Our experts answer readers’ home-buying questions and write unbiased product reviews (here’s how we assess mortgages). In some cases, we receive a commission from our partners; however, our opinions are our own.
Mortgage rates increased last week and remain high today. High rates have strained affordability for those who are trying to purchase a home during the peak homebuying season. But some relief may be on the way for those who wait to buy later in the season.
In its latest mortgage forecast, the Mortgage Bankers Association predicted that 30-year mortgage rates will finally drop below 6% by the end of 2023. Looking further ahead, the MBA thinks rates could reach 4.8% by the end of 2024 and 4.5% by the end of 2025.
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Today’s Refinance Rates
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Mortgage Calculator
Use our free mortgage calculator to see how today’s mortgage rates will affect your monthly and long-term payments.
Mortgage Calculator
$1,161 Your estimated monthly payment
Total paid$418,177
Principal paid$275,520
Interest paid$42,657
Paying a 25% higher down payment would save you $8,916.08 on interest charges
Lowering the interest rate by 1% would save you $51,562.03
Paying an additional $500 each month would reduce the loan length by 146 months
By plugging in different term lengths and interest rates, you’ll see how your monthly payment could change.
Mortgage Rate Projection for 2023
Mortgage rates started ticking up from historic lows in the second half of 2021 and increased over three percentage points in 2022.
But many forecasts expect rates to fall later this year. In their latest forecast, Fannie Mae researchers predicted that 30-year fixed rates will trend down throughout 2023 and 2024.
But whether mortgage rates will drop in 2023 hinges on if the Federal Reserve can get inflation under control.
In the last 12 months, the Consumer Price Index rose by 4.9%. Inflation has continued to slow for several months now, which is a sign that the Fed’s efforts are working.
For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of our best HELOC lenders to start your search for the right loan for you.
A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.
Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.
When Will House Prices Come Down?
Home prices declined a bit on a monthly basis late last year, but we aren’t likely to see huge drops this year, even if there’s a recession.
Fannie Mae researchers expect prices to decline 1.2% in 2023, while the Mortgage Bankers Association expects a 0.6% decrease in 2023 and a 1.4% decrease in 2024.
Sky high mortgage rates have pushed many hopeful buyers out of the market, slowing homebuying demand and putting downward pressure on home prices. But rates may start to drop this year, which would remove some of that pressure. The current supply of homes is also historically low, which will likely keep prices from dropping too far.
What Happens to House Prices in a Recession?
House prices usually drop during a recession, but not always. When it does happen, it’s generally because fewer people can afford to purchase homes, and the low demand forces sellers to lower their prices.
How Much Mortgage Can I Afford?
A mortgage calculator can help you determine how much you can afford to borrow. Play around with different home prices and down payment amounts to see how much your monthly payment could be, and think about how that fits in with your overall budget.
Typically, experts recommend spending no more than 28% of your gross monthly income on housing expenses. This means your entire monthly mortgage payment, including taxes and insurance, shouldn’t exceed 28% of your pre-tax monthly income.
The lower your rate, the more you’ll be able to borrow, so shop around and get preapproved with multiple mortgage lenders to see who can offer you the best rate. But remember not to borrow more than what your budget can comfortably handle.
Today we’re going to talk about the “home equity loan,” which is quickly becoming all the rage with mortgage rates so much higher.
In short, many homeowners have first mortgages with fixed interest rates in the 2-3% range.
Now that a typical 30-year fixed is closer to 6%, these homeowners don’t want to refinance and lose that rate in the process.
But if they still want to access their valuable (and plentiful) home equity, they can do so via a second mortgage.
Two popular options are the home equity line of credit (HELOC) and the home equity loan, the latter of which features a fixed interest rate and the ability to pull out a lump sum of cash from your home.
What Is a Home Equity Loan?
A home equity loan allows you to borrow against the value of your property to access needed cash.
That cash can then be used to pay for things such as home improvements, to pay off other higher-interest loans, fund a down payment for another home purchase, pay for college tuition, and more.
Ultimately, you can use the proceeds for anything you wish. The home equity loan simply allows you to tap into your accrued home equity without selling the underlying property.
Of course, like a first mortgage, you must pay back the loan via monthly payments until it is paid in full, refinanced, or the property sold.
Similarly, you can obtain a home equity loan from a bank, credit union, or direct mortgage lender.
The application process is comparable, in that you must provide income, employment, and asset documentation, but it’s typically faster and less paperwork intensive.
Additionally, your credit report will be pulled to determine your credit scores and overall creditworthiness.
Home Equity Loan Example
Property Value $650,000
First Mortgage
Home Equity Loan
Cash Out Refinance
Interest Rate
3.25%
6.75%
5.75%
Loan Amount
$450,000
$70,000
$520,000
Monthly Payment
$1,958.43
$532.25
$3,034.58
Total Cost
$2,490.68
$3,034.58
Home equity loans are typically second mortgages, taken out by an existing homeowner who already has a first mortgage.
This allows the borrower to access additional funds while maintaining the favorable terms of their first mortgage (and continue to pay it off on schedule).
Imagine a homeowner owns a property valued at $650,000 and has an existing home loan with an outstanding balance of $450,000. Their interest rate is 3.25% on a 30-year fixed.
Obviously they don’t want to lose that low, low rate, so they turn to a home equity product instead.
They would have $200,000 in home equity, though not all of it is necessarily available to tap into.
Most home equity loan lenders will limit how much you can borrow to 80% or 90% of your home’s value.
That means a maximum loan amount of $135,000 if maxed out at 90%.
But we’ll pretend you take out just $70,000, or 80% of your property’s appraised value.
Assuming the loan term is 20 years and the interest rate is 6.75%, you’d have a monthly payment of $532.25.
The loan would amortize like a traditional mortgage, with equal monthly payments until maturity.
Each payment would consist of a principal and interest amount, which would change as the loan was paid off.
You would make this payment each month alongside your first mortgage payment, but would now have an additional $70,000 in your bank account.
When we add the first mortgage payment of $1,958.43 we get a total monthly of $2,490.68, well below a potential cash out refinance monthly of $3,034.58.
Because the existing first mortgage has such a low rate, it makes sense to open a second mortgage with a slightly higher rate.
Do Home Equity Loans Have Fixed Rates?
A true home equity loan should feature a fixed interest rate. In other words, the rate shouldn’t change for the entire loan term.
This differs from a HELOC, which features a variable interest rate that changes whenever the prime rate moves up or down.
To that end, a home equity loan provides safety and stability, similar to a 30-year fixed mortgage.
However, home equity loans have higher interest rates to compensate for that lack of an adjustment.
Simply put, HELOC interest rates will be lower than comparable home equity loan interest rates because they may adjust higher.
You effectively pay a premium for a locked-in interest rate on a home equity loan. How much higher depends on the lender in question and your individual loan attributes.
Home Equity Loan Rates
Similar to mortgage rates, home equity loan rates can and will vary by lender. So it’s imperative to shop around as you would a first mortgage.
Additionally, rates will be strongly dictated by the attributes of your loan. For example, a higher combined loan-to-value (CLTV) coupled with a lower credit score will equate to a higher rate.
Conversely, a borrower with excellent credit (760+ FICO) who only borrows up to 80% or less of their home’s value may qualify for a much lower rate.
Also keep in mind that interest rates will be higher on second homes and investment properties. And maximum CLTVs will likely be lower as well.
All that being said, at the moment home equity loan rates may range from as low as 5% to as high as 12% or more.
As a rule of thumb, you should expect a rate 1-2%+ higher than a comparable 30-year fixed given the increased risk of a second mortgage.
But this spread can shrink or widen depending on market conditions.
Do Home Equity Loans Require a Down Payment?
Now let’s discuss some home equity loan requirements.
While no down payment is required on a home equity loan, since you already own the property, a required amount of home equity is necessary to get approved.
After all, the home equity loan relies upon your property as collateral, and if you don’t have any equity, there’s nothing to lend against.
In other words, you need to have a certain percentage of home equity available to get a home equity loan.
Typically, this is at least 20% of your property’s appraised value to allow for an additional loan against the property.
For example, if you own a home valued at $500,000, you’ll want to have at least $100,000 available.
This would mean an existing first mortgage with a balance of $400,000 or less to allow for more borrowing capacity.
Assuming the home equity loan only allowed for a CLTV of 80%, you’d need even more equity.
