Offers home purchase loans and mortgage refinances
Founded in 2005, headquartered in Columbia, MO
Funded about $3.75 billion in home loans last year
#1 retail home purchase lender in the state of Missouri
Roughly two-thirds of overall business comes from home state
Also very active in Illinois, Kansas, and Oklahoma
Currently licensed in 30 states nationwide
Flat Branch Home Loans is an employee-owned, direct-to-consumer retail mortgage lender located in Columbia, Missouri.
They were founded by current president Jim Yankee in 2005, and have since grown to a 700-employee strong company.
Their claim to fame is being #1 home purchase lender in the state of Missouri, as well as a big-time USDA loan lender.
This makes it obvious that they’re a solid choice for home buyers, though they also do a good deal of mortgage refinancing as well.
Last year, they funded about $3.75 billion in home loans, with a 70/30 split of purchase loans and refinances.
Roughly two-thirds of their overall production comes from their home state of Missouri.
And they’re the fourth largest mortgage lender in Missouri overall, only bettered by U.S. Bank, Rocket Mortgage, and Wells Fargo.
Aside from Missouri, they’re quite active in the states of Illinois, Kansas, and Oklahoma.
At the moment, they’re licensed in 30 states, including Alabama, Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia, and Wisconsin.
For the record, their name is derived from the Flat Branch stream that flows near Columbia, MO.
How to Apply with Flat Branch Home Loans
To get started, you can visit a local office if located in the Midwest, or simply navigate to their website.
At last count, they’ve got about 58 physical locations in a handful of Midwestern states.
If you begin at the website, you can browse their online loan officer directory, read bios, and find someone to work with.
Once you narrow down your loan officer search, you can click on “Apply” and you’ll have the option to continue on to the digital application or have them reach out to you.
It might be wise to have them reach out first so you can discuss loan pricing and eligibility before filling out the app.
When it comes time to complete the app, their digital mortgage experience is powered by SimpleNexus.
You can fill out the app from a computer, or download their smartphone app and tackle it that way.
Applicants can eSign disclosures, quickly calculate payments, securely scan and upload documents, and message their loan officer with questions along the way.
You’ll also receive updates as you go to determine where you’re at in the process. And receive a notification whenever they request a new document from you.
Simply put, Flat Branch Home Loans offers a good combination of the latest technology and human touch.
Loan Programs Offered by Flat Branch Home Loans
Home purchase loans
Refinance loans: rate and term, cash out, streamline
FHA loans
USDA loans
VA loans
HomeReady and Home Possible (3% down)
Grants and down payment assistance programs
MHDC loans
Section 184 Indian Home Loan Guarantee program
Flat Branch Home Loans is big on home purchase financing, and has a long list of programs to help secure a mortgage.
If you’re an EMT, firefighter, police officer, teacher, or military, their “Community Champions Program” comes with up to $900 in lender credits and a waived appraisal fee.
They also originate Missouri Housing Development Commission (MHDC) loans, which feature down payment assistance via a forgivable second mortgage.
As noted, they’re a major USDA loan lender, so if you’re purchasing a rural home they should be a great fit.
The USDA program has its quirks, so using an experienced lender who knows how to navigate it is advised.
Aside from that, they offer all the major stuff like conforming loans, FHA loans, VA loans, and even bridge loans to help you buy before you sell.
Their Lock and Shop option, which allows you to lock a mortgage rate before you find a home, is available in the states of Arkansas, Illinois, Iowa Kansas, Missouri, Oklahoma, Texas, and Nebraska.
Lastly, they offer the Section 184 Indian Home Loan Guarantee program, a low-down payment loan option for Native Americans.
It’s unclear if they offer jumbo loans or adjustable-rate mortgages, though you can get a fixed-rate mortgage in a variety of different loan terms.
Flat Branch Home Loans Rates
While we know they specialize in home purchase lending, we don’t know a lot about their loan pricing.
To my knowledge, they don’t feature their mortgage rates or lender fees on their website. As such, you’ll need to speak with a human to get a quote.
This doesn’t say anything about their rates, good or bad, it just doesn’t give us anything to go on in this review.
Once you get a mortgage rate quote, be sure to shop their mortgage APR with other banks, lenders, and mortgage brokers to see where they stand.
Take note of any lender fees and/or discount points required for the quoted rate to ensure you’re doing an apples-to-apples comparison.
The only hint we have about pricing comes from their Zillow reviews, in which a good chunk of customers indicated a lower rate and/or closing costs than expected.
Flat Branch Home Loans Reviews
Over at Zillow, Flat Branch Home Loans has a stellar 4.96-star rating out of a possible five from about 900 customer reviews.
Many of the reviews highlight their hands-on service and fast closings, especially important to home buyers.
They’ve also got a 4.9-star rating from about 160 Google reviews, along with a 4.7-star rating on Facebook from roughly 200 reviews, and a 4.9 rating on LendingTree from 40 reviews.
While they aren’t an accredited business, they do hold an ‘A+’ rating with the Better Business Bureau based on customer complaint history.
To wrap things up, Flat Branch Home Loans is clearly a home purchase lender first and foremost.
They pride themselves on their extensive mortgage knowledge and experience, important attributes when it comes to home buying.
Ultimately, if you want a competent lender who you can rely on to close on time, they might be a solid choice.
Their wide array of loan programs, including proprietary offerings and low or zero down options, is also a big plus.
Just pay attention to pricing as well to ensure you receive quality service and a competitive rate.
Flat Branch Home Loans Pros and Cons
The Pros
Can apply for a home loan online or via smartphone
Offer a mostly paperless, digital mortgage experience
Physical branches in many Midwestern states
A good range of loan programs to choose from (especially for home buyers)
Excellent customer reviews across ratings websites
A+ BBB rating
Free smartphone app
Free mortgage calculator and home buyer guides online
They service their loans after closing
The Cons
Do not list their mortgage rates or lender fees online
The housing market is cooling. There’s really no debate. Things are slowing down. You can mostly thank a doubling in mortgage rates and high home prices for that.
However, talks of a more severe housing bubble might be overstated.
Sure, it’s easy to compare today to 2007 or 2008, if you don’t take time to dig down into the details.
After all, home prices are lofty, the stock market is shaky, and the economy is looking as uncertain as ever.
But let’s talk about why things aren’t the same as they were 15 years ago.
Yes, Home Prices Are Too High
First things first, home prices are too high. Similar to pretty much every other asset, whether it’s a tech stock or bitcoin, home prices overshot the mark.
This was arguably driven by the easy money days of the past decade, exacerbated by a pandemic and a frenzy to own real estate, especially in the suburbs and exurbs.
For example, everyone wanted lots of space all of a sudden, far from urban centers.
