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Mortgage Info
 

Mortgage Info

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    Mortgage Info Mortgage Info Document Transcript

    • New Mortgage Guide Loan Servicing
    • Kentucky Housing Corporation understands and respects our customers’ right to privacy and our obligation to keep any and all customer information confidential. It is important for you to know that Kentucky Housing does not sell customer information. We have developed and will continue to maintain certain standards to ensure that customer information is secure and private at all times. This document was produced without state funds. Alternative format available upon request.
    • At Kentucky Housing Corporation, our mission is to provide safe, decent, affordable housing opportunities to Kentuckians. We believe that housing is much more than just a roof over one’s head. Having a home instills a sense of safety and security, creates individual pride and provides a place for families and friends to share, celebrate and grow together. Kentucky Housing works with partners across the state to create affordable housing opportunities. We offer many programs and services for housing producers, renters, providers and home buyers. We invite you to read through this guide to learn more about your new mortgage loan. If you would like more information, visit www.kyhousing.org. If you have questions or need assistance, we are just a phone call away and are happy to help you. We hope you are enjoying the benefits of owning your own home. Sincerely, Ben A. Cook Chief Executive Officer
    • Welcome T he Loan Servicing Department of Kentucky Housing Corporation (KHC) is pleased to have you as a customer. Providing quality servicing of your mortgage loan is our responsibility – from proper overall administration and clear communications about your mortgage to the details of tax and insurance processing. Who We Are Kentucky Housing Corporation is the state housing finance agency, created by the 1972 General Assembly to provide affordable rental housing and homeownership opportunities. KHC operates primarily with funds generated from the sale of tax-exempt mortgage revenue bonds. Besides providing loan servicing, KHC offers low-interest mortgage loans, down payment assistance, homeownership education and counseling, rental housing production financing and a variety of rental assistance and housing rehabilitation programs. WhAt You CAN expeCt Serving you, our customer, is the Loan Servicing Department’s first priority. We pay special attention to accuracy, punctuality and superior service for each and every account. Another priority is our commitment to excellence. We know that, even if we handled all the mortgages in the world, only one is important to you – and that’s yours. Let us KNoW We encourage you to write, call or send an e-mail message to let us know how we can better serve you. Your mortgage will receive the attention that you, as a customer, have the right to expect from KHC. 2
    • tABLe of CoNteNts Directory ----------------------------------------------------------------------- 4 Correspondence and Addresses ---------------------------------------- 5 Fee Schedule ---------------------------------------------------------------- 6 Introducing Your New Mortgage ----------------------------------------- 7 Basic Facts About Your Mortgage -------------------------------------- 8 Accessing Your Mortgage Information --------------------------------- 10 Your Monthly Mortgage Payments -------------------------------------- 11 Automatic Payment Program -------------------------------------------- 12 Authorization Agreement for Preauthorized Payments ------------ 13 How to Handle Payment Changes and Problems ------------------ 16 Other Details ----------------------------------------------------------------- 17 Your Escrow Account ------------------------------------------------------- 19 Property Taxes --------------------------------------------------------------- 22 Insurance ---------------------------------------------------------------------- 24 Transferring or Selling Your Property ---------------------------------- 27 Mortgage Loan Payoffs ---------------------------------------------------- 28 Recapture Tax – Questions and Answers ----------------------------- 30 Glossary of Terms ----------------------------------------------------------- 34 Household Budgeting ------------------------------------------------------ 35
    • DireCtorY Kentucky Only ------------------------- (800) 633-8896 Nationwide ------------------------------ (800) 341-5622 In Frankfort ----------------------------- (502) 564-7630, extension 204 Fax ---------------------------------------- (502) 564-5430 TTY --------------------------------------- 711 extension List Customer Service --------------------- 203, 282, 302 Taxes and Insurance ----------------- 297, 336, 437, 438, 445 Delinquent Accounts ----------------- 339, 484, 333, 311, 497 Bankruptcy/Foreclosure ------------- 486, 487, 332, 320 Automatic Funds Transfer ---------- 212, 337, 435 en Español ------------------------------ 217 Note: Please leave your message on the voice mail system. You can also obtain loan information on the KHC Web site at www.kyhousing.org. To obtain the information, you will need your loan and Social Security numbers. 4
    • CorrespoNDeNCe AND ADDresses Correspondence: Kentucky Housing Corporation P.O. Box 4150 Frankfort, KY 40604-4150 Overnight and Express Mail: KHC-Servicing Department 1231 Louisville Rd. Frankfort, KY 40601 Web Site Address: www.kyhousing.org Payments: Kentucky Housing Corporation P.O. Box 4809 Frankfort, KY 40604-4809 5
