan and home purchase. Closing costs depend on a lot of things-the price of the home you buy, your down payment amount, the lender costs, the kind of loan you choose, and the location of your new home. Since you're still early in the process, it's hard to make a precise estimate at this stage. You can make a rough estimate now using a home price that is typical for the neighborhoods you'd like to live in. Refine your estimate as you move forward an gather more information. Typically, closing costs (not including your down payment) range from 2-5% of the home purchase price. 

Set aside some money to cover initial home expenses. New homeowners often find things that need fixing, or discover that they need an additional piece of furniture to make the new home work for their family. Moving expenses and utility set-up fees can also add up. When thinking about how much you can afford for a down payment, make sure to set aside some money to cover these expenses. 

Give yourself a cushion. At this stage, none of the numbers you are working with are precise. It's a good idea to give yourself a cushion in your estimates, so that if you costs turn out ot be higher than you expected, you're not left scrambling for money. 

Don't forget your other savings goals. when considering how much savings you have available for your down payment, don't forget your retirement and other savings goals. 

All About Down Payments

 5. Decide How Much You Want to Spend on a Home

Once you know your estimated down payment amount, one of your credit scores, and a few other details, you can use our tools to figure out what interest rate you might expect to pay for a mortgage. This lets you get a realistic estimate of the home price range that you can comfortably afford. 

Explore interest rates. The interest rate you receive is one of the most important factors in determining the home price you can afford. It's important to know the range of rates you can expect, and the impact that rate has on your home price. Explore the range of interest rates you can expect based on your information, and choose a realistic interest rate to use in calculating your affordable home price. Explore our current rates here.

Figure out how much you can afford for monthly principal and interest. The loan amount you can afford depends on how much you can afford to pay back each month. 

• If you haven't already, decide how much you can afford to spend on a total monthly home payment. 
• Your total monthly home payment includes several costs of home-ownership. Your principal and interest payment is the part of your total monthly payment that pays back your loan and is used to calculate your affordable loan amount. 
• Estimate how much you expect to pay monthly in property taxes and homeowner's insurance. Browsing for-sale listings or talking with family, friends, or a real estate agent in your area is a good way to get a rough estimate. 
• Subtract your estimated taxes and insurance from your target total monthly home payment to get the amount you can afford to pay monthly for principal and interest.

Calculate your affordable loan amount. You can use our simple calculator or try searching online for "mortgage calculator."

Estimate your affordable home price. Add your down payment amount to your calculated loan amount to get an estimate of the home price that will be affordable for you. 

What to Know: Home Prices

6. Consider Whether It's the Right Time for You to Buy

Buying a home is a big financial decision. Now that you've looked at your finances and estimated how much you can afford to pay for a home, consider whether now is the right time for you to buy. 

Compare your estimate for the home price you can afford to the prices of homes in your target area. Real estate websites can help you find general prices for the neighborhoods you are interested in. If the typical home price in your target neighborhoods is more than you can afford, you may want to explore options in other neighborhoods or adjust your search criteria. 

Explore the financial trade-offs of renting vs. buying. If you're currently renting, or moving to a new area Our CFCU calculator can help you assess the financial trade-offs of renting versus buying based on your financial situation and the length of time you expect to be in your new home. Try several different scenarios when using a calculator to see a range of possible outcomes. Calculators make assumptions about future economic conditions, such as the rate of home price growth. These assumptions can have a big impact on the calculator's results. 

Understand the risks and responsibilities of home-ownership. Home-ownership can be rewarding and a good way to build wealth. But there are risks and responsibilities associated with owning property. When you rent, your landlord is responsible for the property and takes on the risks. When you buy, you take on these risks and responsibilities: 

• Your home value could decline, and you could lose equity or even owe more than your home is worth.
• If something important breaks-for example, the furnace stops working, or the roof starts to leak-you will have to pay for expensive repairs to get it fixed right away.
• If something else breaks-for example, a cracked window, a broken dishwasher, or a clogged toilet-you will need to spend the time to fix it yourself or pay for a professional. 

