Frequently Asked Questions
None of the loan programs we offer have prepayment penalties. You can pay off your mortgage at any time with no additional charges.
The maximum percentage of your home's value depends on the purpose of your loan, how you use the property, and the loan type you choose, so the best way to determine what loan amount we can offer is to complete our online application!
Still, need answers? Contact our Mortgage team today!
Income from a second job will be considered - provided you can show a 2-year work history from the place of employment.
In general, only income that is reported on your tax return can be considered when applying for a mortgage. Unless the income is legally tax-free and isn't required to be reported. But it will need to be documented.
We take advantage of an automated underwriting process which helps to limit the amount of paperwork needed to complete your application. We use this information to verify your income and assets. The automated underwriting system will compare your financial situation with statistical data from millions of other homeowners and uses that comparison to determine the level of verification required. If at some point our automation system or someone in our office feels that they need more information to get a full picture of your financial status, additional documentation may be requested.
This information does not need to be provided unless you want it to be considered when paying your mortgage. If you do want to use it, you will need to document receipt for a period no less than 6 months. We will also need a copy of the fully executed divorce decree or separation agreement. The income must also continue for the next 3 years to be considered.
The short answer is, "not much." In fact, a hard credit inquiry only drops your score by a few points, at the most, 5. So don't worry about those credit pulls mortgage lenders or mortgage apps request as part of their prequalification or quote process. Unless your credit score is very low to begin with, those few points aren't going to change anything.
In fact, according to Experian (one of the "big three" credit bureaus), "...hard inquiries related to mortgage, auto loan and student loan applications are entirely ignored for 30 days from the date of the inquiry."
And even after those 30 days, Experian states, "After those inquiries have aged past 30 days, they still may not be counted as independent inquiries by credit scoring models. That's because FICO® considers similar loan-related inquiries that have occurred within 45 days of each other as a single inquiry in the scoring process."
So go ahead and get that quote, prequalification, or application started! You're good.
Read more from Experian about how credit inquiries impact (or don't impact) your loan application/approval.
The interest rate is dependent on market trends. Locking in a rate protects you during the timeframe from your rate lock to the day that your lock period expires.
What is a Lock-In Agreement?
This agreement between the credit union and the member specifies the number of days your rate and points are guaranteed. If the rate increases during that time, you are still guaranteed the rate that you "locked" in at. If interest rates fall during that period, you will pay the higher rate you locked in at.
When Can I Lock?
Please reach out to the Mortgage team to discuss rate lock options and timing. We currently offer a variety of lock-in periods which may range from 15 to 90 days. This means your loan must close and disburse within this number of days from the day we confirm your lock.
An adjustable-rate mortgage, also referred to as an "ARM," is a loan that provides a lower initial interest rate than most fixed-rate loans. But the interest rate can change periodically, usually in relation to an index, and in line with the type of ARM, for example: a three-year can change every three years, a 5-year would potentially change every five years, etc. When the rate changes, the monthly payment will also change.
To learn more, visit our blog titled: "Adjustable Rate Mortgages - Your Questions Answered"
In most cases, no. We will need to see documentation of your employment prior to taking time off, and verification of your current job.
We will ask for copies of your recent pension check stubs, or bank statement if your pension or retirement income is deposited directly into your bank account. Sometimes it will also be necessary to verify that this income will continue for at least three years since some pension or retirement plans do not provide a steady income for life. This can usually be verified with a copy of your award letter.
If you're receiving tax-free income, such as social security earnings in some cases, we'll consider the fact that taxes are not being deducted from this income when reviewing your request, meaning we will adjust the amount used to reflect the fact that you aren’t paying taxes as you would with regular income.
With rental income we require the two most recent years of federal tax returns (showing a history of rental income on Schedule E), Signed lease/rental agreements, a recent mortgage statement (if applicable), and a tax and insurance bill to verify your rental income.
We’ll use rental income from your Schedule E deducting reported expenses, but adding back in depreciation. Depreciation does not count against your rental income.
In some cases, if you have owned the rental property for less than 2 years, we can still use some rental income and we will let you know what would be required for documentation.