    • fee sCheDuLe Amortization Schedule $10 Copy of Note $5 Copy of Mortgage $5 Copy of Survey $5 Payment History $5 (current year and prior year free) Replacement Copy of 1098 $5 Replacement Copy of Annual Disclosure $5 Replacement Coupon Book $5 Fax Fee $5 Duplicate Payoff Quote $5 (within six-month period) Verification of Mortgage $20 Other Documents ** ** Call Customer Service staff for fee amount. 6
    • introducing Your New Mortgage In this guide, we’ve tried to answer the questions most frequently asked by our new customers. If you still have questions after reading this information, please give us a call. One of our customer service representatives will be happy to assist you. The ImporTance of Your Loan number Your loan number serves as your identification. Please be sure to write your loan number on all checks and correspondence. We also ask that you have it close by when you call so that we can serve you quickly and accurately. Write your loan number in the space provided on the inside cover of this manual for future reference. If Your Loan Was Transferred Transfers of mortgage loan accounts are commonplace in our industry; they happen all the time. But having an individual mortgage loan transferred is a new experience for most of our customers. We understand that you will have questions and concerns: • Will the terms of your loan change? • Where do you send your check? • Do you have a new loan number? • Are there new payment requirements? • Your Terms Stay the Same: The terms and conditions of your original mortgage contract have not changed. They are exactly the same as they were before. The amount of your monthly payment remains the same and so does the maturity of your loan. • Pay the Full Amount: Regular payment should be remitted in the exact amount stated on your payment coupon and mailed to P.O. Box 4809, Frankfort, Kentucky 40604-4809. 7
    • • You Have a New Loan Number: As previously mentioned, your mortgage loan was one of many loans transferred to KHC. The transfer was routine. It does not reflect any problems with your account. We reorganized all of the mortgage loans, including yours, into our computer system. Then we assigned you a new loan number. It is listed on each coupon in your new coupon book. • Know Your Payment Due Date: Mortgage payments are generally due on the first day of each month. Be sure to check your coupon book or your mortgage for your specific date. Payments received after the due date will be considered late. Please allow a few days for delivery when sending payments. Also, please note that payment due dates will not be changed. Basic facts About Your Mortgage • Build Good Credit: A good payment record is essential for a good credit rating. Late payment habits may be reported to the credit bureau. • Avoid Late Charges: Make sure KHC receives your full payment on or before the due date. Payments not received by KHC by the due date will be considered late and are subject to late charges. • Avoid Late Payments: You should call Delinquent Accounts staff at (800) 341-5622 (in Frankfort, call 564-7630), extension 311, 333, 339, 484 or 497 immediately if you encounter any problems, such as unemployment or other loss of income, which may affect the timeliness of your payments. Prompt notification will give our loan counselors sufficient time to work with you to address problems. If you are having difficulty making your payments, please do not ignore the situation. We may be able to work with you on a revised payment schedule to enable you to keep your home. • Send Payments Quickly: You can use Western Union/Quick Collect to quickly send your loan payments to KHC. Call (800) 325-6000 to learn the location of the Western Union agent nearest you. At the agent location, select and fill in the BLUE Quick Collect Payment form. 8
    • Include the following information: Pay To: Kentucky Housing Corporation Code City: KHC State: KY Make sure that your name and account number are correctly written on the form. This is a cash transaction, and Western Union will charge a fee for this service. Using this Western Union service will ensure that KHC receives your payment the same day and your account will be properly credited. Another quick payment option is Check payment by phone. To use this service, you must call one of our representatives at one of the following KHC extensions: 311, 333, 339, 484 or 497. For this method of payment, money will be taken directly from your bank account for a minimum fee. • Please note that federal law requires us to inform you that any information you provide to us can be used in the collection of your mortgage debt. 9
    • Accessing Your Mortgage information InTegraTed VoIce response sYsTem-IVr Offers easy access to your mortgage loan 24 hours a day. Using your touch tone telephone dial (800) 341-5622 or (502) 564-7630 then press 2 and follow the instructions provided by the automated attendant. This new system allows you to: * Check the status of your mortgage at your convenience. * Verify last payment made, amount and next payment due. * Obtain loan balance, escrow balance, interest rate and maturity date. * Provides instructions for obtaining payoff information, making. payments by telephone and automatic payment bank drafting. * Retrieve mailing addresses for payments or correspondence along with overnight mailing instructions. * Utilize system to track disbursements from your escrow account and obtain other information concerning your mortgage. * Speak to a servicing representative at any time during your call. InTeracTIVe Web sITe www.kyhousing.org This service provides you with access to your mortgage loan from the comfort of home or work and at any time. For security, you will need your loan number and your Social Security number to utilize this service. Simply access the Web site and click on the Loan Servicing tab. This site allows you to: * Obtain details concerning your mortgage. * Make payments online, saving time and money. * View instructions and the form to sign up for automatic bank drafting. * Print payment coupons. * View and print Substitute 1098 statement for income tax filing purposes. * View loan history to verify payments received and escrow disbursements. * Look up Loan Servicing representatives information. * View information and forms to apply for life and/or disability insurance. * Information Center 10