This ran counter to the trend of moving into cities and ditching cars for pedestrian-friendly, urban hubs.
The reason was COVID-19, which has now mostly abated, making those who purchased in far out places question the decision.
Certain cities saw massive inflows, like Boise, Idaho, which are now expected to see the biggest declines.
We’ve also had a massive supply/demand imbalance, with far too few homes available to satisfy the appetite of prospective home buyers.
Together, this led to record home price appreciation, with property values rising 125 straight months on a year-over-year basis.
In fact, home prices were up 18.3% in June 2022 from a year earlier, per CoreLogic. However, home price gains slowed from the prior month for the second consecutive month.
Home Price Gains Are Slowing, Cooling the Housing Market
There’s been a lot of confusion regarding home prices lately. Some folks seem to be jumbling slowing appreciation with falling prices, as if they’re the same thing.
But as noted, home price GAINS are dropping. In other words, if your home was appreciating 10% year-over-year, it might only rise 5% next year.
The takeaway is that it’s still rising in price, which might be the best way to look at today’s housing market.
CoreLogic still expects home prices to rise 4.3% from June 2022 to June 2023 on a year-over-year basis.
This differs from the stock market, which has actually fallen quite a bit to the point of being in a bear market.
Because we experienced the worst housing crisis in our lifetimes just over a decade ago, it’s natural to start having those same concerns.
There are probably also sharks waiting and hoping for home prices to plummet so they can scoop up homes on the cheap.
But as of now, it doesn’t appear that an outright housing bubble is in the cards, as expensive as real estate is these days.
A Housing Bubble Should Burst, Right?
The term “housing bubble” is a somewhat loose phrase that may be defined in numerous different ways.
But the general thinking is that a bubble should pop if it’s a truly a bubble.
That means it’s unsustainable, and a soft landing isn’t possible. The air isn’t slowly let out of the balloon. It pops, violently.
With regard to a housing market bubble, this would mean plummeting home prices and a deluge of distressed inventory, including short sales and foreclosures.
I think if you asked the average American if they foresaw a housing market like that, they’d probably say no.
Instead, they might say “home prices are too high, they need to come down.” They might also express that it’s a bad time to buy a home.
This could mean slowing appreciation, or zero appreciation in the hardest hit markets.
It could also mean lower listing prices, price reductions, more days on the market, and fewer bidding wars.
Does that equate to a “pop,” or is it more of a fizzle?
Economist Mark Zandi already called a housing market correction back in June, but merely referred to it as the end of the housing boom.
The end of a boom isn’t synonymous with a bubble burst. It might simply mean that the housing market has peaked and is now expected to cool.
Why No Housing Bubble Burst This Time Around?
A housing market bubble is typically accompanied by rampant speculation, a huge run up in prices, and lots of questionable home loan financing.
It’s generally also driven by a supply glut, that is, too many homes for sale and not enough demand.
If you consider all of the above, the only thing that seems to stand out is a “huge run up in prices.”
There hasn’t been crazy speculation, there isn’t shoddy financing, and there certainly hasn’t been an oversupply of homes.
On the contrary, there’s been too few homes for sale and a mortgage market dominated by 30-year fixed mortgages priced at all-time lows.
To that end, how many existing homeowners with 2-3% 30-year fixed mortgages and tons of home equity are going to lose their homes if the housing market cools?
In 2007/2008, the typical homeowner had no equity, an option ARM for a mortgage, and wasn’t qualified to be in the property to begin with.
There was also a huge oversupply of homes on the market and more actively being built, which led to the worst housing bubble burst in recent memory.
This doesn’t mean home builders today won’t have to lower prices, or that prospective buyers will walk away from purchases.
That likely will happen as home price appreciation comes to a halt. And you’ll see all the negative headlines regarding the housing market along the way.
But unless something significant takes place, a housing bubble burst doesn’t appear likely at this juncture.
It’s good to be a homeowner these days. After all, home prices are rising at an incredible pace, and have been for nearly a decade now since bottoming out.
On top of that, many of today’s homeowners hold fixed-rate mortgages with ultra-low mortgage rates, making it very affordable to own rather than rent.
Unfortunately, the same can’t be said of those looking over the fence, or sitting on the fence, wondering if they too should make the move to homeowner.
One of the biggest hurdles to homeownership that continues to worsen is the pesky down payment.
And as property values increase, so too does the minimum amount required to get a mortgage, assuming a down payment is needed, which it often is unless you’re taking out a USDA loan or VA loan.
This has made it more and more difficult for renters to become homeowners, despite mortgage rates being at/near all-time lows.
It also highlights the fact that low mortgage rates, while certainly great, aren’t a be-all, end-all solution to affordable housing.
Home Price Gains Outpace Mortgage Rate Discounts
Median monthly mortgage payment on an existing single-family home increased to $1,059 in Q3
That number was up from $1,019 in the second quarter and $1,032 in Q3 2019
Mortgage payments accounted for 15.6% of income in Q3 based on median income of $81,477
That was up from 14.8% in the second quarter unchanged from a year ago
In the National Association of Realtors (NAR) latest statistical release, they noted that the median existing single-family home price surged 12.0% on a year-over-year basis to $313,500.
These home price gains were seen all throughout the country, with double-digit year-over-year increases in the West (13.7%), Northeast (13.3%), South (11.4%), and the Midwest (11.1%).
Meanwhile, home prices are growing four times as fast as median family incomes, which have only ticked up about 2.9%.
Still, with mortgage rates so low at the moment, the monthly mortgage payment on an existing single-family home has only increased to $1,059 from $1,019 a quarter earlier and $1,032 a year ago.
For most prospective home buyers and existing homeowners, this is probably incidental, and not a deal-breaker in terms of qualifying for a mortgage.
But NAR chief Lawrence Yun still remarked that “housing prices are increasing much too fast.”
Interestingly, the low mortgage rates are a double-edged sword because they’re continuing to lure buyers to market, thereby increasing demand and raising home prices in the process.
So while you might get a lower mortgage rate, you’ll pay more for the house, assuming you don’t already own it.
In fact, 65% of metro areas , or 117 areas out of 181, experienced double-digit price gains from one year ago.
These are the hottest metros nationwide when measuring home price growth from the third quarter of 2019 to the third quarter of this year.
Shockingly, home values were up nearly 30% in Bridgeport, Connecticut, which certainly doesn’t sound like healthy home price appreciation.
Yun noted that home prices have “jumped” in cities that contain larger properties with more open space, a symptom of the ongoing COVID-19 pandemic.
More frightening is the continued lack of housing inventory – at the end of the third quarter there were just 1.47 million existing homes available for sale, which was down a whopping 19.2% from a year earlier.