For example, a $350,000 existing first mortgage that would allow you to borrow an additional $50,000 via the home equity loan.
Do Home Equity Loans Require an Appraisal?
While it will depend on the company, an appraisal isn’t always required for a home equity loan.
The same is even true of first mortgages these days thanks to advancements in technology.
This may save you some money and make the home equity loan process significantly faster.
However, the bank or lender will still need to determine the value of the property to ensure it is a sound lending decision.
Whether you pay for an appraisal, or are paid a visit by a human appraiser, are entirely different questions.
Either way, understand that the company offering the home equity loan will base the loan amount and APR on some kind of appraised value.
This allows them to determine a LTV or CLTV for which to base pricing adjustments, interest rates, maximum loan amount, and so on.
Do Home Equity Loans Have Closing Costs?
As with the appraisal question, it may depend on the company offering the home equity loan.
Some charge origination fees and other closing costs, while others do not charge any fees.
For example, Discover Home Loans says it doesn’t charge appraisal fees or origination fees.
However, it’s important to look at the big picture, aka the interest rate, to determine what the best deal is.
Similar to a first mortgage, closing costs may not be charged, but the interest rate could be higher as a result.
You would then need to weigh the upfront cost versus monthly interest expense to determine what’s the better deal.
Also note that some lenders may ask that you reimburse them for any waived closing costs if you pay off your home equity loan within 36 months.
This is sort of like a prepayment penalty, though there may be a cap and certain states are exempt.
Just something to keep in mind if you pay off your loan ahead of schedule.
Some home equity loans may have a nominal annual fee, such as $50 per year. And if your loan amount is quite large, title insurance could even be required.
Minimum Credit Score for a Home Equity Loan
Chances are you’ll need at least a 620 FICO score to get approved for a home equity loan these days.
Some lenders may even require a higher credit score, such as a 660 FICO score, in order to get approved.
Also note that your borrowing capacity may be limited by your credit score.
For example, if you have a 620 FICO score, you might only be able to borrow up to 80% of your home’s value.
Meanwhile, a borrower with a 660 FICO might have access to up to 90% of their home’s value.
Additionally, the interest rate will also be dictated by your credit score.
Like a first mortgage, the higher your score, the lower the interest rate. And vice versa.
Do Home Equity Loans Affect Your Credit?
Yes, like a first mortgage, the home equity loan will appear on your credit report.
This includes when the loan was taken out, the outstanding loan balance, and the monthly payment.
Your payment history on the loan will also be tracked over time, which can help or hurt you.
Obviously, if you miss a payment (generally by more than 30 days) it can negatively impact your credit score.
Because it’s a home loan, the impact can be quite severe.
Conversely, if you exhibit a lengthy history of on-time payments, it can bolster your credit scores over time.
How to Get a Home Equity Loan
Similar to a mortgage, many banks and independent mortgage lenders offer home equity loans.
However, they aren’t as readily available as first mortgages, so you’ll need to dig a little deeper.
Simply put, just about all mortgage companies offer 30-year fixed mortgages, but only a handful offer home equity loans.
Chase and Wells Fargo, two of the biggest mortgage lenders out there, don’t offer them at the moment.
That could change as they become more popular, but chances are they’ll be a bit harder to come by.
Additionally, because the terms of home equity loans can vary quite a bit, it’s important to speak to several different companies during your search.
For example, some lenders may only offer home equity loans with loan terms as long as 20 years, or with a minimum credit score of 660. Or their loan amounts might be too small for your needs.
The Rocket Mortgage home equity loan recently launched, but requires a median qualifying FICO score of 680 or higher.
Others come with unique options. The PNC home equity loan allows borrowers to switch between a fixed and variable rate. In that sense, it works as a home equity loan and a HELOC in one loan.
Because this type of product can be a lot more diverse than a standard 30-year fixed, shopping around is probably a good idea.
Rates can also range quite a bit from lender to lender, so put in the time to speak with a local credit union, bank, online lenders, and even mortgage brokers.
Home Equity Loan Advantages
Fixed interest rate
Flexible loan terms (5 – 20 years)
Can borrow large amounts
Little or no closing costs
Fast approvals and fundings
Potential tax write-off
Doesn’t disrupt your first mortgage (e.g. a low rate)
Home Equity Loan Disadvantages
Entire loan amount must be borrowed upfront
You pay interest on the full lump sum
No additional draws permitted
Interest rates higher than HELOCs and first mortgages
Have to manage multiple loans
May have annual fee
Potential early closure fees
Are Home Equity Loans a Good Idea?
As seen in my example above, a home equity loan could be a great idea versus a cash out refinance.
But that assumes you need additional cash and your existing first mortgage features a super low interest rate that is fixed.
This might not always be the case, and it will also depend on the rate you receive on the home equity loan.
Additionally, there might be other options to consider instead of a HEL, such as a HELOC or even a 0% APR credit card.
In the past, I’ve made the argument that a credit card could be used to pay for home renovations.
At the end of the day, a home equity loan is still a loan, and likely an additional loan taken out on top of whatever you’re already paying.
So you need to consider if you really need more cash and if tapping your home equity is the way to go.
Read more: Cash Out vs. HELOC vs. Home Equity Loan
A credit union is a nonprofit institution that’s owned by its members. Compared to a traditional bank, a credit union tends to offer more personalized service.
You can turn to a credit union for a variety of financial products, like checking and savings accounts, credit cards, car loans, and mortgages. Some regional and federal credit unions also offer wealth management services and other extras.
A typical credit union only accepts members who live in a specific region or work for an eligible employer. For example, they may require that you’re a resident of Atlanta, Georgia or work as a teacher.
The good news is some credit unions require less and make it easy for just about anyone to join. If you’d like to join a credit union but don’t want to worry about the strict membership requirements at most institutions, you’ve come to the right place.
38 Best Credit Unions Anyone Can Join
There are hundreds of credit unions that anyone can join, but we’ve done the heavy lifting and found the best ones for you. The credit unions below, which are overseen by the National Credit Union Administration (NCUA) may be an option for you, regardless of what you do for a living or where you’re located.
Just keep in mind that you may have to make a donation, join an organization, live in a certain state, or meet some other eligibility requirement. We encourage you to explore this lengthy to list of credit unions anyone can join so you can hone in on the ideal credit union for your unique situation.
1. Alliant Credit Union
Alliant Credit Union made its debut in 1935 to serve the employees of United Airlines. It stands out for it high-interest savings and checking accounts with low minimum opening deposits as well as excellent customer service.
You’ll also receive access to more than 80,000 free ATMs across the U.S. and get reimbursed up to $20 in out-of-network ATM charges per month. Since it only has two brick-and-mortar locations, you should feel comfortable with online banking. If you’d like to join Alliant Credit Union, make a $5 donation to Foster Care to Success.
2. Connexus Credit Union
Connexus Credit Union was founded in 1935 and has a widespread presence in Wisconsin as well as more than 54,000 ATMs across the country. It couldn’t be easier to join the credit union as all you have to do is pay a one-time $5 fee to the Connexus Association, which supports financial education through college scholarships.
As a member, you can open one of its three checking options with high APYs and a traditional savings account or one that’s specifically designed for the holidays.
3. Pentagon Federal Credit Union
Pentagon Federal Credit Union, or PenFed, was founded in 1935 as a credit union for military and civilian government. Today, this Virginia-based credit union has opened it doors to anyone as long as they open a savings account and deposit a minimum of $5. It offers two savings accounts, including the Regular Savings and Premium Online Savings.
In addition, you can find checking accounts, CDs, and money market accounts. Other products include Coverdell Education Savings Certificates, IRAs, credit cards, mortgages, home equity loans, and student loans. Plus, you can enjoy modern perks like mobile check deposits, online bill pay, and instant transfers.
4. First Tech Federal Credit Union
First Tech Federal Credit Union is headquartered in California. The credit union offers many benefits, such as excellent customer service, many branches throughout the U.S. and Puerto Rico, online banking, and mobile banking.
It also has the Dividend Rewards Checking Account, which gives you 1.00% APY on balances below $1,000. You don’t have to live in California to join as long as you donate to a nonprofit called the Financial Fitness Association.
5. Consumers Credit Union
Consumers Credit Union was established in 1951 as a local credit union. Based in Illinois, it’s one of the largest credit unions in the state with over 100,000 members and more than $1.2 billion in assets.