    • Both of these services were designed to be easy to use and convenient for you. If you experience difficulty using these features, please contact Customer Service at (800) 341-5622, extensions 203, 282 or 302. Our customer service representatives will be happy to assist you. Your Monthly Mortgage payments You might have a few questions about your new payment program, such as: · What happens to this month’s payment? · Will there be new coupons? · Can automatic payments be made? · When are payments due? · What happens if payments are late? · What if there are problems in making a mortgage payment? abouT Your TemporarY coupons Temporary coupons are enclosed with this booklet. Your actual coupon booklet should arrive in 45-60 days. Please use these temporary coupons until your coupon booklet arrives. This will ensure that your payment is handled quickly and accurately. If you run out of temporary coupons before your coupon booklet arrives, please write your loan number on your check and mail your payment to avoid late charges. If you misplace your coupon book, we can replace it at a cost of $5. hoW To paY Your morTgage usIng The coupon bookLeT Detach the proper coupon and mail it with your check or money order made payable to KHC. Be sure to write your new KHC mortgage loan number on your check or money order. 11
    • Where To send Your paYmenT • For All Your Payments: In your coupon booklet, you will find preaddressed mailing labels for your convenience. Please use the new coupons and address labels provided when making your monthly payment. • Don’t Delay Payment: Do not delay payment while you are waiting for additional or corrected coupons. Simply write your KHC loan number on your check or money order and mail it to: KHC, P.O. Box 4809, Frankfort, KY 40604-4809. • Please note that coupons will be automatically sent to you each year. It is not necessary to notify us if your coupon supply is low. Automatic payment program The automatic payment program at KHC is free. There is no fee or charge for this service. Within 30-45 days of receiving your signed authorization form and voided check, we will notify you by mail when your automatic payment program will begin. You must continue to send your mortgage payments by mail until you receive this letter. geTTIng sTarTed If you would like to have payments automatically withdrawn from your checking or savings account, simply complete and return the automatic payment form in this booklet. 12
    • auThorIzaTIon agreemenT for preauThorIzed paYmenTs Company Name: Kentucky Housing Corporation Company ID: 61-0864674 I (we) hereby authorize Kentucky Housing Corporation (KHC) to make withdrawals from my (our) checking account, indicated below, at the financial institution named below for monthly payment of my (our) mortgage serviced by KHC. Financial Institution _______________________________________________ Branch _________________________ Routing No. ____________________ City _____________________________ State ________ Zip __________ Account No. _____________________________________________________ Date to Draft Payment 5th________ 15th________ This authorization will remain in effect until KHC has received written notification from me (either of us) of its termination in such time and manner as to afford KHC and the financial institution reasonable opportunity to act on it. Name (please print) ________________________________________________ Name (please print) ________________________________________________ Loan No. ___________________________ Date ________________________ Signature ________________________________________________________ Signature ________________________________________________________ Additional Principal Payment ________________________________________ (This amount will be added to your regular payment amount each month.) NOTE: All written authorization for withdrawals must state that the receiver may revoke the authorization only by notifying the originator in the manner specified in the authorization. 13
    • Fold and seal with tape. Affix Postage Loan Servicing Department Kentucky Housing Corporation P.O. Box 4809 Frankfort, KY 40604-4809
    • hoW To enroLL • Read the Authorization Form Provided in This Booklet: Fill in all blanks. This form is also available on our Web site, www.kyhousing.org. • Sign the Form: If the funds will be withdrawn from a joint account, all parties must sign. • Send a Voided Check: Along with the authorization form, include a blank check from your account. Write “VOID” in the center of the check. The voided check will allow us to activate your automatic payment plan with your financial institution. Mail the authorization form, along with your voided check, to: KHC, P.O. Box 4809, Frankfort, KY 40604-4809. • Copies: Make a copy of the form for your files. same Terms When you pay automatically, your mortgage terms remain the same. The only difference is you save the cost and inconvenience of mailing a check every month. paYmenT drafT daTe Your payment will be drafted from your checking or savings account on the fifth or fifteenth day of each month. paYmenT records The monthly statement that you receive from your bank/financial institution will show the withdrawal from your account by KHC. 15
