Is There A Difference
It is reasonable to think that no real differences exist between a bank and a credit union, especially when it comes to highly regulated loans. It is true that both lenders need to follow all the Congressional laws for lending practices, privacy and information protection. However, credit unions are nonprofit institutions owned by the members members are the customers. Banks are for-profit industries that report to shareholders. A key difference is in the desire for credit unions to build and retain a relationship with people within their own community.
A Growing Source Of Mortgage Funds
Consumers are still far more likely to take out a mortgage with a traditional bank or lender. But a growing number of borrowers are turning to credit unions. Research firm Callahan & Associates said that in the second quarter of 2016, credit unions across the country had a loan balance of more than $340.7 billion in first mortgage loans. That’s the highest this number has been for any one quarter.
Still, credit unions only claimed 11 percent of the mortgages originated in the United States during the first quarter of 2015, according to a report by TransUnion, evidence that most customers still seek out traditional funding sources when they’re searching for home loans.
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Bank Vs Credit Union Terms
The fees charged by banks are typically higher than those charged by credit unions for the same type and size of loan. Since credit unions are designed only to earn as much as is needed to exist and not to make a profit, they return the extra funds they earn to members in the form of increased interest or reduced fees.
All this means that your credit union home loan will likely come with lower closing costs and origination fees. Credit union mortgage rates also tend to be lower than traditional banks although the difference may not be as drastic as you might like. A few tenths of a percent may not seem like much but it can amount to a large savings over the life of the loan.
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Why You Should Get A Mortgage Through A Credit Union Or Local Bank
Modified date: Oct. 19, 2020
It often seems as if you can get a mortgage just about anywhere. There are mortgage banks, mortgage brokers, and online mortgage sources. Even many insurance companies and investment brokers offer mortgages, either to their clients or to the general public.
But is there any advantage to get a mortgage through a credit union or local bank?
There are actually a few:
How To Get A Mortgage From Meridian
You can get a Meridian mortgage in one of two ways: by contacting the bank directly , or by speaking to a mortgage broker.
The benefit of using a mortgage broker is that they can give you and your finances a personal, expert assessment, as well as a set of recommendations. As well as comparing mortgage rates between multiple lenders a broker can negotiate on your behalf, and may be able to secure a lower interest rate than those that are advertised in public.
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Home Equity Loan And Home Equity Line Of Credit Experts
Although not directly related to mortgages, credit unions tend to offer highly competitive terms for home equity loans and home equity lines of credit . Credit Unions may be willing to offer a home equity loan or HELOC for borrowers with unusual circumstances when other lenders say no. For example, several credit unions provide home equity loans on non-owner occupied properties whereas other types of lenders do not. Additionally, credit unions usually offer aggressive pricing on home equity loans and HELOCs. Borrowers in the market for a home equity loan or HELOC should take advantage of the expertise credit unions possess in this area.
Online Services And Technology
Large banks tend to have more money to spend on technology, and as a result, they are known for adding technical services much more quickly than credit unions. Mobile banking services are likely to be far more advanced at banks. If technology and online banking are keys to your choice, make a list of your must-have services and ask for a demonstration of them before opening an account at a bank or credit union.
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What Are The Disadvantages Of Credit Unions
Most credit unions cannot compete with banks when it comes to convenience and technology like mobile banking. Many credit unions cannot compete with online banks in terms of technology. Credit unions may offer lower interest rates on loans, but the array of financial products may be limited in scope compared to big banks.
How Navy Federal Credit Union Works
You can get a mortgage through Navy Federal if you are an active military member, veteran, family member of someone affiliated with the military, or Department of Defense civilian. You may also qualify if you live with a Navy Federal member.
The credit union has over 200 branches around the US, plus nine overseas branches and locations on US military bases. It provides mortgages for residents all around the US.
Navy Federal specializes in mortgages for people affiliated with the military. You can get a regular VA loan. If you’ve already used up all your VA loan benefits, you may qualify for a Military Choice Loan, a 30-year mortgage with no minimum down payment.
It’s possible to qualify to become a Navy Federal member without having all the requirements for a VA loan, so you can also get a conventional mortgage . You may qualify for a Homeowners Choice Loan, which is similar to Military Choice, but for people who aren’t eligible for VA loans.
You can also refinance your VA, conventional, Military Choice, Or Homeowners Choice mortgage.
Navy Federal doesn’t offer FHA or USDA mortgages, or home equity loans or HELOCs. It also doesn’t have construction loans or reverse mortgages.
