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Washington and Lee University

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Employee Home Loan Policy

Upon the recommendation of the appropriate Dean or Senior Administrator, the Treasurer, and the President, full time faculty members and administrative, professional and supervisory personnel who are defined as exempt personnel under the terms of the Fair Labor Standards Act of 1938, as amended, are eligible for University housing loans. These housing loans may be used to purchase, build, or improve a principal residence in the Lexington-Rockbridge County area immediately upon entering the employ of the University. (The President may, upon receiving an appeal through the Treasurer, approve as an exception a loan for a residence outside the Lexington-Rockbridge County area when, in his opinion, there are compelling personal circumstances.)

Application

Apply for housing loans with a letter to the Treasurer. State the amount requested, the purpose of the loan (build, buy, improve), and the location of the premises. If the loan is to build a house, attach plans, specifications, and your contractor’s bid estimate. If the loan is to buy an existing house, attach a copy of an executed purchase agreement. If the loan is to improve a house, describe the major elements of the project and attach your contractor’s bid or estimate.

Types of Loans

The University provides two types of loans: (a) loans to build or acquire a principal residence, and (b) loans to improve a principal residence. They differ as to terms and amounts.

Amount of Loans

The University will loan to an eligible employee up to a total of $300,000 to build, buy, or improve a principal residence but not in excess of 90 percent of the value of the property. The total amount loaned can be any combination of purchase or construction cost loan and home improvement loan except that the home improvement loan may not exceed 25 percent of the maximum loan amount (currently $75,000).

A husband and wife, both of whom are eligible for a loan, may borrow jointly up to a total of $450,000 to buy, build, or improve a principal residence, but not in excess of 90 percent of the value of the property. The total amount loaned can be any combination of a purchase or construction cost loan and home improvement loan. The maximum amount allowed for a home improvement loan will be similarly calculated (currently $112,500).

The borrower(s) must demonstrate sufficient income to support payments for the loan schedule. A basic requirement is that the monthly loan payment may not exceed 25 percent of the borrower’s monthly salary. In cases where this requirement is not met, the Treasurer may approve an exception if additional ability to pay can be adequately demonstrated.

Interest Rates

Interest rates on all loans will be 25 percent less than the interest rate charged by Lexington financial institutions for residential mortgage loans. The Lexington financial institution rate used will be the lowest quoted on a date as close as practical to either the date of approval of the loan or the date of closing. Locking in on an interest rate is not an option.

Terms of Loans

Loans to purchase or build: Maximum term is 30 years. (Such loans are limited to one over the period of ownership of the property.

Home improvement loans: Maximum term is fifteen years. (There is no limit on the number of improvement loans on a property.)

Payment; Security; Insurance

Loans will be amortized on a level-debt basis by payroll deduction. They must be secured by a first deed of trust to the University. Fire and extended coverage in at least the total amount of loans must be provided by the borrower, naming the University as an insured party.

Repayment of loans made jointly to a husband and wife both of whom are eligible for a loan will be made from the paychecks of either or both of the borrowers, as they request, so long as both are employed by the University. If one of the borrowers leaves the University’s employ, debt service payments will be deducted from the paycheck of the borrower still employed. In the event of separation or divorce, both borrowers remaining in the University’s employ, debt service payments will be made equally from the paychecks of each employee unless they agree otherwise.

Loans not transferable; Acceleration

Loans are not transferable. If the property on which they are made is sold, transferred, or rented (except when the borrower is on leave or absence from the University) without the consent of the University, or should the borrower leave the employ of the University other than by death, retirement because of age or disability, or by leave of absence for a specified period, the entire principal and accrued interest on the loan will become due and payable sixty days from such occurrence, without notice, at the option of the University.

Refinancing; Prepayment

The University will not refinance loans with one exception: a newly hired eligible employee who happens to live in the Rockbridge County area at the time of hire may refinance an existing external loan under the University loan program during their first year of employment. University loans may be prepaid at any time in whole or in part at no penalty.