    • how to handle payment Changes and problems If your loan allows additional payment against the principal, you may do this at any time. You can make a separate payment to principal by sending a check to the address where you send your monthly payment. Be sure to clearly print your loan number on the check and note that the check should be applied toward your principal balance. You may also include a payment to be applied toward principal with your regular monthly payment. Your payment coupon has a place on it to note any additional amount to be applied toward principal. • Changes in Your Monthly Payment Amount: Sometimes there is a change in the amount of your mortgage payment. This can be caused by an increase in your tax and insurance bills (see How Your Account is Analyzed on page 20). If this happens, we will notify you in advance with a tax and insurance disclosure statement. We will also notify your bank or other financial institution of the new amount and the effective date. • Stopping Automatic Payments: If you wish to stop your automatic payments, inform us in writing. Be sure to include your mortgage loan account number on your letter. You will receive a coupon book in 30-45 days. However, automatic payment withdrawals will continue until you are notified of an effective date for discontinuation. • Insufficient Funds: Only regularly scheduled payment amounts can be transferred from your account to KHC. No partial payments can be accepted. If you have insufficient funds in your account on the date your automatic payment is supposed to be withdrawn, no withdrawal will be made. KHC and your bank/financial institution will notify you. Then you must make your payment by check for that month only and send it to us. Please note that it is possible for automatic payment plans to be canceled after two occurrences of insufficient funds. In that event, we will contact you to arrange a different payment method. There will also be a $15 NSF fee charged to you for each occurrence. 16
    • other Details paYIng properTY Taxes If your mortgage includes a tax escrow account, your property taxes will be paid from that account. If you receive a real estate tax bill, write your loan number on the bill and send it to KHC immediately. If your mortgage does not have a tax escrow account, the payment of taxes is your responsibility. KHC will not be responsible for your loss of discount or penalties if your bill is not mailed to us in a timely manner. paYIng homeoWner’s Insurance premIums Generally, if your mortgage payment includes an escrow account, your homeowner’s insurance premiums will be paid from that account. If you receive a premium notice for your insurance, write your loan number on the bill and send it immediately to KHC. If your mortgage does not have an escrow account, the payment of insurance is your responsibility. 17
    • Irs 1098 Year-end sTaTemenTs Prior to January 31 of each year, KHC will send you a year-end statement for Internal Revenue Service (IRS) reporting. This form, IRS 1098, also will be included in the coupon booklet you receive at the end of each year. In addition, the form is available on KHC’s Web site, www.kyhousing.org. To obtain this information, you will need your loan number and Social Security number. Click on the loan servicing tab, enter your loan number and Social Security number, log- in and look for the link, “Year-End Information.” If your loan has been transferred to KHC in the last year, you may receive two mortgage record statements at the end of the year – one from your previous servicer for the portion of the year your mortgage was in their hands and one from KHC showing all activity on your mortgage from the time of transfer through the end of the year. In some instances, KHC will provide all this information for you. When You haVe a name or address change • Address Change: Notification of your change of address cannot be accepted over the phone. Please notify KHC in writing. For your convenience, a change of address form is included in your coupon book. • Name Change: If you have legally changed your name, please send KHC a copy of the recorded or filed document proving the change. · Marriage – Please send a copy of the marriage license to KHC. · Divorce – If there is a divorce between titleholders, please send a copy of the final divorce decree and property settlement agreement, as well as a copy of the recorded quit claim deed,* if applicable. · Death – If either titleholder dies, a copy of the death certificate and a copy of the probated will or estate settlement, if applicable, must be sent to KHC. * Note: The recorded quit claim deed does not constitute release of liability. Contact KHC Customer Service staff for more information. 18
    • Your escrow Account The purpose of an escroW accounT Some mortgage contracts have what is called an impound or escrow account. If funds for payment of taxes and insurance were required at closing, KHC is obligated, under the terms of your mortgage, to collect and maintain this account for real estate taxes, insurance and certain other expenses connected with your home. The escrow provision cannot be waived. If your loan contract does not require an escrow account, you are responsible for paying your property taxes and insurance premiums. hoW Your accounT Works Each mortgage payment includes an amount that is deposited to your escrow account. Usually the deposited amount represents 1/12 of the annual disbursement for your property taxes and insurance premiums. These property taxes and premiums are paid from the escrow account as they become due. In effect, an escrow account serves as a budget plan – making sure your funds are available as they are needed. • Projected Annual Disbursements: This is the total projected amount that KHC will pay on your behalf towards property tax, Federal Housing Administration (FHA) or private mortgage and hazard insurance. • Real Estate Settlement Procedures Act (RESPA): This is a federal guideline to assist mortgage-servicing organizations in the collection and distribution of escrow funds. RESPA regulates the maximum amount of escrow money that mortgage servicers may collect and hold in an escrow account. Mortgage servicers can collect additional escrow payments (up to two months’ worth) from borrowers to prevent escrow balances from dropping below a certain amount. 19
