Why we’re offering this mortgage program.
Mid-year 2013, we saw mortgage rates begin to rise sooner than expected. The mortgage world went from a refinance to a purchase market almost instantly due to rising rates. To meet this change in demand, we designed a product that would be competitive in the market allowing members to put down as little as possible for their dream home. Coming up with the cash down payment, we’ve found, is the biggest issue members face when buying a home. Our 3% mortgage loan helps solve this dilemma.
Why do lenders want a down payment?
The down payment is the cash a member pays up front before the mortgage term begins. For some lenders, it can be a sign that you’re a trustworthy prospect for repayment. Fortunately, at ECCU, we look at the complete member relationship from day one. We get to know you personally and your needs. That’s the beauty of dealing local with your credit union – we already have that trust and rapport established. We don’t necessarily need a big down payment as proof.
Who qualifies for this loan?
All of our members can take advantage of the loan, but we see the majority of applicants being first-time home buyers, mostly Millennials, who are now the largest segment of the home-buying population. Like any loan, we review the customary items when you apply, such as your debt-to-income ratio, credit score, and repayment history. Once approved, you need only 3% of the home’s purchase price as cash down. Closing costs are also the same as our other mortgage programs and extremely competitive to the industry.
How ECCU members benefit.
Our 3% mortgage loan is a product that provides peace of mind – there’s no hassle coming up with a larger down payment, such as the 10 or 20% required by other lenders. The difference is significant when you think about it. For example, with a $100,000 loan, a member only needs $3,000 down versus $10,000 or $20,000. It’s easier coming up with a much smaller down payment. Plus, you’re able to keep a savings safety net – rather than depleting all of your savings for the down payment and becoming what’s sometimes called ‘house-poor.’
Being house-poor can hurt your finances.
House-poor is a term used by the housing industry or financial professionals. It means all of your money is tied up in your home, leaving you without a comfortable cash flow or worse, unprepared for emergencies without adequate savings. Neither is good. By having a lower down payment, you can keep some of your savings available for a safety net.
Flexible rates and terms.
Consistent with our other mortgage programs, terms range from 15, 20, and 30-year repayment plans. Loan amounts are a minimum of $20,000 up to our maximum of $417,000. Private Mortgage Insurance or PMI is required on the loan, but will be removed once your Loan-to-Value (LTV) reaches 78%. (When you put 3% down, your original LTV is 97%.) Our 3% mortgage loan is designed for new purchases specifically; members interested in refinancing have a number of other low-cost ECCU mortgage options to choose from.
Similar to the newly resurrected 97% loan-to-value program by Fannie Mae, our 3% mortgage loan is perfect for anyone struggling to come up with a down payment. Fannie Mae brought the loan back specifically because of high demand for the product and to help boost the economy. We instituted the program to serve member needs. The Fannie Mae product is really no different than our product; we follow the same professional underwriting guidelines. We also service the loan for life – meaning you will always make your payment with us.
Why this loan versus an FHA mortgage?
An FHA (Federal Housing Administration) mortgage loan is similar to our 3% loan in regards to the low down payment requirement. But, the FHA charges a large non-refundable premium at the loan’s closing. Additionally, when a member chooses FHA, it’s for the life of the loan. And, the FHA no longer removes the monthly insurance (PMI) premium when you reach 78% LTV, where we remove ours automatically. That’s an added cost you don’t need to pay.
The next step: need determination.
The best thing a member can do is schedule an appointment with one of our Mortgage Specialists. We’re available anytime to sit down and discuss your personal needs and goals. We can also help you to weigh the options of what type of mortgage best fits your needs and budget. That’s what being your financial partner is all about. We want to make sure your dream of home ownership comes true, and your financial well-being stays strong.
Want to run some numbers?
Our website has several financial calculators that are useful for estimating monthly loan payments, comparing loans, budgeting, and more.
*View 3% Down Mortgage disclosures here.