Credit unions offer no-down-payment mortgages

Loan officers say the products have performed well. Other options for loans with low or no down payments also are available.

By Teresa at MSN Real Estate Mar 27, 2013 1:58PM

© CorbisMortgages with no money down are back, if they ever left.

 

Two credit unions, the NASA Federal Credit Union and Navy Federal Credit Union, are offering members mortgages without requiring any down payment or mortgage insurance.

 

"We underwrite all of our loans so our members can succeed with the loan," Katie Miller, vice president for mortgage products of the Navy Federal Credit Union, told the Credit Union Times.

 

While there has been lots of talk since the real-estate bust about requiring homeowners to have more "skin in the game," more homeowners are turning to the Federal Housing Administration, which allows homeowners to put down as little as 3.5%, and the Department of Veterans Affairs, which offers no-down-payment loans.

Other lenders allow down payments of less than 20% if borrowers pay for mortgage insurance. Some lenders are also providing 100% financing to wealthy clients.

 

The NASA credit union restricts its no-money-down loans to mortgages in the Washington, D.C., suburbs, a market it knows and believes has hit bottom, according to the Credit Union Times, and also applies tighter underwriting standards. The credit union holds the loans in its portfolio, because they can’t be sold in the secondary market and backed by Fannie Mae and Freddie Mac.

The Navy Federal Credit Union underwrites no-down-payment mortgages the same way it underwrites other loans. It allows sellers to pay up to 6% of the purchase price and makes $2,500 available to help members with closing costs, according to the Credit Union Times.

 

Both credit unions said the loans have performed well.

"We know and trust our members, and we believe they know and trust us," Richard Morris, vice president of mortgage products at the Navy credit union, told the Credit Union Times. "It really is all about our members. They understand how the credit union seeks to help them, and they want to help the credit union, too."

 

While many have attributed the foreclosure crisis to homeowners who made no or low down payments, even a 20% down payment would not have kept their loans from going underwater in hard-hit areas such as Miami and Las Vegas.

 

So far, the definition of a qualified residential mortgage, which grants certain protections to the lenders, does not specify a down-payment level. Setting such a limit is still under consideration.

 

Do you think lenders should require higher down payments, or should homebuyers have the option of low or no down payments?

 

Tags: loans
 
138Comments
Oct 6, 2013 8:48PM
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The fiscal collapse had it's routes in political and social agendas. Organizations like HUD (Housing and Urban Development), backed by the Justice Department basically threatened banks with discrimination lawsuits unless they gave mortgages to blacks in much higher numbers.. Under this threat the banks abandoned sound banking practices re: vetting people regarding work history, credit history etc. All the normal criteria was ignored in order to meet quotas of granting minority mortgages. ACORN, the socialist, radical shakedown group (for which Obama at one time worked) announced that there had to be a parity in mortgage lending and that home ownership was the new entitlement for blacks (to achieve "equality"). Andrew Cuomo who headed HUD at the time admitted that many of these mortgage recipients would not pay their mortgage, but he was OK with that because overall it would put more blacks into home ownership (remember that when he runs for president). The end result was as disastrous as it was predictable. Huge numbers of these sub-prime mortgage recipients reneged on their obligations and defaulted. The vast majority of working people (white) had to pay the bill and in the process many lost their retirement savings amidst higher taxes, and collapses of retirement fund investments etc. Yet, even now because the law has still not been changed - banks run commercials advertising mortgages with the quip "An equal opportunity lender". The very same thinking and agenda that destroyed the US economy and damaged the rest of the world's. Banks should not use social agendas as a basis for lending (they only did so under threat from the Justice Dept). They should loan money based on the risk assessment of the customer. His ability to pay., His work and credit history. America has been damaged because of ideologues pressuring banks, schools and lawmakers to replace sound practices with crazy, destructive ones because they don't care about the country. They have an agenda. A very destructive agenda.

May 26, 2013 10:01AM
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appears that NASA credit union is reverse red lining which is illegal.....but what the hey it's Wash DC after all...
May 26, 2013 9:25AM
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Not putting a large chunk of money down, was not the problem.  The problem was financing homes with exuberant prices with creative financing for people who could not afford those overvalued homes.  My husband and I bought our first home with 0 down, and we did not have to have it foreclosed on.  The real trick is to buy a home that you truly can afford including not just the payment but allowing for whatever maintenance will be needed.  It is the responsibility of the financing company to ensure that the purchaser is qualified to purchase the home they want.  Everyone was quite happy, including the banks, to let anyone and everyone purchase homes that were way over priced as long as it worked.  Just like a pyramid, it only works in the beginning, once the initial big money is made the rest of the people lose out.
May 26, 2013 9:04AM
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Here is a wake up call!

