Is homeownership right for you?
Buying a home is the largest purchase most people make. It has tremendous benefits, but also carries lots of responsibilities. Ask yourself the following questions:
- Can I afford to buy a home and at what price point?
- Am I ready to budget for home associated expenses, like insurance, taxes and repairs?
- Is it in line with my 5- to 10-year plan?
- Do I wish to remain in the same area for the next few years?
- Have I had a steady income for the past two years?
If you answered YES to the questions above, then homeownership may be for you! Remember, however, real estate transactions aren’t cheap, so buying, and then turning around and selling, is typically not a good idea.
Advantages and Risks
ADVANTAGES
- Freedom to live as you wish, making the changes you want
- Build wealth in the equity of your home
- Home buying sets down roots, invests in your future and allows you to make connections with your neighbors and your community
- Also, possible federal income tax reductions (check with your tax advisor)
RISKS
- Less mobility
- All repairs are your responsibility (you bought it, you broke it, now you fix it!)
- A home can be a slow appreciating asset
- Initial and up-front costs of owning a home could be a financial burden
Can I apply for a mortgage loan before I find a property to purchase?
Yes, applying for a Preapproval before you find a home may be the best thing you could do! If you apply for a Preapproval now, we'll issue an approval subject to you finding the perfect home. You can use the Preapproval letter to ensure real estate brokers and sellers that you are a qualified buyer. A mortgage preapproval may give more weight to any offer to purchase you make. ( Additional fees apply.)
When you find the perfect home, you'll simply call your Loan Originator to complete the processing of your application.
If you aren’t quite ready to search for a home and are more interested in exploring loan programs and what loan amount you might qualify for, consider a Prequalification Request.
What is a credit score, and how will my credit score affect my application?
A credit score is one of the pieces of information we'll use to evaluate your application. Financial institutions have been using credit scores to evaluate credit card and auto applications for many years, and mortgage lenders also use credit scoring to assist with their loan decisions.
Credit scores are based on information collected by credit bureaus and information reported each month by your creditors about the balances you owe and the timing of your payments. A credit score is a compilation of all this information converted into a number that helps a lender to determine the likelihood you will repay the loan on schedule. The credit score is calculated by the credit bureau, not by the lender. Credit scores are calculated by comparing your credit history with millions of other consumers. They have proven to be a very effective way of determining credit worthiness.
Some of the things that affect your credit score include your payment history, your outstanding obligations, the length of time you have had outstanding credit, the types of credit you use, and the number of inquiries that have been made about your credit history in the recent past.
Credit scores used for mortgage loan decisions range from approximately 300 to 900. Generally, the higher your credit score, the lower the risk your payments won't be paid as agreed.
Using credit scores to evaluate your credit history allows us to quickly and objectively evaluate your credit history when reviewing your loan application. However, there are many other factors when making a loan decision, and we never evaluate an application without looking at the total financial picture of a customer.
Will the inquiry about my credit affect my credit score?
An abundance of credit inquiries can sometimes affect your credit scores since it may indicate that your use of credit is increasing.
But don't overreact! The data used to calculate your credit score doesn't include any mortgage or auto loan credit inquiries that are made within the 30 days prior to the score being calculated. In addition, all mortgage inquiries made in any 14-day period are always considered one inquiry.
Will I be charged any fees if I authorize my credit information to be accessed?
No credit report fees are charged for the purpose of submitting online mortgage or home equity loan applications. You will only be charged for a credit report after going through the application process and your loan is approved and closed.
What can you expect when you apply for a mortgage loan?
First, you'll complete our online application.
Through the application process, you will be asked questions about the home and your finances, such as income, assets and liabilities, and this process usually takes less than 20 minutes to complete.
After completing your online application, a Loan Originator will contact you to answer any questions you may have. Your Loan Originator is a mortgage expert and will provide help and guidance along the way. We will send you an application package that will contain papers for you to sign, along with a list of items we will need to verify regarding the information you provided about your finances during the online application..
We will order the appraisal from a licensed appraiser who is familiar with home values in your area.
Title insurance will be necessary. If you are purchasing a home, we will work with the real estate broker or seller to ensure the title work is ordered as soon as possible. If you are refinancing, we will take care of ordering the title work for you. We will use the title insurance commitment to confirm the legal status of your property and to prepare the closing documents.
After your loan has been approved and the title work done, we will schedule your loan closing. The closing will take place at one of the Capitol Federal® offices in your area.
That's all there is to it! You're on your way to the most convenient home loan ever!
How do you decide what you need from me to process my loan?
Usually, paystubs covering the most recent 30 days and previous two years’ W-2's can be used to verify your income. Bank statements and/or asset statements for two months can be used to verify the assets needed to close your loan, along with any required reserves. Tax returns for self-employed borrowers are required. Of course, additional documentation may be required depending on your personal situation.
I'm self-employed. How will you verify my income?