In general, two years of personal federal tax returns are required to determine the amount of your dividend/ interest income. An average of the amounts you receive will then be calculated. We will also need to verify ownership of these assets with copies of current statements from your financial institution(s), brokerage, stock certificates, etc. to ensure the likelihood of continuance of receipt of this income.
Generally, a co-signed debt must be considered when determining your qualifications for a mortgage. If the co-signed debt doesn't affect your ability to obtain a new mortgage. If that additional debt does change your approval decision, we may need to discuss additional documentation.
A bankruptcy or home foreclosure could affect your ability to get a new mortgage unless it was caused by a situation beyond your control. We usually like to evaluate two to four years after the bankruptcy and three to seven years after a foreclosure. It all depends on the circumstances. This also provided a timeframe in which to build up your credit history.
Unfortunately, that is not the case when buying a new home. We use the lower of the appraised value or the sales price to determine the down payment of the home.
It's still a great benefit if you can purchase a home for less than the appraised value, but our investors don't allow us to use this "instant equity" when making our loan decision.
Several inquiries from different lenders, made in a short amount of time may indicate that you are opening many lines of credit and this, in turn, could affect your score. But don’t panic, 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. Also, any mortgage inquiries made in any 14-day period are considered one inquiry. Don’t limit your house shopping because you are concerned about multiple credit inquiries.
Each point is equal to one percent of the loan. If you buy points at your closing you will lower your monthly payments but pay more at the closing.
To determine whether buying points is the right choice for you, it helps to compare the cost of the points paid to the savings you receive on your monthly payments. You can do this by dividing the total cost of the points by the savings in each monthly payment. For example, if you pay $2,000 to buy a point and your monthly savings with buying a point is $200, then divide $2,000 by $200. This comes out to 10 months of payments. By the 11th month, you have already recouped the price you paid for the point. If you plan to stay in your house for any length of time, then buying points might be a good option.
A 15-year mortgage allows you to own your home free and clear within 15 years, but your monthly payment will be higher than that of a 30-year mortgage. The added benefit of a 15-year mortgage is that you will be paying out much less on interest than you would for a 30-year mortgage. Keep in mind that during the first several years of your loan, you are paying more on interest than principal.
Most people end up taking out a 30-year mortgage because it just makes owning a house more affordable. As your loan gets paid down, you may want to consider a 15-year mortgage.
If you’ll be working for the same employer, complete the application as such but enter your new income if that has changed. You may also need a letter from your employer stating that your position will continue in your new location.
If your employment is with a new employer, complete the application listing your new employer.
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 their name, address, and phone number as well as their relationship to you. If your loan is for more than 80% of the purchase price, with certain programs and products we'll need to verify that you have at least 3% - 5% of the property's value in your own assets.
Prior to closing, we'll verify that the gift funds have been transferred to you by obtaining a copy of your bank statement showing that you deposited the funds into your account. A signed gift letter will also need to be provided. The gift letter will need to clearly state the amount of the gift, the relationship to the homebuyer, and the fact that it does not need to be paid back. We may also need to document the account from which the funds are coming and ensure that they have been on deposit for a specific length of time.
If you are self-employed, we will verify your income by requesting copies of your federal tax returns from the past two years. Your net income as reported is used to determine qualification for the loan. Any income that has not been reported on your tax returns will not be considered. But, by getting two years of returns we can establish that you have a steady income and what is reasonable to expect in future years.
If you’re selling your current home to purchase your new home, you’ll have to bring a copy of the closing statement in order to show that your current mortgage has been paid off and you have the funds available to close on your new home. Often the closing of your current home and new home happens on the same day. If that’s the case, we’ll just ask you to bring the closing statement to the closing and provide an unexecuted copy prior to the final closing.
Typically changing jobs is not an issue as long as you don’t have recent wide gaps in your employment history. We also look at advancements in salary as the job history changes.
If you are paid on a commission basis this can be a bit tricky since it is difficult to predict future earnings - especially if you recently started a new job. However, we will review and consider a two-year history and determine an average income from commissions. If you have not been earning commissions for two years, we may not be able to use this income.
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." You will need to provide a copy of your diploma and/or transcripts.
