CEFCU Home Loans

Enjoy affordable down payments and low

closing costs with no junk fees.

Home Loans

With honest answers, local service for the life of your loan, plus a great value financially, it's easy to see why more borrowers stay at CEFCU for their Home Loans.

Benefits

  • Convenient service: CEFCU services your loan, so your payments come to CEFCU, and members of the CEFCU team are ready to help you.
  • Low closing costs: There is no markup on closing costs — you pay only the actual cost of appraisal, title search, and other services.
  • Better value: You pay no processing, administrative, loan origination, or other "junk" fees.
  • Low-down-payment options: CEFCU does offer down-payment options for members.
  • Ownership: CEFCU is owned by its members. We're in business for people — not profits.

If you're buying your first home, find out about our special loan programs and be sure to ask about our First-Time Home Buyer Kit. The Kit contains a home shopping checklist along with information on preapproval, low-down payment options, closing costs, and more.

Let CEFCU help you choose the right Home Loan and manage the loan process. Apply online with Loan @ Home. You also can get started by emailing CEFCU, calling 1.800.542.3328 ext. 33424, or visiting a Member Center.

Buying a Home?

Use these resources for help when you're buying a home. Then check out the great discounts available to CEFCU members!

Online Home Loan Application

Great news! You can apply for a Home Loan with Loan @ Home, a step-by-step online loan application.

Benefits

Apply for a primary residence, second home, or investment property loan. For more information, visit the Home Loan FAQs and Learning Center, email CEFCU, call 1.800.542.3328, ext. 33424, or visit a Member Center.

Choosing the Right Home Loan

Finding the right Home Loan may be confusing, but these answers can help you analyze the options.

What is a Fixed-Rate Loan, and which one should I choose?

Fixed-Rate Loans are available in 10-, 15-, 20-, or 30-year terms. Principal and interest payments remain unchanged for the life of the loan; and the longer the term, the lower your payment. If you're looking to build equity quickly, then the shorter terms might work for you. Your choice may be determined by your ability to cover monthly payments. Use the calculators with the current interest rates to see what your monthly payments may be for different terms.

What is an Adjustable-Rate Mortgage?

An Adjustable-Rate Mortgage (ARM) 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.

When considering an ARM, 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, an ARM is the right mortgage choice, particularly if your income is likely to increase in the future or if you only plan on being in the home for three to five years.

If you are considering an ARM, you will need to evaluate:
Adjustment Period: With most ARMs, the interest rate and monthly payment will remain the same for an initial time period such as one year, three years, five years, or seven years. After the initial period, the interest rate can change every year. For example, one of CEFCU's most popular is a five-year ARM. The interest rate will not change for the first five years (the initial adjustment period) but can change every year after the first five years.

Index: CEFCU's 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. The current value of most indices is published weekly in the Wall Street Journal. 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 to your rate floor.

Margin: To determine the interest rate on an ARM, CEFCU adds 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 because 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 adjustment caps, which limit the interest rate increase or decrease 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 because no one knows what can happen in the future. At CEFCU, a member's loan can only change once a year; your rate cannot adjust to more than 2 percent in a year or 6 percent throughout the life of the loan. All of the ARMs CEFCU offers have both adjustment and lifetime caps. Please see each product description for full details.

Negative Amortization: Negative Amortization occurs when your monthly payment changes to an amount 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 CEFCU offers allow for negative amortization.

Prepayment Penalties: CEFCU never charges a penalty for prepayment. Some lenders may require you to pay special fees or penalties if you pay off the ARM early.

Selecting a mortgage may be the most important financial decision you will make, and you are entitled to all the information you need to make the right decision. If you have questions about the features of ARMs, email CEFCU; call 309.633.3424 or 1.800.633.7077, ext. 33424; or visit a Member Center.

Should I choose a Fixed- or Adjustable-Rate Home Loan?

Fixed-Rate Loans are available in 10-, 15-, 20-, or 30-year terms. Principal and interest payments remain unchanged for the life of the loan; and the longer the term, the lower your payment. With a Fixed-Rate Loan, you know your principal and interest payment during the entire term of the loan, which can mean more peace of mind.

An ARM 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. Adjustable rates allow you to qualify for a larger loan, but the rates do vary annually after an initial period. Rates are capped, but they can increase.

Use the calculators to determine your payments for different types of loans. Apply online; email CEFCU; call 309.633.3424 or 1.800.633.7077, ext. 33424; or visit a Member Center to get started.

How much money will I save by choosing a 15-year Home Loan rather than a 30-year Home Loan?

A 15-year Fixed-Rate Loan gives you the ability to own your home free and clear in 15 years. While the monthly payments are higher than a 30-year loan, the interest rate on the 15-year mortgage is usually lower. More important — you'll pay less than half the total interest cost of the traditional 30-year mortgage. 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 Home Loan?

The 15-year Fixed-Rate Loan is most popular among homebuyers with sufficient income to meet the higher monthly payments, and they want to quickly build equity or pay off the loan.

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. Typically, a 15-year mortgage has a slightly lower interest rate than 30-year loans — typically up to .5 percent lower. It is this lower interest rate added to the shorter loan life that creates real savings for 15-year fixed-rate borrowers.

The possible disadvantages associated with a 15-year fixed-rate mortgage are:

  • The monthly payments for this type of loan are roughly 10 to 15 percent higher per month than the payment for a 30-year Home Loan.
  • 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.

Compare Them Yourself:
Use the Mortgage Comparison: 15 years vs. 30 years calculator to help decide the best loan term for you.

Are there any prepayment penalties charged for these loan programs?

None of the loan programs CEFCU offers have penalties for prepayment. You can pay off your mortgage any time with no additional charges.

Do you have any special low-down-payment loans?

CEFCU does offer programs for first-time home buyers.

Take Five: Available only to first-time home buyers who have a strong credit history with FICO scores greater than 660. All borrowers on the application must occupy the home as their principle residence. A Take Five loan is available for purchase transactions only with a maximum of 95 percent financing and requires a 5/1 Adjustable Rate Mortgage. It offers:

  • ½ percent APR discount
  • Down payments as low as 5 percent
  • 5-year rate lock
  • Smart Lock
  • Opportunity to qualify for a larger loan amount

The borrower's household income will be restricted to 100 percent or less of the area median income. Income limits are based on the county where the property is located. Verify your income eligibility by selecting your state then county.

USDA Rural Housing: The USDA Rural Housing Guarantee Loan program could allow you to buy a home with no down payment.*

  • Loan amounts can be up to 100 percent of the appraised value and include closing costs up to 95 percent. No reserves are required.**
  • Property must be located in an eligible community designated by the USDA as rural. To determine eligibility, please visit the USDA Income and Property Eligibility Site and choose Single Family Housing under Property Eligibility.
  • Your payment is fixed for the term of the loan, even if interest rates rise.
  • Income for all persons over the age of 18 living in the property must be verified and fall within median income limits per county.
  • Any Improvements to the property must be completed prior to closing, otherwise, 150 percent of improvement cost to be held in escrow for no more than 30 days.
  • The upfront guarantee fee is 2 percent. A .40 percent annual fee is required for the life of the loan, and the premium is collected with your monthly payment.
  • The loan is underwritten by CEFCU, but it requires approval through USDA.
  • Online approvals are not available.
  • Final loan approval may take up to 15 days.
  • Currently the USDA rate is less than our 30-year rate. No rate reduction (.125 percent) for loan amounts greater than $100,000.
  • Discount points are not offered for this program.
  • No manufactured housing or construction loans are available through this program.

*Certain geographic requirement and income limits apply.
**Contact CEFCU for more details.

To learn more, apply online; email CEFCU; call 309.633.3424 or 1.800.633.7077, ext. 33424; or visit a Member Center. Be sure to request a First-Time Home Buyer Kit.

What is the maximum percentage of my home's value I can borrow?

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 apply online; email CEFCU; call 309.633.3424 or 1.800.633.7077, ext. 33424; or visit a Member Center.

Back to top

Understanding Rates, Points, and More

You can find help to questions about rates, payments, points, and more with these answers.

How long does it take to close a Home Loan?

Typically, it takes approximately 30 days from the time you submit a completed application to closing. It can take less, and at times, CEFCU has closed Home Loans in as little as seven days. We will work with you to streamline the process and meet the contract date on purchases and Construction Loans. For specific information, email CEFCU; call 309.633.3424 or 1.800.633.7077, ext. 33424; or visit a Member Center.

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 are points?

Points are fees that are collected by the lender in exchange for a lower interest rate. Commonly called discount points, each point is equal to 1 percent of the loan amount. For our comparison purposes, a discount point is considered to be a lender fee. To determine if it is wise to pay discount points to obtain a lower rate, you must compare the up-front cost of the points to the monthly savings that result from obtaining the lower rate.

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 at your loan closing in exchange for a lower interest rate during 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 the loan program option that doesn't require discount points to be paid.

If you would prefer not to make this calculation the "old-fashioned way," use the points calculator!

When are points required?

On a Jumbo Loan, a 1 percent point is applied to loan amounts more than $417,000. This point does not discount the rate.

If you are refinancing your home, partial points are charged for a cash out. If you are borrowing 75 to 90 percent of the home's value (LTV), a .75 percent fee is charged. This fee does not discount the rate of the loan.

Where can I find current interest rates on CEFCU.com?

You can find a selection of Home Loan rates on the CEFCU.com Home page. In addition, complete this form for a detailed list of current rates.

Is comparing Annual Percentage Rates (APRs) the best way to decide which lender has the lowest rates and fees?

The Federal Truth in Lending law requires that all financial institutions disclose the APR when they advertise a rate. The APR is designed to present the actual cost of obtaining financing, by requiring that some, but not all, closing fees are included in the APR calculation. These fees, in addition to the interest rate, determine the estimated cost of financing over the full term of the loan. Because most people do not keep the mortgage for the entire loan term, it may be misleading to spread the effect of some of these up-front costs throughout the entire loan term.