Generally, the income of self-employed borrowers is verified by obtaining copies of federal business tax returns for the most recent two-year period. Depending on the timing of your application, a year-to-date profit and loss statement may be needed.
We'll review and average the income from self-employment that is reported on your tax returns to determine the income that can be used to qualify. We may not be able to consider any income that hasn't been reported as such on your tax returns. Typically, we'll need a full two-year history of self-employment to verify your self-employment income is stable.
Will my overtime, commission, or bonus income be considered when evaluating my application?
In order for bonus, overtime, or commission income to be considered, you must have a history of receiving it and it must be considered likely to continue. We'll usually need to obtain copies of a recent pay stub and previous two years’ year-end pay stubs to verify receipt of this type of income. We'll likely average the amounts you have received over the past two years to calculate the amount that can be considered as a regular part of your income.
If you haven't been receiving bonus, overtime, or commission income for at least one year, it may not be considered as a part of qualifying income.
I am retired and my income is from pension or social security. What will I need to provide?
We will ask for copies of your most recent social security or pension benefit letter, and bank statement, to show receipt of this income. Sometimes it will also be necessary to verify this income will continue for at least 3 years, since some pension or retirement plans do not provide income for life. If you don't have an awards letter, we can usually contact the source of this income directly for verification.
If you're receiving tax-free income, such as social security earnings in some cases, we'll consider the fact that taxes will not be deducted from this income when reviewing your request. We may ask for your most recent tax return to verify.
If I have income that's not reported on my tax return, can it be considered?
Generally, only income that is reported on your tax return can be considered when applying for a mortgage. Unless, of course, the income is legally tax-free and isn't required to be reported.
How will rental income be verified?
If you own rental properties, we'll generally ask for two years federal tax returns to verify your rental income. We'll review the Schedule E of the tax return to verify your rental income. We will also request current lease agreements for the rental properties.
I am relocating because I have accepted a new job I haven't started yet. How should I complete the application?
Congratulations on your new job! If you will be working for the same employer, complete the application as such but enter the income you anticipate you'll be receiving at your new location.
If your employment is with a new employer, complete the application as if this were your current employer and indicate you have been there for one month. The information about the employment you'll be leaving should be entered as a previous employer. We'll sort out the details after you submit your loan for approval.
I've had a few employers in the last few years. Will that affect my ability to get a new mortgage?
Having changed employers frequently may not be a detriment to obtaining a mortgage loan. This is particularly true if you made employment changes without having periods of time in between without employment. We'll also look at your income advancements as you have changed employment.
If you're paid on a commission basis, a recent job change may be an issue since we'll have a difficult time predicting your earnings without a history with your new employer.
I was in school before obtaining my current job. How do I complete the application?
If you were in school before your current job, enter the name of the school you attended and the length of time you were in school in the "length of employment" fields. You can enter a position of "student" and income of "0."
If my property's appraised value is more than the purchase price, can I use the difference towards my down payment?
Unfortunately, if you are purchasing a home, we'll have to use the lower of the appraised value or the sales price to determine your down payment requirement.
I'm getting a gift from someone else. Is this an acceptable source of my down payment?
Gifts are an acceptable source of down payment, if the gift giver is related to you or your co-borrower. We'll ask you for the name, address, and phone number of the gift giver, as well as the donor's relationship to you.
Prior to closing, we'll verify the gift funds have been transferred to you by obtaining a copy of your bank receipt or deposit slip to verify you have deposited the gift funds into your account.
I am selling my current home to purchase this home. What type of documentation will be required?
If you're selling your current home to purchase your new home, we'll ask you to provide a copy of the closing disclosure you'll receive at the closing to verify your current mortgage has been paid in full and you'll have sufficient funds for our closing. Often the closing of your current home is scheduled for the same day as the closing of your new home. If that's the case, we'll just ask you to bring your closing disclosure with you to your new mortgage closing.
Can I really borrow funds to use towards my down payment?
Yes, you can borrow funds to use as your down payment! However, any loans you take out must be secured by an asset you own. If you own something of value you could borrow funds against, such as a car or another home, it's a perfectly acceptable source of funds. If you are planning on obtaining a loan for this purpose, make sure to include the details of this loan in the Expenses section of the application.
I've co-signed a loan for another person. Should I include that debt here?
Generally, a co-signed debt is considered when determining your qualifications for a mortgage. If the co-signed debt doesn't affect your ability to obtain a new mortgage, we'll leave it at that. However, if it does make a difference, we can ignore the monthly payment of the co-signed debt if you can provide verification the other person responsible for the debt has made the required payments by obtaining copies of their cancelled checks for the last 12 months.
I have student loans that aren't in repayment yet. Should I show them as installment debts?
Any student loan, whether in repayment now or deferred for repayment in the future, should be included in the application. If you are not sure exactly what the monthly payment will be at this time, enter an estimated amount.
How will a past bankruptcy or foreclosure affect my ability to obtain a new mortgage?