The world's most powerful people

No. 6: Ben Bernanke

Title: Chairman, U.S. Federal Reserve
Age: 59

Ben Bernanke has led the Federal Reserve on a buying spree: In a third round of quantitative easing, the central bank is snapping up $40 billion a month ($480 Billion a Year) of mortgage-backed securities and $45 billion worth of Treasurys. The result is a modest economic recovery and a near-record $2.9 trillion on the Fed's balance sheet.

The American economy's "adult in the room" recently warned that there is only so much the Fed can do; Bernanke wants politicians to take the initiative needed to keep the country from going over the fiscal cliff.

Function

·         Mortgage-backed securities are debt in pools of mortgages. Holders of MBS are entitled to payment of interest and principal as the payments on the mortgages held in the pool are made.

Identification

·         The majority of MBS are issued by the Government National Mortgage Association, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, known as Ginnie Mae, Fannie Mae and Freddie Mac, respectively.



Read more:

Considerations

·         Ginnie Mae is a U.S. government agency; its securities are backed by the full faith and credit of the U.S. government. Fannie Mae and Freddie Mac are government-sponsored enterprises whose securities have certain guarantees but not full U.S. government backing.

Types

·         Regular pass-through MBS securities entitle holders to their proportionate share of principal and interest as payments are made. Exotic mortgage securities such as CMOs (collateralized mortgage obligations) and mortgage derivatives have different claims on various pieces of mortgage pools.

Potential

·         Regular pass-through agency mortgage-backed securities are safe, marketable investments for investors or . Derivative mortgage securities can be dangerous and hard to value.

Warning

·         Most regular MBS make payments monthly to investors that are a combination of interest and principal, just like mortgages. If interest rates fall, the pool of mortgages will be paid off faster and investors will receive their principal back sooner than planned. Rising interest rates will stretch out the time it takes an MBS to pay off the principal.

May 26, 2013 8:43AM
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No Down Payment loans sound great but all banks and credit unions require more before they even accept you. Things like showing a good profit via IRS if you are self employed with at least 2 years of your books and tax statements- we all know that we hunt for the most deductibles so we do not have to pay a huge tax payment so this knocks us out of the game. Yes you can show more, pay the tax then amend the tax stating you found a bunch of receipts but then you are under the scrutiny of the IRS again and they want to know why?   Then comes your credit rating. After getting my credit repaired and up to the low 700's from the 550's I thought that was the time to go house hunting. Nope. You see the Mortgage companies do not use the Big 3 in checking your credit... That's Right...When they pull your credit its on "CoreLogic Credco" and it shows me as having no credit at all- You ask Why? Well this company only shows your credit standing using the following...Real-estate, Installment, Revolving, Other Accounts. I have all but eliminated owing anybody so when this company sees that there are no Sears, Auto, Clothing, Credit Card Companies etc. owed anything then it comes up as a big fat ZERO. So then they dig up what you have owed in the past and have paid off and what it shows is if you were delinquent and that is not good as even though you paid it off there are no records of monthly payments "Track Record"  This system requires that you have credit accounts, pay ontime or earlier for the term of the account. and also keep those credit cards moving and paid each month on time. Well, I do not believe in paying a credit card company fees for buying stuff during the month that I just as soon pay cash for. I feel that if you do not have the money to buy things then you need to earn more to realistically buy those items and not pay a card company to get things earlier for the simple fact that what if you were injured and couldn't work and these credit card bills needed to be paid? You get behind because the flexibility of these card companies allow you to reach the limit not considering your income/expense ratio. That's when you get in trouble. I paid $2,000.00 per month on my lease for 2 years to the tune of $48,000.00 in 2 years that could have gone to house payments if the real truth about ZERO Down existed. So here I am, Old School, with only my now $600.00 rent and $45.00 +/- Elect bill, Gas, etc and wood for the wood stove. Pretty Good. But I am renovating a home that isn't even mine. Still its a pretty good deal financially. So Is there any companies out there that can and will sell a house to me with a shop where I can do my Street Rod Customizing in anywhere near Yelm, Roy, McKenna or Eatonville, Wa. knowing this? Think Not. But if so email me at hot-rod-upholstery at live dot com.
May 26, 2013 8:21AM
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People should be able to purchase home with little money down only if they can prove they can afford that home. The problem is many loans were given to people who already had lots of debt or not enough income to pay there mortgage. The banks gave mortgages to people who didn't even have jobs in some cases. Banks need to take a look at debt verses a persons ability to pay, that is reasonable when lending money. They should be sure this person pays there current rent and bills on time and has little debt that may interfere with paying off there loan. Just because a person puts down less than 20 percent does not mean they can't pay for monthly payments on a mortgage. There are many factors to take into consideration. There are all kinds of circumstances to take into account . Banks and Individuals all need to take responsibility for there expenses and debt and there ability to pay.  Everyone has to be responsible to do there best in this area so the tax payer doesn't end up holding the bag.

