By July 07, 2021 Home loans
Congratulations! You have taken the initial steps into owning your first home and we are so excited you are considering Verity Credit Union. Buying a home will be one of the biggest purchases in your life. Luckily for you, Verity offers specific programs for First Time Buyers.
What is a First Time Buyer (FTB)? A First Time Buyer is someone who has never owned a house, condo, or property, or it has been at least 3 years since they did. When it comes to learning more about buying your first home—whether it’s a condo, house, duplex, or cabin—there are a few things you should know.
How much of a down payment is enough?
The industry standard says to put 20% down, but in today’s world that is not the case. Our FTB program covers 100% financing, which means you actually don’t need a down payment. If that program isn’t a good fit for your situation, we have other options that only ask for 3% down. If you are looking at a home with a list price of $700,000, 20% would be $140,000 and 3% would be 21,000. That is a difference of $119,000!
What is an ARM and how does it differ from a fixed loan?
An ARM stands for “Adjustable Rate Mortgage”. Typically, you’ll see these on a rate sheet as “7/1” which means for the first seven years your interest rate is fixed and every year after that it can adjust. Now, because 2008 was a year that showed us adjustable rates are not trustworthy, don’t run for the door quite yet. ARMs come with yearly and overall ceilings. Meaning, your adjustable rate can only go up a certain percentage every year, and throughout the life of the loan it can only be raised to a maximum level—it does not rise infinitely. Verity’s ARM products offer a yearly ceiling of 2% and a life ceiling of 5%. For example, if your mortgage rate is 3% APR to start, after your first seven years of the loan, your rate could be as high as 5% APR in year eight, but would top out at 8% APR during the life of your home loan.
With a fixed-rate mortgage, the rate you have when you open the loan is the rate you keep the life of the loan—that is the main difference. So why would someone want to get an ARM? The benefit is frequently a lower rate at the start of the loan and lower closing costs, helping you save money at the beginning of the home buying process.
Should I look for a real estate agent before applying for a loan?
To better understand the process, take a look at our mortgage resources. It is best to get pre-approved for a home loan first before shopping for your dream home so you have a clear understanding of what you can afford. Once you have received your pre-approval, then finding a real estate agent would be the next step. If you are not sure where to find an agent, we have a list of real estate agents that we work with through our HomeAdvantage program. The best part is if you close with one of our experienced real estate agents, you get cash rewards equal to 20% of the agent’s commission!
Want to learn more? We periodically host mortgage seminars that feature our local real estate agents and Verity’s own mortgage experts. These events go over trends in the market, current rates and allow an open space for any questions you might have.
Contributed by Anthony Rice, member consultant II at Greenwood's Verity branch