If you've had a bankruptcy or foreclosure in the past, it may affect your ability to get a new mortgage. Unless the bankruptcy or foreclosure was caused by situations beyond your control, we will generally require that four years have passed since the bankruptcy or foreclosure. It is also important you've re-established an acceptable credit history with new loans or credit cards.
What, exactly, is an installment debt?
An installment debt is a loan you make payments on, such as an auto loan, a student loan or a debt consolidation loan. Do not include payments on other living expenses, such as insurance costs or medical bill payments. We'll include any installment debts that have more than 10 months remaining when determining your qualifications for this mortgage.
I have income from dividends and/or interest. What documents will I need to provide?
Generally, two years personal tax returns are required to verify the amount of your dividend and/or interest income so an average of the amounts you receive can be calculated. In addition, we will need to verify your ownership of the assets that generate the income, using copies of statements from your financial institution, brokerage statements, stock certificates or Promissory Notes.
Typically, income from dividends and/or interest must be expected to continue for at least three years to be considered for repayment.
Do I have to provide information about my child support, alimony or separate maintenance income?
Information about child support, alimony, or separate maintenance income does not need to be provided, unless you wish to have it considered for repaying this mortgage loan.
Will my second job income be considered?
Typically, income from a second job will be considered, if a one-year history of secondary employment can be verified.
How are interest rates determined?
Interest rates fluctuate based on a variety of factors, including inflation, the pace of economic growth, and Federal Reserve policy. Over time, inflation has the largest influence on the level of interest rates. A modest rate of inflation will almost always lead to low interest rates, while concerns about rising inflation normally cause interest rates to increase. Our nation's central bank, the Federal Reserve, implements policies designed to keep inflation and interest rates relatively low and stable.
What is an adjustable rate mortgage?
An adjustable rate mortgage, or an "ARM" as they are commonly called, is a loan type that offers a lower initial interest rate than most fixed rate loans. The trade-off is that the interest rate can change periodically, usually in relation to an index, and the monthly payment will go up or down accordingly.
Against the advantage of the lower payment at the beginning of the loan, you should weigh the risk that an increase in interest rates would lead to higher monthly payments in the future. It's a trade-off. You get a lower rate with an ARM in exchange for assuming more risk.
For many people in a variety of situations, an ARM is the right mortgage choice, particularly if your income is likely to increase in the future or if you don't plan on being in the home for more than 7 years.
Here's some detailed information explaining how ARMs work:
Adjustment Period
With most ARMs, the interest rate and principal and interest payment are fixed for an initial time period, such as seven years. After the initial fixed period, the interest rate can change every year after. The interest rate will not change for the first 7 years (the initial adjustment period) but can change every year after the first 7 years.
Index
Our ARM interest rate changes are tied to changes in an index rate. Using an index to determine future rate adjustments provides you with assurance that rate adjustments will be based on actual market conditions at the time of the adjustment. If the index rate moves up, so does your mortgage interest rate, and you will probably have to make a higher monthly payment. On the other hand, if the index rate goes down, your monthly payment may decrease.
Margin
To determine the interest rate on an ARM, we'll add a pre-disclosed amount to the index called the "margin". If you're still shopping, comparing one lender's margin to another's can be more important than comparing the initial interest rate, since it will be used to calculate the interest rate you will pay in the future.
Interest-Rate Caps
An interest-rate cap places a limit on the amount your interest rate can increase or decrease. There are two types of caps:
Periodic or adjustments caps, which limit the interest rate increase from one adjustment period to the next.
Overall or lifetime caps, which limit the interest rate increase over the life of the loan.
As you can imagine, interest rate caps are very important, since no one knows what can happen in the future. All the ARMs we offer have both adjustment and lifetime caps. Please see each product description for full details.
Negative Amortization
"Negative Amortization" occurs when your monthly payment changes are less than the amount required to pay interest due. If a loan has negative amortization, you might end up owing more than you originally borrowed. None of the ARMs we offer allow for negative amortization.
Prepayment Penalties
Some lenders may require you to pay special fees or penalties, if you pay off the ARM early. Our current ARM products do not contain any prepayment penalty.
Is comparing APRs the best way to decide which lender has the lowest rates and fees?
The Federal Truth in Lending Act requires all financial institutions disclose the Annual Percentage Rate (APR) when they advertise a rate. The APR is designed to present the actual cost of obtaining financing, by requiring that some of the closing fees charged at closing be included, in addition to the interest rate, to determine the cost of financing over the full term of the loan.
For adjustable rate mortgages, the APR can be complex. Since no one knows exactly what market conditions will be in the future, assumptions must be made regarding future rate adjustments.
You can use the APR as a guideline to shop for loans, but you should not depend solely on the APR in choosing the loan program that's best for you. Also, the APR doesn't include all the closing costs. Look at total fees, possible rate adjustments in the future if you are comparing adjustable rate mortgages, and consider the length of time that you plan on having the mortgage.
