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Can You Afford a Home? on 7/31/2015

Buying a house can be a daunting process and it's easy to feel overwhelmed. From crown molding to mortgages, you might have many questions: Which neighborhood is right for you? Is an appraisal different from an inspection?

Before you even begin your search for a home, the best place to start is your credit union.

SLFCU loan advisors can walk you through the entire home buying process from helping you find a real estate agent to reviewing your credit report, and determining what you can afford. They have the answers to questions such as "Where do I begin?" and "How does the pre-approval process work and when do I start it?" Our loan advisors don’t work on commission – their job is to find mortgage options that best fit your needs.

DOWN PAYMENTS LOWER THAN YOU THINK

Many would-be home buyers believe that they can’t afford a home because they need a down payment of at least 20%. While it is true that the larger your down payment, the smaller your loan balance, in most markets SLFCU can help you buy a home with as little as 3% down if you’re a qualified first time home buyer, and 5% if you’ve purchased a home before. That means purchasing your home can be a reality, and at an affordable cost.

SLFCU’S ALTERNATIVE TO PRIVATE MORTGAGE INSURANCE

Unlike some institutions, SLFCU doesn’t require you to pay Private Mortgage Insurance (PMI). This is insurance, paid by the home buyer, which protects the bank or lender if the buyer stops making payments. PMI is usually required when the amount financed is more than 80% of a home’s value. Most lenders require you to pay this fee on top of your loan payment and in addition to your principal, interest, taxes, and homeowners insurance, until your loan amount is less than 80% of your home’s value.

"If you have 20% to put down on a home, it’s the way to go," says Mortgage Loan Manager Terri Cocain. "But if you don't, SLFCU offers an alternative that allows your entire monthly payment to go towards paying off the loan."

Rather than charging PMI, SLFCU offers first and second mortgages, or piggyback loans, to borrowers with down payments of less than 20%. SLFCU will split the financed amount between two loans – a first mortgage and a second mortgage – so that 80% is financed on the first and the remaining percentage, minus the down payment, is put on the second. This eliminates the need for PMI, and the payment on your second mortgage can be comparable to a PMI premium, but you’re putting those funds toward reducing your loan balance, instead of insurance for your lender.

When you finance your first and second mortgage at the same time, you only pay one origination fee, and the seller will often agree to pay for some of the closing costs on both loans.

MORE MORTGAGE OPTIONS

Even though a second mortgage can be a good solution for many homebuyers, it’s not the only option. "We never recommend that a member get a loan that they don’t need," Cocain says. “We’re going to work for the member’s best interest." SLFCU loan advisors consider your goals, your budget, your finances, and your credit score when recommending products and services. No matter where you are in the home buying process, SLFCU's mortgage department can answer your questions.

If you're considering buying a home, schedule an appointment with a loan advisor by calling 505.237.7161 or by visiting the mortgage department located at SLFCU’s Juan Tabo branch.

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