That represented just 2.7 months at the current sales pace, as of September 2020, which tells you why it’s overwhelmingly a seller’s market still.
Sure, you can probably get your hands on a super low mortgage rate, but good luck finding a house if you don’t already own one!
Read more: Would You Rather Have a Low Mortgage Rate or Pay a Lower Price for a Home?
Union Home Mortgage (UHM) has announced that Matt Roberts (pictured) will move into the role of regional manager to spearhead new growth in the Pacific Northwest region. In his new position, Roberts will oversee sales growth across the West Coast, including Alaska, Arizona, Colorado, Idaho, Montana, Nevada, Oregon, Utah, and Washington. Roberts joined UHM in … [Read more…]
Compared to banks, credit unions offer more individualized service. Plus, many of them also provide lower fees and higher rates on certain accounts. However, you must become a member of a credit union to utilize its services. In most cases, credit union membership is reserved for people who live, work, and worship in a certain area.
Some credit unions are also geared toward those in specific professions, like education or law or anyone who makes a donation or joins an organization. You’ll be pleased to learn that most credit unions have made their membership criteria more lenient and opened up their offerings to more types of people. In fact, many of them are quite easy to join.
14 Best Nationwide Credit Unions
While many credit unions are small and can only be found in select local areas, there are quite a few that are nationwide. If you travel frequently for work or pleasure, you might be in the market for nationwide credit unions.
Fortunately, most credit unions that have a nationwide presence are easy to join and offer a variety of benefits. To make your search for the best federal credit unions a bit easier, we’ve compiled this handy list.
1. Connexus Credit Union
Headquartered in Wisconsin, Connexus Credit Union is known as one of the largest credit unions in the U.S. It has over 400,000 credit union members across all 50 states. This is no surprise as it partners with well-known companies, such as Liberty Mutual Insurance, Kraft, Honeywell, and BMW.
To join, you’ll need to qualify through your employer that’s one of the credit union’s partner companies or donate at least $5 and open an account. As a credit union member, you can enjoy high APYs on checking accounts and other deposit accounts as well as low rates on mortgages, personal loans, and car loans.
The Xtraordinary Checking Account offers an APY of up to 1.75% on certain balances so you can make the most out of your hard earned money. White you don’t have to pay any fees, Connexus does require that you spend a certain amount on your debit card and sign up for eStatements to take advantage of the interest.
Furthermore, if you don’t use your checking account for more than 90 days and have a balance of $100 or less, you may have to pay an inactivity fee. Connexus has more than 5,600 shared branches and over 67,000 fee-free ATMs. Plus, the credit union offers higher rates and exclusive discounts throughout the year.
2. Navy Federal Credit Union
If you’re part of the military community, Navy Federal Credit Union should be on your radar. You can become a member if you have an active duty or reservist military member, worked for the Department of Defense, or are the immediate family member of someone eligible for membership. You’ll also be required to open a Navy Federal savings account and make a minimum deposit of $5.
The credit union has about 350 physical branches worldwide and many of them are near military bases in Maryland, Virginia, and California. There are also more than 30,000 fee-free ATMs. If you like to do your banking on your mobile device, you’ll be pleased to know that there is a highly rated app.
If you join Navy Federal Credit Union, you can enjoy no monthly fees or minimal fees on basic savings or youth savings accounts. NFCU also offers several checking accounts as well as competitive rates for share certificates, which are basically certificates of deposits (CDs).
3. Consumers Credit Union
Based in Illinois, Consumers Credit Union has 11 branches in the Chicago suburbs but opens its membership to anyone in the country. All members get access to more than 5,000 shared credit union branches and over 30,000 ATMs.
To join, simply pay $5 and fill out a short application form. Consumers offers some of the highest annual percentage yields or APYs on its rewards checking accounts. However, it requires that you make at least 12 debit card purchases per month, enroll in eDocuments, and have a monthly minimum of $500 in ACH deposits, direct deposits, and mobile check deposits.
If you prefer, you can choose from a no-frills checking account that doesn’t earn any interest. Other product offerings include four savings accounts, IRA certificates, and money market accounts.
4. Pentagon Federal Credit Union
Founded in 1935, PenFed Credit Union is known as one of the largest credit unions in the country. It serves more than 2.8 million members and has over $36.6 billion in assets. While this best credit union was originally only available to military members and their families, it eventually opened the doors to anyone. You can join as long as you deposit $5 into a savings account.
As a PenFed member, you can reap numerous benefits, including great rates on checking accounts, savings accounts, and money market certificates. In addition, you can sign up for early direct deposit and access more than 85,000 fee – free ATMs across the nation.
Even though PenFed is not part of a shared branch network, like other credit unions, it pays high rates, and has about 40 of its own branches throughout the U.S. There’s also a solid mobile app and customer phone support with evening and weekend hours.
5. SkyOne Federal Credit Union
SkyOne Federal Credit Union is one of the best credit unions and has a mission to help families become financially stable. It serves more than 40,000 members with $600 million in assets. Since its inception in 1949, SkyOne has offered a robust lineup of financial products, like interest-bearing checking accounts, money market accounts, credit cards, mortgages, and car loans.
Its share certificates come with exceptional rates that you might not find at other credit unions. SkyOne also has a free mobile banking app, a plethora of free educational tools, and a network of thousands of credit union branches for easy access.
The main downfall of this credit union is that it’s geared toward those who work in the air transportation industry so you might have a difficult time qualifying. Fortunately, membership has recently become a bit more lenient to accommodate more people.
6. Alliant Credit Union
Illinois-based Alliant Credit Union has more than 700,000 members across the country. Unlike other credit unions on this list, Alliant operates strictly online. If you like the idea of online and mobile banking, this credit union should definitely be on your radar. Its online accounts pay highly competitive interest rates that can be as much as 22X the national average.
Plus, you don’t have to worry about overdraft or ATM fees. You can also score up to $200 per month in ATM rebates. While its checking and savings accounts are the most popular products, Alliant also provides mortgages, auto loans, personal loans, and credit cards. At this time, Alliant does not offer any no-penalty or specialty CDs.
Customer service is available 24/7 and there’s also an online contact form you can use for less pressing questions or concerns. To become a member, join Foster Care to Success (FC2S). Once you do, Alliant will pay the $5 membership fee to the organization for you.
7. First Tech Federal Credit Union
First Tech Federal Credit Union made its debut in 1952 when it was first founded by employees of Hewlett-Packard and Tektronix. Today, the credit union partners with large companies, like Hewlett-Packard, Amazon, Microsoft, and Nike. You can join as long as you work at one of its partner firms or become a member of the Computer History Museum or Financial Fitness Association.