The credit union’s website has an intuitive interface with an online preapproval application. The site says that you may even get preapproved immediately. Or you can apply in person at a branch.
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How To Choose Between A Bank And A Mortgage Broker
Which avenue is best for you could come down to whether you already know a good mortgage broker or bank loan officer. If you have a line on a great broker or banker who is knowledgeable and trustworthy, or you’ve had a good experience working with your bank on a loan in the past, that might tip the scales.
If you don’t have a ready contact in the mortgage business, try shopping around. Consulting multiple sources, including brokers as well as banks, is one way to get a better idea of what each has to offer. Online lending sites can also help you understand your range of available options, based on your credit score, income, down payment and home value.
Getting prequalified for a mortgage with both a bank and a mortgage broker can help you understand what your options are and compare offers. While an offer can change once you submit an actual loan application, prequalification will give you a good idea of what rates and terms you can expect. This could help you see right away whether your bank or a mortgage broker is likely to offer you the best rate and terms.
Whether you’re meeting with a broker or a bank, here are a few questions to ask:
Which Mortgage Lender Do We Recommend
If theres one thing you get from this article, its probably that there are more mortgage lenders out there than you thought.
But just because you have a wide selection, doesnt mean you should go all eeny-meeny-miny-mo on your choice. You dont want just anyone lending you money. You want someone who cares about you and your journey toward financial peace.
If youre looking for someone who will walk with you in the mortgage process every step of the way, check out Churchill Mortgage and talk to a home loan specialist.
The folks over at Churchill have been helping families like you get mortgages the smart way for over two decades.
So contact a Churchill Mortgage loan specialist today!
About the author
Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.
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Pros Of Getting A Credit Union Mortgage
More and more people are learning that they can find the best deal and the best service in town at a credit union, says Curt Long, chief economist and vice president of research for the National Association of Federally-Insured Credit Unions .
The benefits of getting your mortgage through a credit union include:
How Do Mortgage Brokers Work
A mortgage broker acts as a middleman between you and lenders when you’re shopping for a home loan. Most mortgage brokers work with a variety of lenders, including banks, credit unions and private mortgage companies, which allows them to offer you a wider range of choices. If you have less-than-perfect credit, are self-employed or have any other special circumstances, this extra flexibility can help you find the best fit.
Having a great mortgage broker is like having a great real estate agent: They get you results you couldn’t easily get yourself. Mortgages have a lot of working parts: interest rates, down payments, origination fees, points and more. A good broker can help you understand how these variables work together and what makes one loan a good value compared with another.
But be aware: Mortgage brokers work on commission from lenders. For that reason, they may have an incentive to sell you a bigger loanor steer you toward one lender over another, regardless of what’s best for you. Some mortgage brokers may charge you fees, but a great broker will be forthcoming with both loan options and good information. To help ensure that your mortgage broker is working hard for you, consider these three tips:
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Mortgage Broker Vs Bank: Who Offers The Best Mortgage Rates
When youre shopping for a home loan, you have two main sources of money a mortgage broker or a bank .
One might be better than the other for you, depending on your circumstances.
Someone with a high credit score, for instance, might make a different choice than an applicant with a lower score.
The key is to get quotes from both sources and compare offers. You might be surprised at the difference.
How Do Bank Mortgages Work
Getting a mortgage from your bank or credit union is a simpler process. You complete a loan application, meet with a loan officer and review your available choices. Your bank or credit union may have excellent options for you, and getting a home loan through your own financial institution may qualify you for relationship perks like free checking.
On the downside, working with one bank limits your choices. The bank next door might offer a better deal, but you won’t know about it if you only talk to your bank. That could be important if your for a better rate at one financial institution over another. Even a small difference in your interest rate can cost you tens of thousands of dollars over the life of a 30-year mortgage.
Again, doing your homework is key. Learn more about qualifying for a mortgage and consider which factors might affect your loan approval, rates and fees. Familiarize yourself with going interest rates and see how your bank’s rates line up. Armed with this knowledge, you’ll have some idea whether or not you’re getting a good offer from a bank. Do you have doubts? You can always shop around with other lendersand a mortgage brokerto see what they have to offer before you sign.
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Do Credit Unions Refinance Mortgages
Refinancing your mortgage is an option most homeowners will think about at some point. As to whether credit unions refinance mortgages, the answer is yes. Whether its worth it depends on a few factors.