You can join it, even if you don’t live in Illinois. All you have to do is donate the $5 membership free to an affiliated nonprofit. You can open almost all of its accounts online, except for the checking accounts and IRAs. The credit union also offers a high-yield checking account that offers high interest if you meet certain criteria.
6. Langley Federal Credit Union
Langley Federal Credit Union is based in Virginia and made its inception in 1936. At that time, members of the National Advisory Committee for Aeronautics, the predecessor to NASA, chartered the credit union.
Today, Langley offers membership to anyone who pays a fee to support an important cause in Virginia and deposits at least $5 into a savings account. You can choose from a checking account without a monthly fee, a variety of no-fee savings accounts with competitive interest compounds monthly, and Visa Cards with cash back rewards.
7. Lake Michigan Credit Union
Lake Michigan Credit Union made its debut in 1933 by a group of teachers. Headquartered in Grand Rapids, Michigan, it has 51 branches in Michigan and southwest Florida. Since it’s part of the Allpoint ATM network, members can enjoy free access to more than 55,000 free ATM.
To join, donate $5 to the ALS Foundation and deposit $5 into a Member Savings account. Once you do, you can earn perks through the MORE rewards program and redeem them for complimentary checks and free out-of-network ATM transactions.
You may also open the free, no frills Max Checking account. Note that the Member Savings account, which you must open to become a member, requires a minimum daily balance of $300 or you’ll be charged a $5 monthly fee.
8. Lafayette Federal Credit Union
Lafayette Federal Credit Union was founded in 1935 as an alternative to traditional banks. It offers numerous perks, like no minimum balance requirement or monthly maintenance fees, online banking, mobile deposits, free direct deposit, and special discounts.
You can join it if you live, work, worship, or attend school in Washington D.C. If you live outside the D.C. area, you may still become a member as long as you invest in a lifetime Home Ownership Financial Literacy Council (HOFLC) membership for only $10. This nonprofit focuses on helping consumers navigate the path to homeownership.
9. Affinity Plus Federal Credit Union
Affinity Plus Federal Credit Union has 26 branch locations across Minnesota. APFCU offers MyPlus Rewards that gives you points if you keep a certain amount of money in your bank account or use its debit or credit card.
To be eligible to join, all you have to do is donate $25 to the Affinity Plus Foundation and open a basic savings account. If you live and work in Minnesota or have a family member in the state, there are other ways to become a member.
10. Chevron Credit Union
Chevron Credit Union has been around since 1935 and has 19 branches that span six states, including California, Louisiana, Mississippi, Texas, Utah and Virginia. It operates under two brands: Chevron Federal Credit Union and Spectrum Credit Union.
To become a member, join one of its nonprofit partner organizations, such as the Contra Costa County Historical Society. You’ll also need to deposit $25 into a primary savings account and maintain a $25 minimum balance.
Chevron also offers a second chance checking account called New Solutions for those who need help rebuilding their banking history.
11. Ascend Credit Union
Since its inception in 1951, Ascend Credit Union has offered a variety of products, like checking and savings accounts, a money market account, Christmas Club account, youth accounts, credit cards, and loans.
If you’re interested in these services, join The Nature Conservancy, Tennessee Chapter and you’ll be eligible automatically. Note that there is a one-time fee of $25.
12. Hope Credit Union
Hope Credit Union is a black-owned credit union that was organized in 1995 by the Anderson United Methodist Church in Mississippi. You can join if you pay a $10 membership fee and show a foreign passport, permanent resident card, or Matricula Consular. Plus, you may use an ITIN number instead of a Social Security number.
Hope Credit Union provides a number of personal bank accounts, business banking accounts, and transformational deposits. With its transformational deposits, you can participate in socially responsible investing.
13. Boeing Employees Credit Union
Boeing Employees Credit Union, or BECU, was established in 1935 for Boeing employees and currently caters to more than 1 million members. But despite its name, you don’t have to work at Boeing to join.
Its products and services are available to you if you become a member or donor to the KEXP, which is a nonprofit art organization or the Sea Hawkers Central Council. The most noteworthy benefit of joining is the first-time homebuyer grant in which you can receive $7,500 toward your down payment and closing costs.
14. Hiway Credit Union
Hiway Credit Union made its debut in 1931 to serve employees of the Minnesota Department of Transportation. It offers a free checking account with no monthly fee or minimum balance requirements, a free money market account with a $500 minimum deposit, credit cards, and loans.
You can qualify for a Hiway Federal Credit Union membership if you donate to the Minnesota Recreation and Park Foundation for $10 per year or the Association of the U.S. Army, which costs $40 for two years.
15. GreenState Credit Union
GreenState Credit Union was founded in 1938. It provides its members with personal accounts, business accounts, credit cards, loans insurance, wealth management services, and more.
GreenState was named one of the fastest growing credit unions in 2021. As long as you live or work in the state of Iowa, you can become a member and take advantage of its services without any issues.
16. Cascade Credit Union
Cascade Credit Union made its debut in 1952 to serve employees of the Cascade Division of the Great Northern Railway. Today, it’s open to many people and offers great perks like members-only sweepstakes, competitive rates, online banking tools, financial counseling, and group insurance benefits.
If you’d like to join, simply become a member of the Great Northern & Cascade Railway Association (GNCR) and pay an annual membership cost of $40. The credit union can help you fill out your application online or in-person at a local branch.
17. Wildfire Credit Union
Wildfire Credit Union began in 1937 as Saginaw Telephone Employees Credit Union, its original credit union name. Its first location was in the basement of the home of Hank Kosk, the credit union’s treasurer.
After some office upgrades, the credit union opened the doors to its current location on Bay Road in Saginaw and merged with Flint Telephone Employees Credit Union that same year. Today, Wildfire Credit Union offers several deposit accounts as well as personal banking and business banking services. You can join if you live, work, worship, or attend school in Michigan.
18. Nextmark Credit Union
Nextmark Credit Union made its debut in 1958. Its offerings include personal and business checking, home equity loans, personal loans, credit cards, gift cards, and more.
To join, you must live in a qualifying county in Virginia or make a donation to Herndon Elementary PTA, a Title I school.
19. Technology Credit Union
Technology Credit Union, or Tech CU, was established in 1960. It’s based in Silicon Valley and provides its members with no shortage of benefits. These include competitive rates, online banking, access to fee-free ATMs, free credit score monitoring, conference room space, and easy online appointment booking. To become a member, join Financial Fitness Association for only $8.
20. Veridian Credit Union
Veridian Credit Union was established in 1934. Most of its members are those who live or work in Iowa or certain counties of Nebraska. However, it’s open to anyone who is a registered user of Dwolla, a financial technology company. This means you can join as long as you sign up for a personal account at Dwolla.
You’ll also need to open a savings account and deposit at least $5. If you’re already a member of a credit union or bank but would like to switch to Veridian Credit Union, the switch kit may be helpful.
21. Harborstone Credit Union
Harborstone Credit Union’s roots date back to 1955, when it was known as McChord Federal Credit Union and served airmen on the McChord Air Force Base. In 1996, the credit union expanded its membership to anyone in the state of Washington and changed its name as a result.
As long as you live, work, or worship in Washington, you may join Harborstone Credit Union and enjoy a variety of financial products and digital tools.
22. NASA Federal Credit Union
NASA Federal Credit Union began in 1949 to serve NASA employees. Since then, it’s grown to more than 177,000 members. While the credit union is headquartered in Upper Marlboro, Massachusetts, there are 12 branches in Maryland, Virginia, and Washington, DC.
Its product lineup includes a simple checking account with no minimum opening deposit, a savings account with a great rate, and several CDs. You can also monitor your credit score and make deposits with the mobile app. If you don’t work for NASA, you can still join. Simply sign up for a one-year membership at the National Space Society (NSS).
Hanscom Federal Credit Union opened in 1953. The credit union has over 20 branches in and around Boston as well as one in McLean, Virginia. It offers fee-free checking accounts, savings accounts with rewards, credit cards, and loans.
To join, you’ll need to support one of its partner organizations, such as the Burlington Players, a volunteer theater group. In addition, you’ll be required to deposit $25 into a free primary savings account.