What to Know About Home-Ownership

7. Create a Loan Application Packet

In the exploring loan choices phase, you will talk with a  CFCU Mortgage Loan Sales Associate to get acquainted with the loan process, and you'll provide CFCU some information about your finances. It's best to gather this information now, so you'll have it ready at your fingertips. 

Gather your personal and financial information. 

• Pay stub for the last 30 days
• W-2 forms, last two years
• Signed federal tax return, last two years
• Documentation of any other sources of income
• Bank statements, two most recent
• Documentation of the source of your down payment: investment or savings account statements showing at least two months' history of ownership. If some of the funds were a gift, get a signed gift letter from a CFCU Mortgage Loan Sales Associate. 
• Documentation of name change, if recent
• Proof of your identity (typically a divers' license or non-driver ID)
• Social security number
• Certificate of housing counseling or home buyer education, if you have one

Make sure your documents are accurate and complete. The more organized you are, the faster the loan approval process is likely to be. Your lenders use the information you provide to decide how much they are willing to lend you at what interest rate. If your information is inaccurate, you could encounter costly surprises down the road. If your documents are incomplete, lenders may reject them. Make sure to include every page of multi-page documents, even ones marked "intentionally left blank", and make sure when printing online documents that the full URL is included on the bottom of each page. 

Chances are, you'll need to update your loan application packet at least once during this process. CFCU needs to see the most recent bank statements, pay stubs, etc. If you access any of these items online, write a reminder to yourself on how to find the information again so you can update your packet easily. If you are self-employed or have irregular or non-wage income, you may need additional documentation. Share your situation when you meet your CFCU mortgage originator and ask what kind of documentation you need. 

Next, Explore Loan Choices!

Explore Loan Choices

Don't wait until you find a home to start thinking about how to finance it. Take time now to explore your mortgage choices so that you're ready when the right home comes along. Follow the steps below to meet with a CFCU Mortgage Loan Sales Associate, ask questions, and decide what kind of mortgage is right for you. Getting a preapproval letter helps show sellers that you are a serious buyer-but it doesn't commit you to a loan. The kind of loan you choose affects the interest rate you can expect to receive. Continue below to learn about the different kinds of loans and decide which kind is best for you.  

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1. Understand the different kind of loans available

Don't worry, we can help you find the right mortgage for you. As a local not-for-profit financial institution, you are our focus.

• Fixed Rate Mortgage (10, 15, 20, or 30 year term)

• No Closing Cost Fixed Rate Mortgage (10, 15, 20, or 30 year term)

• Adjustable Rate Mortgage

• FHA (15 or 30 year term)

• First Home Club

• Jumbo Loans (greater than $424,100)

• VA Loans

• USDA Rural Development

• Construction Loans

Get a sense for market interest rates. Explore interest rates to learn a range of interest rates you may expect CFCU to offer you, and how different loan options affect rates. For example, you might look at a 30-year, fixed-rate mortgage against a 15-year, fixed-rate mortgage to see how the interest rates compare. Explore our current rates here.

 What to Know When Exploring Loan Options

2. Learn About Loan Costs

Choosing a loan isn't just about the interest rate or the monthly payment. There are many costs associated with getting a mortgage. Take the time upfront to learn about these costs and your choices for paying for them. That way, you'll be better prepared to make the right decision for you when the time comes. 

Learn more about all the costs associated with getting a mortgage. Mortgages are complex, and getting a better deal on one part of the mortgage often means paying more elsewhere. For example, one mortgage may have a lower interest rate, but higher closing costs than another offer. 

