The mortgage process can be confusing, especially if you are a first-time home buyer. What’s the difference between using a bank or a credit union for your mortgage loan? The smartest thing you can do is shop around for a mortgage lender, consider all factors and choose the best option for you. Here are a few items to consider when deciding between a credit union or bank.
Credit unions operate like a bank but they are non-profit organizations. Members of the credit union are the owners of the credit union. Credit Unions offer lower interest rates and closing costs and provide a greater level of one-on-one service. Below are some additional items to keep in mind when comparing services and cost advantages of which lender to choose.
More Flexibility in the Mortgage Process
Credit Unions will typically offer more flexibility in applying for a mortgage loan. A credit union is interested in finding the best option that works for the member. If you are currently a member of a credit union you may be pre-approved for a mortgage.
First- time buyers might also be eligible for some programs to help you get into a starter home with some incentives such as a lower down payment, no down payment, and grant money. Additionally, credit unions offer a wide variety of mortgage product lines including 10, 20, 30 year fixed or adjustable mortgages and lines of credit that fit what you need.
Keeping the Loan at the Credit Union
Credit Unions are more likely to hold onto the mortgages they originate, rather than selling them like many banks do. The bonus to keeping the mortgage at the credit union is your interest rates or terms won’t change.
Lower Rates and Fewer Fees
Credit Union rates tend to be lower on all loan types. This is beneficial in savings over the life of the loan. Both credit unions and banks can charge costs for taking out a mortgage, but a bank may have additional fees. The less fees paid can save you hundreds to thousands of dollars tacked on to the amount of the loan.
Personalization and Service
Credit Unions are known for superior service. With the loan staying at the credit union and not sold to a 3rd party lender, borrowers are more likely to establish a lasting relationship throughout the life of the loan. This relationship can be beneficial when needing other types of financial assistance in the future.