There are 33 branches, mainly in California, Washington and Oregon, but with several locations across Colorado, Georgia, Idaho, Massachusetts and Texas. As a member, you can enjoy in-person service at more than 5,600 Co-op Shared Branch locations in the U.S.and access your money at over 30,000 free ATMs.
It offers a long list of financial products, like checking accounts, savings accounts, credit cards, loans and investment accounts. Most of these offerings come with low minimum opening balance requirements and no monthly maintenance fees. First Tech Federal Credit Union is unique in that there are many business banking services that are rarely seen at other credit unions.
9. Bethpage Credit Union
While it is located in New York, Bethpage Credit Union opens its membership to anyone who makes a $5 payment, regardless of where they live. The credit union partners with hundreds of other credit unions to offer access to more than 5,000 branches and over 30,000 fee free ATMs. Virtual visits by phone and video appointment are also available.
Bethpage’s product lineup includes three checking accounts, four savings accounts, share certificates, and money market accounts. Believe it or not, even the free checking accounts pay interest. In addition to deposit accounts, the credit union provides mortgages, home equity lines of credit (HELOCs), car loans, auto refinancing, personal loans, retirement planning, health savings accounts, IRAs, and insurance.
You can access your accounts on the go with the handy mobile app, which includes convenient features, such as budgeting tools, online bill pay, and budgeting tools. Bethpage also offers access to a digital wallet and Zelle money transfers.
10. Latino Community Credit Union
Headquartered in North Carolina, Latino Community Credit Union has 15 branches in the state as well as 1,300 free ATMs through the CashPoints network. While it was originally built for the Latino community, you don’t have to be Hispanic or live in North Carolina to join. All you have to do is submit an application and pay a $10 membership fee.
Latino Community Credit Union is federally insured by the National Credit Union Administration (NCUA) and offers 24/7 customer service via phone. Compared to brick-and-mortar banks, it provides competitive interest rates and accounts with low minimum opening balance requirements.
If you’re part of the Hispanic community, you may also benefit from services in both Spanish and English as well as a financial literacy education program that’s focused on low-income Latino families and immigrants.
11. Boeing Employees’ Credit Union
If you’re a Boeing employee or live or work in Washington, Boeing Employees’ Credit Union can be a good fit. Just keep in mind that you’ll be required to open the Member Advantage Savings account, Member Share Savings account or Early Saver account.
You can enjoy nationwide access to more than 30,000 free ATMs, discounts on local events, such as sporting games and fairs and impressive rates on CDs, money markets and IRAs. Plus, there are no monthly service fees or minimum balance requirements.
Other noteworthy perks include free credit score monitoring, Zelle payments, online bill pay, and budgeting tools. You can find more than 50 physical branches in Washington as well as one location in North Charleston, South Carolina, for in-person banking.
12. Blue Federal Credit Union
Blue Federal Credit Union began as Warren Federal Credit Union and has been in business for more than 70 years. It offers more products than most credit unions, including checking accounts, savings accounts, credit cards, home loans, personal loans, and investment banking. This is great news if you’d like the diverse offerings that are widely seen at banks at lower price points.
In addition to a vast selection of financial products, Blue Federal Credit Union provides rates as high as 2x to 5x higher than the national average and access to thousands of partner credit unions across the nation. Thanks to the tiered membership rewards program, you can earn great rewards.
To join, donate to the Blue Foundation and open a Blue FCU Membership Share Savings account. Once you’re a member, you can bank online, visit branches in Colorado or Wyoming, or go to shared branches across the U.S.
13. Wings Financial Credit Union
Wings Financial Credit Union is worth exploring, even if you don’t work in the aviation industry. It has more than 26 branches in Minnesota, Michigan, Florida, Georgia, and Washington. Not only is it NCUA insured, it’s part of the Allpoint, CO-Op, and MoneyPass ATM networks that offer access to more than 80,000 free ATMs.
To become a member, you should live in work in an eligible location, work in the aviation industry, or make a $5 donation to Wings Financial Foundation, a non-profit organization that offers financial education programs and college scholarships.
The credit union pays high interest rates on many of its accounts and doesn’t charge monthly service fees. Depending on your goals, you can open the Wings Financial High-Yield Savings Account, Wings Financial Credit Union High-Yield Checking Account, Wings Financial Investment Money Market Account.
14. NASA Federal Credit Union
NASA Federal Credit Union dates back to 1949 when it first launched to serve NASA employees. Over time, the credit union has expanded and has more than 140,000 members to date. You can join even if you’re not affiliated with NASA as long as you become a member of the National Space Society.
Popular product offerings at NASA Federal Credit Union include the Premier Checking, Premier eChecking, Premier Preferred Checking, Shared and Special Savings account or Education Savings Account.
We can’t forget the Star Trek credit cards which offer 2x points for gas station purchases, and 3x points for purchases at StarTrek.com. Furthermore, if you spend $3,000 in the first 90 days, you get a bonus of 30,000 points. You may redeem your points for merchandise, gift cards, and more.
Credit Unions vs. Banks
If you’re used to banks or unfamiliar with credit unions, you might wonder how credit unions and banks compare. The truth is both types of financial institutions offers similar products, but there are several differences between them, including:
Financial Products
In general, banks offer more financial products and services than credit unions, especially large banks with a national presence. Credit unions primarily focus on checking accounts, savings accounts, and credit accounts. While loans and investment products are less common, they can still be found at some credit unions.
Rates and Fees
Banks tend to charge higher rates and fees than credit unions. However, online banks are usually more affordable and comparable to credit unions as they have lower overhead costs. It’s a good idea to shop around so you can compare rates and fees at a variety of financial institutions and hone in on the best option.
Technology
Credit unions typically are less technologically advanced than banks. The good news is more and more credit unions, especially those with a nationwide presence, are improving their technical offerings. Many of them offer mobile apps, online bill pay, and other advanced banking tools that were unheard of in the past.
Bottom Line
With this list of the best credit unions nationwide, you’re sure to find a credit union or two that checks all your boxes. Whether you’re new to credit unions or have used them for a while, these types of financial institutions can help you meet (or even exceed) your personal finance goals.
Credit Union FAQs
What is the difference between a bank and a credit union?
While a credit union is a member-owned, non-profit institution, a bank is a for-profit financial institution that is owned by shareholders or individuals. Credit unions are known for more personal service and flexibility. Whether you use a bank or credit union depends on your unique goals and priorities.
Do I have to join a credit union?
All credit unions may have certain membership requirements. Fortunately, many are lenient and let you join if you make a donation or pay a fee. Some credit unions will pay for you once you make a deposit into an account. Of course, some credit unions limit membership to people in certain geographical locations or professions.
Do credit unions have ATMs?
Yes! In many cases, credit unions partner with a large network of ATMs. This makes it easy for you to access your money regardless of where you are.