24. Pen Air Federal Credit Union
Pen Air Federal Credit Union was founded in 1936 to support civil service employees of Naval Air Station Pensacola. It has 16 locations in northwest Florida and southeast Alabama. You may be surprised to learn that you don’t have to be an active duty or retired military member to join.
You’ll be able to take advantage of Pen Air Federal Credit Union if you become a member of the Friends of the Navy-Marine Corps Relief Society and deposit a minimum of $25 into a savings account. As a member, you can enjoy the Pen Air Platinum Mastercard, Share Savings account with the Round It program, and more.
25. State Department Federal Credit Union
State Department Federal Credit Union was founded in 1935. To join, you can become a member of the American Consumer Council for $8. This is a non-profit organization with a focus on consumer education and financial literacy.
The State Department Credit Union offers a long list of products and services, including basic, advantage, and privilege checking, a money market account, share certificate accounts, individual retirement accounts (IRAs), credit cards, and loans.
26. United Nations Federal Credit Union
United Nations Credit Union made its debut in 1947. As long as you join the United Nations Association of the United States of America, you can become a member.
UNFCU has a vast product lineup that includes a checking account, membership savings account, credit cards, debit cards, and loans, like car loans and debt consolidation loans.
Other membership perks include loyalty rewards, credit card rewards, and the member referral program.
27. Premier Members Credit Union
Premier Members Credit Union was established in 1959 for members of the Boulder Valley School District. You’re eligible to join if you make a donation to Impact on Education, a charity in the Boulder Valley School District, and open an online savings account or youth savings account.
As a member, you can expect perks, such as high interest rates on checking accounts, no monthly service fee, no overdraft fees, and free overdraft protection. The credit union also offers an extensive network of branches and ATMs for your convenience.
28. SRI Federal Credit Union
SRI Federal Credit Union is headquartered in Menlo Park, California. It was founded in 1957 and offers membership to anyone who joins the Financial Fitness Association for $8 per year.
The credit union’s account offerings include a checking and savings account, money market account, IRA, health savings account, and youth, teen, and gradate accounts.
29. United States Senate Federal Credit Union
United States Senate Federal Credit Union has been around since 1935. Its mission is to “improve the financial wellness of members throughout all stages and circumstances of life.” Its products are similar to what most credit unions offer.
As a member, you can enjoy access to a number of checking and credit union savings accounts, mortgage loans, personal loans, auto loans, Visa debit cards, and business advisory services. To join, you’ll need to become a member of the U.S. Capitol Historical Society for $65.
30. Wings Financial Credit Union
Wings Financial Credit Union was founded in 1938 by seven employees from Northwest Airlines. To date, it serves more than 320,000 members with more than $7.5 billion in assets. You can join if you donate $5 to the Wings Financial Foundation, even if you don’t work in the aviation industry.
There are no fees on its basic banking accounts, including its checking and savings accounts, a money market account, and CDs. Its high yield savings and checking accounts offer competitive rates to help you grow your money.
31. Skyward Credit Union
Skyward Credit Union was chartered in 1941. It offers a share savings account with competitive rates, an aim higher checking account with no monthly fees or minimum balance requirements, affordable mortgage and home equity loans.
It also offers online banking, a variety of insurance products, and access to over 30,000 surcharge-free ATMs. Like most credit unions require membership, so does this one. To become a member, join the Kansas Aviation Museum.
32. San Diego County Credit Union
San Diego County Credit Union has been around since 1938 and has over 430,000 credit union members. It’s considered the largest locally owned financial intuition in San Diego.
As a member, you can enjoy a free checking account, secured and unsecured credit cards, a wide range of account options with no service fees, and access to over 30,000 ATMs without ATM fees. To join San Diego County Credit Union, become a member of the Financial Fitness Association.
33. Bellco Credit Union
Bellco Credit Union is a Denver-based credit union that opened its doors in 1936. You can join it even if you don’t live in Colorado as long as you donate at least $10 to the Bellco Foundation, pay a one-time $5 membership fee, and deposit at least $25 in a savings account.
Once you do, you’ll have access to several noteworthy products, like the Boost Interest Checking account, which offers a competitive interest rate, the Premier Money Market Account, and two, no-fee credit cards.
34. Bethpage Federal Credit Union
Bethpage Federal Credit Union was founded in 1941 and currently has over 30 branches across Long Island and New York City. It has a reputation for competitive rates on it money market accounts and certificates of deposit (CDs).
The credit union also offers three checking accounts, a few savings accounts, retirement planning services, IRAs, insurance, and more. You don’t have to live in New York to join if you open a $5 savings account. As a member, you may meet with credit union staff virtually and bank on the go with a handy mobile app.
35. First South Financial Credit Union
First South Financial Credit Union opened its doors in 1957 to serve those on the Millington base. Since then, it has become of the safest financial institutions in the U.S., as stated by independent rating agencies. While the credit union has locations throughout Tennessee and Mississippi, its online banking services make it a suitable option if you live elsewhere.
Like other credit unions, it offers a full suite of checking, savings, CDs, and IRA accounts. To join, become a member of the Courage Thru Cancer Association, which supports St. Jude Children’s Research Hospital.
36. Dow Credit Union
Dow Credit Union was founded in 1937 in Midland, Michigan. It provides numerous products, including checking and savings accounts, certificates of deposit (CDs), HSAs, deposit trust accounts, and loans.
Fortunately, you don’t have to work at Dow Chemical to take advantage of them. To join, make a $10 donation to the Dow Chemical Employees’ Credit Union Endowed Scholarship Fund.
37. Blue Federal Credit Union
Blue Federal Credit Union was chartered in 1951 as Warren Federal Credit Union. If you’re looking for a high-yield checking account, you’ll appreciate its Blue Extreme Checking Account with no minimum opening deposit or monthly service fees.
Other perks include a tiered membership rewards program and round-the-clock customer service. The easiest way to become a member is to donate $5 to the Blue Foundation and open a Membership Share Savings Account with $5.
38. Digital Federal Credit Union
Digital Federal Credit Union (DCU), based in Marlborough, Massachusetts, was established in 1979. Today, it is known for its comprehensive range of financial products that includes checking and savings accounts, auto loans, mortgages, personal loans, credit cards, and wealth management services.
Perhaps one of DCU’s standout features is its commitment to digital banking, offering robust online and mobile platforms that compete with larger, nationwide banks. This makes DCU a fitting choice for those who prefer online banking, no matter where they live.
Membership is open to those who are a part of participating organizations or live, work, worship, or attend school in eligible communities. If you don’t fit those criteria, you can still join by becoming a member of a participating nonprofit organization, such as Reach Out for Schools, which requires a nominal donation.
See also: Best Nationwide Credit Unions of 2023
Bottom Line
Not all credit unions are created equal. Some have strict membership criteria, while others are more flexible. Before you join a credit union (or several credit unions) on this list, be sure to consider numerous factors.
You’ll want to look at eligibility requirements, branch location, monthly maintenance fees, accounts offered, interest rates, mobile banking, digital banking, reputation, and customer service. Best of luck as you explore the best credit unions and search for the perfect credit union.
Frequently Asked Questions
Can civilians join Navy Federal Credit Union?
Yes, civilians can join the Navy Federal Credit Union (NFCU), the largest credit union in the U.S. However, this is limited to immediate family members of service members in all branches of the armed forces. This broad eligibility criteria is one of the reasons why NFCU has grown to be the largest credit union in the country.
Can anyone join American Airlines Credit Union?
No, not anyone can join the American Airlines Credit Union. Membership is limited to those who work in the air transportation industry, including airlines, airports, and related businesses, as well as their family members. While this broadens the scope beyond just American Airlines employees, it still doesn’t include everyone.
Today’s mortgage rates are more than 1 percentage point higher than a year ago. Plus, rates edged even further up this week, to 6.39% for a 30-year fixed-rate loan, compared with 6.35% a week earlier, according to Freddie Mac.
These stubbornly high interest rates, combined with headstrong home prices, have plunged the entire housing market into a strange sort of stalemate.
On the one hand, 82% of home sellers feel “locked in” by the low mortgage rates they’d secured years earlier. Meanwhile, cash-strapped homebuyers with few new listings to pique their interest feel locked out of the American dream.
Yet despite this unrelenting real estate limbo, there are small signs of life kicking around that spell hope in the weeks ahead.