Also, unfortunately, the APR doesn't include all the closing fees, and lenders are allowed to interpret 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 ARMs, the APR can be even more confusing. Because 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 best for you. Look at total fees, possible rate adjustments in the future if you're comparing ARMs and consider the length of time 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. Ask CEFCU about a Good Faith Estimate, which will help you compare different deals.

Do you have any tools I can use to calculate my payments?

We have a series of calculators designed to help you compute how much you can afford and which Home Loan may be right for you. We encourage you to use our calculators, then contact us if you have any questions.

What is your Rate Lock Policy?

The interest rate market is subject to movements without advance notice. Locking in a rate protects you from the time your lock is confirmed to the day your lock period expires. The typical lock is 60 days and starts with the day of your application. CEFCU also offers Smart Lock, a 90-day rate lock.

Smart Lock:
CEFCU offers Smart Lock,* which allows you to lock in your rate for 90 days. With Smart Lock, you:

  • Can lock your rate for 90 days when you apply for preapproval and pay a non-refundable $350 application fee.
  • Continue shopping for the perfect home.
  • Close on your new home within 90 days of locking the rate.
  • It's that easy! Don't worry about your rate while you shop for a home. Get Smart Lock!

*Smart Lock available for mortgages used for the purchase of a primary or retirement home; it does not apply to Construction Loans.

How can I lock my rate?

You can lock your rate online; by phone at 309.633.3424 or 1.800.633.7077, ext. 33424; or in person at a Member Center. Immediately after you apply online and lock your rate, a printable confirmation page is displayed for your records. In addition, a confirmation is sent to the email address you provided during your online application. If you lock your rate by phone or in person, you will receive a letter of confirmation.

Are there any prepayment penalties if I pay off my loan early?

No. CEFCU does not charge prepayment penalties on any of our Home Loans. You can pay off your CEFCU Home Loan at any time.

Can I make my mortgage payments online?

Yes. CEFCU On-Line® allows you to transfer your loan payment directly from another CEFCU account.

Is it possible to make a Lump Sum Payment?

If you apply a lump sum toward your principal balance, you may qualify to reduce your future monthly principal and interest payments for the remainder of your loan's original term without the expense of refinancing. Your loan term and rate will remain the same. Restrictions may apply, so email CEFCU or call 309.633.3424 or 1.800.633.7077, ext. 33424, for details.

Can I refinance an existing loan with CEFCU?

Yes. For more information, please contact CEFCU by email; call 309.633.3424 or 1.800.633.7077, ext. 33424; or visit a Member Center.

Will CEFCU sell my Home Loan?

Like most mortgage lenders, CEFCU sells Home Loans to investors, including the Federal National Mortgage Association (Fannie Mae).

Selling mortgages allows CEFCU to offer affordable Home Loans and quality Credit Union service to more members than we could otherwise. However, CEFCU only sells the debt — never the relationship or the servicing of the loan. Nothing will change in how your Home Loan will work for you. Payments will still come to CEFCU, and members of the CEFCU team can help you with any questions or concerns.

Recent regulations require a borrower be notified when a Home Loan has been purchased, so you may receive communication from the loan purchaser, which could be Fannie Mae or another buyer.

If CEFCU sells my Home Loan, will the new holder service the loan?

No. CEFCU will continue to service your Home Loan. Your Home Loan payments will still come to CEFCU, and members of the CEFCU team can help you with any questions or concerns.

Contact CEFCU first if you choose to sell or refinance your home. You can continue to be confident in the strength, soundness, and quality service you get from CEFCU.

Back to top

Learning about the Application & Interview Process

These answers may help as you apply for a Home Loan and prepare for the interview.

Can I apply for a 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, CEFCU will issue an approval subject to you finding the perfect home. CEFCU will issue a preapproval letter online instantly, or you can contact CEFCU to get your preapproval letter offline. You can use the preapproval letter to assure real estate brokers and sellers you are a qualified buyer. Having a preapproval for a mortgage may give more weight to any offer to purchase you make.

When you find the perfect home, you'll simply call your Mortgage Originator to complete your application. You'll have an opportunity to lock in our great rates and fees then and we'll complete the processing of your request.

Can I apply for my Home Loan online?

Yes. Loan @ Home allows you apply online 24/7. It's convenient and secure with step-by-step instructions to guide you through the process.

What is the difference between prequalifying and preapproval?

Prequalifying is a non-verified estimate of how much you can afford. You'll learn about loans types and which one might be best for you. It costs nothing, it's fast, there's no obligation, and you can do it over the phone.

Preapproval requires a more detailed application where you provide copies of various documents, which depend on the kind of loan you choose. Preapproval is a commitment from CEFCU that you're approved for a loan amount. It is free, and you may even be able to get same-day approval. Many sellers prefer preapproved borrowers.

To prequalify or for preapproval, call CEFCU at 309.633.3424 or 1.800.633.7077, ext. 33424.

Why should I get preapproved for a Home Loan?

Preapproval means you can shop for a home knowing how much you can afford. Preapproval shows the seller that you're serious and prepared — and able — to buy. And finalizing your Home Loan application will probably take less time because much of your information is already in place.

What is a credit score and how will my credit score affect my application?

A credit score is one of the pieces of information CEFCU will use to evaluate your application. Financial institutions have been using credit scores to evaluate credit applications for many years.

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 CEFCU 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 CEFCU never evaluates an application without looking at the total financial picture of a member.

Will the inquiry about my credit affect my credit score?

An abundance of credit inquiries can sometimes affect your credit scores because it may indicate 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 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. Don't limit your mortgage shopping for fear of the effect on your credit score.

Will I be charged any fees if I authorize my credit information to be accessed?

There is no charge to you for the credit information CEFCU will access with your permission to evaluate your application. You will only be charged for a credit report if you decide to complete the application.

Is CEFCU right for me?

Whether you're purchasing or refinancing, you'll find our service amazing! If you'll be purchasing but haven't found the perfect home yet, complete the application, and CEFCU will issue an approval for a Home Loan now with no obligation!

Can I really borrow funds to use toward 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, make sure to include the details of this loan in the Expenses section of the application.

How do you decide what you need from me to process my loan?

CEFCU takes full advantage of an automated underwriting system that allows us to request as little information as possible to verify the data you provided during your loan application. Gone are the days when it was necessary to verify every piece of data collected during the application. The automated underwriting system compares your financial situation with statistical data from millions of other homeowners and uses that comparison to determine the level of verification needed. In many cases, a single W-2 and pay stub can be used to verify your income or a single bank statement can be used to verify the assets needed to close your loan.

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.

CEFCU will review and average the net income from self-employment 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. CEFCU will 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 will 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?

CEFCU will request 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 three years because some pension or retirement plans do not provide income for life. This can usually be verified with a copy of your award letter. If you don't have an award 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, you will generally be asked for the most recent year's federal tax return 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. Because depreciation is only a paper loss, it won't be counted against your rental income. If you haven't owned the rental property for a complete tax year, you will be asked for a copy of any leases you've executed, and the expenses of ownership will be estimated.

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 Home 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.

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 hindrance to obtaining a new 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, it may be more difficult to figure 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, may I use the difference toward my down payment?

Unfortunately, if you are purchasing a home, the lower of the appraised value or the sales price will need to be used to determine your down payment requirement. It's still a great benefit for your financial situation if you are able to purchase a home for less than the appraised value, but market guidelines do not allow us to use this "instant equity" when making our loan decision.

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. You will be asked for the name, address, and phone number of the gift giver, as well as the donor's relationship to you.

If your loan request is for more than 80 percent of the purchase price, it will need to be verified you have at least 5 percent of the property's value in your own assets. Prior to closing, it will need to be verified the gift funds have been transferred to you by obtaining a copy of your bank statement or deposit slip to show it has been deposited.

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, you will be asked 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, you will be asked to bring your settlement statement with you to your new mortgage closing.

I am relocating because I have accepted a job with a new employer that I haven't started yet. How should I complete the application?

Congratulations on your new job! Complete the application identifying the new employer as if this were your current employer and indicate you have been there for one month. Enter the income you will be receiving at your new location.

The information about the employment you'll be leaving should be entered as a previous employer. Documentation needed includes job letter from your new employer stating start date, new position, and starting salary.

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 canceled checks for the last six months.

I have student loans that aren't in repayment yet. Should I show them as installment debts?

Any student loan 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. Written explanation outlining the circumstances of the bankruptcy and/or foreclosure will be requested to determine application decision. Unless the bankruptcy or foreclosure was caused by situations beyond your control, CEFCU will generally require that two to 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 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.

What should I bring to the interview?

If you are planning to buy a home, the CEFCU Home Loan Application Checklist shows you what to have for you interview. Use the Construction Loan Interview Checklist if you are planning to build home.

Depending on the type of loan you're applying for, we could ask for supplemental documentation. Contact CEFCU for further information.

Good Faith Estimate

Why do you need to call me prior to my appointment?

A Mortgage Originator may call you prior to your in-person appointment to obtain preliminary information, which will enable them to research any costs associated with the Home Loan, and which will be provided to you on the Good Faith Estimate. At the time of the in-person application appointment, your Originator will review these costs and forms with you.

How long is my Good Faith Estimate good?

When the Good Faith Estimate is provided to you, CEFCU will honor the fees listed on the estimate for 10 business days. If you notify CEFCU of your intent to continue with your Home Loan application within the 10 business days, the fees listed on your estimate will be honored at the loan closing, unless you change your loan request or other changed circumstances occur. The fees on the Good Faith Estimate have three categories: Zero tolerance, a 10 percent tolerance, and fees that can change.

When does the Good Faith Estimate expire?

If intent is not given to proceed with the loan, the Good Faith Estimate expires after 10 business days.

I previously purchased/refinanced a home, and my closing costs were nowhere near the amount my Good Faith Estimate is now. Why the difference?

Due to regulatory changes that took effect January 1, 2010, all lenders are required to disclose all fees associated with a purchase, construction, or refinance of your property on the same standardized form. The Good Faith Estimate form includes one year's worth of homeowner's insurance and amounts to start funding an escrow account to pay property taxes and homeowner's insurance premiums, and some fees, such as the Owner's Policy the seller may pay. In the past, these fees were not included on Good Faith Estimates.

