Can I apply for a mortgage loan before I find a property to purchase?
Yes, applying for a mortgage loan before you find a home may be the best thing you could do! If you apply for your mortgage now, we'll issue an approval subject to you finding the perfect home. You can use the Preapproval letter to insure 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.
When you find the perfect home, you'll simply call your Loan Originator to complete the processing of your application.
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, but only recently have mortgage lenders begun to 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.
As soon as you have finished the application we will review your request for instant approval! (Don't worry if your application is not approved online - it doesn't mean we can't provide you financing. Some situations are too complicated for an automated decision and require a little human intervention. We will review your information offline and a Loan Officer will contact you to discuss your situation.)
After completing your online application, a Loan Officer 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. If your request wasn't approved online, we'll ask you for any information required to make a decision about your loan.
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, W-2 statements for two years and pay stubs for one month 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 personal (and business, if applicable) federal tax returns for the most recent two-year period.
We'll review and average the net income from self-employment that's reported on your tax returns to determine the income that can be used to qualify. We won't 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 likely to continue. We'll usually need to obtain copies of W-2 statements for the previous two years and a recent pay stub to verify this type of income. If a major part of your income is commission earnings, we may need to obtain copies of recent tax returns to verify the amount of business-related expenses, if any. We'll 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 probably can't be given full value when your loan is reviewed for approval.
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 recent pension check stubs, or bank statement, if your pension or retirement income is deposited directly in your bank account. 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. This can usually be verified with a copy of your awards letter. If you don't have an awards letter, we can 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.
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, after all expenses except depreciation. Since depreciation is only a paper loss, it won't be counted against 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 is typically not 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 settlement or closing statement 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 settlement statement 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.