Are credit unions insured?
Reputable credit unions are insured by the National Credit Union Administration or NCUA, which is similar to the Federal Deposit Insurance Corporation or Federal Deposit Insurance Corp of traditional banks. This means if the credit union fails because of bankruptcy, for example, you’ll get your money back.
Are credit unions online?
While credit unions have a reputation for in-person branches with individualized service, online credit unions do exist. Several examples include Alliant Credit Union, Connexus Credit Union, and Quorum Federal Credit Union. If you like the idea of online banking, an online credit union might make sense.
What is the best nationwide credit union?
Not all nationwide credit unions are created equal. In fact, there are many options available with various pros and cons. To pinpoint the ideal online or local credit union for you, explore the institutions on this list and consider your priorities. Remember, you can join multiple credit unions if you’d like.
For those looking to build their dream home, purchasing land is usually the first big step.
While building a house is far from easy, there are ways for first-time homeowners to make their dreams achievable. Land loans are a great resource, often used in conjunction with a traditional loan. Anyone choosing to build a house is likely to at least consider applying for a land loan.
A land or lot loan is a great financing option for those who have always dreamed of buying land and building their own home.
11 Best Banks for Land Loans
Because land loans typically carry higher interest rates than traditional mortgage loans, it pays to carefully consider the pros and cons of several lenders.
Below we’ve compiled a detailed list of the banks and credit unions offering the best land loans available today. Whatever lender you choose, be sure to check beforehand that they are fully licensed to provide mortgage loans.
The Nationwide Mortgage Licensing System (NMLS) is a centralized database of licensed lenders which you can use as a reference.
1. Atlantic Union Bank
Atlantic Union Bank offers land loans for both residential lots and undeveloped land. The bank is based in Virginia.
There are also separate construction loans available for those interested in financing the construction of a residence. Bear in mind that while Atlantic Union has a strong reputation as lenders, having been in business since 1902, they don’t have services like loan calculators, interest rate guidelines, or down payment information on their website.
For more information on a land loan with Atlantic, you’ll need to call them or visit a local branch to speak about a land loan.
2. Old National Bank
Old National Bank is headquartered in Indiana, and has been in operation since 1834. They offer lending products and services to residents of Indiana, Minnesota, Wisconsin, Michigan, and Kentucky. Old National has two different types of financing for land on offer, depending on the size of the property you’re interested in:
Lot Loans are designed to finance land purchases of no more than 5 acres, requiring a 20% down payment.
Land Loans are for larger property, designed to finance land purchases between 5 and 25 acres. These loans come with a minimum down payment of 35%.
Both land and lot loans with Old National will carry various interest rates and repayment terms. You can get either of these loan types for both improved and unimproved land, and there is no obligation to immediately begin building once a loan is secured.
Old National Bank also has around 250 brick-and-mortar locations since merging with First Midwest Bank. If visiting a local branch to speak with a loan officer is your preference, you shouldn’t have to travel too far.
On the other hand, you also have the option of using Old National’s online loan calculator and online loan application service, if visiting a local branch isn’t convenient.
3. Mountain America Credit Union
Mountain America Credit Union is a federally chartered credit union regulated by the National Credit Union Administration (NCUA) and headquartered in Sandy, Utah. They locations across Arizona, Idaho, Utah, Montana, Nevada, and New Mexico.
Mountain America’s lot loans are available with 85% financing on approved credit, fully amortizing fixed-rate and balloon options, and an easy online application process. The loans are designed to be easily converted to a construction loan, ensuring that you can move forward with your home building plans when you’re ready.
4. WaFd Bank
WaFd, or Washington Federal, offers bank loans for improved land up to the value of $700,000, without any immediate obligations to build.
You can use their online loan calculator to receive an estimate of the interest rates you can expect for a land loan. These estimates are based on your credit score, development plans and the specifications of your desired property.
The minimum down payments and interest rates will vary depending on your ideal loan term, as well as all the other details of your application.
You can apply directly for loans through their online portal, as well as in person at a bank branch. Land loans are available from WaFd Bank only in the following states: Washington, Idaho, Nevada, New Mexico, Oregon, Texas and Utah.
5. Banner Bank
Banner Bank is active in the states of Idaho, Washington, Oregon, and California. They offer financing for purchasing both improved and unimproved land. Banner allows customers to borrow up to 75% of a property’s purchase price, and they also claim to bring competitive interest rates and fees.
All loans with Banner Bank are approved in-house, which means a streamlined credit score check and loan approval process.
If you do apply for a loan with Banner Bank, you also have the option of locking in a fixed interest rate or a flexible rate. Banner also offers financing for construction and personal loans.
6. California Bank & Trust
Customers with California Bank and Trust can potentially avail of both a land loan and a construction loan in one. The bank offers financing for up to 60% of the lot purchase value, along with several loan options.
The option to choose either a single or dual-purpose loan, which can cover both land purchase and construction of a home, makes California Bank & Trust an attractive lender. This is a great option for those looking to save both time and money.
You can apply for a loan online, over the phone, or in person at a local branch.
7. Randolph-Brooks Federal Credit Union
Randolph-Brooks Federal Credit Union is not your typical financial institution. As a financial cooperative, its sole mission is to help members save time, save money, and earn money. Over the years, the credit union has expanded its reach to over 1 million members in Texas and beyond, with a strong presence in Austin, Corpus Christi, Dallas-Fort Worth, and San Antonio.
With over 60 branches dedicated to serving members and the community, RBFCU offers a range of land loan benefits and features, including term options up to 15 years, free 60-day rate lock, and up to 90% financing.
And the best part? There are no building requirements from the lender, so you can have the freedom to build your dream home the way you want. Set up automatic payments and let RBFCU help you make your land ownership dreams a reality.
8. Citizens Bank & Trust
Citizens Bank & Trust is a North Alabama-based institution that’s committed to providing a hassle-free lending experience. What’s more, you can roll your loan into a permanent one, saving you on closing costs.
With local decision-making and processing, you’ll get the personalized attention you deserve, while a streamlined application process ensures you get your funds when you need them. You can experience a stress-free borrowing experience when you choose Citizens Bank & Trust for your land loan needs.
9. Alpine Bank
Alpine Bank is active in Colorado, offering financial services including land loans. Specifically, they offer loans for both lot and new constructions, with a maximum loan to value amount of 75% for land classified as improved.
Alpine Bank doesn’t offer lending details on their website. You can use their website to connect with lending experts in your county. You can also reach out for more loan information online, over the phone, or in person at one of their local bank branches.
10. First Bank & Trust
If you’re looking to buy land or a lot and build your dream home, First Bank and Trust Company can help. Headquartered in southwest Virginia, with additional locations in Tennessee, North Carolina, and Virginia, the bank is committed to helping you realize your homeownership goals.