Don't forget the APR is an effective interest rate - not the actual interest rate. Your monthly payments will be based on the actual interest rate, the amount you borrow, and the term of your loan.
If you would like additional information, you may want to see the Your Home Loan Toolkit - A Step-by-Step Guide provided, or by calling 1-888-8CAPFED.
How do I know if it's best to lock in my interest rate or to let it float?
Mortgage interest rate movements are as hard to predict as the stock market, and no one can really know for certain whether they'll go up or down.
If you have a hunch rates are on an upward trend then you'll want to consider locking the rate as soon as you are able. Before you decide to lock, make sure your loan can close within the lock in period. It won't do any good to lock your rate if you can't close during the rate lock period. If you're purchasing a home, review your contract for the estimated closing date to help you choose the right rate lock period. If you are refinancing, in most cases, your loan could close within 60 days. However, if you have any secondary financing on the home that won't be paid off, allow some extra time, since we'll need to contact that lender to get their permission. Please review our Rate Lock Policy for details, including applicable Rate Lock Fees.
If you think rates might drop while your loan is being processed, you may wish to take a risk and let your rate "float" instead of locking.
How much money will I save by choosing a 15-year loan rather than a 30-year loan?
A 15-year fixed rate mortgage gives you the ability to own your home free and clear in 15 years. And, while the monthly payments are somewhat higher than a 30-year loan, the interest rate on the 15-year mortgage is usually a little lower, and more importantly - you'll pay less than half the total interest cost of the traditional 30-year mortgage. However, if you can't afford the higher monthly payment of a 15-year mortgage, don't feel alone. Many borrowers find the higher payment out of reach and choose a 30-year mortgage.
It still makes sense to use a 30-year mortgage for most people.
Who should consider a 15-Year Mortgage?
The 15-year fixed rate mortgage is popular with young home buyers with sufficient income to meet the higher monthly payments to pay off the house before their children start college. Other home buyers, who are more established in their careers, have higher incomes and have the desire to own their homes before they retire, may also prefer this mortgage.
Advantages and Disadvantages of a 15-Year Mortgage
The 15-year fixed rate mortgage offers two big advantages for most borrowers:
- You own your home in half the time it would take with a traditional 30-year mortgage.
- You save more than half the amount of interest of a 30-year mortgage. Lenders usually offer this mortgage at a slightly lower interest rate than with 30-year loans - typically up to .5% lower.
The possible disadvantages associated with a 15-year fixed rate mortgage are:
- The monthly payments for this type of loan are roughly 10 percent to 15 percent higher per month than the payment for a 30-year.
- Because you'll pay less total interest on the 15-year fixed rate mortgage, you won't have the maximum mortgage interest tax deduction possible.
- You may be better off, in the long run, by investing the extra amount you are applying towards your monthly mortgage payment in other investments.
RATE LOCK AND DISCOUNT POINTS
Should I pay discount points in exchange for a lower interest rate?
Discount points are considered a form of interest. Each point is equal to one percent of the loan amount. You pay them up front at your loan closing in exchange for a lower interest rate over the life of your loan. This means more money will be required at closing, however you will have lower monthly payments over the term of your loan.
To determine whether it makes sense for you to pay discount points, you should compare the cost of the discount points to the monthly payments savings created by the lower interest rate. Divide the total cost of the discount points by the savings in each monthly payment. This calculation provides the number of payments you'll make before you actually begin to save money by paying discount points. If the number of months it will take to recoup the discount points is longer than you plan on having this mortgage, you should consider a loan program option that doesn't require discount points to be paid.
RATE LOCK POLICIES
First Mortgage Loan Products
The interest rate market is subject to movements without advance notice. Locking in a rate protects you from rising interest rates from the day your rate is locked until the day your lock period expires.
You will have the opportunity to either lock or float the interest rate at the end of the application process before you submit your application. If you do not want to lock your interest rate at the time of application, you may choose to float the interest rate up to 15 days prior to closing for no fee. Please talk to one of our Mortgage Loan Professionals for more information regarding our rate lock options and fees.
PREPAYMENT PENALTIES
Are there any prepayment penalties charged for these loan programs?
None of the loan programs offered by us have penalties for prepayment. You can pay off your mortgage anytime with no additional charges.
HOME EQUITY POLICIES
What is your home equity line of credit and home equity loan lock policy?
The interest rate market is subject to movements without advance notice. Because our home equity line of credit interest rate is based on an index, the interest rate will change anytime the value of the index changes – whether your loan has closed or not. If you apply for a fixed rate home equity loan your interest rate will be locked at the rate as of the date of application, provided the loan closes in a reasonable period of time.
CLOSING FEES
Fees
A home loan often involves many fees, such as the appraisal fee, title charges, closing fees and state or local taxes. These fees vary from state to state and also from lender to lender. Any lender or broker should be able to give you an estimate of their fees, but it is more difficult to tell which lenders have done their homework and are providing a complete and accurate estimate. We've completed the research necessary to make sure our fee quotes are accurate to the city level.
