Should I Apply For A Mortgage With Credit Unions?

Finance2 years ago
House keys in a door

Buying a house and arranging a mortgage loan was always a difficult and potentially overwhelming process, but post-pandemic the real estate market has seen a record scarcity of listed properties combined with elevated prices and interest rates. This can make the very idea of buying a home and applying for a mortgage seem like an unwise choice at this point.

Below, we will take a look at the process of applying for a mortgage with Credit Unions and what the pros and cons of this are for house buyers. First of all, we need to establish what the current housing market looks like and why you may be finding buying your first home so difficult.


Why is the Housing Market so Difficult to Navigate Post-Pandemic?

The housing market saw a sales boom during the pandemic with high sales and low mortgage rate offers combining to ensure that available properties became more and more scarce. This led to more competition between buyers who were scrambling for the remaining unoccupied properties and price hikes as owners looked to take advantage of the high demand for properties.

The real estate market is starting to slow and cool a little now, but now buyers have a new problem to contend with - a sharp increase in interest rates. Whether or not you can manage to attain a mortgage loan at a reasonable fixed rate is going to be the main determination as to whether you can secure your own property or will have to continue renting for a while yet!


But applying for a mortgage loan is not your only option - have you considered contacting a Credit Union?

When most people start to consider applying for a mortgage, the first place they think of will be their bank. This is the most obvious choice for most people and, depending on your credit score, you may find that arranging a loan through your bank is one of the least complicated ways to do this. But it doesn't mean it is automatically your best option from a financial standpoint.

When you are looking for the best mortgage option for you, you have to remember that your bank will be looking to make as much profit out of the situation as possible. So, it makes sense to shop around and see what else is on offer before you commit to anything.

Before you sign-up with any mortgage from a bank, you should make sure to research what else is available and check whether a credit union mortgage rate makes more sense for your situation.

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What is a Credit Union?

A credit union is a non-profit financial co-operative which is owned by its members. These organizations can vary in size, with the larger unions having thousands of members or corporations amongst their membership and smaller credit unions which can be owned by a group of individual members or a single organization.

Credit unions operate for an entirely different purpose from banks which are looking to make the most amount of money out of their customers. In contrast, a credit union will use its profits to benefit its members by offering saving accounts with higher interest rates, lower fee charges, and potentially more favorable mortgage rates! Their main priority when assessing your suitability for a mortgage will be ensuring you are not going to lose them any money.


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What Services do Credit Unions offer?

In many ways, a credit union operates in the same way as a bank they offer their members ATM card services, loans, and savings and checking accounts. And, most relevant to this article, they also offer their members mortgages!


What are the Benefits of Applying for a Mortgage Credit Union?


You may be offered a Lower Credit Union Mortgage Rate

You will usually find that credit unions offer lower rates on their products and services than banks. Obviously, we can't guarantee that this will always be the case, but this can be particularly apparent when you are applying for a mortgage without a long-established credit history or with a less-than-ideal credit score. In these cases, the differences in proposed home loan rates may extend to several percentage point.


There are Fewer Mortgage Credit Union Fees

Because credit unions are non-profit and put profits back into the organization, this usually results in fewer administration fees and add-on costs, and lower pricing.


You may get Easier Approval when Applying for a Mortgage with Credit Unions

A credit union is concerned with serving its membership and less concerned with making the highest profit possible. Because of this, those with a poor credit score or short credit history may find it easier to get a mortgage with a credit union rather than taking the traditional route of applying for a bank loan.


Credit Unions Generally Offer Faster Closings

Waiting for a mortgage to close with a bank can be a frustratingly slow process and one that can end up costing you a whole month's worth of mortgage payments or rent on your current home as you wait for the closing process to complete.

A credit union is likely to complete the process quicker due to less internal bureaucracy and red tape. T hey are also more member-focused and will be aiming to provide you with the quickest service possible. You are also likely to face lower closing costs than those you would be charged by a bank.


You can Expect a Better Standard of Customer Service when dealing with a Credit Union

Anyone who has applied for a bank loan before can attest to the stress of the situation as you jump through a seemingly never-ending number of hoops to prove yourself worthy of being approved. Credit unions are focused on providing the best for their members and this usually translates into a more pleasant and streamlined experience.


What are the Possible Downsides to consider when looking into Credit Union Mortgage Rates?

Although there are many benefits to applying for a mortgage with credit unions, there are some potential downsides to consider before you make your decision.


You Need To Be a Member to Apply

Although there are some credit unions with open memberships, most unions will need you to join and meet membership requirements before you can apply for a loan. Make sure you read the terms and conditions of membership before you apply.


Credit Unions have Smaller Infrastructures and Less Resources

In comparison to national and international banks, credit unions will generally have fewer facilities, branches, and ATMs.


Their Services Aren't Cutting Edge

Whereas banks tend to be at the forefront of online convenience, smaller credit unions are more likely to be a little behind the times, in terms of being able to manage accounts from apps.


Summary - Should I Apply for a Mortgage with Credit Unions?

Choosing a mortgage provider is one of the most important decisions you will make in your life , and you owe it to yourself and your financial future to make sure you secure the most favorable mortgage rates possible. So, you need to do your research and check whether a credit union mortgage rate might be better for you, before settling on whatever your bank is offering.