    • hoW Your accounT Is anaLYzed Your escrow account is analyzed annually. This analysis will be included with the new coupon book you receive at the beginning of each year. Sometimes there are changes in your monthly payment amount. These changes usually result from increases or decreases in the amount of insurance premiums, taxes or assessments on your property. The required monthly payment amount of your escrow account will be determined by the aggregate method. This method of accounting projects the balance of your account over the next year, based on the actual bills paid for escrow items during the previous 12 months. The projection includes your monthly escrow deposits, expected bills to be paid from your escrow account, the months in which we expect to pay them and the estimated monthly balance. Any shortage or surplus will be reflected on the statement, and your payment will be adjusted as necessary. • Escrow Shortage: If increases in escrow items result in a shortage of required funds, repayment of an escrow shortage occurs with the next 12 payments (each payment will equal the shortage divided by 12). You can also pay this shortage in full or in part by check. • Escrow Surplus: If your annual analysis shows surplus funds in your account and if this excess is greater than $50, we will send a refund check to you. If the surplus is less than $50, we will decrease your next 12 monthly payments by 1/12 of the surplus amount. undersTandIng Your T&I accounT dIscLosure sTaTemenT On the following page is a sample of an account disclosure statement for your property. The first page is an account history. The second and third pages of the statement show projected escrow activity – the payment of taxes and insurance – for the coming year. These projections may increase or decrease your monthly mortgage payment to KHC. 20
    • • Projection for Next Cycle: Each year, KHC reevaluates your monthly mortgage payment to reflect any changes in local property taxes or insurance. Although the principal and interest portion of your monthly mortgage payment may not change, your total payment may increase or decrease because of changes in property taxes and/or insurance on your home. sample DisCLosure stAteMeNt 21
    • property taxes The amounT You paY As a property owner, you are required to pay taxes on your property. The taxes you pay are in proportion to the value of your property. The exact tax amount is determined by multiplying the taxing authority’s valuation of the property by a percentage they establish. KHC has no control over the amount of your property tax. If you have an escrow account and receive an original tax bill from any source, please send the bill immediately to KHC. Write your KHC loan number on the tax bill. Delays in sending the bill may result in penalties being added to your taxes. KHC will not be responsible for payment of penalties. properTY Tax exempTIons Depending on your age or where you live, you may be eligible for a property tax exemption. If you are over age 65 and you receive a Social Security disability benefit, you may be eligible for a disability tax exemption. Your local taxing authority can determine whether or not you qualify for an exemption. You must apply for the exemption yourself. If you do qualify and receive a reduced or corrected tax bill, please send it to KHC immediately. Tax bILL InquIrIes If you have questions about your tax bill, contact your local taxing authority. They can explain the amount and how it was calculated. They can also give you a copy of your tax receipt and information about exemptions. 22
    • KHC will request that the taxing authority send your tax bill to us. After we receive the bill, it will be processed for payment. However, you should know that most taxing authorities mail the tax bills to the property owners. If you have questions about your property assessment, contact your local property valuation administrator (PVA). • Year-End Statements: For income tax purposes, year-end statements are furnished prior to January 31 of the following year. A substitute 1098 form will be included in the coupon book you receive each January. Please do not contact KHC requesting your statement prior to the above-mentioned date. 23
    • insurance homeoWner’s Insurance • Hazard and Flood Insurance: Having sufficient insurance is extremely important in protecting your property against disaster. The best protection you can have is adequate property insurance coverage. Basic coverage, such as fire and extended coverage or a homeowner’s policy on your property, is your responsibility to maintain at all times in an amount at least equal to the current principal balance. If your property is located in a designated flood area, adequate flood insurance coverage is also required. • Proof of Insurance: Your property must have insurance coverage at all times. You are responsible for making sure your renewal policy reaches our office before the expiration date of existing coverage. Failure to do so can result in incorrect premium payments along with additional insurance costs to protect your mortgage lender. If we do not receive proof of insurance, dwelling coverage only (not contents) will be purchased on your behalf and charged to your escrow account. You will be given prior written notice in this event. The coverage provided by this temporary insurance may be different and more expensive than your expired coverage. If we secure this special insurance for you, it can be canceled after you obtain a policy and provide proof of coverage to KHC. • Premium Notices and/or Invoices: Review any renewal policies or insurance invoices for your homeowner’s insurance. Make sure that it covers the correct property and provides the coverage and policy limits you desire. Check to see that it contains a mortgage or loss payable clause naming as mortgagee: Kentucky Housing Corporation, P.O. Box 4150, Frankfort, KY 40604-4150. Verify that the correct amount has been billed. If there are any discrepancies, contact your insurance agent to make the necessary adjustments. Mail any renewal or replacement policies to the address above. 24
