In a Nutshell: WyHy Federal Credit Union helps members throughout Wyoming secure desirable loans — even if they have credit issues. Low inventory has made securing a mortgage or a car loan more difficult. In response, WyHy FCU developed a robust homebuying program and offers educational resources to help members improve their credit scores. The federal credit union aims to be a partner that helps members on their credit improvement journeys.
Home prices around the US have seen rapid increases since 2019. Property values are at their highest since 2005, increasing more than 13% from March 2020 to March 2021. Those prices aren’t only in hot markets — valuations are rising from coast to coast.
But housing prices are not influencing all sectors of the homebuying market equally.
First-time homebuyers with poor credit may feel they’re out of luck when trying to purchase a home. WyHy Federal Credit Union helps would-be Wyoming homebuyers navigate that complex process, regardless of their financial standing. The federal credit union also plans to launch a traditional first mortgage product focused on Fannie Mae and Freddie Mac mortgages before moving on to VA and other mortgage types.
“We want to be good at one type first and start to grow the department. A lot of the counseling is going to come in, too,” said George Sellitto, Chief Lending Officer at WyHy.
The federal credit union also aims to help members with low credit scores understand the inherent responsibilities of taking on a mortgage. Loan officers explain how the mortgage process works, as the type of loan requires homeowners to have the necessary down payment. Borrowers also need to have the resources to make their monthly payments while keeping up with other financial obligations.
“We anticipate becoming involved in the education process. It fills a gap in the state of Wyoming. Very few credit unions have robust mortgage programs in this state,” Sellitto said.
Car Loans are Increasingly Competitive
In addition to a national home shortage, autos are also in limited supply, meaning that good credit has become increasingly important to secure a loan.
Cars are priced higher than they were before because of the shortage of computer chips produced during the COVID-19 pandemic. According to Kelley Blue Book, the average cost of a new car is more than $41,000 — the highest it has ever been.
In Wyoming, car prices are also inflated. For example, in Casper, new cars sell for many thousands above MSRP.
“We’re all experiencing growth issues. Whether you’re involved directly or indirectly, you’re affected by this chip shortage. The way car values are increasing, non-luxury vehicles are 130% or 140% higher than they were a year ago. Three-year-old used vehicles are insane,” Sellitto said.
Even used vehicles are increasing in price. Used car prices are 30% higher than they were before the COVID-19 pandemic.
Individuals with good credit can often comfortably afford that increase. But consumers with fair or poor credit are struggling more than ever.
“You’re not going to do a loan at 140% or 150% when they’re already upside down. We want to help you, but you need to be reasonable. You need to cut back your expectations — you’re not going to buy a $90,000 Cadillac. Start with a used Toyota Tacoma,” Sellitto said.
The increase in vehicle prices matters more to people with lower credit because they are adding so much cost in advance of the loan — up to 25 or 30 points.
Promoting Real-Time Financial Education
Sellitto said he doesn’t see vehicle prices dropping anytime soon. He said the earliest the issue could be rectified is fall of 2022, also suggesting that the chip shortage is more of a problem than many people know.
Competition for housing isn’t likely to diminish either. The currently low mortgage rates mean that more people are interested in purchasing homes. In turn, individuals with lower credit scores are less likely to receive desirable loan rates from lenders.
What’s more, fewer homes are on the market, meaning far more buyers than sellers. Many sellers aren’t taking advantage of rising housing prices because they don’t think they can find a more desirable place to live in the hot market — unless they downsize or move to a cheaper market.
“Millennials are making up 50% of homebuyers right now. That’s great. The Gen Xers who spent more money on traveling are looking at investments and homeownership,” Sellitto said. “At the same time, baby boomers have retired and are selling off their big houses — and now they’re outbidding everybody on smaller starter homes.”
And the best way for consumers with low credit scores to increase their home-buying power is to educate themselves on efficient ways to improve their credit. WyHy teaches members interested in car loans or mortgages about financial topics they may not understand.
“I don’t think people understand APR, interest rates, or how those are calculated,” Sellitto said. “We make sure we’re getting out there, speaking to the community, and educating them in that way. We want to educate the future leaders of tomorrow,” Sellitto said.
With that mission in mind, the credit union’s Chief Retail Officer regularly visits local Wyoming high schools to teach students about credit and banking.
WyHy Supports Members on Their Credit Journeys
Sellitto also has two pieces of advice to improve bad credit or build credit: Start building credit while you are young and don’t accrue burdensome expenses.
For example, some WyHy members want to set their children up for success, so they help them secure car loans on low-price vehicles.
“Teach them the responsibility of making car payments. You can’t say working at McDonald’s doesn’t pay enough anymore. They pay $17 to $22 an hour, depending on your region. There is a lot more opportunity for those new to credit to secure it,” Sellitto said.
He also suggests taking on as little a financial burden as possible. If a new driver buys a five- or six-year-old BMW, for example, they have no clue about maintenance costs. So, if a WyHy member with low or no credit wants a luxury car, even a used one, Sellitto suggests they reconsider.
He and his team help members make smarter financial decisions. Sellitto said he worked with one member whose car was damaged in a hailstorm and was deemed a total loss by his insurance company. Sellitto helped the member — who had a low credit score of 540 — qualify for an unsecured car loan of several thousand dollars.
“I told him, ‘You need to make your payments on time for the next year. If you do, you’re not going to be 540 or 600 anymore. You’re going to be up in that 650 and 675 range.’ He hasn’t missed a payment. He has been on time for everything,” Sellitto said.
Sellitto said he wants individuals with poor credit to recognize that credit scores don’t change overnight; improvement takes time and effort.
“It’s a process. You’ve got to be in it for the long haul. Work with your lender. We work with members to improve their credit scores so they can get to where they want to be,” he said.