To assist you in evaluating Capitol Federal's fees, we've grouped them as follows:
Third Party Fees
Fees we consider third party fees include the appraisal fee, the credit report fee, the survey fee, title insurance fees, flood certification fees, and courier/mailing fees. Third party fees are fees we’ll collect and pass on to the person who actually performed the service. For example, an appraiser is paid the appraisal fee, a credit bureau is paid the credit report fee and a title company or an attorney is paid the title insurance fees. Typically, you'll see some minor variances in third party fees from lender to lender, since a lender may have negotiated a special charge from a provider they use often.
Taxes and other Unavoidable Costs
Fees we consider to be taxes and other unavoidable costs include: State/Local Taxes and recording fees. These fees will most likely have to be paid regardless of the lender you choose. If some lenders don't quote you fees that include taxes and other unavoidable fees, don't assume you won't have to pay them. It probably means the lender who doesn't tell you about the fee hasn't done the research necessary to provide accurate closing costs.
Lender Fees
Fees such as discount points, origination fees, non-escrow fees, processing fees, rate lock, closing and underwriting fees are retained by the lender. This is the category of fees you should compare very closely from lender to lender before making a decision.
Required Advances
You may be asked to prepay some items at closing that will actually be due in the future. These fees are sometimes referred to as prepaid items.
One of the more common required advances is called "per diem interest" or "interest due at closing". You will pay interest from the date of closing through the interest due date. For example, if the loan is closed on June 15, and you have chosen to have your payments on the 1st of the month, we'll collect interest from June 15 through July 1st at closing. This also means you won't make your first mortgage payment until August 1st. This type of charge should not vary from lender to lender, and does not need to be considered when comparing lenders. All lenders will charge you interest beginning on the day the loan funds are disbursed; it is simply a matter of when it will be collected.
If an escrow or impound account will be established, you will make an initial deposit into the escrow account at closing so that sufficient funds are available to pay the bills when they become due.
If your loan requires mortgage insurance, the first month or so of the mortgage insurance will be collected at closing. Whether or not you must purchase mortgage insurance depends on the size of the down payment you make. The upfront insurance premium will be collected at your loan closing and the monthly premium will be included in your monthly payment. If your loan is a purchase, you'll also need to pay for your first year's homeowners insurance premium prior to closing. We consider this to also be a required advance.
What happens at the loan closing?
The closing will take place at one of Capitol Federal's offices in your area with one of our bank employees.
During the closing, you will be reviewing and signing loan documents. As you review the documents you will have the opportunity to ask questions. If you are working with a Real Estate Agent, they often attend the closing with you.
While you are in the office closing, we will offer you additional products. For example, if you would like to open a new checking or savings account or a safety deposit box, we can help with those at the same time in addition to any future financial needs.
Some of the documents you will be signing at the closing include:
Closing Disclosure
The Closing Disclosure is typically prepared a week in advance of closing and provided to you at least three business days prior to your closing. You will be asked to acknowledge receipt of the Closing Disclosure at least 3 business days prior to closing as required by Regulation. Please call your Loan Closer if you have any questions regarding the Closing Disclosure.
The Closing Disclosure provides an itemized listing of the final fees charged in connection with your loan. If your loan is a purchase, the Closing Disclosure will also include a listing of any fees related to the transaction between you and the seller. If this loan will be a refinance, the Closing Disclosure will show the pay-off amounts of any mortgages that will be paid in full with your new loan. This document also discloses additional terms and conditions of the mortgage, including the annual percentage rate (APR) and other calculations relative to your loan. The Closing Disclosure also compares what fees were disclosed to you on the Loan Estimate to what they are at closing. Certain fees are not allowed to be increased unless there has been a “Changed Circumstance”.
Note
This is the document you sign to agree to repay your mortgage. The note will provide you with all the details of your loan, including the interest rate and length of time to repay the loan. It also explains the penalties you may incur, if you fall behind in making your payments.
Mortgage / Deed of Trust
This document pledges a property to the lender as security for repayment of a debt. Essentially, this means you will give your property up to the lender in the event you cannot make the mortgage payments. The Mortgage/Deed of Trust restates the basic information contained in the note and details the responsibilities of the borrower. In Missouri, the document is called a Deed of Trust, in Kansas it is called a Mortgage.
If your loan is a refinance, Federal Law requires you have a three days right to cancel after you sign the documents. This means the loan funds won't be disbursed until three business days have passed. The Loan Closer will provide more details at the closing.
Will I need to have an attorney represent me at closing?
In some areas of the country, it is customary, and sometimes required by law, to have an attorney represent you at the closing. In other areas, like Kansas and Missouri, attorneys are not as common at a real estate closing. Please contact your Attorney, Loan Originator or Real Estate Agent if you have questions about attorney representation.. If you decide to work with an attorney and they have questions for us about your new mortgage, please refer them to your Loan Originator. We'd be happy to provide any information necessary with your approval.