Consider your choices for paying these costs. Most mortgage loans include some costs that you pay upfront, at the time of closing, and some you pay over time in your monthly payment. You have some choices for how much you pay, and when: 

• If you want to lower your interest rate, you can pay points. Points, also known as discount points, are money you pay upfront to your lender in exchange for a lower interest rate. Points increase your closing costs. 
• If you want to reduce your closing costs and you qualify, CFCU offers the no closing cost mortgage.
• You can do neither. You pay all of your closing costs out-of-pocket up front, and get an unadjusted interest rate.

What to Know When Exploring Loan Costs

3. Gather and update your paperwork

If it's been a while since you gathered your paperwork, it's a good idea to update it now. 

Update your application packet to make sure you have everything. Gather the most recent copies of any time-sensitive paperwork, such as pay stubs, bank statements, etc. Now is a good time to ask your CFCU Mortgage Loan Sales Associate what additional documents you might need based on your specific situation. 

When in doubt, gather it anyway. Even if CFCU doesn't need a particular piece of paperwork right now, they may want to see it once you get further into the application process. Having everything in the same place makes the rest of the process easier. If you: 

• Receive child support or alimony, you need to provide proof of that income if you want it to be considered. For example, you likely need a court order stating the amount and documentation showing the payments were received. If the payments are inconsistent or expected to end in the next three years, you may not be able to use this income to qualify for a mortgage
• Are you self-employed or have irregular or seasonal income? If so, you will need to provide more extensive documentation of your income. Requirements vary based on the CFCU program and your specific situation. Ask your CFCU Mortgage Loan Sales Associate what you need. 

4. Get a preapproval letter

A preapproval letter is a document stating that CFCU is tentatively willing to lend to you, up to a certain loan amount. This document is based on certain assumptions and it is not a guaranteed loan offer. But, it lets the seller know that you are likely able to get financing. Sellers frequently require a preapproval letter before accepting your offer on a house. 

Decide when to get a preapproval letter. CFCU will typically check your credit before issuing a preapproval letter, and the letter will have an expiration date on it (typically 60 days). For these reasons, many people wait to get a preapproval letter until they are ready to begin shopping seriously for a home. However, getting pre-approved early in the process can be a good way to spot potential issues in time to correct them. 

Ask questions. Ask CFCU what assumptions they made to issue the preapproval. Is there anything about your situation that could lead to your loan being denied later on, or that could increase your interest rate or loan costs? 

What to Know About Preapproval

5. Select the kind of loan that fits your needs 

Once you find the right home to buy, things start to move very fast. There are a lot of trade offs and choices to make when choosing a mortgage. It's best to think through those trade offs in advance, while you have a bit more time. Choosing what kind of loan you want now lets you speed up the application process. 

The first choice you need to make is the kind of loan. The key choices you have to make about the kind of loan are: 

• fixed vs. adjustable interest rate
• loan term (for example, 15-year or 30-year)
• loan type (for example, conventional, FHA, or VA)

If you're considering a low-down payment conventional loan, there are also private mortgage insurance options. If you're not sure what the difference might be between two or three kinds of loans, ask your Mortgage Loan Sales Associate to give you detailed worksheets for each choice, and compare them side by side. A housing counselor can also help you decide which kind of loan is best for your situation.  

What to Know: Comparing Loan Types

6. Find the Right Home

You can explore your loan choices and shop for homes at the same time. Once you've learned about the available options, met with your CFCU Mortgage Loan Sales Associate, received a preapproval letter, and selected the kind of loan that's right for you, there's not much more to do in the mortgage process-until you find a home you want to purchase. Once you have a specific home in mind, you're ready to move on to the next phase in the mortgage process. 

Remember your budget and priorities. As you shop for homes, you're likely to encounter homes that you like that stretch your budget. Before you fall in love with a home that's more than you planned to spend, ask yourself if you can afford it and whether it's worth it. 

• Calculate your total monthly payment here and update your budget to compare the impact on your budget of your target home price vs. higher-priced homes
• Update your interest rate expectations periodically using the purchase price and the kind of loan you are considering. Rates change daily and impact the house price you can afford. Explore our current rates here.
• Update your down payment and closing cost calculations as you get further into your home search. 

