Credit Unions Arm Buyers for Sellers' Market

Credit unions have been devising ways to help average buyers in a market where home prices are setting records and sellers are juggling multiple offers.

Two western credit unions announced mortgage options this month designed to lower the down payment barrier for buyers and raise sellers’ confidence in their offers.

Westerra Credit Union of Denver ($1.9 billion in assets, 112,567 members) has created a pre-approval bridge loan that covers buyers’ down payment for a new house without having to sell their current home first. In the process, they’re approved for a new mortgage loan. The bridge loan is designed to help members tap into the equity of their current home with a full credit approval letter in hand to make a more attractive offer on their next home.

To up the ante for sellers, Westerra is guaranteeing home loans will close by the purchase contract closing date when all requirements are met. If Westerra fails to deliver, it will pay the buyer and seller $500 each at closing.

Westerra’s news release said the guarantee gives its buyers “a stronger position when making an offer and an advantage when multiple offers are presented.”

Orange County’s Credit Union of Santa Ana, Calif., 35 miles southeast of Los Angeles ($2.2 billion in assets, 120,361 members) is offering enhanced options for 0% and 3% down payments for homes in its membership area of in Orange, Los Angeles, Riverside and San Bernardino counties in the Greater Los Angeles metro area.

Carlos Miramontez, Orange County’s CU’s vice president of mortgage lending, said the biggest hurdle in homeownership is saving sufficient funds for a down payment, a challenge amplified during a turbulent economic year and aggressive housing market.

“We knew we needed to create offerings that are different from the standard mortgage options and that lower the barriers to homeownership,” Miramontez said.

The 0% down payment program applies to first-time and experienced home buyers to loans up to $765,600, while the 3% down payment program applies to loans up to $850,000.

Orange County’s CU is also lowering monthly payments by requiring lower levels of mortgage insurance coverage than government sponsored options, such as Freddie Mac or Fannie Mae loans. It is also waiving the increased fees and interest rates typically associated with low down payment home loans.

A recent LendingTree analysis of 2019 Census data found the median cost of owning a home with a mortgage was $2,581 per month in the Los Angeles metro area, while the median cost for renters was $1,545 per month. The $1,036 gap was the fourth-largest among the nation’s 50 largest metros.

In the Denver metro area, home owners with a mortgage paid a median of $1,877 per month, while renters paid $1,380. The $497 difference ranked 32 among the 50 areas.

The median sales price of an existing home was $341,000 in April, up a record 19.1% from a year earlier, according to the National Association of Realtors. The median sales price for a new home was $372,400 in April, up 20.1%, according to the Census Bureau.