Frequently Asked Questions (FAQ) about Mortgages

Getting Ready

Is Sunmark right for you?

There are many reasons to choose Sunmark Federal Credit Union for your mortgage needs. Perhaps the most important factor to consider in choosing a mortgage lender is how dedicated they are to you and your needs. We’re committed to doing everything we can to offer you amazing service, whether you’re purchasing or refinancing!

How do I know how much house I can afford?

The amount that you can borrow depends upon your employment history, credit history, current savings and debts, and the amount of down payment you are willing to make. You may also be able to take advantage of special loan programs for first time buyers to purchase a home with a higher value. Give us a call at (800) 990-6653 extension 3212, and we can help you determine exactly how much you can afford.

How much cash will I need to purchase a home?

The amount of cash that is necessary depends on a number of items. Generally speaking, though, you will need at least a 3% down payment, unless your are applying for a VA mortgage (in which case, a down payment is not required).

How do I know which type of mortgage is best for me?

There is no one-size-fits-all formula to determine the type of mortgage that is best for you. Your choice depends on a number of factors, including your current financial situation and how long you intend to keep your house. However, we have compiled some basic guidelines to help you in the decision-making process.

  • Fixed Rate Mortgages
  • Adjustable Rate Mortgages
  • FHA/VA Mortgages
  • Other Mortgages

We’d be happy to help you evaluate your choices based on your personal financial circumstances.

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

Sunmark Federal Credit Union offers financing options up to 97% of your home’s value (VA loans 100%). However, the maximum percentage of your home’s value depends on the purpose of your loan, how you use the property, and the loan type you choose, so the best way to determine what loan amount we can offer is to complete our online application!

What is a VA Loan and how do I know if I'm eligible to apply?

VA loans are loans guaranteed and administered by the Department of Veterans Affairs and are offered as a benefit to qualified individuals who have served in the armed forces. The significant advantage of a VA loan is that a down payment is not required. If you are a qualified veteran and wish to purchase a home with little or no down payment, a VA loan may be your best bet. If you have funds that you wish to use for a down payment, it is wise to compare Conventional loans with VA loans to determine which financing type is best for you. To officially determine if you are a qualified veteran, you must request a Certificate of Eligibility (COE) from the VA. This certificate indicates that the VA has determined you are eligible for a VA home loan and shows the amount of available entitlement or guaranty. To obtain a certificate of eligibility, complete the “Request for a Certificate of Eligibility for VA Home Loan Benefits (VA Form 26-1880)” form and submit it to the VA. This form, as well as additional information about VA home loan eligibility requirements, are available on the VA website.

In general, any veteran who served on continuous active duty during the timeframes and for the number of days listed below and has received an honorable release or discharge is eligible for a VA home loan:

  • World War II (09/16/40 to 07/25/47): 90 Days
  • Pre-Korean (07/26/47 to 06/26/50): 181 Days
  • Korean Conflict (06/27/50 to 01/31/55): 90 Days
  • Post Korean (02/01/55 to 08/04/64): 181 Days
  • Vietnam Conflict (08/05/64 to 05/07/75) – 90 Days
  • Post Vietnam (05/08/75 to 09/07/80) – 181 Days
  • (Enlisted) Post Vietnam (05/08/75 to 10/16/81) – 181 Days (Officers)
  • Pre-Persian Gulf (After 09/07/80) – 24 Months (Enlisted)
  • Pre-Persian Gulf (After 10/16/81) – 24 Months (Officers)
  • Persian Gulf (08/02/90 to TBD): 2 Years or period called to active duty (not less than 90 days)

In addition, the following people may quality for a VA home loan:

  • National Guard members who have served at least six years
  • Veterans discharged due to service related disabilities, even if the timeframes above are not met. Surviving spouses (not remarried) of veterans who died as a result of service connected injuries or diseases during service or after separation.
  • Commissioned Public Health Officers, National Oceanic and Atmospheric Administration Officers, Environmental Science Service Administration Officers, and Coast and Geodetic Survey Officers

Can I apply for a loan before I find a property to purchase?

Yes!  Please complete the Pre-Approval Mortgage Application.

Being pre-approved for a mortgage loan prior to finding a home may be the best thing you can do. If you apply for your mortgage now, we’ll issue an approval subject to you finding the perfect home. You can use you pre-approval letter to assure real estate brokers and sellers that you are a qualified buyer. The pre-approval may also give more weight to any offer to purchase that you make.

When you find your perfect home, simply contact our Mortgage Experts at mortgage@sunmarkfcu.org or by calling 866-SUNMARK (866-786-6275), extension 3212 to complete your application.

Details & Terminology

What is the difference between a fixed-rate loan and an adjustable-rate loan?

With a fixed-rate mortgage, the interest rate stays the same during the life of the loan.

With an adjustable-rate mortgage (ARM), the interest changes periodically, typically in relation to an index. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM loan will likely change.

There are advantages and disadvantages to each type of mortgage. Let us help you select the best loan for you.

How is an index and margin used in an ARM?

An index is an economic indicator that lenders use to set the interest rate for an ARM. Generally the interest rate that you pay is a combination of the index rate and a pre-specified margin.Three commonly used indices are the One-Year Treasury Bill, the Cost of Funds of the 11th District Federal Home Loan Bank (COFI), and the London InterBank Offering Rate (LIBOR).

