THE ADVANTAGE
Your monthly recap of the most important
mortgage-related news, perspective, and advice
April 2024
4 minute read
The Senate Banking Committee had a hearing last month to address housing affordability. This is an excerpt from America’s Credit Unions President/CEO Jim Nussle, who wrote a letter regarding some proposed legislation:
“Credit unions believe in supporting their members and their communities by creating products and services designed to suit member needs, including the underserved. Data consistently shows that credit unions are at par or exceed our for-profit counterparts in the financial services marketplace.
That said, credit unions understand that a significant gap remains in access to housing for moderate- to low-income and minority members. Credit unions are working to close this gap.”
One of the best ways to serve low-income members on their journey to homeownership is to understand the features of government loans—as they often bridge the gap from just renting a place—to owning a home.
Understanding Government Loans
There are three primary types of government loans:
- Federal Housing Authority (FHA)
- Veterans Benefits Administration (VA)
- U.S. Department of Agriculture (USDA)
Fannie Mae and Freddie Mac technically belong in this list, but they don’t originate loans directly to homebuyers. They do, however, purchase qualifying loans which frees up lender capital so they can originate more loans. Since Fannie Mae and Freddie Mac also purchase conventional loans, approximately 50% of all mortgages are backed by one of these five organizations.
FHA Loans
The loan requirements for FHA loans are typically more relaxed compared to conventional mortgages. The buyer must, however, live in the home; making FHA loans unavailable for investment properties.
Benefits include:
- Lower credit score minimums
- Down payments as low as 3.5%
- Buyers can be approved with little to no credit history
- Higher payment-to-income (PTI) and debt-to-income (DTI) ratios
VA Loans
Veterans Affairs or VA loans are offered as an exclusive benefit to veterans, active duty military, and surviving spouses.
Benefits include:
- Pay as little as 0% down
- No monthly mortgage insurance premiums (MIP)
- More leniency for past bankruptcy or foreclosure
- Could be exempt from the upfront guarantee fee
- Reduced closing costs compared to conventional loans
USDA Loans
These are 0 down payment mortgages that are exclusively available in eligible rural areas. The owner must occupy the home, and the buyer’s income can’t exceed 115% of the median household income in the county where the home is located.
Benefits include:
- Pay as little as 0% down
- No monthly mortgage insurance premiums (MIP)
- Available to US residents with no credit history, but a history of dependable income
Overcoming Objections
When discussing homeownership with members, you may hear the common rebuttal that it’s cheaper to rent. While it’s true that initially rent is less expensive than the average fixed-rate monthly mortgage payment, that can change in as quickly as six years according to the National Association of Realtors. This is because while the principal and interest on a fixed-rate mortgage payment remains the same for the entire term of the mortgage, since 1980 the average rental rate increase has been 8.85% per year.
Remember to use MAM’s Rent vs. Buy Calculator to help your members decide whether renting or buying is best for them.
Partnership Comes Highly Recommended
We’re excited to tell you more about what it’s like partnering with MAM, and to help your credit union offer accessible loans to your membership. For more information contact Jim Mitchell at (616) 466-7793 or [email protected].
Timely Topics:
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Who Is MAM?
Member Advantage Mortgage (MAM) is a Credit Union Service Organization (CUSO) that helps credit unions increase revenue by offering mortgage solutions to their members.
We achieve this by finding the mortgage solution that is in each individual member’s best financial interest.
What We Do
Since 2006, MAM has offered first and second mortgage origination and fulfillment services to credit unions. We also provide marketing tools (like our Mortgage Payment Calculator) to increase lead generation.
How We Can Help You
We’ll help you improve member satisfaction and deepen member relationships by offering or streamlining your mortgage delivery process. You’ll be able to serve current members so they don’t need to turn to the competition, all while increasing your mortgage revenue and generating non-interest income.
How You Can Learn More
This page goes into greater detail on exactly how we provide support and partner with credit unions.
You can also call Jim Mitchell, our Senior Vice President of Strategic Partnerships, to get answers to any questions about partnering with MAM.
Disclaimer:
This information is solely for credit union and mortgage professionals and should not be distributed or provided to consumers or the general public.
This is not an offer for extension of credit nor a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. Certain restrictions may apply. All approvals subject to underwriting guidelines. Not all applicants will qualify. Member Advantage Mortgage, LLC is an Equal Housing Lender. We do business in accordance with the Federal Fair Housing Law and the Equal Credit Opportunity Act.
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