Should I expect the Good Faith Estimate to list the exact charges I will pay at settlement?

No. The Good Faith Estimate is only an estimate or range of charges. For example, the lender may not know the costs for a settlement agent chosen by you or the seller. The exact amount that will be collected for an escrow account for taxes and insurance are determined based on the date your loan closes.

What rights do I have if the charges I must pay at settlement are higher than those listed on the Good Faith Estimate?

The lender is bound by certain tolerances on select closing costs that were provided on the Good Faith Estimate. The fees on the Good Faith Estimate have three categories: Zero tolerance, a 10 percent tolerance, and fees that can change. The best protection is to let the lender and settlement agent know you will want to see the HUD-1 Settlement Statement one day in advance. You should question any amount you do not understand.

What happens if I don't commit to the terms of the Good Faith Estimate within the 10-day period?

If the signed Letter of Intent or verbal statement of intent has not been received by CEFCU, the file and any rate lock will be canceled. To continue to proceed after the 10-day period, a new application may be required, which may be at a different interest rate if the rates have increased.

How long do I have before I have to send my written Letter of Intent?

You need to inform CEFCU of your Intent to proceed with your Home Loan application (written or verbal) within 10 business days. If you provide a verbal intent, then you need to provide your written intent prior to closing, or your loan closing will be delayed.

When will my appraisal be ordered?

CEFCU orders the appraisal once you provide intent (verbal or written) to proceed with your Home Loan application and the remaining $335 Application Fee is collected from you. For purchase transactions, CEFCU also must receive a purchase contract before the appraisal can be ordered

Why is homeowner's insurance listed on my Good Faith Estimate for my refinance?

The Good Faith Estimate lists required fees to be paid for the application to be processed and closed. CEFCU requires homeowner's insurance on all properties, therefore the annual premium you will pay for your homeowner's insurance is listed on the Good Faith Estimate.

Is a Good Faith Estimate a loan commitment?

No. The Good Faith Estimate is an estimate of settlement charges only.

I received a Good Faith Estimate at application. Why did I receive another Good Faith Estimate?

A Good Faith Estimate may be re-disclosed (re-issued or updated) if there is a change in circumstance regarding the loan transaction or property. The lender may only re-disclose those costs associated to the reason for the change to the loan, such as a loan-to-value impacted by lower value or a borrower request to change loan amount.

I'm purchasing a home, and the seller has agreed to pay some of my settlement charges. Why are those charges still listed on the Good Faith Estimate?

Regulations requires CEFCU list all fees the borrower typically pays on the Good Faith Estimate. At the time of closing on the HUD-1 Settlement Statement, the seller can provide a credit to the borrower for the costs the seller agreed to pay.

Back to top

Finalizing & Closing the Home Loan

Know what you need to have for finalizing and closing on your Home Loan.

What happens at the loan closing?

The closing will take place at the office of a title company or attorney in your area who will act as our agent. If you are purchasing a new home, the seller may also be at the closing to transfer ownership to you; but in some states, these two events actually happen separately.

During the closing you will be reviewing and signing several loan papers. The closing agent or attorney conducting the closing should be able to answer any questions you have, or you may contact your Closing Coordinator if you prefer. Just to make sure there are no surprises at closing, your Closing Coordinator will contact you a few days before closing to review your final fees, loan amount, first payment date, etc.

The most important documents you will be signing at the closing include:
HUD-1 Settlement Statement: This document provides an itemized listing of the final fees charged in connection with your loan. If your loan is a purchase, the settlement statement will include a listing of any fees related to the transaction between you and the seller. If this loan will be a refinance, the settlement statement will show the payoff amounts of any mortgages that will be paid in full with your new loan. Most items on the statement are numbered according to a standardized system used by all lenders. These numbers will correspond to the numbers listed on the Good Faith Estimate that will be provided in your application package. The HUD-1 Settlement Statement is also commonly known as the closing statement, and both the buyer and seller must sign this document.

Truth-in-Lending Statement (TIL): This document provides full written disclosure of the terms and conditions of a mortgage, including the APR. It is exactly the same as the TIL that you received immediately after your initial application, except it has been updated to reflect the final rate and fee information. Federal law requires all lenders provide you with this document at closing.

The 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 restates the basic information contained in the note, as well as details the responsibilities of the borrower. In some states, the document is called a Deed of Trust instead of a Mortgage.

If your loan is a refinance, Federal Law requires you have three days to decide positively you want a new mortgage after you sign the documents, called the three-day Right of Rescission period. This means the loan funds won't be disbursed until three business days have passed. If you are refinancing an existing mortgage from another lender, during the three-day Right of Rescission period, interest is charged on your new loan from the date of closing. Interest on your existing mortgage is included in the payoff quote through the actual payoff date. However, if your existing mortgage is with CEFCU, as a courtesy, CEFCU will pay off your old mortgage on the day of closing and only collects interest on the new mortgage through the three-day Right of Rescission period.

Will I need to have an attorney represent me at closing?

In some areas of the country it is very customary, and sometimes required by law, to have an attorney represent you at the closing. In other areas, attorneys are not as common at a real estate closing. Please contact the closing agent if you have questions about attorney representation. By all means, we recommend you have an attorney at the closing if it would make you more comfortable. If your attorney has any questions about your new mortgage, please refer them to your Closing Coordinator. CEFCU is happy to provide any information necessary.

Can I get advanced copies of the documents I will be signing at closing?

The most important documents you will sign at closing are the note and mortgage, sometimes called the deed of trust. Unless there are special circumstances, these documents are usually prepared one to two days before your closing. Other documents are prepared by the closing agent the day before or the day of your closing. You will receive copies of the completed documents at the time of closing.

Who will be at the closing?

The closing agent acts as CEFCU's agent and will represent CEFCU at the closing. If you have any questions the closing agent cannot answer during the closing, ask him/her to contact your Closing Coordinator by phone, and we'll get you the answers you need — before the closing is over!

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 Closing Coordinator to discuss other options. If someone you trust is able to attend on your behalf, you can execute a Power of Attorney so that person can sign documents on your behalf. We're sure to have a solution that will work in your circumstances.

May I make my monthly payments with an automated debit from my checking account?

Automated monthly payments are available. At the loan closing, an automated payment application will be provided. Simply sign and return it at your earliest convenience to enroll in the automated payment program.

If I apply, where will the closing take place?

We use a nationwide network of closing agents and attorneys to conduct our loan closings. Your closing will take place in a location that is located near your home for your convenience. We'll deliver your loan documents and loan funds to the closing agent or attorney prior to closing so they will have plenty of time to prepare for your closing.

What is needed for the final approval of my Home Loan?

The following documents are needed for final approval of the loan:

  • An appraisal of the home's fair market value
  • All Title search/insurance documentation
  • The home termite inspection report (purchase only)
  • A copy of your homeowner's insurance policy
  • And, if applicable, a copy of the well and septic inspection report (purchase only)

What should I bring to the closing?

To close the agreement, you should bring the following documents with you:

  • A copy of the termite inspection
  • Proof of homeowner's insurance
  • A copy of your most recent paycheck stub
  • Acceptable photo identification (driver's license or state identification card acceptable)
  • A certified check or Bank Wire to cover closing costs and any down payment funds due

What are closing fees and how they are determined?

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. Lenders or brokers 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. CEFCU takes quotes very seriously and has completed the research necessary to make sure our fee quotes are accurate to the city level — and that is no easy task!

To assist you in evaluating CEFCU's fees, they are grouped as follows:

Third-Party Fees: These fees include the appraisal fee, credit report fee, settlement or closing fee, survey fee, tax service fees, title insurance fees, flood certification fees, and courier/mailing fees.

Third-party fees are collected and passed 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 because a lender may have negotiated a special charge from a provider used often or chosen a provider that offers nationwide coverage at a flat rate.

Taxes and other unavoidables: Taxes and other unavoidables 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, document preparation fees, and loan processing fees are retained by the lender and are used to provide you with the lowest rates possible. 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". All CEFCU Home Loans have payment due dates of the first of the month. If your loan is closed on any day other than the first of the month, you'll pay interest from the date of closing through the end of the month at closing. For example, if the loan is closed June 15, CEFCU will collect interest from June 15 through June 30 at closing. This also means you won't make your first mortgage payment until August 1. If you close on the first of the month, such as June 1, your payment will be due July 1. 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 of the loan closing. 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 sufficient funds are available to pay the bills when they become due.

If your loan is a purchase, you also will need to pay for your first year's homeowner's insurance premium prior to closing. We consider this to be a required advance.

What is title insurance and why do I need it?

If you have ever purchased a home before, you may already be familiar with the benefits and terms of title insurance. But if this is your first home loan or you are refinancing, you may be wondering why you need another insurance policy.

The answer is simple: The purchase of a home is most likely one of the most expensive and important purchases you will ever make. You, and especially your mortgage lender, want to make sure the property is indeed yours … that no individual or government entity has any right, lien, claim, or encumbrance on your property.

The function of a title insurance company is to make sure your rights and interests to the property are clear, that transfer of title takes place efficiently and correctly, and that your interests as a homebuyer are fully protected. Title insurance companies provide services to buyers, sellers, real estate developers, builders, mortgage lenders, and others who have an interest in real estate transfer. Title companies typically issue two types of title policies:

  • Owner's Policy: This policy covers you, the homebuyer.
  • Lender's Policy: This policy covers the lending institution over the life of the loan.

Both types of policies are issued at the time of closing for a one-time premium, if the loan is a purchase. If you are refinancing your home, you probably already have an owner's policy that was issued when you purchased the property, so it will only require a lender's policy be issued.

Before issuing a policy, the title company performs an in-depth search of the public records to determine if anyone other than you has an interest in the property. The search may be performed by title company personnel using public records.

After a thorough examination of the records, any title problems are usually found and can be cleared up prior to your purchase of the property. Once a title policy is issued, if any claim covered under your policy is ever filed against your property, the title company will pay the legal fees involved in the defense of your rights. The title company also is responsible to cover losses arising from a valid claim. This protection remains in effect as long as you or your heirs own the property.