Find the right real estate agent for you. Most people work with a real estate agent to shop for homes. Ask friends, relatives, and other people you can trust to recommend a specific agent or a good method for finding one. Real estate websites can also help you find a home or connect you with an agent. Choose an agent that has a strong experience with your preferred neighborhoods, price range, type of home, and other factors that are important to you. Many homebuyers feel an obligation to work with a family member or friend who is a real estate agent. Remember that buying a home is one of the most important investments you'll make. You need to work with an agent who has the experience to do the best job, which may or may not be your family member or friend. 

What to Know: Finding a Home

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Next Steps - Prepare to Close

Mortgage rates are ever changing, however we do post daily rates in our Mortgage Center!

Click here to view the daily rates!

Prepare For Final Steps

Once your purchase offer has been accepted by the seller and you have chosen a CFCU loan, it's time to focus on the remaining loan process. At this stage, you will be introduced to your CFCU Loan Processor who specializes in getting the loan ready for closing. You'll need to provide your CFCU Loan Processor with additional documents, so stay alert for requests and notifications. You'll  may also want to get a home inspection and will need to shop for homeowner's insurance. 

1. Submit Documents and Answer Requests from CFCU Community Credit Union.

Once you've decided to proceed with a loan, you may be asked to provide additional financial information and to submit documents to verify the information you previously reported to CFCU. 

Gather your documents. Use our application packet checklist as a guide for what to gather, if you haven't already. Ask your Mortgage Loan Sales Associate what additional documents you may need based on your particular situation. Keep all of your documents in one place so you won't have to waste time looking for them if CFCU needs more information. 

Submit your documents. Ask your Mortgage Loan Sales Associate or Loan Processor for precise instructions on how and where to submit the information-online, in person, email, fax, etc. Submit copies, keep your originals, and confirm that the right person has received your documents. 

Be proactive and responsive to your Loan Processor. Make sure your Mortgage Loan Sales Associate and Processor have your current contact information, check your email, voicemail, and mail frequently to make sure you don't miss any requests for more information. Respond quickly to requests for additional documents. 

What to Know: Submitting Documents

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2. Schedule a Home Inspection 

Once you've chosen a home, schedule a home inspection appointment as soon as possible. You want to have plenty of time to resolve any problems. 

Find a home inspector. Choose an inspector with a reputation for being honest and thorough. You want someone who will give you a complete and honest assessment of the physical condition of the home. Ask friends or family in your area if they have an inspector to recommend. Ask what about their experience specifically leads them to recommend the inspector. You can also look for inspectors online. Check reviews from other buyers. 

Schedule an independent inspection for the home as soon as possible. You want to know as soon as possible if there are any major problems with the home so you can decide whether or not you still want to buy the home. also, if additional inspections are needed, you'll want to have plenty of time to get them completed. 

What to Know About Home Inspections 

3. Shop for Homeowner's Insurance

Homeowner's insurance protects you in case of accidental damage to your home. CFCU requires you to have homeowner's insurance as a condition of your loan. You can choose your homeowner's insurance company. 

Shop for homeowner's insurance. Ask your family, friends, etc. if they have a recommendation for a homeowner's insurance company. You can also look for homeowner's insurance online. Contact several companies to get quotes in writing. Compare the costs and coverage amounts. See how your premium would change if you increase the deductible. Consider the reputation of the company. If something happens to your home, you want to be well covered. CFCU Insurance Services offers Homeowner's Insurance and may be the perfect fit for you! Learn more here. 

Choose a homeowner's insurance company and policy. Send the final information to your Loan Processor. 

Determine if you need flood insurance. Flooding causes $8 billion in damages in the Unites Sates in an average year. Homeowner's insurance typically does not cover damage from floods. Learn more about flood insurance at FloodSmart.gov. 

