The DCU Mortgage Application Process
Frequently Asked Questions
- Can I apply for a loan before I find a property to purchase?
- What is a credit score and how will my credit score affect my application?
- Will the inquiry about my credit affect my credit score?
- Will I be charged any fees if I authorize my credit information to be accessed?
- I'm self-employed. How will you verify my income?
- Will my overtime, commission, or bonus income be considered when evaluating my application?
- I am retired and my income is from pension or social security. What will I need to provide?
- If I have income that's not reported on my tax return, can it be considered?
- How will rental income be verified?
- I have income from dividends and/or interest. What documents will I need to provide?
- Do I have to provide information about my child support, alimony or separate maintenance income?
- Will my second job income be considered?
- What can you expect when you apply for a first mortgage?
- I've had a few employers in the last few years. Will that affect my ability to get a new mortgage?
- I was in school before obtaining my current job. How do I complete the application?
- If my property's appraised value is more than the purchase price can I use the difference towards my down payment for a first mortgage?
- I'm getting a gift from someone else. Is this an acceptable source of my down payment for a first mortgage?
- I am selling my current home to purchase this home. What type of documentation will be required for a first mortgage?
- I am relocating because I have accepted a new job that I haven't started yet. How should I complete the application?
- I've co-signed a loan for another person. Should I include that debt here?
- I have student loans that aren't in repayment yet. Should I show them as installment debts?
- How will a past bankruptcy or foreclosure affect my ability to obtain a new mortgage?
- What, exactly, is an installment debt?
Yes, applying for a mortgage loan before you find a home may be the best thing you could do! If you apply for your mortgage now, we'll issue a prequalification letter subject to you finding the perfect home. We'll instantly issue a prequalification letter on-line if you qualify*. You can use the prequalification letter to assure real estate brokers and sellers that you are a qualified buyer. Having a prequalification for a mortgage may give more weight to any offer to purchase that you make.
When you find the perfect home, you'll simply call your Mortgage Representative 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.
Need help finding a property? DCU Realty offers a wide range of Services to assist you throughout your home buying process.
* Not applicable for Home Equity Loan applications.
A credit score is one of the pieces of information that we'll use to evaluate your application. Financial institutions have been using credit scores to evaluate credit card and auto applications for many years, but only recently have mortgage lenders begun to use credit scoring to assist with their loan decisions.
Credit scores are based on information collected by credit bureaus and information reported each month by your creditors about the balances you owe and the timing of your payments. A credit score is a compilation of all this information converted into a number that helps a lender to determine the likelihood that 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 that your payments won't be paid as agreed.
Using credit scores to evaluate your credit history allows us to quickly and objectively evaluate your credit history when reviewing your loan application. However, there are many other factors when making a loan decision and we never evaluate an application without looking at the total financial picture of a member.
An abundance of credit inquiries can sometimes affect your credit scores since it may indicate that your use of credit is increasing, but don't overreact. The data used to calculate your credit score doesn't include any mortgage or auto loan credit inquiries that are made within the 30 days prior to the score being calculated. In addition, all mortgage inquiries made in any 14-day period are always considered one inquiry. Don't limit your mortgage shopping for fear of the effect on your credit score.
There is no charge to you for the credit information we'll access with your permission to evaluate your application online. You will only be charged for a credit report if you decide to complete the application process after your loan is approved.
Generally, the income of self-employed borrowers is verified by obtaining copies of personal (and business, if applicable) federal tax returns for the most recent two-year period.
We'll review and average the net income from self-employment that's reported on your tax returns to determine the income that can be used to qualify. We won't be able to consider any income that hasn't been reported as such on your tax returns. Typically, we'll need a full two-year history of self-employment to verify that your self-employment income is stable.
In order for bonus, overtime, or commission income to be considered, you must have a history of receiving it and it must be likely to continue. We'll usually need to obtain copies of W-2 statements for the previous two years and a recent pay stub to verify this type of income. If a major part of your income is commission earnings, we may need to obtain copies of recent tax returns to verify the amount of business-related expenses, if any. We'll average the amounts you have received over the past two years to calculate the amount that can be considered as a regular part of your income.
If you haven't been receiving bonus, overtime, or commission income for the most recent two years, it probably can't be given full value when your loan is reviewed for approval.
We will ask for copies of your recent pension check stubs, or bank statement if your pension or retirement income is deposited directly in your bank account. It will also be necessary to verify that this income will continue for at least three years since some pension or retirement plans do not provide 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. Your most recent year's tax returns may be required to confirm the income is non-taxable.
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.
Some lenders may offer a stated income program, which means that you can be qualified for a loan based on the income you state rather than that which can be verified. Usually these programs require larger down payments and offer interest rates that are substantially higher than regular mortgage rates. We do not offer stated income programs at this time.
If you own rental properties, we'll generally ask 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. Since 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, we'll ask for a copy of any leases you've executed and we'll estimate the expenses of ownership. In some circumstances, we will not be able to use the rental income if there is not a two year history of receiving rental income.