The Federal Truth in Lending law requires that financial institutions disclose the APR when they advertise a rate. The APR reflects the actual cost of obtaining financing plus some closing fees. In addition to the interest rate, these fees determine an estimated cost of financing over the length of the loan. Usually, most people end up refinancing at some point so it may be considered misleading to spread some of these up front costs over the entire loan term.
Unfortunately, the APR doesn't include all the closing fees. Lenders are allowed to decide which fees they include. Fees for things like appraisals, title work, and document preparation are not included even though you'll probably have to pay them.
For adjustable-rate mortgages, the APR can be even more confusing. Since no one can predict market conditions there will most likely be rate adjustments.
It’s best to use the APR as a guideline when shopping for a good rate but seek a loan that works for you. Keep in mind total fees and possible rate adjustments (in the case of an adjustable-rate mortgage). Also, consider the length of time you plan on keeping the mortgage (or figure you’ll refinance later to draw funds out or lower your payment if rates drop), and whether you will be staying in the same place for any length of time.
Keep in mind that 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.
A credit score is just one of the factors considered when obtaining a loan from a mortgage lender. It determines your credit worthiness and can affect the rate you obtain for a loan. For more information read our blog titled: What is a credit score and how does it affect my mortgage?
In general, a home loan involves several fees, including 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 should provide you with accurate costs. MIT FCU takes quotes very seriously. We've completed the research necessary to ensure that our fee quotes are accurate to the city level - and that is no easy task! For more information on fees read our blog titled: Closing Fees and What You Should Know.
An installment debt is a loan that 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.
PMI kicks in when you are not able to make a down payment of 20% or more on the purchase of your new home. It protects lenders against the risk of a low down payment if someone eventually stops making loan payments and the property goes into foreclosure. The benefit as a borrower is that you can afford a more expensive house and put down less than 20% to get the home of your dreams. While there is an additional cost on your monthly payments for PMI, it does allow for more flexibility when house hunting.
The price of private mortgage insurance is based on loan-to-value ratio, type of loan, credit score, debt-to-income ratio, property type, and amount of coverage required by the lender. Usually, the price is included in your monthly payment. Discuss different options with your Mortgage Originator.
Eventually, it will be possible to cancel your PMI when the loan balance is reduced. Recent Federal Legislation requires automatic termination of mortgage insurance for many borrowers when their loan balance has been amortized down to 78% of the original property value, however, this applies only to single-family homes. If you have any questions about when your mortgage insurance could be canceled, please get in touch with your Mortgage Originator.
Mortgage rates are difficult to predict as the stock market changes daily.
If you feel that rates are going to increase, then it's best to lock in at your current rate. Just make sure that you do so during the rate lock period. There is a finite amount of time you have to lock in the rate. In most cases, when purchasing a new home, the loan usually takes 30-45 days to close (could be longer in some states or if there is still negotiating to do). Make sure you know the estimated closing date so that you can choose the rate lock period. Also, if you refinance and have secondary financing on your home that won't be paid off, make sure you allow some extra time to contact the lender to get their permission.
If you think rates might drop while your loan is being processed, you can take a risk and let your rate "float" instead of locking. After you apply, you can lock in the rate.
The 15-year mortgage is more desirable amongst young homeowners with a healthy disposable income that may want to pay off their house before their children start college. Other homeowners who have higher incomes would like to finance a 15-year mortgage so that they can retire without worrying about having a mortgage payment. It depends on your income and where you see yourself in the future.
What are the advantages and disadvantages of a 15-Year Mortgage?
The 15-year fixed-rate mortgage offers two big advantages for most borrowers:
1. You own your home in half the time it would take with a traditional 30-year mortgage.
2. 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. This lower interest rate added to the shorter loan span creates actual savings for 15-year fixed rate borrowers.
The possible disadvantages associated with a 15-year fixed-rate mortgage are:
1. The monthly payments for a 15-year are roughly 10 percent to 15 percent higher per month than a 30-year.
2. 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.
In order to consider these factors, there must be a history of receiving this “extra” money and it must be likely to continue in order to be considered a regular part of your income. Again, we usually need a two-year history of receipt to verify this income. We’ll average the amounts you have received over the past two years and take that into consideration when approving a loan amount.
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.