The 20% Down Payment Requirement: Another Innovative 1930's "Industry Standard" At SECU!

  ... and financing!

You read about that extra $9,000+ PMI fee you'll pay [link] if SECU sticks you with a 30-year fixed rate mortgage without a @20% down payment. With the typical "starter" home price in North Carolina now @ $300,000, that means first time home buyers need to cough up @ $60,000 - well beyond the means of most young SECU members!

Since the 1980's SECU has been making and managing 100% first-time home buyers mortgages to SECU member-owners. It was a struggle to get the Board to approve such a "risky" mortgage - it was different, it certainly wasn't "industry standard". SECU started with a trial program and the program proved exceptionally successful and created member loyalty a hundred times better than a Super Bowl ad!

😎 Try this basic logic which finally won the Board over: 1) the member borrowers both have steady jobs, 2) a mortgage is a low-risk loan [link] with the home as collateral if something goes wrong, 3) the borrowers have been reliably paying monthly rent that is about the same as the mortgage payment, 4) mortgage interest payments are tax deductible, 5) home prices are rising @3% a year which lowers the lending risk, 6) SECU earns more on a mortgage loan than on an idle T-bill investment, 7) home-ownership is "The American Dream", 8) the 100% mortgage will change the lives of two young SECU members - for the better ...

✅ 9) Isn't this what State Employees' Credit Union was created to do ! 

😎 Hope SECU members still agree with those principles - and purpose! 

  SECU lending leader? or 1930's lending Luddite?

If Your 30-Year Fixed Rate Mortgage Is Sold By SECU, Did You Know About The Extra $150 Each Month You Will Pay?

   Why didn't you tell me this!

One more "little thing" about why a 30-year fixed rate is a mistake for members when a fairly priced ARM is available. (I know, I know you find that hard to believe). 

✅ Here again is the example on a $300,000, 30-year mortgage loan [see entire post]: 

"The monthly principal and interest payment on the 30-year fixed rate loan is $1,847 for the next 360 months (30 years).

The monthly principal and interest payment on the 5-year ARM is $1,476. the SECU borrower will save @ $22,260  ($1,847 - $1,476 = $371 savings per payment x 60 payments = $22,260) over the first 5 years. If market rates decline or don't move, the SECU member will save at least another $22,260 in the second five years!"

With the ARM you save $22,260 in the first five years, breakeven in terms of monthly payment amount in years 6-10 (would be $1,847, at worst - same as the fixed!), and so forth....

Fannie/Freddie require mortgage borrowers to have at least a 20% down payment to get their best fixed-rate. Most young SECU borrowers in particular have difficulty coming up with down payments of $60,000 and up! But an extra fee (called "PMI") is required if you don't. Without a 20% down payment, the SECU member would be required to pay an additional @$150 per month on that 30-year fixed rate mortgage, not so on the SECU ARM.

So, on top of that $22,260 you saved with the SECU ARM,  you will save an additional $9,000 ($150 x 12 months x 5 years = $9,000!) with the no PMI requirement! With the ARM you'll be $31,260 ahead - that's @ 10% of the total cost of your home!!!!.

But the PMI penalty payment is worse than you think. The GSEs which bought your loan generally require you to continue to pay PMI until you mortgage gets down below that 20% down payment requirement. Wanna guess how long that will take?

To get your principal balance below $240,000 (80% x $300,000 = $240,000) will take until 2036 - 11 years!  If your mortgage loan is sold by SECU, your PMI extra cost will be $19,800!

😎 A 30-year fixed rate mortgage is a costly, risky deal for the member and SECU!

 But, but, but it's... "industry standard"!