The fact that title companies try to eliminate risks before they develop makes title insurance significantly different from other types of insurance. Most forms of insurance assume risks by providing financial protection through a pooling of risks for losses arising from an unforeseen future event — say a fire, accident or theft. On the other hand, the purpose of title insurance is to eliminate risks and prevent losses caused by defects in title that may have happened in the past.

This risk elimination has benefits to both the homebuyer and the title company. It minimizes the chances adverse claims might be raised, thereby reducing the number of claims that have to be defended or satisfied. This keeps costs down for the title company and the premiums low for the homebuyer.

Buying a home is a big step emotionally and financially. With title insurance you are assured any valid claim against your property will be borne by the title company, and the odds of a claim being filed are slim indeed.

What is mortgage insurance and when is it required?

Mortgage insurance should not be confused with mortgage life insurance, which is designed to pay off a mortgage in the event of a borrower's death. Mortgage insurance makes it possible for you to buy a home with less than a 20 percent down payment by protecting the lender against the additional risk associated with low-down-payment lending. Low down payment mortgages are becoming more and more popular; and by purchasing mortgage insurance, lenders are comfortable with down payments as low as 0 to 5 percent of the home's value. It also provides you with the ability to buy a more expensive home than might be possible if a 20 percent down payment was required.

The mortgage insurance premium is based on loan-to-value ratio, type of loan, and amount of coverage required by the lender. Usually, the premium is included in your monthly payment, and one to two months of the premium is collected as a required advance at closing.

It may be possible to cancel private mortgage insurance at some point, such as when your loan balance is reduced to a certain amount — below 75 to 80 percent of the property value. Recent Federal Legislation requires automatic termination of mortgage insurance for many borrowers when their loan balance has been amortized down to 78 percent of the original property value. If you have any questions about when your mortgage insurance could be cancelled, please contact CEFCU.

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. 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 have licensing requirements for appraisers evaluating properties located within their states.

The appraiser will create a written report for CEFCU, and you will be given a copy at your loan closing. If you would like to review it earlier, your Mortgage Processor can provide it to you.

The appraiser will inspect both the interior and exterior of the home. After the appraiser inspects the property, he/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 try to 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 on 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.

If your home is for investment purposes or is a multi-unit home, the appraiser also will consider the rental income that will be generated by the property to help determine the value.

Using these three different 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 very different.

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. CEFCU needs to be confident if you decide to sell your home, it will be as easy to market as other homes in the area.

It is not expected you will default under the terms of your loan and a forced sale will be necessary; but as the lender, CEFCU will need to make sure if a sale is necessary, it won't be difficult to find another buyer.

The features of your home will be reviewed then compared 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 with similar features.

In addition, CEFCU needs to 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.

The market statistics about your neighborhood will be reviewed, and we will 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?

As soon as we receive your appraisal, your loan will be updated with the estimated value of the home. As a standard practice, we will provide a copy of your appraisal at closing.

How will I know what the abbreviations stand for in the appraisal report?

As of September 1, 2011, there are new appraisal guidelines for any appraisal report. The Uniform Appraisal Dataset Abbreviations sheet (PDF, 2 MB) explains what the abbreviations and ratings are.

Are there any special requirements for condominiums?

Because 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 CEFCU's guidelines.

One of the most important factors is determining if the project the condominium is located in is complete. In many cases, it will be necessary for the project, or at least the phase your unit is located in, to be complete before financing can be provided. 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 because many people would prefer to live in a project occupied by owners rather than renters.

We'll also carefully review the appraisal to ensure that 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 would like to finance, other items — such as condominium bylaws, letter of no special assessments, and a master insurance policy — will 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 have 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 home inspectors come in. They generally perform a detailed inspection and can educate you about possible concerns or defects with the home.

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 ask questions about the condition of the home.

I've heard that 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 the Federal Emergency Management Agency (FEMA). 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.

CEFCU uses a third-party company which specializes in the 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 because standard homeowner's insurance doesn't protect you against damages from flooding.

How long does it take for the property appraisal to be completed?

Licensed appraisers who are familiar with home values in your area perform appraisals. CEFCU orders the appraisal once receiving a purchase contract and have completed a preliminary review of your application. Generally, it takes five to seven days before the written report is sent to CEFCU. We follow up with the appraiser to ensure it is completed as soon as possible. If you are refinancing, an interior inspection of the home is necessary, and the appraiser will contact you to schedule a viewing appointment. If you don't hear from the appraiser within seven days of the application date, please inform your Mortgage Processor. If you are purchasing a new home, the appraiser will contact the seller's real estate agent, if applicable, or the seller to schedule an appointment to view the home.

Back to top

Buying Your First Home

When you're ready to buy your first home, you will have a lot of questions, and these answers can help.

What is a Fixed-Rate Loan, and which one should I choose?

Fixed-Rate Loans are available in 10-, 15-, 20-, or 30-year terms. Principal and interest payments remain unchanged for the life of the loan; and the longer the term, the lower your payment. If you're looking to build equity quickly, then the shorter terms might work for you. Your choice may be determined by your ability to cover monthly payments. Use the calculators with the current interest rates to see what your monthly payments may be for different terms.

What is an Adjustable-Rate Mortgage?

An Adjustable-Rate Mortgage (ARM) 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.

When considering an ARM, 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, an ARM is the right mortgage choice, particularly if your income is likely to increase in the future or if you only plan on being in the home for three to five years.

If you are considering an ARM, you will need to evaluate:
Adjustment Period: With most ARMs, the interest rate and monthly payment will remain the same for an initial time period such as one year, three years, five years, or seven years. After the initial period, the interest rate can change every year. For example, one of CEFCU's most popular is a five-year ARM. The interest rate will not change for the first five years (the initial adjustment period) but can change every year after the first five years.

Index: CEFCU's 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. The current value of most indices is published weekly in the Wall Street Journal. 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 to your rate floor.

Margin: To determine the interest rate on an ARM, CEFCU adds 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 because 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 adjustment caps, which limit the interest rate increase or decrease 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 because no one knows what can happen in the future. At CEFCU, a member's loan can only change once a year; your rate cannot adjust to more than 2 percent in a year or 6 percent throughout the life of the loan. All of the ARMs CEFCU offers have both adjustment and lifetime caps. Please see each product description for full details.

Negative Amortization: Negative Amortization occurs when your monthly payment changes to an amount 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 CEFCU offers allow for negative amortization.

Prepayment Penalties: CEFCU never charges a penalty for prepayment. Some lenders may require you to pay special fees or penalties if you pay off the ARM early.

Selecting a mortgage may be the most important financial decision you will make, and you are entitled to all the information you need to make the right decision. If you have questions about the features of ARMs, email CEFCU; call 309.633.3424 or 1.800.633.7077, ext. 33424; or visit a Member Center.

Should I choose a Fixed- or Adjustable-Rate Home Loan?

Fixed-Rate Loans are available in 10-, 15-, 20-, or 30-year terms. Principal and interest payments remain unchanged for the life of the loan; and the longer the term, the lower your payment. With a Fixed-Rate Loan, you know your principal and interest payment during the entire term of the loan, which can mean more peace of mind.

An ARM 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. Adjustable rates allow you to qualify for a larger loan, but the rates do vary annually after an initial period. Rates are capped, but they can increase.

Use the calculators to determine your payments for different types of loans. Apply online; email CEFCU; call 309.633.3424 or 1.800.633.7077, ext. 33424; or visit a Member Center to get started.

How much money will I save by choosing a 15-year Home Loan rather than a 30-year Home Loan?

A 15-year Fixed-Rate Loan gives you the ability to own your home free and clear in 15 years. While the monthly payments are higher than a 30-year loan, the interest rate on the 15-year mortgage is usually lower. More important — you'll pay less than half the total interest cost of the traditional 30-year mortgage. 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.

Are there any prepayment penalties charged for these loan programs?

None of the loan programs CEFCU offers have penalties for prepayment. You can pay off your mortgage any time with no additional charges.

Do you have any special low-down-payment loans?

CEFCU does offer programs for first-time home buyers.

Take Five: Available only to first-time home buyers who have a strong credit history with FICO scores greater than 660. All borrowers on the application must occupy the home as their principle residence. A Take Five loan is available for purchase transactions only with a maximum of 95 percent financing and requires a 5/1 Adjustable Rate Mortgage. It offers:

  • ½ percent APR discount
  • Down payments as low as 5 percent
  • 5-year rate lock
  • Smart Lock
  • Opportunity to qualify for a larger loan amount

The borrower's household income will be restricted to 100 percent or less of the area median income. Income limits are based on the county where the property is located. Verify your income eligibility by selecting your state then county.

USDA Rural Housing: The USDA Rural Housing Guarantee Loan program could allow you to buy a home with no down payment.*

  • Loan amounts can be up to 100 percent of the appraised value and include closing costs up to 95 percent. No reserves are required.**
  • Property must be located in an eligible community designated by the USDA as rural. To determine eligibility, please visit the USDA Income and Property Eligibility Site and choose Single Family Housing under Property Eligibility.
  • The upfront guarantee fee is 2 percent. A .40 percent annual fee is required for the life of the loan, and the premium is collected with your monthly payment.
  • Your payment is fixed for the term of the loan, even if interest rates rise.
  • Income for all persons over the age of 18 living in the property must be verified and fall within median income limits per county.
  • Any Improvements to the property must be completed prior to closing, otherwise, 150 percent of improvement cost to be held in escrow for no more than 30 days.
  • The Guarantee Fee is 3.5 percent of the loan amount and payable at closing. This avoids monthly PMI premium.
  • The loan is underwritten by CEFCU, but it requires approval through USDA.
  • Online approvals are not available.
  • Final loan approval may take up to 15 days.
  • Currently the USDA rate is less than our 30-year rate. No rate reduction (.125 percent) for loan amounts greater than $100,000.
  • Discount points are not offered for this program.
  • No manufactured housing or construction loans are available through this program.