If you're buying a condo or co-op, homeowner's insurance may be more complicated. When you're buying into a multi-unit building, your condominium association's or co-op board's fees usually include master insurance for the common areas of the building, but you need your own insurance for your unit. 

4. Look Out for Revised Loan Estimates

As CFCU works to verify the information in your loan application, you may receive revised Loan Estimates. These new Loan Estimates indicate that something important has changed about the loan and its costs.  

Stay alert for communication from your Mortgage Loan Sales Associate and Processor. Check your email and mail frequently to make sure you don't miss a revised Loan Estimate or other important communications from CFCU.

Compare a revised Loan Estimate to the previous one you received. Can you tell what changed? If not, or if you don't understand why something changed, ask your Mortgage Loan Sales Associate or Processor right away. Ask: 

• Can you explain why I received a new Loan Estimate? 
• How is my loan different from what I was originally expecting? 
• How does this change my loan amount, interest rate, monthly payment, other loan features, and cash to close? 

What to Know: Revised Loan Estimates

5. Review Documents Before Closing

Closing can be stressful. You may be getting ready to move. There's a lot going on, and a lot of paperwork to go over and sign. Make things easier on yourself by reviewing the documents in advance. 

Find out how you will receive your Closing Disclosure. CFCU will provide you a copy of your Closing Disclosure three days prior to closing. Contact your Processor at least a week before closing to find out how you will receive your Closing Disclosure. Find out if your Closing Disclosure will come via email, mail, if you will have to download it from a website, or if you will have to stop at a CFCU branch to sign. 

Find your most recent Loan Estimate from your paperwork file. Compare it to your Closing Disclosure. Our interactive sample Closing disclosure form helps you double-check details on your form and get definitions for terms used on the form. 

Request a copy of your other closing documents in advance. In addition to the Closing Disclosure, there are other important documents to review. Ask your loan Processor to send these documents to you in advance, at the same time as the Closing Disclosure. Key documents include: 

• Promissory Note
• Mortgage (also known as the Security Instrument or Deed of Trust)
• Deed

Get our guide to closing forms and our closing checklist. The guide helps you review many of the other forms you receive at closing. The step-by-step closing checklist has tips for what to do and what to look out for before, at, and after closing. 

What to Know: Reviewing Documents

6. Close the Deal

Congratulations! You're ready to sign the papers to your new home and the loan that you will use to pay for it. 

Before you sign any paper, do a final walk-through of the home. Make sure everything that you and the seller agreed would be repaired and anything the seller agreed to leave in the house is in place. If it isn't, contact your real estate agent immediately to discuss. If this is your first time buying a home, or you're nervous about it for any reason, bring along a trusted adviser to the closing. 

Take your time. There are many documents involved in a real estate closing. Many are required by CFCU, and some are required by state and federal law. Regardless of who requires a document, you have the right to take your time and review them all. Make sure the information on the closing documents is exactly what you're expecting. If things look different than what you were told or than what your earlier paperwork said, ask questions. Don't sign anything until you're fully satisfied that the paperwork matches your expectations. 

What to Know: Closing the Deal

7. Save and File Your Documents

Your mortgage is a big financial commitment. Keep your documents so you can refer to them as needed. 

Save all of your final loan and purchase documents in a safe place. Save the whole stack or electronic file. Double-check to make sure you have these four key documents:

• Closing Disclosure
• Promissory Note
• Mortgage (also known as the Security Instrument or Deed of Trust)
• Deed

Save your budgeting documents and other information you used during the mortgage process. The information may be helpful in the future. 

Your Closing Disclosure can help you with your finances in the future. Your closing Disclosure can help you save money at tax time. Some of the closing costs you paid may be tax-deductible. You'll need your Closing Disclosure to complete your tax return accurately. When it comes time to consider refinancing your home or moving to a new home, your Closing Disclosure reminds you of the types of costs you can expect. Your Closing Disclosure may also be helpful for tax purposes when you sell your home.