With a range of lot and land loans, you can choose the financing option that’s right for you, while enjoying competitive rates and flexible terms. Whether you’re looking to build your dream home or invest in a piece of land, First Bank and Trust Company has the financing options you need to make it happen.
11. First Hawaiian Bank
First Hawaiian Bank offers land loan options designed for those who are ready to buy land but not quite ready to build. With 2- and 3-year terms available and no prepayment penalty, you can secure the land you want without worrying about costly fees. And with interim financing available to purchase a vacant lot at residential pricing, you can lock down the land you need to bring your vision to life.
Best of all, your FHB land loan can be refinanced into a construction-to-permanent loan with reduced fees, making it easier than ever to get the financing you need to build your dream home.
What are land loans?
Land loans are loan products designed to help individuals and businesses purchase land for development. A bank, credit union, or online lender can offer specific loans for those interested in buying land. Land loans are also known as ‘lot loans’.
Similar to a mortgage loan, land loans provide individuals and small businesses the opportunity to finance the purchase of land for many purposes, such as investment, agriculture, recreation, or development.
However, because these types of loan are considered riskier for lenders, they typically come with a higher interest rate compared to a mortgage loan. In addition, the conditions of the loan will depend on the type of land being purchased, as well as what the land will be used for.
Let’s take a closer look at the types of land that a land loan can help finance.
Types of Land Classification
Your chances of obtaining financing for land will depend partly on the type of land you want to purchase. In general, lenders who offer land loans will view developed land as less of a risk than undeveloped land.
When it comes to land loans, there are three primary types of land considered for financing.
Raw Land
‘Raw land’ is the first classification and refers to completely undeveloped, rural land. Think no buildings, electricity or drainage system. This is the most difficult land to obtain financing for because land loan lenders view it as the greatest risk of abandonment.
As a result, if you plan to apply for a land loan for raw land, you’ll need to demonstrate that you’ve got a detailed plan for development. Showing lenders that you’re competent and dedicated to the project will help you navigate the lending market.
Although the purchase price of raw land is often cheaper than land that is developed, a raw land loan will come with higher rates. You may also be required to put up a more substantial down payment.
Unimproved Land
‘Unimproved land’ is a step up from raw land, and covers a broad variety of possibilities. Unimproved land will often be land that was once developed, or has seen failed attempts at development in the past. In some cases unimproved land will have some limited access to utilities and amenities, but will need significant repair and refurbishing.
An unimproved land loan can also be difficult to get, even though it poses less risk compared to raw land. Again, having a detailed plan and being aware of the challenges at hand will be a huge help when negotiating with lenders. A large down payment and a strong credit score will also be helpful.
While lenders tend to view unimproved land loans as less risky than raw land, it is still common for rates to be a fair bit higher compared to traditional mortgage rates, for example.
Improved Land Loan
‘Improved land’ typically has decent or good access to utilities, roads and water. Because improved land is the most developed land type, it almost always comes with a higher price tag. On the other hand, this means that interest rates will be significantly lower compared to raw or unimproved land loans. You’ll also find more affordable down payments for developed lots.
For most aspiring homeowners, purchasing land that is already developed with access to basic amenities is the ideal. This allows them to immediately get to work building a house, whereas having to develop land first could add at least another year to their construction project.
How to Apply for a Land Loan
If you want to buy land and build your dream home, you’ll probably want to apply for a land loan. Land loan applying isn’t complex, and land loans work the same as many other types of loan. Here are the steps involved:
Find a Plot
You should start by first identifying the plot of land you want to buy. It helps to have a few options chosen in advance. For example, in the event that you can’t afford to find a good lending option for your first choice, you can quickly move on to an alternative instead.
Draw up a Development Plan
The next step is to make a development plan for each plot that you have on your shortlist. You may need or want to hire professional help to create a solid plan. Try to include as much detail as possible, without overextending yourself or wasting too much time and money.
When it comes to development and construction plans, both an estimated timeframe and overall cost range are the most important details. A good plan will help you negotiate the best rates with a lender.
Find a Lender
Once your development plan is ready, it’s time to seek potential lenders. Depending on the type of development you’re proposing, as well as the type of land you want to buy, it may take some time to find willing lenders.
Be prepared to also take some time to consider more than one loan offer. Ideally, you can compare multiple lenders, and use a pre-approved quote from at least one lender to negotiate against others.
Complete the Application Process
Once you’ve chosen a lender and been approved for your loan, you’ll be guided through the lender’s application process. The majority of lenders will require information such as your development plan, a credit check, and personal information.
You might also need to provide details on things like zoning considerations, utilities access and land use restrictions, where relevant.
Alternative Land Financing Options
In addition to seeking a land or construction loan, there are several other types of loans and financing options available.
USDA Loans
If you’re looking to own land and build a home in a rural area, you may be eligible for a USDA loan. The U.S. Department of Agriculture offers loans that may assist low and moderate income families in finding a new home. USDA Section 523 loans are for wanting to purchase land to develop, and Section 524 loans are for financing new constructions by contractors.
While it isn’t easy to qualify for a USDA loan, the benefit is they require no down payment and the interest rates are low. USDA loans must be settled within two years, however, so there are no long term options.
FHA Loans
Another government-funded product, FHA loans are tailored towards those wanting to buy land and quickly build a home. The Federal Housing Administration insures these loans, protecting FHA-approved lenders from risk.
FHA loans are not available for land purchase alone, but for those intending to build a home on as well as land. FHA loans are sometimes granted in conjunction with construction loans, too. If you’re eligible for one of these loans, you’ll likely have a lower minimum down payment, but potentially higher interest rates.
Home Equity Loans
Home equity loans may be an appealing alternative to land loans for some homeowners. If you already own a property and have good credit standing, this kind of loan might be a good fit. A home equity loan acts as a second mortgage, and will essentially convert your equity into collateral for a new loan to fund your purchase.
Cash-Out Refinancing
Cash-out refinancing involves homeowners refinancing their homes to increase equity. This type of refinancing is essentially paying off your current mortgage to secure another mortgage, but with a lower interest rate and easier monthly payments.
Once the remortgaging is made official, your bank or financial institution will issue you a check based on the equity in your property. You can then use this payment to fund your land purchase.
SBA Loans
The Small Business Administration (SBA) offers loans to small business owners from the 504 loan program.
These loans are best suited to the purchase of real estate for business reasons, so they are not ideal for regular homeowners. However, if you’re looking for land to purchase to grow your business, you might want to consider an SBA loan.
Generally, the Small Business Administration will cover 40% of the purchase value, with 10% from the borrower and another lender of choice providing the other half of the loan. The terms and rates on SBA loans vary depending on the lender you choose to fund 50% of the land purchase.