*Certain geographic requirement and income limits apply.
**Contact CEFCU for more details.

To learn more, apply online; email CEFCU; call 309.633.3424 or 1.800.633.7077, ext. 33424; or visit a Member Center. Be sure to request a First-Time Home Buyer Kit.

How long does it take to close a Home Loan?

Typically, it takes approximately 30 days from the time you submit a completed application to closing. It can take less, and at times, CEFCU has closed Home Loans in as little as seven days. We will work with you to streamline the process and meet the contract date on purchases and Construction Loans. For specific information, email CEFCU; call 309.633.3424 or 1.800.633.7077, ext. 33424; or visit a Member Center.

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 are points?

Fees that are collected by the lender in exchange for a lower interest rate. Commonly called discount points, each point is equal to 1 percent of the loan amount. For our comparison purposes, a discount point is considered to be a lender fee. To determine if it is wise to pay discount points to obtain a lower rate, you must compare the up-front cost of the points to the monthly savings that result from obtaining the lower rate.

Is comparing Annual Percentage Rates (APRs) the best way to decide which lender has the lowest rates and fees?

The Federal Truth in Lending law requires that all financial institutions disclose the APR when they advertise a rate. The APR is designed to present the actual cost of obtaining financing, by requiring that some, but not all, closing fees are included in the APR calculation. These fees, in addition to the interest rate, determine the estimated cost of financing over the full term of the loan. Because most people do not keep the mortgage for the entire loan term, it may be misleading to spread the effect of some of these up-front costs throughout the entire loan term.

Also, unfortunately, the APR doesn't include all the closing fees, and lenders are allowed to interpret 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 ARMs, the APR can be even more confusing. Because 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 best for you. Look at total fees, possible rate adjustments in the future if you're comparing ARMs and consider the length of time 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. Ask CEFCU about a Good Faith Estimate, which will help you compare different deals.

Do you have any tools I can use to calculate my payments?

We have a series of calculators designed to help you compute how much you can afford and which Home Loan may be right for you. We encourage you to use our calculators, then contact us if you have any questions.

What is your Rate Lock Policy?

The interest rate market is subject to movements without advance notice. Locking in a rate protects you from the time your lock is confirmed to the day your lock period expires. The typical lock is 60 days and starts with the day of your application. CEFCU also offers Smart Lock, a 90-day rate lock.

Smart Lock:
CEFCU offers Smart Lock,* which allows you to lock in your rate for 90 days. With Smart Lock, you:

  • Can lock your rate for 90 days when you apply for preapproval and pay a non-refundable $350 application fee.
  • Continue shopping for the perfect home.
  • Close on your new home within 90 days of locking the rate.
  • It's that easy! Don't worry about your rate while you shop for a home. Get Smart Lock!

*Smart Lock available for mortgages used for the purchase of a primary or retirement home; it does not apply to Construction Loans.

How can I lock my rate?

You can lock your rate online; by phone at 309.633.3424 or 1.800.633.7077, ext. 33424; or in person at a Member Center. Immediately after you apply online and lock your rate, a printable confirmation page is displayed for your records. In addition, a confirmation is sent to the email address you provided during your online application. If you lock your rate by phone or in person, you will receive a letter of confirmation.

Can I make my mortgage payments online?

Yes. CEFCU On-Line® allows you to transfer your loan payment directly from another CEFCU account.

Can I apply for a 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, CEFCU will issue an approval subject to you finding the perfect home. CEFCU will issue a preapproval letter online instantly, or you can contact CEFCU to get your preapproval letter offline. You can use the preapproval letter to assure real estate brokers and sellers you are a qualified buyer. Having a preapproval for a mortgage may give more weight to any offer to purchase you make.

When you find the perfect home, you'll simply call your Mortgage Originator to complete your application. You'll have an opportunity to lock in our great rates and fees then and we'll complete the processing of your request.

Can I apply for my Home Loan online?

Yes. Loan @ Home allows you apply online 24/7. It's convenient and secure with step-by-step instructions to guide you through the process.

What is the difference between prequalifying and preapproval?

Prequalifying is a non-verified estimate of how much you can afford. You'll learn about loans types and which one might be best for you. It costs nothing, it's fast, there's no obligation, and you can do it over the phone.

Preapproval requires a more detailed application where you provide copies of various documents, which depend on the kind of loan you choose. preapproval is a commitment from CEFCU that you're approved for a loan amount. It is free, and you may even be able to get same-day approval. Many sellers prefer preapproved borrowers.

To prequalify or for preapproval, call CEFCU at 309.633.3424 or 1.800.633.7077, ext. 33424.

Why should I get preapproved for a Home Loan?

Preapproval means you can shop for a home knowing how much you can afford. Preapproval shows the seller that you're serious and prepared — and able — to buy. And finalizing your Home Loan application will probably take less time because much of your information is already in place.

What is a credit score and how will my credit score affect my application?

A credit score is one of the pieces of information CEFCU will use to evaluate your application. Financial institutions have been using credit scores to evaluate credit applications for many years.

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 CEFCU 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 CEFCU never evaluates an application without looking at the total financial picture of a member.

Will I need to have an attorney represent me at closing?

In some areas of the country it is very customary, and sometimes required by law, to have an attorney represent you at the closing. In other areas, attorneys are not as common at a real estate closing. Please contact the closing agent if you have questions about attorney representation. By all means, we recommend you have an attorney at the closing if it would make you more comfortable. If your attorney has any questions about your new mortgage, please refer them to your Closing Coordinator. CEFCU is happy to provide any information necessary.

Who will be at the closing?

The closing agent acts as CEFCU's agent and will represent CEFCU at the closing. If you have any questions the closing agent cannot answer during the closing, ask him/her to contact your Closing Coordinator by phone, and we'll get you the answers you need — before the closing is over!

What is needed for the final approval of my Home Loan?

The following documents are needed for final approval of the loan:

  • An appraisal of the home's fair market value
  • All Title search/insurance documentation
  • The home termite inspection report (purchase only)
  • A copy of your homeowner's insurance policy
  • And, if applicable, a copy of the well and septic inspection report (purchase only)

What should I bring to the closing?

To close the agreement, you should bring the following documents with you:

  • A copy of the termite inspection
  • Proof of homeowner's insurance
  • A copy of your most recent paycheck stub
  • Acceptable photo identification (driver's license or state identification card acceptable)
  • A certified check or Bank Wire to cover closing costs and any down payment funds due

What are closing fees and how they are determined?

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. Lenders or brokers 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. CEFCU takes quotes very seriously and has completed the research necessary to make sure our fee quotes are accurate to the city level — and that is no easy task!

To assist you in evaluating CEFCU's fees, they are grouped as follows:

Third-Party Fees: These fees include the appraisal fee, credit report fee, settlement or closing fee, survey fee, tax service fees, title insurance fees, flood certification fees, and courier/mailing fees.

Third-party fees are collected and passed 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 because a lender may have negotiated a special charge from a provider used often or chosen a provider that offers nationwide coverage at a flat rate.

Taxes and other unavoidables: Taxes and other unavoidables 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, document preparation fees, and loan processing fees are retained by the lender and are used to provide you with the lowest rates possible. 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". All CEFCU Home Loans have payment due dates of the first of the month. If your loan is closed on any day other than the first of the month, you'll pay interest from the date of closing through the end of the month at closing. For example, if the loan is closed June 15, CEFCU will collect interest from June 15 through June 30 at closing. This also means you won't make your first mortgage payment until August 1. If you close on the first of the month, such as June 1, your payment will be due July 1. 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 of the loan closing. 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 sufficient funds are available to pay the bills when they become due.

If your loan is a purchase, you also will need to pay for your first year's homeowner's insurance premium prior to closing. We consider this to be a required advance.

Is CEFCU right for me?

Whether you're purchasing or refinancing, you'll find our service amazing! If you'll be purchasing but haven't found the perfect home yet, complete the application, and CEFCU will issue an approval for a Home Loan now with no obligation!

Can I really borrow funds to use toward 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, make sure to include the details of this loan in the Expenses section of the application.

How do you decide what you need from me to process my loan?

CEFCU takes full advantage of an automated underwriting system that allows us to request as little information as possible to verify the data you provided during your loan application. Gone are the days when it was necessary to verify every piece of data collected during the application. The automated underwriting system compares your financial situation with statistical data from millions of other homeowners and uses that comparison to determine the level of verification needed. In many cases, a single W-2 and pay stub can be used to verify your income or a single bank statement can be used to verify the assets needed to close your loan.

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. 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 have licensing requirements for appraisers evaluating properties located within their states.

The appraiser will create a written report for CEFCU, and you will be given a copy at your loan closing. If you would like to review it earlier, your Mortgage Processor can provide it to you.

The appraiser will inspect both the interior and exterior of the home. After the appraiser inspects the property, he/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 try to 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 on 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.

If your home is for investment purposes or is a multi-unit home, the appraiser also will consider the rental income that will be generated by the property to help determine the value.

Using these three different 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 very different.

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 Home 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.

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 hindrance to obtaining a new 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, it may be more difficult to figure 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".

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. You will be asked for the name, address, and phone number of the gift giver, as well as the donor's relationship to you.

If your loan request is for more than 80 percent of the purchase price, it will need to be verified you have at least 5 percent of the property's value in your own assets. Prior to closing, it will need to be verified the gift funds have been transferred to you by obtaining a copy of your bank statement or deposit slip to show it has been deposited.

I am relocating because I have accepted a job with a new employer that I haven't started yet. How should I complete the application?

Congratulations on your new job! Complete the application identifying the new employer as if this were your current employer and indicate you have been there for one month. Enter the income you will be receiving at your new location.

The information about the employment you'll be leaving should be entered as a previous employer. Documentation needed includes job letter from your new employer stating start date, new position, and starting salary.

I have student loans that aren't in repayment yet. Should I show them as installment debts?

Any student loan 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. Written explanation outlining the circumstances of the bankruptcy and/or foreclosure will be requested to determine application decision. Unless the bankruptcy or foreclosure was caused by situations beyond your control, CEFCU will generally require that two to 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 should I bring to the interview?