What is title insurance and why do I need it?

If you’ve 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 we’ll only require that 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 either public records or, more likely, the information contained in the company’s own title plant.

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. They are also 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 that 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 that any valid claim against your property will be borne by the title company, and that the odds of a claim being filed are slim indeed.

What is private mortgage insurance (PMI) and when do I need it?

Private mortgage insurance makes it possible for you to buy a home with less than a 20% 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 private mortgage insurance, lenders are comfortable with down payments as low as 3 – 5% of the home’s value.

PMI also provides you with the ability to buy a more expensive home than might be possible if a 20% down payment were required. The private 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% of the property value. Recent Federal Legislation requires automatic termination of private mortgage insurance for many borrowers when their loan balance has been amortized down to 78% of the original property value. If you have any questions about when your mortgage insurance could be cancelled, please contact your Mortgage Expert.

What does my mortgage payment include?

For most homeowners, the monthly mortgage payments include four separate parts:

  • Principal: Repayment on the amount borrowed
  • Interest: Payment to the lender for the amount borrowed
  • Taxes & Insurance: Monthly payments are normally made into a special escrow account for items like hazard insurance and property taxes. This feature is sometimes optional, in which case the fees will be paid by you directly to the County Tax Assessor and property insurance company.
  • Private Mortgage Insurance (PMI): Insurance required by most lenders if loan-to-value is greater than 80 percent.

Should I pay discount points in exchange for a lower interest rate?

Discount points are considered a form of interest. Each point is equal to one percent of the loan amount. You pay them, up front, at your loan closing in exchange for a lower interest rate over the life of your loan. This means more money will be required at closing, however, you will have lower monthly payments over the term of your loan.

To determine whether it makes sense for you to pay discount points, you should compare the cost of the discount points to the monthly payments savings created by the lower interest rate. Divide the total cost of the discount points by the savings in each monthly payment. This calculation provides the number of payments you’ll make before you actually begin to save money by paying discount points. If the number of months it will take to recoup the discount points is longer than you plan on having this mortgage, you should consider the loan program option that doesn’t require discount points to be paid.

How do I know if it is best to lock in my interest rate or let it float?

Mortgage interest rate movements are hard to predict and no one can be absolutely sure whether they’ll go up or down.

If you believe the rates are going to move up then you’ll want to consider locking the rate as soon as you are able. However, before you decide to lock your rate, make sure you are able to close your loan within the rate lock period.

If you think rates will go lower before it is time to close on your loan, then you may want to “float” your rate instead of locking it. Once you are approved you can lock your rate by contacting one of our mortgage experts at mortgage@sunmarkfcu.org or by telephone at 866-SUNMARK (866-786-6275), extension 3212.

What is your rate lock policy?

General Statement

The interest rate market is subject to movements without advance notice. Locking in a rate protects you from the time that your lock is confirmed to the day that your lock period expires.

Lock-In Agreement

A lock is an agreement by the borrower and the lender and specifies the number of days for which a loan’s interest rate and points are guaranteed. Should interest rates rise during that period, we are obligated to honor the committed rate. Should interest rates fall during that period, the borrower must honor the lock.

When Can I Lock?

We will notify you after we receive your application, when you are able to lock the rate. The interest rate market is subject to movements without advance notice so rates may change prior to us locking your rate. If that happens, you will be requested to lock at the prevailing rate.  Before locking,  Sunmark requires a copy of your purchase contract before allowing you to lock the rate.

Fees

You may be charged a fee for locking in your interest rate. The amount of the fee will be dependent upon the number of days of the rate lock period. You will be asked to pay the fee prior to Sunmark Federal Credit Union locking the rate. Please contact the Mortgage Department at 800-990-6653 ext. 3212 for additional information.

Lock Period

We currently offer 30, 45 and 60 day lock in periods. This means your loan must close, disburse and be funded within this number of days from the day your lock is confirmed by us.

Lock Changes

Once we accept your lock, your loan is committed into a secondary market transaction. Therefore, we are not able to renegotiate lock commitments.

The Closing Process

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 can feel free to contact your Mortgage Expert if you prefer. Just to make sure there are no surprises at closing, your Mortgage Expert 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 also 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 pay off 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. This document is also commonly known as the closing statement and both the buyer and seller must sign this document.

Truth-in-Lending Statement

This document provides full written disclosure of the terms and conditions of a mortgage, including the annual percentage rate (APR) and other fees. 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 that all lenders provide you with this document at closing This is the document you sign to agree to repay your mortgage. The note will provide you with all of the details of your loan including the interest rate and length of time to repay the loan. It also explains the penalties that 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 that you will give your property up to the lender in the event that 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 that you have three days to decide positively that you want a new mortgage after you sign the documents. This means that the loan funds won’t be disbursed until three business days have passed. The closing agent will provide more details at the closing.

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

In New York, it is not a requirement that you have an attorney represent you at closing, but it is certainly worth considering. Sunmark will have an attorney represent its interest. You may also want to have someone review the contracts and other documents so your interests are represented.

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

The most important documents you will need at closing are the note and mortgage. Unless there are special circumstances, these documents are prepared one or two days before your closing. Other documents are prepared by the closing agent (Sunmark’s attorney) the day before or the day of the closing. If you would like copies of the completed documents to be sent to you after they are prepared, please contact our mortgage experts.