Credit union vs. bank mortgages: which is the better option?
Credit unions and banks offer a variety of mortgage programs to first-time homebuyers and existing homeowners who are moving and buying a new home or need a second mortgage on their current home. Mortgages from credit unions and banks are essentially the same product; however, there are some key differences between credit union vs. bank home loans which we'll discuss in detail.
Read on to learn more about credit union vs. bank mortgages.
At Credit Union of Southern California (CU SoCal), we make getting a mortgage easy.
Call 866.287.6225 today to schedule a no-obligation consultation and learn about our home equity lines of credit, auto loans, personal loans, checking and savings accounts, and other banking products. As a full-service financial institution, we look forward to helping you with all your banking needs.
Get Started on Your Mortgage Today!
How are credit union and bank mortgages similar?
First, let's look at the similarities between getting a credit union mortgage vs. bank mortgage:
Application process. Both offer in-person and online application options, and the loan approval process is the same. All mortgage loans require processing, underwriting, and funding.
Mortgage types. Credit unions and banks typically offer the same types of mortgage programs, such as
conventional mortgage loans,
FHA loans,
VA loans,
USDA loans, and
adjustable-rate mortgages (ARMs), to name a few.
Other banking products and services. In addition to mortgage loans, credit unions and banks offer
home equity loans and
home equity lines of credit, savings and checking accounts,
personal loans,
certificates of deposit/share certificates, and other investment products.
Differences between credit union and bank mortgages
The primary differences between credit union vs. bank home loans are:
https://www.cusocal.org/are-credit-unions-non-profit
Profit model. Credit unions are non-profit organizations owned and controlled by the Members who use their services. Credit unions operate to promote the well-being of their members. This is one reason why credit unions tend to offer lower interest rates on mortgages.
Membership. Credit unions require membership which may be based on where you reside, your occupation, military status, or professional union. Most people can easily join a credit union based on one of these criteria. For example, there are teachers credit unions, firefighters credit unions, and location-based credit unions, including CU SoCal, which serves people who live, work, worship, or attend school in
Orange County,
Los Angeles County,
Riverside County, and
San Bernardino County.
Retaining loans. When banks grant a mortgage, called a mortgage note, they typically "sell" the mortgage on the secondary mortgage market and the company or financial institution that buys the loan becomes the new loan servicer (where you send your monthly payment). Credit unions may retain servicing on the loans they grant, which makes getting service more personalized.
Advantages of credit union mortgages
There are several
advantages of getting a mortgage at a credit union, including:
- Fewer fees. As non-profit organizations, credit unions tend to charge lower application fees and closing costs on mortgages.
- Competitive rates. Lower mortgage interest rates are one of the main advantages of getting your mortgage at a credit union.
- Better service. Credit unions offer personalized customer service and have policies that are member friendly.
- Easier to get approved. Flexible lending policies may make it easier to get approved for a mortgage, even if you have bad credit or lower income than what a bank would accept.
Disadvantages of credit union mortgages
- Membership requirements. If you do not meet any of the membership requirements you cannot join.
- Limited branch and ATM access. Because credit unions are local and not national like banks, credit unions have fewer branch locations, and some have limited ATM networks.
Advantages of bank mortgages
- Loan options. Because most banks are nation-wide corporations with more financial leverage, they may be able to provide more types of mortgage programs to serve a wider range of homebuyer needs.
- Accessibility. National banks have branches throughout the country, which means more access to ATMs as well. This is particularly convenient when traveling on vacation or for business.
- No membership required. No membership is required to apply for a mortgage or open an account at a bank.
Disadvantages of bank mortgages
- Profit-driven. Banks operate for profit, which typically means higher interest rates on mortgages.
- Harder to get approved. Banks have stricter lending policies and mortgage eligibility requirements, which may make it harder for to get approved for a mortgage, particularly if you have a low credit score.
- Lack of personalized service. Although many banks operate in the same neighborhoods for decades.
Are credit unions safer than banks?
Yes,
credit unions are as safe as banks. Just like banks, credit unions are federally insured; however, credit unions are not insured by the Federal Deposit Insurance Corporation (FDIC) which insures banks. Instead, the
National Credit Union Administration (NCUA) is the federal insurer of credit unions, making them just as safe as traditional banks.
Do credit unions have better mortgage rates?
Yes. When it comes to credit union vs. bank mortgages credit unions can offer better rates because credit unions are not for profit. Members pay lower interest rates on mortgages and other loans, lower fees, lower mortgage
closing costs.
Which institution is more likely to sell my mortgage?
Banks are more likely to sell your mortgage. Doing so lets banks quickly earn back the money they lent to you and other homebuyers to whom they provide mortgage loans. Credit unions earn money over time in the form of interest homebuyers pay on their mortgages.
Do credit unions offer HELOCs and second mortgages?
Yes, credit unions offer
home equity lines of credit (HELOCs) and home equity loans, which are both types of second mortgages.
Should I get a mortgage through a credit union or bank?
As you begin shopping for a home, it's smart to shop for different mortgage lenders as well. Start the process by speaking to a representative where you currently do your banking. Compare credit union vs. bank mortgage interest rates and mortgage program options to find the rate and terms that are best for your unique position.
Why Savvy Consumers Choose CU SoCal
For over 60 years CU SoCal has been providing financial services, including HELOCs, car loans, personal loans, mortgages, credit cards, and other banking products, to those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County.
Please give us a call today at 866.287.6225 today to schedule a no-obligation consultation with one of our HELOC experts.
Get Started on Your Mortgage Today!