If you are planning to buy a home, the CEFCU Home Loan Interview Checklist shows you what to have for your interview. Use the Construction Loan Interview Checklist if you are planning to build a home.

Depending on the type of loan you're applying for, we could ask for supplemental documentation. Contact CEFCU for further information.

What happens at the loan closing?

The closing will take place at the office of a title company or attorney in your area who will act as our agent. If you are purchasing a new home, the seller may also be at the closing to transfer ownership to you; but in some states, these two events actually happen separately.

During the closing you will be reviewing and signing several loan papers. The closing agent or attorney conducting the closing should be able to answer any questions you have, or you may contact your Closing Coordinator if you prefer. Just to make sure there are no surprises at closing, your Closing Coordinator will contact you a few days before closing to review your final fees, loan amount, first payment date, etc.

Are there any special requirements for condominiums?

Because 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 CEFCU's guidelines.

One of the most important factors is determining if the project the condominium is located in is complete. In many cases, it will be necessary for the project, or at least the phase your unit is located in, to be complete before financing can be provided. 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 because many people would prefer to live in a project occupied by owners rather than renters.

We'll also carefully review the appraisal to insure that 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 would like to finance, other items — such as condominium bylaws, letter of no special assessments, and a master insurance policy — will need to be reviewed.

To learn more, apply online; email CEFCU; call 309.633.3424 or 1.800.633.7077, ext. 33424; or visit a Member Center. Be sure to request a First-Time Home Buyer Kit.

Back to top

Facing Financial Difficulties

I am having difficulty making my mortgage payment.
What should I do?

If you are facing financial difficulties and concerned about making your mortgage payment, we can help.

Back to top

General

What is a Completion Loan?

A Completion Loan allows you to lock your interest rate for up to 12 months while your home is being built. You can apply when you have a contract with a builder and close once your home is completed. At closing, the Completion Loan will either pay off the builder or the Construction Loan.

What is a Construction/Permanent Loan?

The Construction/Permanent Loan allows you to lock your interest rate for up for 12 months while your home is being built. You apply when you have a contract with a builder and close within 60 days of application. You make interest-only payments for up to 12 months while the home is being built and construction disbursements are made to your builder. After 12 months, the Permanent Loan payments begin for the term you selected at application. You may qualify for rate reductions if your home is completed in less time than nine months.

I am a first-time home buyer. Are there any incentives available for a Construction Loan?

CEFCU's First-Time Home Buyer special is available for Construction Loans. However, the First-Time Home Buyer promo does not cover any of the Construction Loan inspection or disbursement fees.

If my down payment funds are in a CEFCU account, can they remain there until the builder needs paid?

No, all your funds need to be available the day of closing. Be sure to allow adequate time to access any funds.

When can I lock in my interest rate for a Construction Loan?

You can lock in your interest rate up to 14 business days prior to your application appointment by paying the Commitment Fee in advance.

Apply for a CEFCU Construction Loan and pay the $350 fee to lock your rate for 12 months while your home is being built. Continue with the same rate for your full Home Loan term. If rates go down between the time you apply and your closing, you can pay a non-refundable $350 re-lock fee to get the lower rate. You can re-lock as often as you'd like, but the re-lock fee must be paid each time. Contact your CEFCU Mortgage Processor or Closing Coordinator prior to closing while the lower rate is available. This fee is not applied toward closing costs, and re-locking may affect or delay your closing date.

How do you determine how long it will take to build the home?

The signed contract between the builder and you will give insight into the expected time to complete the construction of the home. If the contract is not available, we will contact the builder for a realistic completion time frame.

If the construction is completed in less than 12 months, how does this impact my interest rate?

An automatic interest rate reduction is available if your final payout is completed within a specific time period from the date of the first construction disbursement. If the project is completed early, an Amended Construction Loan and Interest Rate Rider will be prepared for you to sign and your rate adjusted accordingly.

Rate Reductions

  • Within six months: 0.375 percent rate reduction
  • Within nine months: 0.25 percent rate reduction
  • Nine+ months: NO rate reduction

What is the minimum down payment required on a Construction Loan?

CEFCU requires a minimum down payment of 10 percent on all Construction Loans, subject to PMI approval. However, if the size of the home means the builder may not be able to complete it in 12 months, a 20 percent down payment will be required.

How are inspections handled?

Inspections are done by the original appraiser and are ordered by CEFCU at various milestones on the construction project. This helps verify the progression of work on the project is reasonably within the percentage of funds disbursed on the project.

Does CEFCU have to approve a change order before I proceed with changes on the project?

If you authorize any extra work or agree to any change in the plans and specifications, the construction contract, or the Adjusted Total Contract Price (other than minor changes involving no material extra cost), you must provide CEFCU with a copy of the change order and/or changed plans and specifications and/or construction contract.

Based on the extra work or change in the plans and specifications, you may need to provide additional funds so we can be sure there are adequate funds in the account to cover the additional costs.

What if the project takes longer than 12 months to complete?

Please contact the Construction/Home Improvement Loan Coordinator for the steps you will need to take.

Are there Private Mortgage Insurance (PMI) companies that will provide coverage on a Construction Loan?

Yes, there are companies that do provide this insurance. Each company has different guidelines and restrictions, so please talk with your CEFCU originator or processor for complete details.

Does CEFCU give notice before inspecting the premises?

The need for an inspection by the appraiser is communicated to the builder based on specific milestones during construction. These may include completion of things like the roof or drywall.

What happens if the appraisal does not go well?

If the inspection report indicates the property is not completed as much as anticipated, any additional payouts are suspended until the work completed is reasonably within the percentage of funds disbursed on the project.

I know CEFCU isn't liable for things like loss, damage, and liability. At what point should I get homeowner's insurance or construction insurance?

Prior to closing, CEFCU suggests you will need to obtain a Builder's Risk Policy to cover the materials and construction site for theft, loss, or liability. CEFCU suggests you will need a minimum of $1 million in liability coverage.

When your home is complete, contact your insurance company to convert the Builder's Risk Policy to a homeowner's policy.

What is Builder's Risk insurance?

This is a special type of property insurance that covers damage to buildings under construction. You don't have insurance for your home being built on a vacant lot, so it is covered by the Builder's Risk insurance.

Who buys Builder's Risk insurance?

It is bought by you, the homeowner. It may be necessary to show proof of insurance to comply with local city, county, and/or state building codes.

Why am I required to have a Builder's Risk Policy?

Building sites are vulnerable to vandalism, stolen building materials, and injury to trespassers. The builder's insurance policy does not cover the landowner/borrower from risk of liability or damage to the construction site, and homeowner's insurance does not cover these types of risks, so CEFCU requires you to have a Builder's Risk Policy at closing.

Do I have to wait to take occupancy until closing?

You are not allowed to move into the home until CEFCU has received evidence that:

  • All work under the construction contract requiring inspection by any governmental authority with jurisdiction has been inspected and approved.
  • A certificate of occupancy has been issued.
  • All parties performing work or providing materials for the project have been paid, or will be paid, in full for work and/or materials.

What is the minimum documentation to get an appraisal ordered?

To order an appraisal, CEFCU needs to have a Contractor's Verified Statement (CVS), specifications, blueprints, and the contract between you and your builder. The appraiser needs these documents to determine the type of home you are building in order to find comparable properties to establish the value of the completed home. Also, you will need to provide information about the lot — such as description, size, address, and date of purchase.

What are specifications?

Construction specifications provide the type and grade of materials to be used to complete the home. Specification forms are available from your contractor.

What is a mechanics lien?

The Illinois Mechanic's Lien Act provides a powerful collection tool to general contractors, subcontractors, and material suppliers who provide labor or materials for the construction of improvements on private projects. It allows a contractor or material supplier to attach a lien to the improved property and ultimately have the property sold to pay the balance due under the lien claim. Absent a mechanic's lien, a general contractor is limited to a breach of contract action or unjust enrichment claim against the property owner, and a subcontractor or material supplier is limited to an action against the party it contracted with, usually a general or other subcontractor. On the other hand, the Act forces an owner to deal with a balance due to a contractor or a material supplier even though the owner did not directly contract with either party.

The Act is very specific about when liens can be used, and because the mechanic's lien is a powerful legal tool, the lien must comply exactly with the Act's requirements. A general contractor – the party contracting directly with the owner – must record its claim for lien with the Recorder of Deeds in the county where the property is located within four months of the last day of providing labor or materials for the property. In addition, the general contractor must file suit within two years of the last day of supplying labor or materials to the property. If the general contractor fails to record its claim for lien within the four-month period, it may enforce its lien claim against the owner. However, the lien claim would not take priority over other parties with an interest in the property, such as lenders and other lien claimants.

Because subcontractors and material suppliers do not have a direct contractual relationship with the owner, the Act imposes an additional burden for these parties to perfect their lien claim. The subcontractor or material supplier must serve the owner and owner's lender with a 60-day notice of its intent to lien the property on single-family owner-occupied property. If a subcontractor or material supplier has not been paid within 10 days of service of its notice of intent to lien, it may record its claim for lien with the Recorder of Deeds in the county where the property is located. This claim for lien must be recorded within four months of the last day of supplying labor or materials on the property.

Similar to the general contractor, a subcontractor or material supplier must file suit within two years of last supplying labor or materials to the property. Failure to file suit within this two-year period renders the lien claim null and void. If a subcontractor or material supplier fails to serve its 60-day notice, it may still enforce its lien claim but only in an amount listed as being due on a sworn statement provided by the general contractor to the property owner.

CEFCU will place a hold on 1.5 times the amount of the lien, and prevent these funds from being disbursed until the lien issue is resolved.

Why does CEFCU receive notice of a mechanic's lien?

Because CEFCU has a mortgage recorded on the property, the mechanic's lien notice will list CEFCU as one of the defendants along with you, the borrower.

A registered letter with a 30-day notice of a pending lien is sent to one of CEFCU's Officers. The letter is then forwarded to the First Mortgage Department, but sometimes the notice is not received right away because it is not addressed to the correct department.