Can I get advanced copies of the documents I will be signing at closing? YES! Closing documents are usually prepared by the Loan Closer the day before your closing and delivered via a secured web portal. If you do not elect to use the web portal and would like copies of documents prior to closing, please contact your Loan Closer.
I won't be able to attend the closing. What other options are there?
If you won't be able to attend the loan closing, contact your Loan Originator or Loan Closer to discuss other options.
Can I make my monthly payments with an automated debit from my checking account?
Automated monthly payments are available from your Capitol Federal account or as an ACH from another financial institution. This service will be offered at the loan closing If you would like the payment deducted from another financial institution, please bring a voided check to closing.
What is an appraisal and who completes it?
To determine the value of the property you are purchasing or refinancing, an appraisal will be required for a mortgage loan application. An appraisal report is a written description and estimate of the value of the property. National standards govern not only the format for the appraisal; they also specify the appraiser's qualifications and credentials. In addition, most states now have licensing requirements for appraisers evaluating properties located within their states. The appraiser will create a written report for us and you will also receive a copy of the appraisal report. After the appraiser inspects the property, he or she will compare the qualities of your home with other homes that have sold recently in the same neighborhood. These homes are called "comparables" and play a significant role in the appraisal process. Using industry guidelines, the appraiser will weigh the major components of these properties (i.e., design, square footage, number of rooms, lot size, age, etc.) to the components of your home to come up with an estimated value of your home. The appraiser adjusts the price of each comparable sale (up or down) depending how it compares (better or worse) with your property. As an additional check on the value of the property, the appraiser also estimates the replacement cost for the property. Replacement cost is determined by valuing an empty lot and estimating the cost to build a house of similar size and construction. Finally, the appraiser reduces this cost by an age factor to compensate for depreciation and deterioration. Using these methods, an appraiser will frequently come up with slightly different values for the property. The appraiser uses judgment and experience to reconcile these differences and then assigns a final appraised value. The comparable sales approach is the most important valuation method in the appraisal, because a property is worth only what a buyer is willing to pay and a seller is willing to accept. It is not uncommon for the appraised value of a property to be exactly the same as the amount stated on your sales contract. This is not a coincidence, nor does it question the competence of the appraiser. Your purchase contract is the most valid sales transaction there is. It represents what a buyer is willing to offer for the property and what the seller is willing to accept. Only when the comparable sales differ greatly from your sales contract will the appraised value be significantly different.
Home equity loans frequently use the county tax assessment value for the value estimate. An automated valuation or appraisal may be required should the tax assessment value be insufficient for the amount of credit requested.
What types of things will an underwriter look for when they review the appraisal?
In addition to verifying your home's value supports your loan request, we'll also verify your home is as marketable as others in the area. We'll want to be confident if you decide to sell your home, it will be as easy to market as other homes in the area.
We certainly don't expect you'll default under the terms of your loan and a forced sale will be necessary, but as the lender, we'll need to make sure if a sale is necessary, it won't be difficult to find another buyer.
We'll review the features of your home and compare them to the features of other homes in the neighborhood. For example, if your home is on a 20-acre lot, or has a large accessory building, we'll want to make sure there are other homes in the area on similar size lots or with similar outbuildings. It is hard to place a value on such unique features if we can't see what other buyers are willing to pay for them. In some areas, additional acreage or outbuildings could actually be a detriment to a future sale. Finding comparable properties can be more challenging in rural areas where it is more difficult to find homes that have similar features.
We'll also make sure the value of your home is in the same range as other homes in the area. If the value of your home is substantially more than other homes in the neighborhood, it could affect the market acceptance of the home if you decide to sell.
We'll also review the market statistics about your neighborhood. We'll look at the time on the market for homes that have sold recently and verify values are steady or increasing.
Will I get a copy of the appraisal?
We will provide you with a copy of your appraisal report.
Are there any special requirements for condominiums?
Since the value and marketability of condominium properties is dependent on items that don't apply to single family homes, there are some additional steps that must be taken to determine if condominiums meet our guidelines.
One of the most important factors is determining whether the project in which the condominium unit is located in has been completed. In many cases, it will be necessary for the project, or at least the phase in which your unit is located, to be complete before we can provide financing. The main reason for this is, until the project is complete, we can't be certain the remaining units will be of the same quality as the existing units. This could affect the marketability of your home.
In addition, we'll consider the ratio of non-owner occupied units to owner-occupied units. This could also affect future marketability since many people would prefer to live in a project occupied by owners rather than renters.
We'll also carefully review the appraisal to ensure it includes comparable sales of properties within the project, as well as some from outside the project. Our experience has found that using comparable sales from both the same project as well as other projects gives us a better idea of the condominium project's marketability.
Depending on the percentage of the property's value you'd like to finance, other items may also need to be reviewed.
I'm purchasing a home, do I need a home inspection AND an appraisal?