    • In some cases, your agent may send you a copy of the premium notice for your records. However, original invoices that request payment must be sent to KHC immediately if you have an escrow account. • Insurance Claims: When there is damage to your property, notify your insurance agent immediately and contact our Insurance Claims staff at (800) 341-5622, extension 297 or 437. Settlement checks will be paid to you and KHC, and certain requirements must be fulfilled before any funds will be released to pay for repairs. • Changing Insurance Companies or Coverage: KHC must receive your written authorization to accept a new insurance policy. If you change insurance companies before your current policy expires, keep in mind that you may not receive a full refund from the former insurance company. prIVaTe morTgage Insurance On a Fannie Mae or conventional loan, the lender usually requires the borrower to purchase private mortgage insurance (PMI) if the amount of the down payment is less than 20 percent of the purchase price. This insurance protects the lender in the event of default and foreclosure. Although the borrower is not protected, few, if any, lenders are willing to make loans that are so close to the value of the property without PMI. In some cases, when the loan balance gets below 80 percent (in some cases 75 percent) of the current value, and the loan is at least two years old, you may request early cancellation of PMI. Please contact our Customer Service staff for more information. 25
    • On a loan insured by the Federal Housing Administration (FHA), mortgage insurance is required. FHA provides this coverage to the lender. For FHA loans that closed after January 1, 2001, the monthly mortgage insurance premium will automatically be canceled once it reaches 78 percent loan-to-value ratio. VA loans are guaranteed by the Veterans Administration, and Rural Housing Services (RHS) loans are guaranteed by Rural Development (formerly Farmers Home Administration). These loans do not require mortgage insurance. opTIonaL Insurance • Life, Accidental Death and Disability: KHC does not sell insurance. However, we can provide you with information about some insurance products that you may wish to consider. Call and ask for literature on insurance including: · Mortgage Life Insurance pays your mortgage balance in the event of your death. · Accidental Death Insurance pays your mortgage balance in the event of your death by accident only, not illness. · Disability Insurance pays your mortgage payments if you are unable to work for at least 30 consecutive days because of sickness or accidental injury. (The first 30 days are excluded.) * Note: The applications for mortgage life and disability insurance are available on our Web site at www.kyhousing.org. To access the PDF forms, click on the Loan Servicing tab, enter your loan number and Social Security number, log-in and look for the insurance application links at the top of the page. 26
    • transferring or selling Your property assumabILITY If you have an assumable mortgage and you decide to sell your home, you may be able to transfer the mortgage to the new buyer. In that case, we require a credit review of the new borrower and will charge a fee for the assumption. Some mortgages, however, contain a “due-on-sale” clause. This means that your mortgage may not be transferred to anyone, including a new buyer. Instead, you may be required to pay the entire balance due when you sell or transfer all or a part of your property. VA, FHA, RHS and conventional loans are only assumable under certain conditions. To determine whether your loan is assumable, refer to the terms of your mortgage contract or call KHC. Before entering into any contract for sale of your property under an assumption of your mortgage, please contact our office so that we can give you the requirements that apply to your mortgage loan. Call toll-free at (800) 341-5622, extensions 203, 282 or 302. * Note: “Contract for deed” is not recognized as a legal transfer of title. Also, most special program loans are not assumable. Please call our Customer Service staff members at extensions 203, 282 or 302 to learn whether or not your loan is assumable. 27
    • Mortgage Loan payoffs hoW To receIVe a morTgage Loan paYoff quoTe If you want to prepay (payoff) your loan in full, you will need a loan payoff quote. Send your written request to: KHC, P.O. Box 4150, Frankfort, KY 40604-4150 or fax it to (502) 564-5430. When you receive your payoff quote, be sure to read it carefully. If you would like us to fax your payoff quote to you, the cost is $5. After receiving your loan payoff, a notice will be forwarded to your insurance company and/or insurance agent. If your agent has not contacted you within 30 days after you submit the payoff amount to KHC, please call your agent directly with the payoff information. Where To maIL or deLIVer Your paYoff check Payment should be made to the following addresses: Standard Mail Overnight Delivery KHC Loan Servicing Department P.O. Box 4809 KHC Frankfort, KY 40604-4809 1231 Louisville Rd. Frankfort, KY 40601 form of paYmenT Prepayments in full (payoffs) must be made by cashier’s check, certified check, money order or attorney’s escrow check and be payable to KHC. Your account number must be written on the check or money order. Personal checks will not be accepted. 28