Will a mechanic's lien delay the disbursements on the project?

Once a contractor or material supplier records a claim for lien against the property, the lien claim needs to be addressed because it affects the lender's security position in the property. Until a lien is released, a delay in the disbursement schedule will occur because CEFCU will not allow any disbursements to be made.

What is a lien waiver exam?

As your new home is being built, with each Construction Loan disbursement CEFCU collects signed lien waivers and final lien waivers from your contractor, subcontractors, and material providers. The signed waivers document the payment or final payment. These lien waivers and final lien waivers are submitted to the title company or attorney's office when your home is complete so CEFCU can be issued a Final Title Policy. The title company or attorney's office reviews the documentation to verify all contractors, subcontractors, and material providers have been paid in full.

Back to top

Property

What if I own my lot?

Prior to closing, you will need to provide CEFCU with a copy of either the title policy or HUD-1 Settlement Statement from when you purchased the lot. This is used to decide how the lot value will be determined and to order title work for the Construction Loan.

If the lot was purchased one or more years ago, the actual appraised value of the lot can be used to determine the total property value. At application, CEFCU will ask you what you believe your lot's value is, and then have the appraiser provide a separate land value with the appraised value of the completed home. The difference between the lot value and any remaining lien is considered lot equity. Lot equity is used toward your down payment and in establishing the loan-to-value ratio.

If the lot was purchased less than one year ago, the purchase price of the lot will be used to determine the total cost to build vs. an appraised value.

What if I'm purchasing my lot?

You will need to provide CEFCU with a signed purchase contract for your lot. You will close your Construction/Permanent Loan at a title company or attorney's office, where the title will be transferred to your name, and the previous owner will be paid.

What if the lot is a gift from a relative?

You will need to provide CEFCU with a signed gift letter from the relative gifting you the lot/land. The gift letter identifies the property being gifted, the donor, the donor's relationship to you, and the recipient. At application, CEFCU will ask you what you believe your lot/land's value is, then have the appraiser provide a separate land value with the appraised value of the completed home. The lot value will then be considered lot equity. Lot equity is used toward your down payment and in establishing the loan-to-value ratio. Check with your CEFCU representative about a gift letter.

Can I include the cost of the lot in the Construction Loan?

The cost of the lot can be included in the Construction Loan; however, the down payment will need to come from another source, such as your liquid assets.

What if I have a lot loan?

If you have a lot loan, it needs to be paid off at the Construction Loan closing. The outstanding balance on the lot must be taken into consideration when determining the loan amount needed to build the home so we can make sure there are enough funds in the construction escrow. Paying off a lot loan is considered your first construction disbursement and starts the clock for whether you qualify for a rate discount for completing the project early.

Back to top

Disbursements

What is a disbursement?

A payment from your construction escrow for work completed, materials ordered, or items purchased.

When do Construction Loan disbursements take place?

The Construction Loan disbursements take place after the loan has been approved and the Construction-Permanent Loan closed. The funds are placed in a construction escrow, and disbursements are usually made at key stages, such as:

  • Foundation completion
  • Framing with roof completion
  • Plaster/drywall completion
  • Home completion

You can arrange for a different schedule or additional disbursements, if needed.* Plus, you only pay interest on the amount of loan funds actually used during the construction period.

*Additional costs may apply.

Who decides when the construction disbursements are made?

The general contractor will submit a disbursement request on a Contractor's Verified Statement (or Owner's Sworn Statement) indicating the subcontractors and/or material suppliers to be paid, the dollar amounts owed to each, and total amount requested. If any prior disbursements have been requested, signed partial or final lien waivers would need to be collected prior to CEFCU authorizing the release of any funds.

Before funds are disbursed:

  • You as the borrower must sign the Payout Authorization form. An Owner's Sworn Statement can be used in place of the Payout Authorization.
  • Lien waivers must be signed by the builder, subcontractor, or supplier and notarized.

How many disbursements are there?

Usually there are four disbursements, but each general contractor has a preference. The number of disbursements is determined based on several factors; however, the size of the construction project is usually the biggest factor.

The number of disbursements required will need to be identified when you apply for the loan so the appropriate fees can be determined. If they are not correctly disclosed when you apply, the loan closing may be delayed.

Who handles loan disbursements/payouts to the builders?

Construction Loan disbursements/payouts can be handled either directly through CEFCU's Construction Loan Coordinator or at a local title company or attorney's office.

If CEFCU is able to handle the Construction Loan disbursements, you or your builder will provide a signed disbursement request for each payout to CEFCU. The payouts will be processed and checks made available to your builder.

If a title company or attorney's office is involved in handling the Construction Loan disbursements, there is an additional charge for each payout required, typically $100 to $125 per payout.

Back to top

Costs & Fees

How do I determine the total cost to build?

The total cost is determined from these sources:

  • Loan funds
  • Down payment
  • Lot equity — verified with HUD-1 from lot purchase or property appraisal
  • Deposits paid to builder — verified with signed and notarized partial or final waiver of lien

How is the total cost to build calculated?

The total cost to build is the sum of the lot value and the construction cost.

If the lot was purchased one or more years prior, the actual appraised value of the lot can be used to determine the total property value. At application, CEFCU will ask you what you believe the value of your lot is, then have the appraiser provide a separate land value with the appraised value of the completed home. The difference between the lot value and any remaining lien is considered lot equity. Lot equity is used toward your down payment and in establishing the loan-to-value ratio.

If the lot was purchased less than one year ago, the purchase price of the lot will be used to determine the total cost to build vs. an appraised value.

What happens if I have cost overruns?

During the construction term, CEFCU is responsible for making sure you have sufficient funds in your construction escrow account to complete your new home. If during the construction phase, you and your builder make changes to the house design, materials used, or other features that add extra cost to the overall project, these changes are to be paid by you outside the Construction Loan. Cost overruns must be paid when they are incurred, and CEFCU requires proof the builder has been paid or funds have been deposited into the construction escrow. You can pay for these cost overruns either from your personal savings, or you can contact a CEFCU Representative about applying for one of the various financing options available — such as a refinance of your Construction Loan or a Home Equity Loan or Line of Credit.

What is used to determine the cost of a home being built?

  • Cost to Build
  • Lot Cost
    Purchase price of the lot, if purchased within the last 12 months.
    Note: If borrower purchased lot from a family member for less than market value and family member is willing to sign a gift letter for difference between market value and sold price, CEFCU can use the difference as a gift of equity in the transaction.
  • Lot Appraised Value
    If the borrower has owned the lot for more than 12 months, the value of the lot is obtained from the appraiser.
  • Lot Equity
    Difference between lot purchase price or appraised value, if applicable, and any liens against lot.

What happens if the cost of the project exceeds the adjusted total contract price?

If you authorize any extra work or agree to any change in the plans and specifications, the construction contract, or the Adjusted Total Contract Price — other than minor changes involving no material extra cost — you will need to:

  • Provide CEFCU with a copy of the change order and/or changed plans and specifications and/or construction contract.
  • Request that the general contractor reflect the extra work or change in the Contractor's Verified Statement to be submitted to CEFCU prior to the next disbursement.
  • Indicate the dollar amount of the extra work or change in the Extras to Contract, Deductions or Credits, and Adjusted Total Contract Price lines and, if applicable, give the names and addresses of any new parties who will furnish the extra work and the amount to be paid to each or the new Amount of Contract if a previously named contractor or material supplier will perform the work or change.
  • Deposit with CEFCU additional funds for the project sufficient to cover the extra work or change. These funds will be disbursed pursuant to the provisions of their Disbursement Agreement or provide CEFCU with receipts evidencing that the extra work or change has been paid for and request that the general contractor reflect the payment in the Amount Paid to Date column of the Contractor's Verified Statement to be submitted to CEFCU prior to the next disbursement.

Are there any fees involved if the construction takes longer than 12 months?

There are no additional fees; however, you will not be eligible for an interest rate reduction.

What is the cost of an appraisal?

An appraiser usually charges $300 to $450.

When do I start paying taxes/insurance on the completed property?

Lower property taxes are generally billed on undeveloped property, and in many instances, the real taxes on a newly built home won't take effect until the home receives a certificate of occupancy from the municipality, until a buyer closes on that home or until some other local requirement occurs that causes the local taxing body to raise the taxes to the level they should be.

Check with your builder to see if he/she knows what your taxes will be. In some areas, developers are required to disclose an estimate of what taxes are expected to be once the home is sold. Your real estate agent is another resource for tax information.

Back to top

Closing

What funds do I need to have available on the day of closing?

The total down payment and closing funds needed to build the home need to be available and brought to the closing.

When will I know my final closing costs?

Approximately one to two days prior to closing.

What are some of the closing costs associated with a Construction Loan?

The following closing costs are estimates that would be needed at closing.

Cost Estimated Amount
Initial Appraisal $400
Appraisal Update
When home is completed.
$150
If loan-to-value ratio is less than 80 percent.
Survey $300
Inspections $375
Three inspections at $125 each.
Interim Mechanics Lien Endorsement 10A
(Chicago Title) up to a $400,000 loan
$500 for four draws
$100 for each additional draw
Date Down Endorsement 10 $300
Four at $75 each.
Construction Disbursement Draw Fee $500
Minimum of four at $125 each.
Lien Waiver Exam Fee $125
Owner's Title Policy Home Value
Including cost of lot.
Closing Funds Example
Total Cost to Build $575,000
Lot $125,000
Cost to Build $450,000
Outstanding Balance on Lot Loan $90,000 Lot owned 6 months
 
Lot Value $125,000 10% = $ 57,500
Loan Balance $ 90,000 90% = $517,500
$35,000 Lot Equity
 
$Maximum Loan Amount $517,500
Less Cost to Build $450,000
O/S Lot Loan $ 90,000
$22,500 Total funds needed for closing
 
Down Payment Needed $ 57,500
Lot Equity $ 35,000
$22,500 Total funds needed for closing

What happens after the closing?