Seller Financing
If you’re lucky, you may be able to obtain financing directly from the landowner you want to buy from. Also known as land contracts, these types of loans involve the buyer essentially taking out a loan directly from the seller, often with a substantial down payment.
Seller financing also tends to come with less than competitive interest rates. For those who struggle to qualify for a traditional mortgage or financing, seller financing can often be a great, but more costly, alternative.
Frequently Asked Questions
What is the best loan for buying land?
The best loan option for buying land depends on your circumstances. While improved land loans may seem ideal, the reality is there are multiple loan options to choose from.
Your credit score, debt-to-income ratio, and the condition of the land you wish to purchase are all factors that can influence which type of financing will suit you best.
Is it difficult to get a loan for land?
It’s true that obtaining loan financing for the purchase of land isn’t as easy as getting a regular personal loan. However, there are lenders out there with experience financing land purchases. As with any loan, the bottom line will be your credit score, as well as the size of your down payment. The nature of the land in question is also a primary factor.
If you can’t qualify for traditional financing options, there are alternatives such as USDA loans, FHA loans and more to consider.
Throughout my military career I’ve constantly been surrounded by acronyms. The Army is notorious for them: APFT, MOPP, PMCS, AWOL. These are just a handful of the thousands of them that exist. Some I know. Most I don’t. I was constantly having to research what the heck most of them stood for.
While acronyms were expected in the military, I didn’t imagine how prevalent they would be in the financial services industry. One of the acronyms that I came across that I felt like I was in the military again was QDRO. What makes it even more confusing is that I’ve heard it pronounced both “Quid-dro” and “Quad-dro”. What’s the correct pronunciation? The jury stills out on that one.
What is a QDRO?
And exactly what does it have to do with your 401K or pension plan? A QDRO is a Qualified Domestic Relations Order from the court which indicates the beneficiaries of your retirement account, other than you. These beneficiaries are also called “alternate payees” and this comes into play should you and your spouse get a divorce.
Usually, the beneficiaries of your retirement account(s) might be your spouse, child or other dependent, or a former spouse, and the QDRO will define how each of these people receive distributions from the retirement account through child support or alimony payments and/or property ownership.
It’s necessary that the information in the QDRO is followed exactly in order to minimize your potential to paying penalties on money you don’t even receive from your 401k plan.
The Importance of a Qualified Domestic Relations Order
If you should go through a divorce, the QDRO becomes extremely important. Following the QDRO is the key to avoiding 10% early withdrawal penalties imposed by 401k plans, because if you don’t follow the QDRO you can be taxed on money taken from your 401k even if it landed in the hands of your beneficiaries! Make sure to enlist professional help (either through your 401k plan administrator or a tax professional) to minimize your own tax implications of having to distribute your 401k to alternate payees due to divorce.
Take Steps to Verify Information in the Qualified Domestic Relations Order
If your 401k plan is subject to a QDRO during a divorce (typically if you have been married at least 5 years before getting divorced), you want to give the administrator of your 401k a copy of your QDRO. This allows them to carry out the order. They’ll review the QDRO to ensure it’s valid within 18 months and determine whether or not any payments must be made to beneficiaries. You’ll receive notification of any alternate payee (beneficiary) receiving funds from the 401k, and provided the QDRO was followed correctly, you will not have to pay a 10% early withdrawal fee from the withdrawal of the funds distributed to your beneficiaries.
The few QDRO’s that I’ve dealt with had been drafted directly by the attorney. All I had to was open the appropriate account (in my cases they were IRA’s) and the money was transferred directly in. I like simplicity 🙂
Who Receives Money From Your 401k After Divorce?
Where you live will determine how your 401k funds are distributed after a divorce. Most states have equitable distribution rules, which means your 401k is divided 50/50 between you and your ex-spouse – but it depends on how long you were married and how much was contributed, as well.
Some ex-spouses win 50% of a 401k plan even in states without equitable distribution rules, during the divorce proceedings. If you live in any of the following states, you can count on paying out half of your retirement to your ex-spouse: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. These are “common property” states.
For the QDRO cases I’ve worked in, all have been in the state of Illinois. Although, not a “common property” state, each spouse did receive 50% of the retirement account balance.
What About QDRO’s and Pensions?
QDRO’s are most commonly associated to 401k’s, but while I was doing my research I learned that they can also apply to pensions. According to the PBGC.gov website here are three items that QDRO’s must do:
Identity of the plan participant, each alternate payee, and each pension plan. A QDRO must specify the name and last known mailing address of the plan participant and each alternate payee covered by the order. A QDRO also must identify the name of each plan to which the order applies—this should be the plan’s formal name.
Amount to be paid and when payments start. A QDRO must state how much of the plan participant’s benefit is to be paid to the alternate payee, such as a dollar amount or percentage of the benefit, or make clear the manner in which the amount is to be determined. A QDRO also must specify or allow the alternate payee to choose when payments to the alternate payee will start.
What happens on the death of the plan participant and the alternate payee. A QDRO should specify whether the alternate payee will be treated as the participant’s spouse for purposes of any survivor benefits. A QDRO also should specify what happens to benefits when the alternate payee dies.
What a QDRO Must Not Require
There is sometimes a misconception on what a QDRO must and must not do. The PBGC.gov site offers what a QDRO must not require the PBGC to do:
pay any benefits not permitted under ERISA or the Code;
provide any type or form of benefit, or any option, not otherwise provided by PBGC;
pay benefits with a value in excess of the value of benefits that would otherwise be payable by PBGC;
pay benefits to an alternate payee when those benefits are required to be paid to another alternate payee under an order previously determined to be a QDRO;
pay benefits to the alternate payee for any period before PBGC receives the order;
pay benefits as a separate interest to the alternate payee if the participant is already receiving benefit payments; or
change the benefit form if the participant is already receiving benefit payments.
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.
Over the past few months, I’ve occasionally used the “Ask the Readers” feature at Get Rich Slowly to poll people about their budgets and spending habits. So far, I’ve asked folks to share their spending on food, clothes, gifts, and health insurance. Now I want to look at a bigger item in your budget — probably the biggest. Let’s talk about how much you spend on housing.
More than other expenses, your housing costs are influenced by where you live. Some parts of the country — and some parts of the world — are much cheaper to buy a home or to rent an apartment. It’s cheaper to live in Boise, Idaho, for instance, than to live in New York City. Generally, however, there are reasons for these price disparities. Most people are willing to pay more to live in New York than in Boise, and that drives prices higher. It’s a trade-off.
