Are Credit Unions Better than Banks?

It is no secret that any real estate investment require a 20% down. There are unique scenarios in which this requirement is not necessary, house- hacks or multi-family units which will require a larger down payment.

Check out this additional resource on credit unions.

In the last 12 months I’ve been in contact with large financial institutes and smaller ones like credit unions. While credit unions offer great benefits, I will explore one powerful perk relating to real estate investment only.

One great opportunity to reduce the amount of down payment needed.

This one really has me excited! You might not need 20% down payment if your potential property appraises for more than your agreed upon purchase price.

Suppose you find the property matching your needs. The right number of rooms, great property location, and most importantly it nets a monthly positive cash flow!

The agreed upon transaction price is $100,000 and the property appraises at $103,000. You are already $3,000 out in front of the down payment. Here’s where the you gain a tangible, immediate return on your property.

That $3,000 now becomes part of your down payment!

How this benefits you.

There are 2 immediate and 1 BONUS results.

  1. Smaller down payment. Your out of pocket down payment is now $17,000 (20,000 down payment – 3,000 delta in purchase and appraised value = $17,000 out of pocket).
  2. You realize a greater return. Your cash on cash return is calculated on the $17,000 down payment.
  3. BONUS- Credit union service fees are less.

Not many lending institutions, some credit unions included, facilitate this.  

As you can read, the mentioned results are reasons why credit unions are your town’s best kept secrets.

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