“While today’s 30-year fixed mortgage rate is more than 1 percentage point higher than a year ago, several housing indicators showed that buyers and sellers are still actively seeking opportunities, though at a slower pace,” notes Danielle Hale, chief economist for Realtor.com®, in her weekly analysis.
Here’s what the most recent housing statistics mean for both buyers and sellers in our latest installment of “How’s the Housing Market This Week?”
A look at the latest home price trends
The median asking price on a home in April was $430,000. Yet for the week ending May 13, home prices came in a mere 1.1% higher than a year ago—less than half the price growth seen in the previous three straight weeks (2.4%).
Practically, this means that “price growth is weakening,” says Hale. Yet she still points out that “significant price declines are not observed.” For now, “sellers are still in a very good position.”
Why home sellers aren’t listing
Even though home sellers are sitting pretty on record amounts of home equity, many remain skittish about listing since it would mean trading in their low mortgage rate for something much higher.
As a result, the number of new listings hitting the market has declined for 45 straight weeks, and is still down by 25% compared with a year ago for the week ending May 13.
Yet that doesn’t spell complete doom and gloom for homebuyers, since total housing stock (of listings both new and old) is still up 23% compared with the same week last year.
And here’s more good news according to Hale: “Recent fluctuations in new listing declines indicate that sellers are closely monitoring the market and looking for chances to maximize their profit.”
In other words, home sellers are watching and waiting for the right moment to strike—and when they do, the floodgates will open.
“With an improving seller’s sentiment and the approaching months when a large number of homes hit the market,” Hale anticipates, “it is very likely to see some improvement in new listings in the upcoming weeks.”
In other words, buyers should hang tight, since a fresh bounty of listings is bound to hit soon, which should help push prices down while also offering up a greater selection.
Why the pace of home sales is slow, but picking up
Homes continue to sit on the market longer than they did a year ago. For the week ending May 13, homes spent 15 more days on the market compared with last year, marking 41 weeks in a row that it’s taken longer to sell a home compared with the same week the previous year.
However, this slower pace of home sales does seem to be picking up just a bit.
“While homes are sitting on the market for a longer time period than a year ago,” Hale notes, “a shrinking difference suggests competitions still exist.”
In other words, opportunities for homebuyers and sellers are still out there if they look hard enough.
Now that tapping home equity is back in fashion, I figured it’d be helpful to see who the top HELOC lenders are.
Last year, banks and mortgage lenders doled out nearly one million home equity lines of credit (HELOCs), per HMDA data.
A total of 962,000 HELOCs were opened in 2021, up 10.7% from the 869,000 originated in 2020, the first annual increase in three years.
I expect HELOC originations to rise again in 2022 now that mortgage rates on existing first mortgages are so low relative to what’s available today.
Read on to see who the top HELOC originators were last year.
Top HELOC Lenders
Ranking
Company Name
2021 Loan Count
1.
Citizens Bank
48,992
2.
PNC Bank
40,566
3.
Truist
40,088
4.
U.S. Bank
34,470
5.
Bank of America
31,375
6.
Huntington Bank
27,783
7.
Third Federal
16,449
8.
Figure Lending
14,726
9.
Regions Bank
13,266
10.
Boeing Employees CU
13,202
11.
Mountain America CU
12,241
12.
Zions Bank
11,127
13.
State Employees CU
11,053
14.
PenFed
10,362
15.
KeyBank
10,238
16.
Fifth Third
10,194
17.
TD Bank
9,536
18.
First Citizens
9,518
19.
M&T Bank
9,287
20.
America First CU
9,065
21.
BMO Bank
8,870
22.
Bank of the West
8,395
23.
Alliant CU
7,992
24.
Idaho Central CU
7,413
25.
Ent CU
7,399
Last year, Citizens Bank led all HELOC lenders with nearly 50,000 lines of credit originated (48,992), representing a solid 5.1% market share, per HMDA data from the CFPB.
They were followed by PNC Bank with 40,566 HELOCs originated for a 4.2% share.
A similar total was generated by Truist Bank (40,088) for a market share of 4.2%.
U.S. Bank took third with 34,470 HELOCs opened and a 3.6% market share, followed by Bank of America with 31,375 lines of credit opened for a 3.3% market share.
In 2020, Bank of America had been the #1 HELOC lender with a 5.6% market share before falling to fifth in 2021.
Huntington Bank took sixth with a 2.9% market share, Third Federal came in seventh with a 1.7% share of the market, and newcomer Figure Lending took eighth with a 1.5% market share.
Regions Bank and Boeing Employees Credit Union rounded out the top 10 with 1.4% of the market, each.
You can see the top 25 HELOC lenders in the above table for more details. These 25 institutions alone accounted for 44% of the overall HELOC market.
Looking for a HELOC? Try a Depository Institution
If you’re in need of a HELOC, know that they’re mostly offered by depository institutions, also known as DIs.
In 2021, 809 DIs, including 271 banks and 538 credit unions, originated 934,000 HELOCs, per the HMDA data.
That represented 97.1% of all HELOC originations reported. In other words, practically every HELOC was opened by a bank or a credit union.
This differs from first mortgages, which have been dominated by nonbank lenders over the past several years.
These nonbank lenders, or non-DIs, accounted for just 2.9% of the HELOC market.
For the record, just one of the top 25 HELOC lenders was an independent mortgage company, Figure Lending.
It’s unclear if that will change in 2022 and beyond, though these companies are looking to get in on the action by offering HELOCs and home equity loans.
For example, Rocket Mortgage launched a closed-end home equity loan (HEL) in early August.
Meanwhile, wholesale lender United Wholesale Mortgage (UWM) released two HELOCs, including a standalone and a piggyback.
Regardless, there’s a good chance a local credit union (or the bank you already do business with) will offer HELOCs.
Who Are the Best HELOC Lenders?
So we know it’s mostly banks and credit unions that offer HELOCs. The question is which one is the best of the bunch?
That’s hard to quantify because banks and credit unions offer lots of different products, not just HELOCs.
As such, reading their reviews probably won’t give us a lot to chew on. Sure, we can see how they are rated on the whole.
But that might mean nothing with regard to their home equity lending.
You still want them to have favorable ratings, but that aside, I would look at the interest rate and loan term offered.
HELOC rates can range quite a bit from bank to bank, so put in the time to see who is offering what.
And pay attention to the margin (which is added to the prime rate), the loan term (how many years to draw and pay it off), and the starting interest rate.
Also take note of any perks such as the ability to lock in your rate so it’s no longer adjustable.
Though the way things are going, HELOC rates might peak in 2023 before beginning to flatten or fall as the Fed stops raising rates (and maybe even lowers them).
Either way, be sure to exhaust all your options in your HELOC search to ensure you don’t miss out on a better deal.
The data, published on Monday, shows that older vintage mortgages (loans originated before 2010) accounted for under 9% of the total refinanced during the Covid-19 refi boom. This contrasts with nearly a third of mortgages refinanced from 2015 and later vintages.
As it makes sense to refinance if the balance is higher, less than 10% of the mortgages with balances below $100,000 outstanding as of the first quarter of 2020 were refinanced, compared to half of those with balances between $400,000 and $500,000.
When broken down by investor type, 38% of U.S. Department of Veteran Affairs mortgages outstanding as of the first quarter of 2020 were refinanced by the end of 2021, compared to 25% of Fannie Mae and Freddie Macmortgage loans and 22% of Federal Housing Administration mortgages.
According to the New York Fed researchers, the refi boom will have impacts for decades.
About 64% of the refis were for borrowers to get better rates, which resulted in an average payment reduction of $220. Nine million borrowers refinanced their loans without equity extraction, with an aggregate decrease of $24 billion annually.
In addition, five million borrowers extracted $430 billion of home equity through cash-out refis. The average amount cashed out was $82,000, and the average monthly payment increased by $150.
“The mortgage refinancing boom is over, but its impact will be seen for decades to come,” Andrew Haughwout, director of Household and Public Policy Research at the New York Fed, said in a statement.
“As a result of significant equity drawdowns, mortgage borrowers reduced their annual payments by tens of billions of dollars, providing additional funding for spending or pay downs in other debt categories,” Haughwout added.
According to the researchers, the 2020-2021 refi boom differed from the refi booms in 2003 and 2013 for three reasons: Interest rates were historically low; home equity was at an all-time high leading to the pandemic; and the rebound in rates was historically steep.