Right of First Refusal

The University has a policy which assures it the first right of refusal to purchase certain properties it has financed. The deeds of trust for those properties contiguous to University-owned property will incorporate the attached policy language.

Loans for a new residence

Additional loans may be made to acquire, construct, or improve a different principal residence to employees who have previously taken our home loans. The previous loan(s) must be satisfied before new loans will be granted.

Supplemental Rider for Construction Loans

In the case of a construction loan the following supplemental rider is required: if construction is not substantially complete within one year, the full amount of the loan would be payable within sixty day of the one year anniversary of the loan at a recomputed 100 percent plus half of any profit realized from the sale of the lot (profit defined as the positive difference between original purchase and sales prices).

Disbursement of construction loans

Loans to pay construction costs will be made in installments as agreed upon between the Treasurer and borrower(s), based on the builder’s schedule. Interest will be payable monthly on the installments through the last day of the month in which the final installment is disbursed. Regular principal-and-interest debt service payments will commence on the last day of the next month.

Appraisals; Inspections; Cost Verifications

The Treasurer may require an independent appraisal of property on which loans are requested. The cost of the appraisal is an expense of the borrower, normally collected at closing.

The Treasurer may arrange for an informal inspection of the property. The Treasurer will notify the borrowers of any concerns raised by the inspector about the state of the property.

Improvement Loan limitations

Home improvement loans are to modify or upgrade living space, for structural or mechanical repairs, or for any other improvements which will clearly improve the property value.

Documents required

Borrowers and their spouses must sign a promissory note and a deed of trust. The University also requires a title letter from a non-related attorney certifying that title records have been searched and no flaw in title to the property has been found.

Attorney’s fees for those documents are for the borrower’s account and may not be borrowed.

If there is no title impediment, the University does not require title insurance. If there is an impediment, title insurance may be required depending on the circumstances. The cost of such insurance is for the borrower’s account and may not be borrowed.

Closings

Closings will be at the borrower’s convenience.

RIGHT OF FIRST REFUSAL POLICY

The Washington & Lee University has implemented a policy whereby the University shall have the first right-of-refusal to purchase the home of employees who have taken advantage of University financing when such persons decide to sell their homes or are required to sell their homes in accordance with University policy. In this case, prior to marketing, contracting to sell, or selling the property to any third party, the employee shall declare his or her intent to sell the property in writing to the Treasurer of the University. A letter of submittal to the Treasurer declaring the intent to sell will suffice. The Treasurer shall then have seven (7) business days from the date of receipt of the employee’s declaration letter to mail or hand deliver a response letter to the employee declaring the University’s interest (or lack thereof) in purchasing the subject property. In the event the University fails to declare such interest or declares no interest to purchase the property within said seven (7) days, the employee may proceed to market and sell the property in any method that he or she desires and the University’s right of first refusal lapses, subject to the conditions below. If a firm contract to purchase the property by a third party has not been entered into within six (6) months of the date of the employee’s declaration letter, the University’s first right of refusal re-emerges and the terms of this policy are reinstated. Similarly, if the University declares no interest or fails to respond to the employee’s declaration letter, and a firm contract to purchase the property by a third party has not been entered into within six (6) months of the date of the employee’s declaration letter, the University’s first right of refusal re-emerges and the terms of this policy are reinstated.

Whenever the University declares its interest to purchase property consistent herewith, both the University and the employee must have the subject property appraised. The price to be paid to the employee by the University for the property, shall be the average of the two appraisals; provided, that there is not more than five percent (5%) difference between the two appraisal amounts. In the event that there is a difference of more than five percent (5%) between the two appraisal amounts, the employee and University shall have two options: (i) the employee and University may agree upon and share the cost of a third appraiser whose appraisal amount shall be binding upon the parties; or (ii) the employee and University may enter into negotiations with a price to be agreed upon within the range created by the first two appraisals.

The University shall have no liability for its failure to purchase any employees property upon which it has declared its interest to purchase when good cause exists therefore.

For more information regarding the home loan policy, visit our FAQ page.