Should You Consider A Credit Union For Your Next Home Loan?

As banks continue to lose their credibility, and loans become more scarce with each passing day, should you consider getting your next home loan from a credit union to score a great deal?

So What Exactly Is A Credit Union?

Credit unions offer savings and checking accounts, accept deposits and provide credit for many different purposes, including home loans and auto lines.  This is very similar to what banks do.

However, unlike banks, credit unions are financial cooperatives that are owned by their members.  They are promoted as not-for-profit organizations that help to build up local communities.  This gives credit unions operating and tax advantages that banks do not have, since banks operate to make a profit.

The American Bankers Association lobbies against credit union attempts to expand their lending abilities because they feel credit unions have unfair competitive advantages already.  Having lower operating costs has allowed credit unions to offer very low closing costs and mortgage rates quite often.  However, because these financial institutions are very loyal to their members, in some situations they might be more conservative with their lending policies.

You might not have considered trying to get a home loan with a credit union before.  However, they have been in the mortgage game for quite a long time.  In fact, while other lenders have been going through hard times recently, from 2006 to 2009 mortgage volume for credit unions increased from $55 billion to $96 billion.

Advantages Of Getting A Home Loan From A Credit Union

Although borrower will basically discover that the same kinds of lending and banking services are offered by credit unions as actual banks, credit unions claim they are the best choices for several different reasons, including:

  • Low interest rates on mortgages
  • No fees
  • Faster closings
  • Personalized service
  • Greater returns on CDs that offset borrowing expenses
  • Better rates for auto loans and other credit products

Can I Find The Home Loan I Am Searching For From A Credit Union?

Although slightly different loan options and programs might be offered by different credit unions, you will discover that they offer a complete range of mortgage products and services for buying a house, refinancing and home improvement projects.

Various conventional mortgage options are also available for borrowers, including 15-year and 30-year fixed-rate mortgages, adjustable rate mortgages (ARMs) of various lengths, government-backed loan programs and home equity loans.  Anything that your local bank offers you can find at a credit union as well.

Why Doesn’t Everybody Get Their Home Loans From A Credit Union?

Despite their tremendous growth recently, a  majority of people still don’t get their loans from a credit union.  Why is this?

Many individuals simply don’t know how credit unions work or may not be aware that they can get a loan for any real estate in Etobicoke, from one.  Also, the loans are available only to the credit union’s members.  For most credit unions, membership is restricted to specific groups.  Industry specific and corporate credit unions are the most popular ones.  However, there are now more than 7,000 federally chartered or state chartered credit unions in the United States, along with an increasing number of community credit unions based on location.  This provides borrowers with many different options to consider no matter where they happen or live or are moving to.

Obviously, the home loans that credit unions offer won’t be the best fit for every borrower.  Not all credit union members will get approved for loans they apply for.

Borrowers should never blindly fall for claims of better deals or slick marketing without shopping around first.  You should always make sure to explore all of the options that are available to you to be certain that you get a fair deal, especially when it comes to the aspect of “not-for-profit.”  Money isn’t just being given away by credit union.

For those who might not meet the conventional loan criteria and need to have underwriting guidelines that are more lenient, along with more flexibility and alternative lending options, or for real estate investors already maxed maxed out the maximum number of loans allowed with one lender, you should continue to look for other options and not give up.

Depending on what your specific situation is, you might want to check into hard money lenders, rehab or construction lenders, or speak with a loan officer or mortgage broker who specializes in helping borrowers who are self-employed or who have documentation or credit challenges.