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.
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).
You realize a greater return. Your cash on cash return is calculated on the $17,000 down payment.
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.
The home-buying process doesn’t have to be a difficult one. That’s why it’s important to have the right lender on your side when you apply for a joint mortgage.
Are credit unions any different from the traditional banking branches?
This was a question I had for Jennifer Lopez, Mortgage Loan Officer at Texas Tech Credit Union.
She mentioned that “CREDIT UNIONS as a whole are way better than larger banks. We have more flexibility, lower interest rates and lower fees. And all of our staff is onsite, so it makes it easy for me to converse with my team on a deal to make sure it will work. At the Texas Tech Credit Union, it is ALL ABOUT THE CUSTOMER!!!”
I will have to agree that being onsite with the rest of her team can expedite the application process. Quick and timely communication is important.
My personal experience has been at a large and smaller bank/ credit union. They both provided a great lending experience with responsive communication and easy to use online loan application.
I have to say it was convenient being able to step into the TTFCU branch without having to make an appointment.
Delays can be avoided
“Some common delays we see are when the buyers do not let us know who they are going to use for homeowner’s insurance in time to pull together final numbers for closing. Closings can be delayed for this reason. Also, not having sufficient funds for closing already available and seasoned in your bank account”, Jennifer mentions.
When applying for a joint mortgage it is important that you both provide the information in a timely manner. Gather the required documents and submit via the online portal or email the PDF files.
I encourage you to shop around for home-owners insurance but make sure you’ve narrowed it down to a couple to make the transaction as smooth as possible.
I have found that bundling insurance is going to provide the best price.
Which mortgage term is best?
Ready to apply for your mortgage
I asked Jennifer what are some DO’s and DON’Ts when applying for a mortgage.
DO: ASK! Once you’re pre-qualified make sure you run all questions by your lender. Don’t be caught off guard when it comes to your credit.
DON’T: Jennifer was adamant about not financing any furniture, cars or ANYTHING!
I have heard from parties, realtors, sellers, realtors, how the above can cause some delays. I use the word “delay” lightly. It makes for some uncomfortable discussions. Closing dates, moving schedules, leasing terms are all issues you’re likely to see.
Apparently it is common.
Sure you can afford it but do you need it.
Consider the term “house-poor”. You will find yourself pushing the budget when you start walking houses.
It is tempting. Stick to that original figure you first worked out.
Last thing you want to have is a mortgage payment that exceeds 35% of your gross pay. That will leave less money to handle the other ncessities and fewer and fewer wants.
The 35% is a figure I’m comfortable with but you need to calculate that ratio for yourself.
Jennifer can provide in greater detail your debt ratio for the loan application.
Seasoning your credit
It happens! You may find that you’re not immediately ready to qualify for a loan. Don’t let this squash your dreams of home ownership. There are solutions.
Jennifer mentioned it might be helpful to get a secured credit card. This can help in preparing your credit for a mortgage loan.
“Obviously making timely payments to ALL creditors you owe money to is very important. I’m always happy to do credit evaluations though for further guidance.”
Get in touch with Jennifer for your pre-qualification mortgage.