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FEATUREBy Scott SteinbergPicking the right home lending program for you There are a variety of loan options that can help suit homebuyers of every life stage and need. More than 5.64 million homes sold in 2020 at a median price of $309,800, per the US Census Bureau, with property sales reaching their highest level since 2006 and mortgage rates continuing to hover around historical lows. In addition to first-time buyers seeking starter homes though, sales were also driven by shoppers seeking acquisitions that fit new stages of their life, from vacation and investment properties to spaces designed for downsizing and retirement. Happily for homebuyers, with most of us expected to move more than 11 times in our lifetime, and median homeownership lasting as little as six years, financing your next move needn’t be difficult. From breaks on down payments to lending solutions designed to offer you more flexible financing, a multitude of loan programs designed to suit every need can help you quickly identify a property and payment plan that works for you.
“There are several factors to consider when choosing a loan type, including your current life stage,” said Aubrey Magyar, Vice President of Lending for American Airlines Federal Credit Union. As an example, she said, for those starting out in their career, the security of a fixed-rate mortgage means a relatively lower monthly principal and fixed interest payment that won’t change over the life of the loan. Another borrower may prefer an adjustable-rate mortgage, which offers a fixed principal and interest payment for a number of years, then can later adjust depending on market rates, when your salary is hopefully higher. HOME LOAN OPTIONSFixed Rate – A conventional mortgage that maintains its original (fixed) interest rate for the entire 15-year or 30-year term of the loan. Typically secured with a 20% down payment.
Adjustable Rate Mortgage (ARM) – Offers a lower monthly fixed payment for a preset number of years before adjusting to a potentially lower or higher interest rate, depending on current market terms after this initial period expires.
Refinance – Allows you to buy out an old mortgage and secure a better rate or extended repayment period by applying for a new one.
Cash-Out Refinance – Leverages equity in your house to let you consolidate high-interest debt to a lower rate or perform home improvements.
80-10-10 Loan – Provides a way to buy a new home with less than a 20% down payment while avoiding private mortgage insurance (PMI) fees. You pay 10% down, then obtain a mortgage for 80% of the new home’s asking price, and a second for the remaining 10%.
Home Equity Line of Credit (HELOC) – Lets you borrow against current home equity to invest in a new property and repay this money over an extended period.
Other loan types – American Airlines Credit Union also offers access to other types of loans, including those that provide special offers for first-time homebuyers, or those seeking investment properties or vacation homes.Understanding your short- and long-term financial goals is crucial to picking the right plan, Magyar said. For example, if purchasing a vacation or retirement home, you may wish to capitalize on the Credit Union’s unique competitive-rate programs specifically geared to buyers. Likewise, if you’re seeking a starter property, you may wish to opt into the organization’s First-Time Home Buyer Program (which boasts low initial interest payments) or choose an 80-10-10 plan, which requires only a 10% down payment to start and helps you avoid primary mortgage insurance (PMI) costs.
Whatever your circumstances, it’s important to consider your current credit situation, seek mortgage preapproval from your lender prior to house shopping and keep three months of minimum savings on hand as an emergency cushion.
Whether you’re looking to apply for a first or second mortgage or want to refinance to obtain lower interest rates, you’re all but certain to find a plan that works for you. Just be certain to keep one eye on today’s financial targets and one eye on tomorrow’s when it comes to making investments, Magyar recommended. “Accounting for future goals [in addition to present-day ones] can greatly help you in achieving your objectives.”American Airlines Credit Union tools and resources Members on the Move: Puts you in contact with a personal program coordinator at no charge who can help guide you through selling your home or the home-buying experience. Connection Points*: Rewards points that can be redeemed for airline tickets, car rentals, gift cards, hotels, and more. You can earn up to 60,000 when you apply for a Visa® Platinum Rewards credit card. Rate modifications: Have an existing American Airlines Credit Union home loan and want to capitalize on all-time low interest rates? For a low fee, you can change your interest rate or loan program. The Navigator**: Get a personal financial check-up and wellness assessment, or access budgeting apps, money management resources, and coaching on-demand with this handy online tool that’s packed with interactive courses and offers personalized action plans. Educational seminars: Free educational seminars provided by Finance Wellness coaches and subject matter experts can help you quickly get up to speed on trending topics from finance to credit.*Connection Points are powered by CURewards. See Connection Point rules available on our website for complete program description at AACreditUnion.org/Connection-Points. **Powered by Enrich. Visa is a registered trademark of Visa International Service Association.Futurist and trends expert Scott Steinberg is the author of Fast >> Forward: How to Turbo-Charge Business, Sales, and Career Growth. Among today’s best-known professional speakers and trendspotters, his website is futuristsspeakers.com.