May 26, 2013 8:20AM
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If you can't come up with 20 percent down chances are you can not afford the price of ownership. Owning a house has a lot of hidden costs that arise if you are the type with no savings likely hood is you won't be able to deal with these either and will incur further debt. And we will start the foreclosure cycle all over again. And  by the way there is still a huge shadow inventory of foreclosures out there that have not ben processed yet for many reasons.

May 26, 2013 4:34AM
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Right back to what caused the problem in the first place!  Sorry, if you can not afford a down payment you more than likely can not afford a house!  The truth hurts sometimes 
May 26, 2013 4:24AM
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The reason that the housing market wa****o hard and thousands of people lost their homes to foreclosure was the fact that houses were to expensive back then and people had to pay a lot of money to purchase a home, and when people were forced to put 20% down that left people broke in case of any problems in the future, now for the past few years people have being buying these foreclosed homes for half the price, in my state the houses are selling so fast that they sell within a day or two and people are overbidding or paying full price because the homes cost half of what they cost 10 years ago and people are applying for FHA loans because they only have to put 31/2 down. My son is a real estate agent and he is selling homes non stop, and my brother is looking to buy a home and he put in 10 offers at full price or 5 to 10 thousand more then asking price and other people are still offering more so his still looking at many cheap homes with my son.
May 26, 2013 3:59AM
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IN ORDER TO SELL HOMES to the MAJORITY it is a most they do not require huge down payments.
May 26, 2013 3:11AM
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I think If a family or a single home buyer can buy a home, with no money down and no mortgage insurance, no closing costs up front  and pay less than they could renting; It would be in the best interest of everyone.  Once they are in the home they will pay money] to the one selling the home= plus for the economy, they would have more to spend= plus for the economy etc. if they lose the home for any reason, the seller could resell it on the market. There could be some negative affects but, the positive side would do  much more for the economy and the people selling and buying!
May 25, 2013 11:01PM
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No,    Don't people learn anything after the last 6 years.   I guess people are going to have to spend

some time in jail before the lenders will listen.

Apr 6, 2013 10:12PM
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If you don't have the money ----- Don't buy a house.

If you don't like Joe landlord ----Your going to hate the bank .

 

No $ down buyers destroy community's and that's a fact  Jack ~!!!

11 full time years in real estate

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I live in the Northern Virginia/ Washington, DC area and I work in the banking industry. I also have had an account with NFCU since 1998. First, these mortgages are going to be backed by Fannie or Freddie. That's why these institutions are willing to take the risk. Currently, mortgages have to meet Fannie or Freddie standards, even if they are not Fannie or Freddie loans (yet). While I support their efforts since most of these are likely to benefit veterans (like it did for me), I also realize that not all of their members are in the military/ DOD or have served in the military/ DOD. Some are FAMILY members of military/ DOD.

For loans in this area, it is definitely worth the risk for the right people. Home prices rose 14% in December alone and we have one of the lowest unemployment rates in the US.

Apr 6, 2013 8:56PM
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Pigs get Fat -- Hogs get Slaughtered

Apr 6, 2013 8:40PM
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I can't believe the stupidity continues in the mortgage industry that caused the mortgage and housing crisis and a big reason for our recession.  To any banking institutions that continue the practice I would want them to fail.  Unfortunately the citizens of the country who do pay their mortgages on time gets stuck with the bill. Loaning to someone who you absolutely know is not going to be able to pay it back  should be a felony on the institution's part.  If they want to do something that stupid, the institutions should be required to get some kind of insurance in case of failure.  Want to bet no insurance company would step up to ensure that kind of stupidity?  What the hell?????? 
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I guess i would not,I am different pay range .
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I commented on the wrong thing, my comment was for Obama.
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America waste to much time on what he or she look like,said did or did not ,but not on their self,look in the mirror ,take a GOOD look and listen to self.THAT is  WHY
Apr 6, 2013 7:57PM
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Most people do not realize that Navy federal Credit Union only allows Military, DOD /federal goverment employees to be members. So NFCU is extending this privilege to those members,,,and yess they are strict. I obtained my account with them in 1994 while deployed overseas.
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