Consider a credit union when you shop for a mortgage
If you’re looking for a home loan, it makes sense to contact different kinds of lenders. That includes banks, mortgage companies, mortgage brokers — and credit unions.
A credit union may offer benefits that the other lenders don’t, because it’s a non-profit and owned by its members.
Or, it may not. Not all credit unions are created equal, and many mortgage companies and banks do a stellar job at a low cost. That’s why you need to compare them all.
How does a credit union work?
Credit unions are non-profit organizations, owned by their members. However, that doesn’t mean they don’t make money. The difference is that the money a credit union makes by lending to you is paid back to all members, including you.
Credit unions often target specific groups for membership, and you must be part of that group to be eligible. For instance, there are credit unions for firefighters, for people who work at the Pentagon, and for teachers.
But there are also credit unions geared toward residents in their communities. The main point is that it’s not usually difficult to find a credit union you can join. You just can’t choose among all of them the way you can with banks.
Does “non-profit” mean “cheaper?”
According to Datatrac surveys of credit unions and banks, there is little difference in the mortgage rates they charge. The survey shows a difference of .015 between the average 30-year-fixed mortgage rates available from bank and credit unions.
Credit unions, like banks and other mortgage lending companies, have to earn enough from their loans to cover their operating expenses. And just like their for-profit counterparts, some are more efficient than others, and can charge lower rates as a result.
In addition, members and employees of credit unions generally want to see some earnings. As commenter Mattnatl said in a Lifehacker post, “I work for a credit union and have been in this business over a decade.
While we say we are ‘not for profit’ we totally are for profit. In the past 5 years we’ve definitely made a move to sales. The slogan goes like this with CEO and executives when I go to conferences, ‘while we are not for profit, if you make more we can pay you more.’”
Conservative credit unions
According to Time Magazine, credit unions are more conservative when they underwrite your loan. It may be harder to secure a mortgage approval from a credit union.
When shopping for a mortgage, you’ll want to ask about credit union underwriting guidelines if you’re a less-than-perfect applicant.
Some credit unions, on the other hand, have come up with innovative products for their customers, including first-time buyer financing to 100 percent, financial counseling, and loans for closing costs.
Your options depend entirely on the policies of the credit union you join, so find out about them before you commit to an organization.
Don’t leave out traditional lenders
Because credit union products, policies and pricing can be all over the place, you should not completely abandon “regular” mortgage lenders when you shop for a home loan.
Competition is a healthy thing and keeps prices down. Get at least four mortgage quotes from a variety of sources — banks, mortgage companies, credit unions and brokers — and compare them all.
Then call a couple of the most competitive lenders and see if their guidelines will work for you, and if their lending agents are professional and respectful.
This way, you ensure that you get a good experience and pay a fair price.
What are today’s mortgage rates?
Current mortgage rates depend on a variety of factors, including your qualifications, the product you choose, and the source of your financing. It’s easy to check with several sources online to get an idea of what you’ll pay.