Buying a home in the United States isn’t easy because of the hefty price tag associated with them. Most people don’t have enough cash on hand to buy a house, so they have no choice but to borrow money. Enter the credit union mortgage.
Related: Buying a house? Make sure you’re prepared by reading our walk-through on how to buy a house.
If you have been denied a loan from a bank or traditional lenders or are concerned about the hefty interest rates and fees, we recommend you get a mortgage from a credit union.
Many people don’t think about credit unions when they are looking for a mortgage when they really should. After all, credit unions offer several benefits that cannot be found at banks or traditional lenders.
Advantages of a Credit Union Mortgage
Credit unions can be more flexible than banks when it comes to services, fees, and rates. They are not-for-profit entities and exist to serve their members, which is why they can offer lower fees and interest rates.
Additionally, credit unions are vested in their communities, and genuinely want borrowers to succeed with their mortgage. Because they are a not-for-profit entity, they have no reason to stick you with excessively high fees or mislead you.
Wide Range of Options
Essentially, credit unions are financial partners of their members on the path to the ownership of a home. That is why they offer a wide variety of loan options so that their members can choose the one that best suits their needs.
Maybe you are veteran or a first-time homebuyer. Perhaps you aren’t sure whether an adjustable-rate mortgage or a fixed-rate mortgage is right for you. Maybe you want to check your eligibility for a Federal Housing Administration (FHA) loan, or you are ready to refinance your home. Or last, you may just want a trusty conventional loan.
Whatever your needs, a credit union’s mortgage officer will work with you to find the home loan that’s best for you with the low closing cost and most competitive rates.
Unique Loan Tools
Typically, you are offered several services that can assist you in finding the information you need to make the most informed decision. For example, at UW Credit Union, you can find mortgage calculators which you can use to remove the guesswork out of the borrowing process.
You can also find tips and advice about getting a home loan that is right for you. Some credit unions also provide reminders and checklists and tools for checking credit report, planning budget, and applying for pre-qualification.
Looser Credit Standards
Additionally, since credit unions are committed to best support their members, they often have options to serve members who’re first-time buyers or lack traditional credit profiles.
Credit unions offer special programs and also take into consideration special circumstances that might have affected credit scores of members in the past. While a bank or traditional lender will close their doors on you if you have damaged credit, your credit union might not do this.
So home buyers who want to get a mortgage, but don’t have the ideal credit history have a better chance of getting it from a credit union.
Tip: Check your credit history with a free credit monitoring tool from Credit Sesame.
Why Consumers Are Moving to Credit Unions?
As we mentioned, credit unions are not-for-profit organizations, which means that they are governed by their members to help the members. Each member has one vote and equal ownership regardless of how much cash they have deposited.
The members elect directors and officers from within the members to establish the policies of the credit union. Therefore, as a member of the credit union, you get the chance to vote on the individuals who’ll direct your institution.
Their job is to provide members with financial benefits and affordable financial services. The member-first approach adopted by credit unions is different from banks. The primary goal of the bank is to create revenue for investors, which is why they don’t consider the best interest of people who use their services.
At credit unions, you are more likely to see lower interest rates and fees on your home loan because the people in the credit union know that you help them, so they are willing to return the favor.
Since credit unions don’t have any investors to answer to, they have more flexibility to pass on the savings to their members. For example, Suncoast Credit Union offers up to $1,000 off closing costs. That’s real value that you won’t find at a bank.
Rate Comparison Example
Perhaps the best way to illustrate the difference in rates is to compare a real-life bank with a credit union (keep in mind that both examples include .5 discount points per the disclosures on their websites).
For this example, we’ve sourced the current mortgage rates offered on both Navy Federal Credit Union and Wells Fargo‘s websites. These rates were pulled as of 4/20/19, and these are being used only as an example. For current rates, go to their respective websites.
Navy Federal Credit Union
As you can see, there is a significant difference in rates. On a conventional 30 year loan, NFCU loans at 4.021% APR, whereas Wells Fargo’s rate is 4.251%. Although this difference seems small, the savings an equal a small fortune over 30 years.
In fact, we ran amortization schedules for both rates, and the difference totals $12,034.50. We can think of a lot of things we’d buy with those savings!
Joining a Credit Union
You now realize that getting a mortgage from a credit union is a better option than applying for a home loan with a bank. But, you are also thinking that joining a credit union is difficult and you won’t be able to get a loan if you aren’t eligible for the membership.
You might have heard that only certain individuals are eligible to join a credit union. Credit unions have different membership criteria that might include where you work, live, where you went to school and where your family members have lived or worked.
However, you should know that most of the credit unions have expanded their limited membership criteria in the last few years. While there are still credit unions that are specific to certain industries and alumni associations, many credit unions have become flexible when it comes to the membership eligibility criteria. Thus becoming a member of a credit union is now easier. For instance, you can become a member of UW Credit Union if you answer ‘yes’ to any of these five questions:
- Are you a Wisconsin resident who is enrolled at or has previously attended any accredited institution of higher education nationwide?
- Do you live, work or attend school within 5 miles of any branch location? Note, we have major branches in Madison, Milwaukee, Green Bay, Whitewater, Oshkosh, Stevens Point and of-course all of their locations are very close to the actual University of Wisconsin.
- Are you an employee, student or alumni of the following statewide universities, colleges, public schools, and extensions?
- Are you a current or former employee of the following organizations?
- Is an immediate family member or are you eligible to be a member?
The members-first approach is the foundation of all credit unions and this approach is what makes your relationship with a credit union different from what you get when you work with a traditional bank for a mortgage.
Credit union home loans are increasingly becoming popular because credit unions are able to offer lower rates, lower closing costs, no minimum balance requirements, and several other benefits.
The flexibility you get in regard to free atms, a mobile app, a web branch, rates, fees, and services from your credit union is not to be found at traditional banks. This is why credit unions are a better option for a mortgage than traditional banks.
Should You Get A Mortgage From A Credit Union?
You don’t necessarily have to deal with hefty interest rates and fees that come with a home loan from traditional lenders or banks. You can get a mortgage from a credit union at lower interest rates, lower fees, and even lower closing costs.
Since credit unions work for their members and are genuinely interested in helping you, the service may also be better. So if you want to trade your monthly rent for a house you can call your own, get a mortgage from a credit union and benefit from lower interest rates.