Do you want to buy your first home with as little down payment as possible and maybe even qualify to get a refund on part of your real estate agent’s commission? If yes, then you may consider joining a credit union for that matter.
Credit unions are growing rapidly and along with it, the mortgage business. Recently, credit unions have been spreading their dominance over the housing industry. According to the National Association of Federal Credit Unions, these credit unions have more than quadrupled their share of total mortgage market volume in the past nine years. This they achieved by offering deals you simply won’t come across at most banks.
Navy Federal, the $64 billion-asset holding largest credit union in the country, has closed more than $1 billion in terms of home purchase in the month of March 2015 alone. That’s astronomical. Surprisingly, fifty-nine percent of the loans were borrowed by first-time buyers, and two-thirds of them belonged to a demographic group that were inactive for years — borrowers aged 18 to 34. Historically, the norm for first-time buyer participation in home purchase is about 40 percent. However, currently the same is just 28-29 percent, as per National Association of Realtors (NAR).
Not just that, Navy Federal is also exploring other business opportunities, and one of them is the mammoth membership base of 5 million members from all across the globe. They are also accepting fresh membership requests from young people a lot faster. As of now, membership is open to branches of the armed services, including both active and retired personnel, contractors, civilian employees and a wide range of relatives. In addition, cohabiting partners are also eligible to membership.
So, what is helping the Navy Federal pull in young first-time home buyers in such large numbers? This they are achieving by offering credit to the home-buyers that is directly in line to their needs. Some of them are no private mortgage insurance (PMI) premiums or zero-down payments attached to their mortgages, add to that standard low-down-payment loans provided by the Federal Housing Administration or FHA loans (3.5 percent minimum). Moreover, VA loans offered by the Department of Veterans Affairs at zero minimum rates are also a big draw for the financially-distressed home-buyers.
There are other credit unions in the country who are running equally lucrative and highly competitive programs with tempting terms. For example, NASA Federal Credit Union that provides credit to not only to the NASA-related employees but also to its members from 900 partner companies as well as associations.
They offer zero-down home loans up to $650,000 without any private mortgage insurance attached to them. Apart from that, borrowers get an extra $1,000 lender credit toward closing costs if the home purchase doesn’t go to settlement as per scheduled the contract date.
Similarly, other credit unions help their new home buyers too by refunding a portion of the real estate agents’ commission in order to reduce their overall home buying costs.
But, the question remains - are these credit unions taking up too much risks by increasing the perks on their loans and thereby, increasing the risks to larger number of default as well as loss cases?
Counterintuitive though it might seem, yet credit union home-purchase programs usually have a lot lesser number of both delinquency and default rates. Navy Federal’s vice president for mortgages, Katie Miller, revealed that serious delinquency of their consumers rate for the month of March in comparison to their entire portfolio was 0.57 percent.
Additionally, senior vice president of North Carolina’s State Employees Credit Union’s loan origination arm, said that, attractive credit terms like zero-down payment, first-time buyer loans, etc actually perform better than the mortgage portfolio as whole, even though she fell short of validating her claim with exact figures.
Miller further added that her organization has been following the ‘ability to repay’ credit underwriting rules much in advance, even before the congressional mandates that made it compulsory on all the lenders.
Credit unions has been growing rapidly and it's no surprise that their membership has almost touched 100 million mark. This stellar performance by credit unions has been well under observation by the banks and the mortgage companies who are their fierce competitors.
Executive vice president of American Banker’s Association (ABA) for mortgage markets, Mr. Robert Davis has said that credit unions enjoy a lucrative break, even though they function mostly like a bank, but endure lower expenses. This is because being a non-profit, member-owned institutions, credit unions are exempted from various federal taxations.
If you’re a first-time buyer, tax policy issues probably don’t concern you. You just want the lowest-cost option for a mortgage. Not all credit unions offer attractive loan deals, but many do. So check out credit-union membership possibilities in your area.
Being a first-time home buyers, tax issues won’t bother borrowers. All they want is affordable mortgage loan deals. However, not all credit unions provide lucrative loan offers, but still, a lot of them do.