    • keep InTeresT from accruIng Because interest on your loan will continue to accrue until funds are received at KHC, there are a few things you can do to avoid this. • Use the Right Address: Mail or deliver your payoff funds directly to our Mortgage Loan Payoff staff (see address in the Where to Mail or Deliver Your Payoff Check section on the preceding page). * Note: KHC/FHA loans accrue interest until the end of the month. • Get the Timing Right: Make sure payment in full arrives at Kentucky Housing Corporation before 4 p.m., Monday through Friday, if you want it processed on the same day. Payoff funds received after 4 p.m. will be processed the following workday, and interest will continue to accrue until the payoff is processed. • Pay the Entire Amount: Be sure you are paying the entire amount. Funds that do not cover the amount required to pay the loan in full will be returned for the total due. Interest will continue to accrue until sufficient funds are received. * Note: All payoff figures are subject to final verification by KHC. 29
    • recapture tax Questions and Answers Q: What is the federal recapture tax? A: It is a federal tax that some homeowners with KHC home loans may be required to pay from the net profit they receive from the sale of their home. If you have to pay a recapture tax, the amount will be due when you file your federal income tax for the year in which you sell your home. The maximum tax is limited to 6.25 percent of the original loan amount. Q: Will most KHC borrowers have to pay a recapture tax? A: Probably not. In fact, it is likely that very few KHC borrowers will be af- fected by the recapture tax. You would pay no recapture tax if any of the following occur: 1. You own your home for more than nine years. 2. You do not have a “substantial increase” in your income. 3. You do not receive a net profit on the sale of your home. Q: Is this tax dependent on the profit I make when I sell my home? A: There must be a profit before any tax is due. However, you may have a profit and no tax will be due if your income does not exceed the allowable income in the year of the sale. If a recapture tax must be paid, all your profit will not be taken. Under what is known as the gain-on-sale adjustment, the recapture amount can never exceed 50 percent of the profit from the sale of the item. 30
    • Q: What do you mean by a “substantial increase” in income? A: Federal maximum income limits apply to the purchase of your home. Certain regulations automatically increase these maximums at the rate of 5 percent a year for recapture tax purposes. If, at the time you purchase your home, your income is near the federal maximum, annual increases would have to exceed 5 percent a year before you would be subject to any recapture tax. If your income is considerably below the federal maximum, your income would have to increase at a greater rate before you would be subject to recapture tax. Example: Federal maximum income allowed in the year of the purchase is $36,500, and your income is $30,000. If you sell your home in year five, the allowable federal maximum income will be $44,366. Your income would have had to increase by $14,366, slightly more than 7 percent a year, for you to be subject to any recapture tax. Q: How can I determine if I will have to pay recapture tax? A: There is no way to predict your exact recapture tax liability, if any, since it is based on your situation when you sell your home. It will depend on your income, family size and the amount of the net profit you obtain from the sale of your home. Q: When I sell my home, how will I determine if I am subject to recapture tax, and if I am, how will I know the amount of the tax? A: When you purchase your home, KHC will provide you with a notice of maximum recapture tax and method to calculate recapture tax if your home is sold. This will help you determine your tax at the time of the sale. KHC cannot calculate the amount for you. IRS Form 8828, Recapture of Federal Mortgage Subsidy, and Publication 551, Basis of Assets, are available from the IRS to assist you. 31
    • Q: Is there any way to reduce or minimize the amount of the recapture tax? A: Yes, if you sell your property within the first year of purchase, the maximum amount of recapture tax you would pay, depending on your increase in income and net profit on the sale, equals 1.25 percent of the original mortgage amount. This percentage increases by 1.25 percent each year through year five (maximum of 6.25 percent) and then decreases by 1.25 percent each year until it is completely eliminated after year nine. This means that if you are subject to recapture tax, you can reduce or eliminate the tax altogether depending on when you sell your home. Q: Will recapture completely eliminate a homeowner’s profit from the sale of the home? A: No. Under the gain-on-sale adjustment, the recapture amount can never exceed 50 percent of the profit from the sale. If the net gain on the sale were $4,200, for example, the maximum recapture would be $2,100 ($4,200 x 50% = $2,100). Remember: If there is no gain on the sale, no recapture tax is due. Q: What happens if the loan is assumed? A: If the sale or transfer occurs within the first nine years of ownership, the original borrower may have to pay the recapture tax, and a new nine- year period begins for the purpose of applying a new recapture tax to the assuming purchaser. 32