In fact, when the market turned, the 30-year mortgage rates rose by 400 basis points, climbing from a historically low rate of 2.68% in December 2020 to 6.90% in October 2022. Such an increase had not been seen since early 1980, per Freddie Mac’s estimates.
And, the mortgage market is still recovering.
The New York Fed’s Center for Microeconomic Data shows in its Quarterly Report on Household Debt and Credit that mortgage originations – measured as appearances of new mortgages on consumer credit reports – dropped in Q1 2023 to $324 billion.
That’s the lowest level seen since Q2 2014, which was an unusually low quarter due to the “taper tantrum.”
Meanwhile, the pace of equity extraction halted when mortgage rates began climbing. Quarterly equity extraction volumes were near historic lows in the first quarter of 2023, mainly as a share of disposable personal income, researchers said.
“Owners now looking to move will face increased borrowing costs and higher prices, with current home prices being more than 36% higher than they had been pre-pandemic,” the researchers concluded. “The improved cash flow generated by the recent refinance boom will potentially provide significant support for future consumption.”
With the never-ending changes and challenges affecting the U.S. financial landscape, multiple community development entities are helping to counter some of their adverse effects by fostering community development initiatives.
Some examples include Community Development Financial Institutions (CDFIs) and Community Development (CD) Banks. These play a significant role in promoting economic growth and inclusion for underserved communities.
This article thoroughly explores CDFIs and the institutions that support CDFIs, outlining their significance, objectives, and how they meet capacity building initiative requirements. We also highlight the federal government’s involvement, explaining its role evolution and the numerous related economic development activities available to those who need them.
What is a Community Development Financial Institution (CDFI)?
Community Development Financial Institutions (CDFIs) are a type of financial institution that provides products and services to financially disadvantaged communities for economic development purposes.
They are essential and critical in promoting inclusion and economic growth to marginalized communities in urban and rural communities countrywide. Legislations like the Community Reinvestment Act help encourage these programs. However, the Community Reinvestment Act is not the only reason for their existence.
CDFI Certification
To become a CDFI, a financial institution must apply for a CDFI certification. This certification ensures that the institution can receive the right federal assistance resources and allows people to benefit from the CDFI fund’s programs.
How did the concept of CDFIs start?
The roots of Community Development Financial Institutions (CDFIs) extend to the 1880s, when minority-owned banks began serving economically disadvantaged communities. These organizations provided essential financial services to areas that mainstream financial institutions neglected or could not reach.
As the years progressed, new types of mission-driven financial institutions emerged. For example, the development of credit unions in the 1930s and 1940s offered alternatives to the traditional community bank that had limited services.
Moreover, new community development corporations emerged in the 1960s and 1970s, providing additional resources and support for underserved areas. These institutions gradually paved the way for the rise of nonprofit loan funds in the 1980s, establishing the groundwork for today’s modern CDFI model.
The Riegle Community Development and Regulatory Improvement Act of 1994 recognized the need to support the growing community development finance sector. With that in mind, it established the Community Development Financial Institutions Fund (CDFI Fund). This fund aimed to promote economic revitalization and community development in low-income areas by investing in and providing assistance to CDFIs.
Since its inception, the CDFI Fund played a substantial role in the growth and impact of CDFIs, enabling them to serve the financial needs of economically disadvantaged communities and contribute to their overall development and prosperity.
Types of CDFIs
Currently, multiple types of Community Development Financial Institutions (CDFIs) exist, each catering to the unique needs and challenges economically disadvantaged communities face. We explore their types and roles below.
Community Development Banks
Community Development Banks are for-profit, federal government supported and regulated financial institutions. These institutions have a board of directors that includes community representatives. CD banks provide affordable banking services, loans, and other financial products to economically distressed and underserved communities.
Operating in these communities creates jobs, improves infrastructure, and promotes economic growth. They also help increase access to capital for small businesses, including affordable housing projects and community service facilities.
Community Development Credit Unions
Community Development Credit Unions (CDCUs) are nonprofit financial cooperatives owned and controlled by their members. As is the case with traditional credit unions, they provide financial services such as savings accounts, checking accounts, and loans.
CDCUs only cater to low-income and underserved communities, offering affordable rates and financial education programs to promote inclusion and help people build credit and assets. The National Credit Union Administration (NCUA), an independent federal agency, regulates these credit unions.
Community Development Loan Funds
Community Development Loan Funds, or CDLFs, are nonprofit entities that finance community development projects by offering loans and technical assistance to marginalized communities. They facilitate access to affordable housing, promote small businesses, and help establish community service facilities to sustain growth. They also serve as an alternative source of capital for those who cannot access traditional bank financing services by offering flexible terms and underwriting criteria.
Community Development Venture Capital Funds
Community Development Venture Capital Funds offer equity and debt-with-equity investments to small and medium-sized businesses in economically distressed areas. They can be for-profit corporations or nonprofit entities.
By offering long-term capital, they help businesses grow, create jobs, and foster innovation. They also provide technical assistance, mentoring, and business development support to maintain the long-term success of their portfolio companies.
Microenterprise Development Loan Funds
Microenterprise Development Loan Funds are loan funds that provide small-scale loans, or microloans, to entrepreneurs and small businesses that might not qualify for traditional financing. They offer small capital amounts that range from hundreds to a few thousand. These loan funds help low-income people, women, and minority entrepreneurs who need smaller loan amounts and more flexible terms.
Community Development Financial Institution (CDFI) Consortia
CDFI Consortia are collaborative networks of CDFIs that pool resources, experience, and capital to increase their impact on community development services. They can access larger funding opportunities and share best practices to serve their target communities by working together. They can also provide joint technical assistance and support services, helping to strengthen individual CDFIs that are part of the network.
Understanding Community Development Financial Institutions
The main goal of CDFI fund programs is to provide affordable loans, community development banking services, financial help, and technical assistance to low-income communities. They foster economic development and empower small business owners, minorities, and marginalized communities by offering access to investment capital and other resources with fewer demands than traditional finance institutions.
CDFIs differ from traditional financial institutions because they focus on community development and serving minority communities. They also collaborate with religious institutions, community service organizations, and rely on federal funding and agencies to address the needs of their target populations.
What’s the federal government’s role in CDFIs?
The Federal Reserve Bank supports CDFIs through various initiatives, tax credits, and programs. One such program is the CDFI Fund, which the U.S. Department of the Treasury administers. The CDFI Fund provides financial, technical, and other resources to CDFIs, casting a wider net to help low income people and communities access their services.
In addition to the CDFI Fund, the Federal Reserve Bank supports CDFIs through programs and training initiatives such as:
Bank Enterprise Award Program
Capital Magnet Fund
CDFI Bond Guarantee Program
CDFI Equitable Recovery Program
CDFI Program
Rapid Response Program
Native Initiatives
New Markets Tax Credit Program
Small Dollar Loan Program
These initiatives by the Federal Reserve Bank provide financial incentives and resources for CDFIs and community development entities to invest in eligible community projects, promote economic growth, and create jobs.
How has that federal role changed over time?
The federal government’s role in supporting the CDFI industry changes over time to respond to the changing needs of disadvantaged communities and the growing recognition of the importance of financial inclusion.
Early efforts, for example, provided seed capital and technical assistance to establish and grow CDFIs. With the maturation and evolution of the industry, the government started focusing on building capacity, collaboration, and supporting innovative endeavors.
Recent changes emphasize leveraging private sector investments, regulatory relief, and encouraging partnerships between the CDFI industry and other financial institutions. Examples include minority depository institutions (MDIs) and mainstream banks.
CDFIs’ Role in Financial Inclusion
Financial inclusion is an essential part of CDFI initiatives. Access to affordable financial products and services helps bridge the gap between poor communities and mainstream financial institutions. CDFIs also promote financial knowledge, support small businesses, finance affordable housing activities, and facilitate economic development initiatives.
CDFIs also ensure that economically distressed communities can access essential community services facilities like healthcare centers, schools, and childcare. Their work helps contribute to these communities’ overall well-being and stability. It creates a solid foundation for long-term economic growth.
Business Model
CDFI business models are unique in combining traditional financial services with a strong emphasis on developing and positively impacting the communities they cater to.
They generate revenue by collecting interest and fees on loans, investments, and other financial products. However, they also rely on grants, donations, and especially government funding like the CDFI fund to support their operations.