Two years personal tax returns are required to verify the amount of your dividend and/or interest income so that 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.
Income from dividends and/or interest must be expected to continue for at least three years to be considered.
The amount of dividend/interest income that can be used may be limited on purchase transactions. Since some of the assets that generated that income may be used towards the down payment of the new home, those assets used are no longer available to generate dividend/interest income.
Information about income you receive from child support, alimony, or separate maintenance does not need to be provided unless you wish to have it considered for repaying this mortgage loan.
Typically, income from a second job will be considered if a two-year history of stable secondary employment can be verified.
First, you'll complete our on-line application. The application will ask you questions about the home and your finances and takes less than 20 minutes to complete. As soon as you've finished the application we'll review your request for instant approval. If your application is approved on-line, we'll ask you for a deposit to process your request immediately. This deposit will be credited towards your closing fees at closing.
After completing your application, a Mortgage Representative will contact you to introduce himself or herself and to answer any questions you may have. Your Mortgage Representative is a mortgage expert and will provide help and guidance along the way. If your request wasn't approved on-line, he or she will ask you for any information required to make a decision about your loan.
Disclosures will be sent within three days and will contain papers for you to sign and a list of items we'll need to verify the information you provided about your finances during the on-line application.
We'll order the appraisal from a licensed appraiser who is familiar with home values in your area. Depending on your finances and the loan amount requested, different types of appraisals are used. Sometimes the appraiser will need to view the home. Sometimes they are able to do their evaluation from the street.
Title insurance will be necessary. If you're purchasing or refinancing a home, we'll work with the attorney or Title Insurance Company to ensure the title work is ordered as soon as possible. We'll use the title insurance to confirm the legal status of your property and to prepare the closing documents.
Your Mortgage Representative will keep you informed every step of the way. We'll contact you to coordinate your closing date.
After we received the disclosures back from you and the appraisal and title work, we'll contact you to schedule your loan closing. If you are purchasing a home, we'll also schedule the closing with the real estate broker and the seller.
The closing will take place at the office of a title company or attorney in your area who will act as our agent. A few days before closing, your Mortgage Representative will contact you to walk through the final information so that there won't be any surprises at closing.
That's all there is to it! You're on your way to the most convenient home loan ever!
Having changed employers frequently depends on the individual loan scenario. We'll look at the reasons for your employment changes, if there was any lapse of time between jobs and we will look at your income advancements as you have changed employment.
If you're paid on a commission basis, a recent job change may be an issue since we'll have a difficult time of predicting your earnings without a history with your new employer.
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." As part of the application process, we may request a copy of your school transcript showing the dates you attended school . The length of time required at your current job may vary depending on the characteristics of the loan you are requesting.
Unfortunately, if you are purchasing a home, we'll have to use the lower of the appraised value or the sales price to determine your down payment requirement.
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 our investors don't allow us to use this "instant equity" when making our loan decision.
Gifts are an acceptable source of down payment on a primary residence if the gift giver is related to you or your co-borrower. We'll ask you for the name, address, and phone number of the gift giver, as well as the donor's relationship to you.
Prior to closing, we'll verify that the gift funds have been transferred to you by obtaining a copy of your bank receipt or deposit slip to verify that you have deposited the gift funds into your account.
If you're selling your current home to purchase your new home, we'll ask you to provide a copy of the signed purchase contract for that property and the settlement or closing statement you'll receive at the closing to verify that your current mortgage has been paid in full and that you'll have sufficient funds for our closing.
Often the closing of your current home is scheduled for the same day as the closing of your new home. If that's the case, we'll ask you for your current home's purchase contract and a "preliminary" settlement statement from the closing attorney. The finalized settlement statement will need to be faxed for our review prior to your official "clear to close" on the new home to review any changes from the preliminary settlement statement.
Congratulations on your new job! If you will be working for the same employer, complete the application as such but enter the income you anticipate you'll be receiving at your new location. We may require a letter from your employer detailing the relocation terms to verify income stability.
If your employment is with a new employer, complete the application as if this were your current employer and indicate that you have been there for one month. The information about the employment you'll be leaving should be entered as a previous employer. You will have an opportunity to enter notes toward the end of the application. Explain the reason for the relocation and your expected start date with the new employer. You will have to start your new job prior to the loan closing and be able to provide your signed offer letter, as well as pay stubs.
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 that the other person responsible for the debt has made the required payments on time, by obtaining copies of their canceled checks for the last six months.
All student loans should be included in the application, regardless of whether or not they are deferred. If you are not sure exactly what the monthly payment will be at this time, enter an estimated amount.
If you've had a bankruptcy or foreclosure in the past, it may affect your ability to get a new mortgage. Unless the bankruptcy or foreclosure was caused by situations beyond your control, we will generally require that a certain amount of time has passed since the bankruptcy or foreclosure. It is also important that you've re-established an acceptable credit history with new loans or credit cards.
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.