I’m a firm believer in the Balanced Money Formula, which says that if you pay too much for housing, you’ll have less to spend on other wants and needs, and you’ll always feel pinched, as if you can’t afford anything. On the other hand, if you limit your housing expense to below 25% of your take-home pay, you should have lots of breathing room.
For my own part, I pay a little more than I ought to for housing. After a few years of spending $0 per month (because we paid off the mortgage after selling the blog), I’m now paying $950 for my apartment in Portland. That’s 36% of my take-home pay, and a fine example of not practicing what I preach. But I’m able to get away with this because:
I’m still saving more than 20% of my income.
I have ample emergency savings.
The rest of my spending on needs is low.
My spending on wants is extremely low, and my relatively high housing expense doesn’t make me feel pinched.
As I mentioned before, this $950/month figure seemed high to me until I started comparing notes with other Portland renters. Yes, there are places that cost less, but they all involve compromises I’m unwilling to make right now. (The biggest compromise? Location. I want to be able to walk almost everywhere, and I can do that from this apartment. That’ll help me save money on auto expenses, which balances things a little.)
What about you? Where do you live and how much do you pay on housing? What percentage of your budget does this represent? Does your housing payment cramp other parts of your life? Or have you intentionally kept it low so that you can afford to spend on other things? If you were to start over again from scratch, what sorts of housing choices would you make? Would you rent? Would you buy? Would you move to another part of the country (or the world)?
Reminder: I’m not one of those who believes that buying a home is always best. Nor do I believe that renting is always best. Either can be a fine choice, but you have to be clear on your financial goals and you have to take into account your local real-estate market. To help make an informed choice, use something like the New York Times rent or buy calculator. In my case, I opted to rent.
National Mortgage News Editor-in-Chief Heidi Patalano joins Yahoo Finance Live to discuss the state of the housing market, including mortgage rates, pricing, and challenges for first-time homebuyers.
Video Transcript
– Keeping a close eye on the housing market, buyers are flowing into the new home market. Sales of new single family houses hitting in 683,000 during the month of April. This comes as mortgage rates continues to gradually trend higher again after a few weeks of declines. Rates on a 30-year fixed rate mortgage, they topped 5% for the first time in over a decade last year climbing as high as 7%.
For more on the housing market, we’re joined by Heidi Delano, who is the National Mortgage News editor-in-chief. Thanks so much for joining us on set.
HEIDI PATALANO: Thanks for having me. Great to be here.
– Certainly. So we were just diving into some of the numbers that broke this morning, particularly on the new home sales front. And one of the kind of figures that caught my eye here was the median sales price, that’s sitting at about $420,000 right now– so just shy of $500,000 there. And particularly, how that correlates to where people are finding mortgage rates.
You say in your notes to us they’re expected to remain volatile in the near term. But what about as we get towards the end of this year where there’s not as much buying that typically takes place towards that kind of latter half, or at least the third and fourth quarter of this year.
– Right. Well, there’s some reason for optimism for first-time homebuyers, those looking to get into their homes now or in the near future. As we’re noting, a lot of Fannie Mae is predicting that there may be a recession, of course, coming at the second half of the year. We’ve heard from the Mortgage Bankers Association, they expect rates to go down to about 5.6 by the end of the year, which should bring some people back to the table in terms of being interested in getting back in there and finally making an offer on a home.
So, you know, prices aren’t going to come down drastically from where they are now. They may come down a smidge– just a smidge. But really, there’s so much more demand than there are homes to be bought, so that’s really going to keep the prices pretty much where they are for the moment.
– Well, that and if we’re seeing mortgage rates come down, doesn’t that give a little room for prices to go up? In other words, when mortgage rates go up a lot, isn’t that a little bit of a curb to some extent on pricing because if you’re buying a house, you need a little bit more of an incentive on the pricing side?
– Right. Right. Absolutely. And you know, it’s interesting that across the country, every market is different. And we’re seeing more and more of that that every market has its own unique dynamics and there’s different things at play. For example, in Boise, Idaho, over the pandemic, the prices went up 70%. And now they’re coming back down. They came back down by about 8% from last year. So where there were huge increases, there is a little bit of a correction right now. And so yes, with rates coming down a little bit, they want to close that deal. It’s possible to maybe come down a little bit more on price.
– That might be a little bit of a correction, but like that’s not– I mean, if it went up 70% and it’s just coming down by 8%, that is still incredibly elevated. I mean, in other words, are you seeing as you look across the country, it doesn’t sound like that there is a, quote unquote, “normalization” to pre-pandemic levels certainly.
– Right. Certainly not. No. From the start of the pandemic, prices went up about 30%. And they’re only coming down just a little bit from that. They’re still way above historic norms. And so that’s actually really good for people who bought in the last few years. Of course, we don’t want to see people who have purchased over the past two to three years have their homes now drop in value drastically.
So this is actually good for the health of the overall housing market the fact that these prices aren’t coming down too much. But it’s also tough for the first-time homebuyers who are really having a hard time getting into those homes that are affordable to them.
– Something that we heard about within the earnings reports of Home Depot and Lowe’s was lumber deflation– that being one of the kind of common threads or denominators there. But how does that also play into potential new homebuyers as well who are looking for a home in the price that they may potentially pay?
– Right. There’s hope there. There’s some hope there. One thing that’s interesting about this market, you know, people in homes that exist today are not– they are not incentivized to move. So they’re staying put. And the things that are– the homes that are available to first-time homebuyers are those new ones, those brand new ones. Making them affordable at this time is, of course, still challenging because labor and materials are still quite high, but that’s where the real optimism is in the housing market for those new homes.
– I don’t know what kind of consumer surveys you guys do or you draw from. When people are making those decisions right now, is it rates? Is it price? Is it still location, location, location? Like, what are kind of what are people prioritizing, I guess?
– Right. I think it’s rates in some ways. Certainly for the people that do own a home now, they are not going to move right now. They’re going to wait to see what’s going to happen over the next couple of months. We’re really just in a holding pattern until the next Federal Reserve meeting and we see what they do in terms of raising the federal funds rate.
And for others, it’s a matter of relocating to a place that’s more affordable for them. Like, maybe the existing homeowner will move if they’re moving to a place where, you know, they can make up the difference in the higher cost of the new home because their overall cost of living will be lower. For first-time homebuyers, they want to get into this market no matter what. And so they’re just looking. And you know, certainly a lot of lenders are trying to come up with products that will help them to get into these homes.
You might have seen yesterday, Rocket launched a new product where they will help cover the 3% down that a homebuyer will need in order to get those people into those homes and make it more of a realistic proposition for them.
– Hopefully that doesn’t come back to bite on the other side. I don’t know.
– Yeah. Mortgage News Editor-in-Chief, Heidi Patalano, thank you so much for joining us here on set today. Thank you so much for having me.