First, as you approach the process, you should know your credit score. Like any loan, refinancing a mortgage is going to mean taking out a new loan, and your credit score will play a direct role in the interest rate youre offered.
Second, consider the reasons you might refinance. Are you looking to lower the interest rate on your current mortgage? Are you hoping to tap into some built-up equity? Will you benefit in the long run by refinancing and getting a shorter mortgage term? When you know what your goals are in making a choice like refinancing, youll be more clearly able to communicate with lending associates at a community credit union or other financial institution. Answering these questions will also help you reflect on how worth it the process is for you.
Let’s Compare Bank Vs Credit Union
Products of a Bank vs Credit Union
A similar suite of basic products is offered by banks and credit unions. For eg, almost all banks or credit unions offer basic checking and savings accounts, and in regards to some products they differ.
A wider range of saving accounts is more likely being offered by credit unions. Credit unions also commonly offer savings accounts for kids and teens.
On the other hand, Banks are more likely to offer more specialized high-end products like wealth management, investments, or business accounts.
Getting Mortgage from Bank vs Credit Union
A credit union guarantees lower fees and interest rates be it mortgages, credit cards, personal loans, or other financial products Credit unions often offer lower interest rates and compared to the average bank.
These rates do not hinder your financial flexibility.The same applies to fees, which are comparatively reasonable because they dont charge you with appraisal, origination, processing, tax service, and underwriting fees.
As per the National Credit Union Administration, the median credit score to secure a mortgage with a credit union was 753, which is lower than the score for banks.
This means that you dont need the perfect credit score to secure a mortgage from the credit union.
Interest Rates of Bank vs Credit Union
Because this will generate more profits for its owners banks often have poor interest rates. This is not necessarily always the case.
Safety with Bank vs Credit Union
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Do Credit Union Loans Show Up On Credit Report
If you borrow money through a credit union, then it will more than likely appear on your credit report. If you only save money with a credit union, then this will not usually be shown on your credit report. If youre approved for the loan, then this will appear on your credit report as an account that you have.
Use Luso Federal Credit Union To Help You Meet Your Future Financial Goals
LUSO Federal Credit Union is a not-for-profit, member-owned financial cooperative dedicated to providing members with quality financial services and products. We at LUSO pride ourselves on serving the financial needs of our members and helping them manage their finances such as credit card debt. Our services and rates, which include home equity loans, mortgage loans, and refinancing solutions, are available in Wilbraham and Ludlow, Massachusetts. Contact us at our Ludlow, Mass. or Wilbraham, Mass. branch at 1- LUSO-FCU to learn more.
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Access To A Home Equity Loan Or Home Equity Line Of Credit
The need for this type of loan could happen at any point in the home ownership process. For example, if youre buying a home, you may decide you want a home equity loan or HELOC as part of the down payment. This is a common strategy for buyers who are looking to avoid private mortgage insurance, which is very expensive.
Banks and credit unions are natural sources of home equity loans and HELOCs. If you already have a relationship with one, itll be easier to get either type of loan. Many banks and credit unions also routinely provide home equity loans and HELOCs along with new first mortgages.
But even after youve been in your home a while, you may still decide you need secondary financing. It could be to renovate or expand the home, or even to borrow money for other purposes, like debt consolidation or investment.
Whatever the reason, it will be much easier to get secondary financing if you already have a well-established relationship with the institution. You may even find that your bank or credit union regularly offer you opportunities for home equity loans and HELOCs.
And once again, since they already have much of your financial informationincluding your first mortgagethe application process will be both quicker and less complicated.
Final Thoughts On Where To Shop For A Mortgage
Banks have served us well for a long time, but credit unions, while not as prominent, have hardly been lurking in the shadows. This year, their membership topped more than 100 million.
So if youre already a member of one, and your credit union offers home loans, as about 80 percent do, why wouldnt you at least give them a crack at your business? After all, youre not just a customer of that institution youre a member-owner.
At the same time, if youre not a member, its fairly easy to become one.
By the same token, if youre a rate watcher, you can start by visiting the MyBankTracker’s mortgage page.
If you find a competitive rate, contact that institution. Ask the bank lender how it performs based on the criteria, such as fees and products, listed above.
If you like what you hear, schedule an appointment. Be honest with the lender and let the bank rep know youre just shopping at this point. Tell them to wow you.
Let the different institutions make their case. Armed with the knowledge you now have, you know what to look for. Who is the most professional? With whom do you want to have a relationship that could last five, 10 or even 30 years?
Talk it out, compare and youll know where to go!
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