    • Q: How does the IRS track the amount of recapture tax due? A: The IRS tracks recapture through Social Security numbers as reported on 1099 forms issued by the title companies in the sale year. If a homeowner is required to pay recapture tax, the homeowner must report it on his or her federal income tax return. Please consult a tax accountant or financial advisor prior to preparing your return. Q: Is recapture tax due if the borrower dies within the nine-year period? A: No. If the deceased borrower is the sole owner of the home, no recapture tax will be due. If, however, the home is owned jointly with a spouse or other person, he or she may be responsible for paying the recapture tax if the home is sold during the first nine years of ownership. Q: In the case of a divorce, who is responsible for recapture tax? A: Whoever receives the home in the divorce settlement pays the recapture tax, if any. Q: What if the home is destroyed by a fire, flood or other natural disaster? A: If the home is destroyed and the borrower rebuilds on the same site within two years after the year that the insurance proceeds are received, no recapture tax is due. * Note: If you have questions, please contact Customer Service at (800) 341-5622, extensions 203, 282 or 302. 33
    • Glossary of terms · Curtailment – additional payment against outstanding principal balance. · Escrow Account – KHC sets up this account on your behalf to pay property taxes, FHA or private mortgage insurance and hazard/flood insurance throughout the year (flood insurance is not required on all homes). The money used to pay taxes and insurance comes from a portion of your monthly mortgage payment. · FHA Insurance paid to the Federal Housing Administration (FHA) to secure mortgage loans. · Hazard Insurance – homeowner’s insurance necessary to cover fire or other damages to a borrower’s property as described in the insurance policy. · P&I (Principal and Interest) – your monthly principal amount plus interest payment. · Private Mortgage Insurance – insurance paid to a private mortgage insurance company; it insures mortgage loans in case of default. · RESPA (Real Estate Settlement Procedures Act) – a federal guideline to assist mortgage lending and servicing organizations, like KHC, in the collection and distribution of escrow funds. RESPA regulates the maximum amount of escrow money that mortgage servicers may collect and hold in an escrow account. · Surplus – an escrow account surplus occurs when more is collected for taxes and insurance than is needed to pay on your behalf. KHC refunds any surplus amounts to you within two weeks of the completed Annual Escrow Disclosure Statement. · Shortage – an escrow account shortage occurs when an insufficient amount is collected to pay taxes and insurance on a borrower’s home. KHC collects shortage over a 12-month period. 34
    • household Budgeting If you don’t already have a budget, it’s time to start one. This is the best way to ensure that you are always in a position to pay essential bills. Here are some budget basics. 1. Know what bills are due and when. Compare the timing of your set expenses (such as your mortgage, utilities, car payments, etc.) with your pay schedule. If you get paid weekly, you need a different strategy than if you get paid monthly. In either case, a checking account will provide not only an easy way to pay your bills, but also a way to help you keep track of what you spend. 2. Ask electric and gas companies if you can get on their “budget” plan or “level pay” plan. Based on the history of gas or electric use in the home, the company arrives at an estimated annual cost then divides it by 12 months. You are billed for the same amount every month, though the utility company still keeps track of how much you use. Once a year, the company adjusts your average monthly payment up or down according to your actual use, but then you continue that same amount for another year. This helps tremendously with budgeting, since you know the amount of the bill in advance. 3. Know how you spend your money. Get in the habit of saving receipts. Jot down what they are for if they are not itemized. This is an easy way of keeping track of your cash expenditures. Then categorize all of your expenditures for an entire month. If money is tight, look for ways you can economize. You will have to do your own analysis, but most of us overspend on some categories. 35
    • 4. Plan for large, periodic expenses such as property taxes (if they’re not paid through an escrow account), home-owner’s insurance, car insurance and the water bill. Make a “budget calendar” showing the approximate amount of these expenses and when they will be due. 5. Budget for regular maintenance and unexpected repairs. Some experts suggest budgeting 1 percent of the purchase price of the house for annual maintenance and repairs. 6. Adhere to a regular savings plan. Many financial advisers suggest saving 5 percent of your take-home pay. You must make this a top priority if it is to work; you can’t just save whatever you have left at the end of the pay period. That’s a sure way to end up with no savings at all. 7. Always keep an emergency fund on hand. You need to have a “nest egg” so you can replace the hot-water heater if it suddenly springs a leak. If you don’t already have an emergency fund, start one. It’s only a matter of time before you’ll need it. 8. Plan ahead for major purchases rather than making impulsive decisions. Whenever you purchase anything on credit, look carefully at the financing terms, including the annual percentage rate. Often the retailers that offer the easiest terms (no payments due for three months) actually charge the highest interest rates. Shop around. Try to save for things you need rather than charging them. You’ll pay less, and you may decide that you would rather use the money for something else. * Note: If you need assistance or have questions regarding budget and credit, please call KHC’s financial counselor, at (502) 564-7630, extension 324. 36
    • for Your information visit us at: www.kyhousing.org Kentucky Housing Corporation 1231 Louisville Rd. Frankfort, KY 40601-6191 (502) 564-7630 (800) 341-5622 TTY - 711 Kentucky Housing Corporation prohibits discrimination on the basis of race, color, religion, sex, national origin, sexual orientation or gender identity, ancestry, age, disability or veteran status.
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