Both a home inspection and an appraisal are designed to protect you against potential issues with your new home. Although they have totally different purposes, it makes the most sense to rely on each to help confirm you've found the perfect home.
The appraiser will make note of obvious construction problems, such as termite damage, dry rot or leaking roofs or basements. Other obvious interior or exterior damage that could affect the salability of the property will also be reported.
However, appraisers are not construction experts and won't find or report items that are not obvious. They won't turn on every light switch, run every faucet or inspect the attic or mechanicals. That's where the home inspector comes in. They generally perform a detailed inspection and can educate you about possible concerns or defects with the home.
You will want to accompany the inspector during the home inspection. This is your opportunity to gain knowledge of major systems, appliances and fixtures, learn maintenance schedules and tips, and to ask questions about the condition of the home.
I've heard some lenders require flood insurance on properties. Will you?
Federal Law requires all lenders to investigate whether or not each home they finance is in a special flood hazard area as defined by FEMA, the Federal Emergency Management Agency. The law can't stop floods. Floods happen anytime, anywhere. But the Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 help ensure you will be protected from financial losses caused by flooding.
We use a third-party company that specializes in reviewing of flood maps prepared by FEMA to determine if your home is located in a flood area. If it is, then flood insurance coverage will be required, since standard homeowners’ insurance doesn't protect you against damages from flooding.
How long does it take for the property appraisal to be completed?
Appraisals are performed by licensed appraisers who are familiar with home values in your area. We order the appraisal as soon as the application fee is paid. Generally, it takes 10-14 days before the written report is sent to us. We follow up with the appraiser to ensure it is completed as soon as possible. If you are refinancing, the appraiser should contact you to schedule a viewing appointment. If you are purchasing a home, the appraiser will contact the real estate agent, if you are using one, or the seller to schedule an appointment to view the home. Appraisal time can vary during high volume time.
ESCROW
What is an escrow account?
An escrow account is a reserve held by Capitol Federal® for the payment of real estate taxes and property insurance and other insurance premiums. Other insurance premiums may include flood insurance, mortgage life and disability premiums, and debt protection costs. With each monthly payment you make, the portion attributed to the payment of those taxes and insurance premiums is deposited into the escrow account. We pay the taxes and insurance premiums from the funds accumulated in the escrow account.
Why would my escrow account have a shortage?
The most common reason your escrow account may have a shortage is due to an increase in the insurance premiums or tax amounts after we estimated the amounts during the most recent escrow analysis. The resulting "shortage" would require an increase in the monthly escrow payment, both to restore the escrow account balance and to pay the higher premium or tax amount in the future.
Will my escrow payment change, and if so, how often?
Escrow accounts are analyzed at least once every 12 months to calculate a new escrow payment for the following 12 months. If the analysis determines the existence of a shortage in the escrow account, the payment will increase. If the analysis determines the existence of surplus funds, the payment will decrease or remain unchanged and a refund may occur.
I made changes to my insurance premium. Can my payment be adjusted?
Absolutely, and the process is simple. Visit one of our branches or contact a customer service or loan servicing representative toll-free at 888-822-7333 to confirm that we have received the updated information from your insurance company. A change to the payment will require a re-analysis of the escrow account, so be certain to advise the representative that you are requesting an escrow re-analysis.
My insurance agent said I could lower my premium if I raised my deductible. Can I do this, and if so, what are the deductible limits?
Yes, with certain limitations. Currently the property insurance policy deductible may not exceed two percent of the dwelling coverage amount with a maximum of $10,000. Other restrictions may also apply. For information on your specific situation, visit one of our branches or contact a customer service or loan servicing representative toll-free at 888-822-7333.
What do I need to do if I want to change homeowner insurance companies?
Once you have made a decision on a new insurance company, request the new company to send us a copy of the declarations page for your new policy. The item can be forwarded to us in several ways, including visiting myinsuranceinfo.com, being scanned and sent via email to [email protected], faxed to 785-270-6024, or mailed to the following address:
Capitol Federal®
ATTN: Loan Servicing Department
700 S. Kansas Avenue
Topeka, KS 66603
How should the mortgagee clause read for my property insurance policy?
The mortgagee clause should read as follows:
Capitol Federal® Savings Bank, ISAOA
PO Box 1967
Carmel, IN 46082
What is PMI?
PMI stands for "private mortgage insurance", and PMI makes it possible for you to buy a home with less than a 20 percent down payment. PMI is different from property insurance or other types of insurance because its purpose is to protect the lender against the risk associated with smaller down payments. The premium can either be paid upfront or included in the monthly escrow payment.
Can PMI ever be removed from my loan, and if so, when?
Yes. Generally PMI can be removed from a loan once the loan-to-value ratio is not more than 80 percent. For example, if the loan balance was $85,000 and the value of the home was $100,000, the loan-to-value would be 85 percent and PMI could not be canceled. But if the loan balance was $79,000 and the value of the home was $100,000, the loan-to-value would be 79 percent and the PMI could be canceled.
