When you’re trying to decide on whether to rent, buy, or build, our loan specialists are great at helping you decide the right next step is in your housing journey. United Heritage Credit Union’s loan specialists are ready to help you determine what’s best for your financial situation. We’ve prepared a few tips and ideas for your consideration in the decision.
How much can you borrow?
Your income, debt, and employment history all play a role in how much you can borrow. And, how much should you borrow? Lenders will look at your gross monthly income to determine how much you can be approved for and depending on the loan type, it will typically be between 43% and 50% of that gross monthly income. Lenders will also consider the HOA payment, property taxes and homeowners insurance along with the monthly home loan payments to determine how much you can borrow. Lenders’ criteria vary, so it’s important to engage with a loan specialist early so you will know what you can afford.
How much can you put on a down payment?
With all mortgage types and deals, the rate you get depends on the level of equity you will have in the property, among other factors. If the home you are considering is valued at $400,000 and you need to borrow $320,000, 80% of the asking price, then you have a downpayment of 20% and a loan-to-value (LTV) ratio of 80%. The lower the LTV ratio, the better the mortgage rate you will qualify for. If you are able to put down enough to get your LTV under 60%, the lowest rates on the market will be available to you. Besides a lower rate, another benefit of having a downpayment of 20% or more is that your monthly payments will be lower.
If you don't have the ability to put 20% down, there are loan programs available which require as little as 3% down. If you choose to go that route, you'll need to consider the additional cost of mortgage insurance to your monthly payment, which is often required by loan programs that accept less than 20%.
How to get started?
Start by reaching out to your UHCU loan specialist, so that they can help walk through the process and help you calculate how much you can afford. And if you are ready, they can help out with a rate quote. Keep in mind that the rate quotes you may see online on various websites are estimates based on near perfect scenarios. A lender or broker will have to pull your credit information and process a loan application to provide an accurate rate, which you can then lock in if you’re satisfied with the product.
Fixed Rate or Adjustable-Rate Mortgage (ARM)?
A fixed-rate mortgage is the traditional way to finance a home. When you choose this mortgage, your interest rate and monthly payments stay the same for the life of the loan. With an Adjustable-Rate Mortgage (ARM), the interest rate is typically locked in for 5 years or less, then it adjusts based on a market index. Depending on the state of the market, your payments could go up, down, or stay relatively comparable.
Special Mortgage Programs
If you qualify, a Veterans’ Administration (VA) loan often requires no down payment and a competitive interest rate. Also, if you've had recent credit issues you may want to explore a Federal Housing Administration (FHA) loan, which has lower credit score requirements than other loan programs. UHCU offers a variety of loan programs, some with downpayments as low as 3%, as well as programs with no mortgage insurance and interest only programs.
Money isn’t everything
The best lender for you may not be the one with the lowest rate, and in some instances that low rate may be too good to be true. Some lenders will use it to lure you in, and when it's time to lock in the rate, it and the fees can end up being much higher than previously discussed. It can be beneficial to work with a local lender like UHCU, which is member-owned and offers personal, local service by people who live in your community. And since a credit union is member-owned, you can expect UHCU’s loan specialist to have your best interest in mind! Not to mention, UHCU typically has some of the lowest rates available.
Would you like to know more?
Contact your UHCU Loan Specialist at 512.435.4444 or visit our Home Loans page today!
Membership/Regular Savings account required. United Heritage Lending Policies apply. Guidelines, terms and conditions apply. Closing costs apply. *Various loan programs are subject to borrower qualification. **Loan programs without Private Mortgage Insurance (PMI) require a 80% loan to value (LTV) first lien with up to 15% LTV second lien. NMLS #630601. Licensed Mortgage Loan Originators.