CDFIs collaborate with organizations like government agencies, nonprofits, and private sector partners to attain their goals. Additionally, they leverage tax credits, guarantees, and other financial tools to attract more investment capital and support their lending activities.
CDFIs Provide Opportunity for All
CDFIs provide real opportunities by addressing the financial needs of underserved communities to help them succeed and promote their economic growth. To do this, they offer access to affordable financial products and services to communities that experienced systematic lockouts from these programs.
By emphasizing their needs and giving them more accessible and affordable ways to prosper, low-income individuals and businesses have access to essential financial tools. These tools were traditionally out of reach for mainstream financial institutions.
Moreover, CDFIs support small businesses owned by women, minorities, and individuals in economically distressed communities. By offering tailored financing solutions, technical assistance, and business planning resources, CDFIs help these entrepreneurs overcome barriers to entry, create jobs, and contribute to local economies.
Another significant aspect of CDFIs’ work is their focus on affordable housing and community development projects. They finance the construction and rehabilitation of affordable housing units and invest in community facilities like schools, healthcare facilities, and childcare. These are essential to the well-being and stability of low-income communities and help them worry less about factors beyond their control or that are too expensive to access otherwise.
CDFIs also promote financial education and empowerment by providing resources and training to help people develop financial literacy skills, manage their finances, and build assets. These initiatives contribute to breaking the cycle of poverty and promoting economic self-sufficiency.
By partnering with various stakeholders, such as government agencies, nonprofit organizations, and private sector partners, CDFIs leverage resources and expertise to maximize their impact. This creates a ripple effect that extends beyond the immediate recipients, fostering inclusive and resilient communities.
Types of CDFIs
Many community development financial institutions focus on addressing the needs of economically disadvantaged communities. These include community development banks, credit unions, loan funds, and venture capital funds.
Federal agencies like the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA) regulate community development banks and credit unions. They offer various banking services, from deposit accounts to loans, catering to low-income communities.
Loan funds make affordable housing possible, support small businesses, and help community facilities. On the other hand, venture capital funds offer equity investments that support small businesses and startups in underserved communities.
“Newer” CDFI Resources
As community development financial institutions evolve, multiple resources and programs are emerging to support their growth and impact. Examples include:
CDFIs as Capital Plus Institutions
Sometimes, community development financial institutions are called “Capital Plus” institutions. This is because they provide investment capital, development services, technical assistance, and financial education to support the long-term success of their clients.
This approach allows community development financial institutions to significantly impact low-income and economically distressed communities, promoting economic opportunity and inclusion.
Emergency Capital Investment Program (ECIP)
The Emergency Capital Investment Program (ECIP) is a federal initiative that provides capital to CDFIs and MDIs to support their lending activities after the economic challenges caused by COVID-19. This program helps ensure that these institutions have the resources to continue providing essential financial services to underserved communities, small businesses, and minority-owned businesses during times of crisis.
Paycheck Protection Program Liquidity Facility (PPPLF)
The Paycheck Protection Program Liquidity Facility (PPPLF) is another federal initiative that supports the lending activities of CDFIs and other financial institutions participating in the Small Business Administration (SBA) Paycheck Protection Program (PPP). By providing liquidity to these institutions, the PPPLF enables them to continue offering loans to small businesses needing financial assistance during challenging economic times.
CDFI Rapid Response Program
The Rapid Response Program from the CDFI Fund provides immediate financial assistance during crises or natural disasters. CDFIs can quickly access funds for disaster recovery, emergency relief efforts, and other needs, serving as “financial first responders” for the communities they support.
These newer resources and programs demonstrate how the federal government, private sector, and other stakeholders support the work of CDFIs and promote financial inclusion and economic opportunity. By leveraging these resources, CDFIs can better address the needs of low-income communities nationwide and foster economic development in urban and rural communities.
As affordability challenges conspire to keep would-be buyers out of the housing market, the nation’s two largest mortgage lenders have rolled out programs that allow borrowers with modest incomes to qualify for a loan with just 1 percent down.
Rocket Mortgage, the largest lender in the U.S. in 2022, announced its ONE+ program this week. United Wholesale Mortgage, the No. 2 lender, launched its Conventional 1% Down loans in April — then made them significantly more generous following Rocket’s announcement.
The rival programs piggyback off of Fannie Mae’s HomeReady mortgages and Freddie Mac’s Home Possible loans. Those initiatives allow borrowers who make less than 80 percent of their neighborhoods’ median income to obtain a conventional loan with just 3 percent down.
Both programs come at a time when home prices remain near record highs and mortgage rates are more than double what they were two years ago.
“With affordability being tougher, people are getting boxed out,” says Bill Banfield, executive vice president of Capital Markets at Rocket Mortgage. “Free money helps people want to buy a home.”
How the 1% mortgages work
To make 1 percent down a reality, both lenders cover 2 percent of the 3 percent down payment needed to obtain a HomeReady or Home Possible mortgage. The borrower supplies the remaining 1 percent.
Rocket offers this scenario as an illustration: A buyer of a $250,000 home with a HomeReady or Home Possible mortgage needs at least 3 percent down, or $7,500. Under its new program, Rocket covers $5,000, or 2 percent of that down payment, through a grant. The borrower then needs to put down just $2,500, or 1 percent.
Rocket’s program also covers private mortgage insurance (PMI) at no cost to the borrower. Typically, lenders require borrowers to pay these insurance premiums if their down payment is less than 20 percent. On a $242,500 loan, those premiums can run as much as $245 a month, according to Rocket.
ONE+ is available to first-time and repeat homebuyers, and there are no limits on assets, just income (more on that below).
United Wholesale Mortgage’s program is similar, following the same guidelines as HomeReady and Home Possible. The lender pays 2 percent of the purchase price, up to $4,000. That means the down payment benefit maxes out at $200,000; a borrower who takes a $400,000 loan under the program would get 1 percent of the down payment from United Wholesale Mortgage, and need to come up with 2 percent.
When United announced its program in April, the down payment assistance was limited to borrowers making less than half of area median income. After taking criticism on social media — and after Rocket rolled out its more generous income limits — the lender boosted its income limit to 80 percent.
What are the income limits?
To qualify for the 1 percent down programs — or any HomeReady or HomePossible loan — you can’t make more than 80 percent of the median income in the area where you’re buying. Those figures vary widely throughout the U.S. A few examples of the 80 percent limit:
Atlanta
No more than $76,560
Chicago
No more than $84,560
Dallas
No more than $76,480
New York City
No more than $90,080
San Francisco
No more than $120,880
To see income limits in your area, enter an address into this map on Fannie Mae’s website.
Is there a catch?
These programs are a sweet deal for borrowers — so much so that there’s no guarantee the terms will stay the same, as evidenced by United Wholesale Mortgage’s decision to boost income limits.
What’s more, the down payment assistance is so generous that the nation’s two largest lenders could decide to pull the plug.
“Some of the features on this are costly for the lender,” says Rocket’s Banfield. “We’ll have to see how it all plays out.”
Another risk for borrowers: They could find themselves owing more than their homes are worth. Median home prices shrank 1.7 percent from April 2022 to April 2023, and home values could keep declining. For homebuyers who put just 3 percent down, a 5 percent decline in local home prices could put them underwater.
The Great Recession infamously played up the dangers of buying with little equity — but it’s worth pointing out that the mortgage market and housing sector are on much firmer footing now than they were 15 years ago. What’s more, borrowers still must qualify based on such factors as debt-to-income (DTI) ratio.
“There’s no stretching the underwriting,” says Banfield.
More lenders are getting creative
In another nod to the challenges facing buyers in a still-expensive market, Movement Mortgage this month announced it’s now allowing FHA borrowers to take out a 10-year second mortgage to finance the 3.5 percent down payment required for FHA loans. In effect, this eliminates the need for borrowers to put down any money upfront. To qualify, you must have a credit score of 620 or higher.
That offer is just one way lenders are responding to the one-two punch of an affordability squeeze and a sharp slowdown in mortgage applications since 2021. Lenders have been rolling out all manner of mortgage promotions, including rate buydowns paid for by the seller and discounts on future refinances.
In another variation on the theme, Rocket earlier this year unveiled a new credit card that allows homebuyers to earn up to $8,000 towards closing costs and a down payment. The Rocket Visa Signature Card offers a generous 5 percent back on all purchases, up to the limit — with the stipulation that the rewards are worth full value only if you ultimately get your home loan from Rocket Mortgage.