Certain restrictions apply with respect to cancellation of PMI. One such restriction is that the value of the home is calculated using the lower of the purchase price (if applicable) or original appraised value. An appraisal must be obtained to substantiate a higher value; county tax assessments cannot be used. For information on your specific situation, visit one of our branches or contact a customer service or loan service representative toll-free at 888-822-7333.
What do I do if I receive an insurance claim check made payable to the Bank and me for damage to my property?
In the event of property damage, it is important to work with a local lender as the repairs are being completed. Visit one of our branches or contact a customer service or loan service representative toll-free at 888-822-7333. When presenting an insurance check for endorsement, please bring copies of the insurance claim documentation and any other related information.
Please be aware that in certain situations, such as a loan with a high loan-to-value ratio and PMI, the need to make sure that the work is complete may preclude endorsement and immediate return of the check to you. Other restrictions may also apply.
NAME CHANGES
I recently changed my name. How can I change it on my mortgage loan?
Please forward to us a written request and a copy of the legal form (e.g., marriage license, divorce decree, etc.) documenting the change. The items can be forwarded to us in several ways, including being scanned and sent via email to [email protected], faxed to 785-270-6024, or mailed to the following address:
Capitol Federal®
ATTN: Loan Servicing Department
700 S. Kansas Avenue
Topeka, KS 66603
I have recently divorced and was awarded the property in the divorce. Can I have my ex-spouse's name removed from the loan?
Yes. A person can be removed as a borrower on a loan through a process known as "release of liability". This process involves an application and evaluation of income and credit to ensure that the remaining borrower(s) has the financial ability to continue to make the payments. There is a fee for this service, although it is considerably less than the cost of a refinancing transaction, which can also be used to remove a borrower from a loan. For information on your specific situation, visit one of our branches or contact a customer service or loan servicing representative toll-free at 888-822-7333.
One of the borrowers on my loan is deceased. Can the name of the deceased be removed?
Yes. Please forward to us a written request and a copy of the death certificate. The items can be forwarded to us in several ways, including being scanned and sent via email to [email protected], faxed to 785-270-6024, or mailed to the following address:
Capitol Federal®
ATTN: Loan Servicing Department
700 S. Kansas Avenue
Topeka, KS 66603
PAYMENTS
Payment can be accepted through:
- Postal Mail
- In-person at a Capitol Federal branch
- By Pre-authorized transfer
- Wire transfer
- Transfer from a Capitol Federal checking or savings account through the True Blue Online® banking service.
- “Cash advance” only, on a credit card
Payments cannot at this time be made by telephone. For more information please visit one of our branches or contact a customer service or loan service representative toll-free at 888-822-7333.
How can I change my automatic draft information?
To change a pre-authorized transfer, please contact us at least three business days before the scheduled transfer date. This lead time is required in the event the transfer is being originated from another financial institution, as the transfer request is sent prior to the date the transfer actually occurs. To change a pre-authorized transfer, please visit one of our branches or contact a customer service or loan service representative toll-free at 888-822-7333.
How can I stop or cancel my automatic draft?
To stop or cancel a pre-authorized transfer, contact us at least three business days before the scheduled transfer date. This lead time is required because the transfer request is initiated prior to the date the transfer actually occurs. To stop or cancel a pre-authorized transfer, please visit one of our branches or contact a customer service or loan service representative toll-free at 888-822-7333.
How can I obtain a payoff quote for my loan?
To obtain a payoff quote, please visit one of our branches or contact a customer service or loan service representative toll-free at 888-822-7333.
What if I lost my coupon book?
To request a new coupon book, please visit one of our branches or contact a customer service or loan service representative toll-free at 888-822-7333.
When are my payments considered late?
Capitol Federal mortgage and installment loans and Execuline home equity lines of credit allow a "grace period" of 15 days. This means that the loan payment must be received and posted by Capitol Federal within 15 days of the due date in order to avoid a late charge. In addition, adverse reporting to the credit repositories may occur if the payment has not been received and credited within 30 days of the due date.
MISCELLANEOUS
Can I access information about my loan online?
Yes. True Blue Online® banking allows you to view your loan and deposit accounts, and to make online transfers between those accounts. For more information or to obtain the temporary password required for enrollment, contact a customer service representative toll-free at 888-822-7333.
Make a Mortgage Payment
Capitol Federal® makes it easy for you to pay your mortgage. Customers have the option to pay directly from their CapFed® account or from a checking or savings account from another bank.
There is also the ability to schedule your payments. With External Transfers, you control the payment date and amount each month, allowing you to pay extra toward the principal if desired. Remember, the payment date is the day you initiate the payment, not the day Capitol Federal receives it.
Connect with Our Loan Professionals
Finding a mortgage lender is more than just an interest rate. It's finding a trusted professional that's spent years preparing for you. Get in touch with one of our trusted and knowledgeable Loan Professionals to start the process of purchasing your dream home.
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