At closing, the funds are placed in a construction escrow held at CEFCU, and disbursements are usually made at key stages, such as:

  • Foundation completion
  • Framing with roof completion
  • Plaster/drywall completion
  • Home completion

The disbursement schedule should be listed in the Builder's contract and determined prior to closing. You only pay interest on the amount of loan funds actually used during the construction period.

Who do I contact once we close?

Once the loan is closed, contact the Construction/Home Improvement Loan Coordinator with any questions.

Back to top

Loan & Payments

When do I start making interest-only payments?

An interest-only payment is due the month following the first advance of Construction Loan funds. If a loan disbursement is advanced right after the loan closing (once the mortgage is recorded) to pay off the lot or make a disbursement to the builder, then an interest-only payment will be due the following month.

Will my money or the loan money be used first?

CEFCU will first advance your funds, then Construction Loan funds, so an interest-only payment may not be required for the first few months of the construction phase.

One exception to this is if you are using a Home Equity Line of Credit (HELOC) against the home being built. In this case, the HELOC will be fully advanced the day of the Construction Loan closing, and the funds will be placed in the construction escrow account.

I have a Home Equity Line of Credit (HELOC). When will that money be used?

The HELOC will be fully advanced the day of the Construction Loan closing, and the funds will be placed in the construction escrow account. You will incur interest charges on the HELOC balance and your monthly HELOC payment will start within 45 days. The HELOC funds will be disbursed from the construction escrow account along with your funds as the construction project progresses.

If the construction is completed in less than nine months, how does this impact my interest rate?

An automatic interest rate reduction is available if your final payout is completed within a specific time period from the date of the first draw on your loan. If the project is completed early, an Amended Construction Loan and Interest Rate Rider should be recorded to reduce the interest rate.

Rate Reductions

  • Within six months: 0.375 percent rate reduction
  • Within nine months: 0.25 percent rate reduction
  • Nine+ months: No rate reduction

What happens if there are not enough funds left for the final disbursement?

You may be required to deposit additional funds for the project from a source other than the loan or provide proof of payment to the builder.

What happens to any leftover funds after the final disbursement?

Very rarely are any funds remaining at the completion of construction. Any funds remaining in escrow can be applied either to the principal loan balance, or used to pay for additional improvements to the home. Remaining funds are only returned to the borrower if the loan-to-value ratio is 75 percent or less.

Should I have my lawyer review the loan documents before I sign it?

We encourage you to seek legal counsel; however, CEFCU will not allow any revisions to our loan or construction documents.

Will I be making loan payments during the time of construction? If so, will they be principal

Monthly interest-only payments will be due the first of each month and payable no later than the 15th of each month once Construction Loan funds have been advanced. Loan funds are advanced after your funds, so an interest-only payment may not be required for the first few months of the construction phase.

Once the home is completed and the final disbursement and final inspection have been received, the loan is converted to a permanent mortgage with a principal and interest payment due based on the full loan amount and the term the first of the full month following the completion of the home. Then regular payments of principal and interest start the first day of the second month following the month in which the construction period ended and continue until your loan is paid in full.

For instance, if the property is completed September 19, an interest-only payment would still be due October 1. The first permanent mortgage payment would be due November 1.

When does my first payment start?

Completion Loans

Interest is collected for the remaining days in the month you are closing. The next month's interest is collected in your regular monthly payment, which will begin the next month if your loan disperses on the first of the month. If your loan disburses on the second of the month or after, interest is collected at closing for the remainder of the month, and your first payment will be the first of the following month. For example, if you close and disburse June 2 or later, your first monthly payment would be August 1. If you close on the first of the month, your first monthly payment is the first of the next month. For example, if you disperse on June 1, your first monthly payment would be July 1.

Construction/Permanent Loans

Construction interest-only payments begin once loan funds have been disbursed and are due the following month.

Regular Mortgage payments will begin based on the first of these to occur:

  • Twelve-month construction period expiration
  • Home completion
  • You move into property

When are funds collected for down payment?

At the time of closing, CEFCU collects all down payment funds needed for the completion of the proposed home, including the funds for purchasing the lot and total cost to build. Down payment funds need to be available for Construction Loan disbursements because CEFCU disburses funds from your down payment before Construction Loan funds — which saves interest during the construction period.

Do I have to have building permits prior to signing loan documents?

If a general contractor is involved in the construction project, he/she typically obtains the necessary building permits. If you are acting as your own general contractor, you may need to obtain building permits from your county planning and/or zoning department.

I purchased wood flooring before construction started. Do I get reimbursed for that?

Funds will be reimbursed to you when you provide a paid receipt, signed lien waiver, and a completed Owner's Sworn Statement (OSS). Multiple items can be grouped together on one OSS and submitted for a disbursement.

Back to top

Construction Process

Does CEFCU allow me to do work on the home?

CEFCU will not finance a property where you, as the borrower, do any of the work or labor to build the home.

This may be reconsidered if you meet any of the following stipulations, but you need to be sure the exceptions do not cause delays.

  • You are employed by a company listed as a subcontractor on the Contractor's Verified Statement (CVS).
  • You opt to do paint and trim work or landscaping. However, the borrower still will need to provide material bids to be included in the cost-to-build calculation.
  • You are a full-time plumber, electrician, or employed in any other skilled labor trade that may be able to run electrical or plumbing in the house; but the general contractor may choose his/her regular subcontractors.

What happens if I change general contractors during the course of construction?

To cancel the contract of your general contractor, you will need to pursue a legal termination of the contract with the original builder. The builder must acknowledge the termination and provide written documentation that no additional payment is due for work completed. The builder also will need to sign a final lien waiver to indicate he/she has been paid in full.

A new contract is required with the new general contractor, and the existing Contractor's Verified Statement would need to be updated before Construction Loan disbursements are resumed.

What happens if I take over as general contractor?

If CEFCU is handling the construction disbursements, you are not allowed to take over as general contractor. You would be required to secure a new general contractor or project manager to complete construction.

What is a project manager?

The project manager helps coordinate the building by working to arrange the work times of subcontractors and other suppliers needed on the job site. They are not recommended by CEFCU, and they are NOT a contractor.

Do the contractors I use need to be licensed in the state where I am building?

Licensing varies by state, so make sure to follow your state's guidelines.

General contractors: Like many states, Illinois does not have a specific state license for general contractors.

Roofing contractors: Although Illinois roofing contractors are licensed by the Illinois Department of Professional Regulation, the state leaves the bulk of regulation of Illinois general contractors up to each county or city.

Plumbing contractors: In Illinois they are regulated by the Illinois Department of Public Health.

Electrical contractors: Although Illinois does not have a state-wide licensing system for credentialing electricians, municipalities do. These requirements vary from town to town, with some requiring up to four years of journeyman experience.

Back to top

Documents & Forms

What is the Contractor's Verified Statement (CVS)?

A CVS details the amount to be paid to all contractors, subcontractors, and suppliers for labor and materials to complete the home. The contract amounts on the CVS may need to change from draw to draw to reflect things like extras and credits. You are not required to sign the CVS.

What is the Owner's Sworn Statement (OSS)?

When you, the homeowner, act as your own general contractor on the entire project, every subcontractor becomes a general contractor on the OSS. CEFCU requires you to provide written bids or proposals to support all items listed on the OSS. You will be required to sign the bids prior to closing.

What does CEFCU's Construction Loan Disbursement Agreement cover?

This agreement includes the terms and conditions that govern the Construction Loan payouts offered by CEFCU to any eligible Construction Loan borrower.

What does the generic Title Company Disbursement Agreement cover?

This document includes terms and conditions that may govern the Construction Loan disbursements as offered by a generic title company. At closing, if your construction disbursements will actually be handled by a title company, then a specific Disbursement Agreement will be provided by that title company.

When do I receive the forms to complete?

The following forms will be provided by your builder or during the pre-approval process. These forms must be completed at application, or you will not be able to continue with your construction application and your rate lock will be released.

  • Contractor's Verified Statement (CVS)
  • Owner's Sworn Statement
  • CEFCU's Construction Loan Disbursement Agreement
  • Generic Title Company Disbursement Agreement

What documents do I need to have at my application appointment?

At application (or before the appraisal is ordered) the following items will need to be collected from you:

  • Lot information
    • Legal description and lot size
    • HUD-1 Settlement from purchase of lot and Lot Title Policy if lot is already owned
    • Lot Purchase Agreement if purchasing lot
  • Set of house plans showing room layout, room dimensions, and exterior views of home
  • Construction specifications with the type and grade of materials to be used to complete the home

If using a general contractor:

  • Contractor's Verified Statement (CVS)
  • Owner's Sworn Statement (OSS)
    If responsible for paying for allowance items
  • Signed contract with builder
  • Builder's letter stating home will comply with all subdivision requirements and restrictions

If acting as own general contractor:

  • Owner's Sworn Statement (OSS)
  • Signed, written bid or proposal to borrower from each subcontractor, material supplier, or labor supplier to support costs identified on OSS
    The borrower will not be required to sign the bid or proposal until just prior to loan closing.
  • Letter stating home you are building will comply with all subdivision requirements and restrictions

Who needs to sign what documents and when?

Document Signature Requirements
Homeowner/builder Contract At application
Contractor's Verified Statement (CVS)* Builder prior to appraisal being ordered
Owner's Sworn Statement (OSS)* Homeowner prior to appraisal being ordered
Bids for costs itemized on OSS Contractor or laborer providing bid prior to appraisal being ordered
Partial (or final) lien waiver* Builder
Subdivision requirements/restrictions letter
  • General contractor
  • Borrower if acting as general contractor.

*Must be notarized.

What is a cost plus construction agreement?

Under cost plus agreements, you are responsible for paying all costs associated with the construction of the project. These are direct and indirect costs associated with the construction of the project — including materials, labor, equipment, tools, project overhead, and company overhead.

If you have entered into this type of agreement, make sure you have reserves to cover costs as the home is being built.

What if my general contractor doesn't get you the necessary documents?

The Contractor's Verified Statement, contract with builder, and any other documentation needed from the builder must be obtained prior to ordering the appraisal. Any delay in receiving this documentation may delay loan approval or a loan disbursement once the loan is closed.

Back to top