Other low-down payment mortgage options
Mortgage lenders and regulators recognize that down payments are one of the primary obstacles to homeownership, so there are several low- and no-down payment loan options. Loans backed by the U.S. Department of Veterans Affairs (VA), for instance, don’t require a down payment.
Aside from HomeReady and Home Possible conventional loans, here are other options for buyers looking to make low down payments:
FHA loans: Insured by the Federal Housing Administration (FHA), FHA loans allow borrowers to put down just 3.5 percent with a credit score of 580 or higher, or at least 10 percent with a score as low as 500. However, FHA borrowers with less than 20 percent down have to pay FHA mortgage insurance premiums (MIP) for the life of the loan.
USDA and VA loans: USDA and VA loans don’t require any down payment, but they’re only for specific types of borrowers: USDA loans for borrowers in certain rural areas and VA loans for active-duty service members, veterans and surviving spouses. Neither charge mortgage insurance, but USDA loans come with guarantee fees and VA loans come with a funding fee.
Deciding between a home equity loan vs. refinance? Both options give homeowners the chance to access their home’s valuable equity with the flexibility to use that cash however they please.
Additionally, refinancing allows homeowners to lock in a lower interest rate or change the length of their loan term.
If you’re trying to figure out whether a refinance or a home equity loan is right for you, consider your needs as well as the advantages and risks of both loan options.
What Is a Home Equity Loan?
As a homeowner, you have several options for taking advantage of the built-up equity in your home — one of those being a home equity loan. A home equity loan is a type of loan that allows homeowners to borrow against the equity in their homes.
Lenders typically pay out a home equity loan in a lump sum payment. The biggest advantage of a home equity loan is its flexibility. The funds can be spent on anything from medical bills, home renovations, and even travel.
Since home equity loans are secured by your home, lenders may give a lower interest rate than they would for personal loans or credit cards. However, defaulting on your loan puts you at risk of foreclosure.
How Does a Home Equity Loan Work?
Lender requirements vary, but you generally need:
At least 15% to 20% equity in your home
Good credit
Low debt-to-income ratio
Steady source of income
Once you’re approved for a home equity loan, your lender will give you documents stating the amount you can borrow (up to 85% of the home’s value), the interest rate, and associated fees.
These fees vary from lender to lender, so it’s a good idea to shop around and compare.
After the funds are disbursed, you will need to repay the loan’s principal amount and fixed-rate interest in fixed monthly payments. Depending on the lender, repayment on your home equity loan can be as long as 30 years.
While a shorter term allows you to repay the loan faster, it means higher monthly payments compared to a 30-year term.
What Does It Mean to Refinance?
If you refinance a mortgage, you’re replacing your current loan with a new one, usually with a new principal amount and a different interest rate. There are several reasons why a homeowner would choose to refinance their mortgage, such as lowering their interest rate, shortening the term of the loan, or taking out equity in their home in the form of cash.
Here are two common types of refinancing:
Rate-and-term refinance: This is a type of mortgage refinance that allows homeowners to change the term and interest rate of their current mortgage by replacing it with a new loan. Homeowners generally choose this option if they are looking to lower their interest rate, reduce their monthly payments, change the loan type or change the term length.
Cash-out refinance: With a cash-out refinance, homeowners take out a new mortgage on their home, up to 80% of the value of your home, for more than what is owed. This difference is paid out at closing and can be used on almost anything. However, this new loan is larger and comes with its own terms.
How Does Refinancing Work?
Refinancing a mortgage is similar to the process you went through with your original mortgage. You must apply and qualify for the loan before approval. The lender will assess your financial situation and determine your interest rate based on your risk level.
It’s also important to keep an eye on closing costs, which can range from 2% to 5% of the loan amount.
Let’s say you’re looking to take out some equity in your home and decide to use a cash-out refinance. You purchased a $300,000 house many years ago and took out a mortgage for $200,000. Your current balance with your lender is $100,000.
If the property value remained the same, you would have at least $200,000 in equity.
You could potentially be approved for $225,000 and use $100,000 to pay the remaining principal. This leaves $125,000 in cash to use as you please.
Comparing Home Equity Loan vs. Refinance
If you’re comparing a home equity loan vs. a cash-out refinance, both options allow homeowners to leverage their home equity to borrow more money.
A cash-out refinance replaces an existing loan with a new loan, meaning you only have one loan and one payment to worry about. A home equity loan, also known as a second mortgage, is another loan that must be paid alongside your original mortgage.
Cash-out refinances are also considered first-lien loans, and typically come with lower interest rates. First-lien debt holders are repaid before all other debt holders in the event of a foreclosure or bankruptcy. A higher interest rate on a home equity loan may be offset by lower closing costs.
If you want to take out some equity but you’re stuck deciding between a home equity loan vs. refinance, a cash-out refinance is an excellent option if you can lock in a lower interest rate. A home equity loan may be worth considering if you want to take out a large portion of equity or if you can’t find a lower interest rate when refinancing.
Home Equity Loan vs. Refinance? Ask an Expert at Total Mortgage
When deciding between a home equity loan vs. refinance, both options give homeowners quick access to cash by leveraging their home’s equity. Yet, one option may make more sense than the other depending on your needs and financial situation.
Are you looking to refinance or take out a home equity loan? Consider Total Mortgage for a quick, personalized mortgage experience. We work with borrowers across the country.
Purchase mortgage rates continue their roller coaster ride – they moved above 5% this week, according to the latest purchase mortgage survey from Freddie Mac.
The 30-year fixed-rate mortgage increased this week to average 5.22%, up from last week’s 4.99%. A year ago this time, rates averaged 2.77%. The index compiles rates reported by lenders during the past three days.
“The 30-year fixed-rate went back up to well over 5% this week, a reminder that recent volatility remains persistent,” Sam Khater, chief economist at Freddie Mac, said in a statement.
Mortgage rates tend to align with the 10-year U.S Treasury yield, which increased five basis points in one week to 2.78% Wednesday.
The volatility in rates reflects the Federal Reserve actions to control persistent inflation. The Fed raised interest rates by 75 bps in its July’s meeting, marking its fourth rate hike this year.
So far, the tightening monetary policy brought a technical recession, as the gross domestic product fell by 0.9% in the second quarter, marking the second consecutive decline. (The Biden administration has refused the country is in a recession, citing a strong labor market.)
Creating a path to success in today’s purchase market
Meeting the needs of a new generation of homebuyers while managing the ebbs and flows of a volatile housing market is a major endeavor for any mortgage lender. So, what should lenders be doing to thrive in the face of a post-pandemic housing market rife with new hurdles?
Presented by: Calyx
In addition, year over year, the Consumer Price Index (CPI) for all items rose 8.5% in July, down from the 9.1% yearly increase reported a month ago. Inflation did not increase from June to July.
“Although rates continue to fluctuate, recent data suggest that the housing market is stabilizing as it transitions from the surge of activity during the pandemic to a more balanced market,” Khater said.
He added: “Declines in purchase demand continue to diminish while supply remains fairly tight across most markets. The consequence is that house prices likely will continue to rise, but at a slower pace for the rest of the summer.”
Regarding borrowers demand for mortgage loans, according to the Mortgage Bankers Association (MBA), the market composite index, a measure of mortgage loan application volume, increased 0.2% for the week ending Aug. 5.
The refinance index rose 4% from the previous week, and the purchase index was down 1%.
Loan officers told HousingWire that, amid volatility, they had seen an uptick in cash-out refis. There is a general concern with the trajectory of the economy, and borrowers worry their home may go down in value as the market cools – in this case, they would have less equity to access.
On HousingWire’s Mortgage Rates Center, Black Knight’s Optimal Blue OBMMI pricing engine measured the 30-year conforming mortgage rate at 5.351% Wednesday, down from 5.448% the previous week. Meanwhile, the 30-year fixed-rate jumbo was at 5.261% Wednesday, down from 5.472% the week prior, according to the Black Knight index.
According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.59% with an average of 0.7 point, up from last week’s 4.26%. The 15-year fixed-rate mortgage averaged 2.15% a year ago. The 5-year ARM averaged 4.43% this week, up from 4.25% the previous week. The product averaged 2.44% a year ago.
