A little over a week from now, this great country will be celebrating its Independence Day. The Fourth of July is a great opportunity to show your patriotism and pride of being an American. To get in the spirit, I’ve decorated the inside of my spaceship in red, white and blue and can’t wait for some awe-inspiring fireworks displays.
With all of this red, white and blue around me, I got to thinking about how our credit unions can help members fulfill their American dreams of home ownership. Two words came to mind: Government Loans. Our Intergalactic Council doesn’t offer anything even close!
Often overshadowed in the mortgage industry by more conventional lending options, government lending is an ideal opportunity for credit unions to help their members become home owners through these loans’ flexible credit requirements and low to no down payments. For those of you who may be unfamiliar with government loan programs, let’s take a look at the three types of loans from which your members are most likely to benefit.
FHA Loans offer low down payments as little as 3.5% of the purchase price. One major benefit of this program is that members with lower credit scores may qualify. FHA also has shorter waiting periods for significant derogatory events, such as bankruptcy, foreclosure, etc. If the member has a reasonably higher credit score, they may be able to qualify with a higher Debt-To-Income ratio than they could on a conventional loan. FHA financing is available for one- to two-unit primary residences.
VA Loans offer eligible veterans or active duty service members home financing with no money down and no monthly mortgage insurance premiums. This can only be used to purchase or refinance primary residences. The veteran is also able to increase housing size over time with bonus entitlement.
USDA Loans offer financing for eligible members in certain rural areas with no down payment. The borrower must be within the low to moderate income guidelines to qualify, and the home must be located in an eligible area. Many properties that are not assumed to be rural may actually be eligible. This program can be used for primary residences only.
As is readily evident, there are quite a few advantages to members who qualify for these loans. Plus, they are quietly gaining in popularity with home buyers. For example:
- In 2019, 1 in 4 mortgages were FHA, VA and USDA loans.
- One-third of millennials choose FHA loans to purchase their homes.
Our team at myCUmortgage often asks credit unions who are not offering government loans, “Why not?” The answers are fairly consistent… “We don’t understand how we can offer government loans.” “Isn’t it a big hassle to provide these to members?” “We simply don’t have the staffing to add these to our mortgage product offerings.”
myCUmortgage knows that navigating the maze of red tape involved in providing these types of loans can seem like an epic undertaking. But it doesn’t have to be. Many credit unions—partners and non-partners alike—may already be eligible to offer (if you aren’t already!) secondary market loans like these, including those with 30-year terms. I guess what I’m trying to say is, we do the heavy lifting and cut the government red tape while you focus on getting members into new homes!
And that’s what it’s all about, right? Helping members fulfill the American dream of home ownership. This Fourth of July, make it a point to learn more about government lending and how your members could benefit. By doing so, you’ll certainly produce some fireworks of your own—Happy Independence Day!