Pros and Cons of Choosing a Credit Union for Your Mortgage Loan

Often homebuyers will not think of a credit union when shopping for home financing. When it comes to securing a mortgage loan, credit unions may be an attractive alternative to traditional banks and mortgage lenders. Credit unions are owned by their members, and they are not-for-profit financial institutions that offer a range of financial products, including mortgage loans. We recommend weighing the pros and cons of a credit union before you decide a credit union is your choice for your mortgage loan.

Pros of Choosing a Credit Union for Your Mortgage Loan:

1. Competitive Interest Rates: Since credit unions are not-for-profit organizations, they may pass on the savings to their members in the form of lower rates and fees. You may find that a credit union will offer the most competitive interest rates.

2. Personalized Service: Credit unions are known for personalized customer service and many times that is the reason many homebuyers will join a credit union. Credit unions typically have a smaller customer base, allowing them to provide more individualized attention and better service to borrowers. You may find it easier to communicate with loan officers and receive personalized guidance throughout the application process.

3. Community Focus: Credit unions are deeply rooted in the communities they serve. By choosing a credit union for your mortgage loan, you support a local institution that reinvests in the community, leasing to a positive impact on the local economy.

4. Member Benefits: Credit union members often enjoy additional benefits from their credit union membership including lower-cost insurance, lower fees and special banking products. If you choose to go with a credit union for your mortgage loan, you may see lower overall fees or maybe certain fees like appraisal fees waived altogether.

5. Flexible Underwriting: Credit unions may be more willing to work with home loan borrowers who have unique financial situations or non-traditional income sources such as self-employed. They often have more flexible underwriting criteria comparable to a bank or going through a mortgage broker.

Cons of Choosing a Credit Union for Your Mortgage Loan:

1. Limited Branch and ATM Network: Credit unions typically have fewer branch locations and a small ATM network compared to regional or national bank. If accessibility to a branch office location or vast network of ATMs is important to you, you may find a credit union is not a fit for you.

2. Fewer Mortgage Products: Credit unions may offer a more limited range of mortgage products compared to mortgage bankers or mortgage brokers. Check to see what mortgage product options your credit union offers, especially if you have specific financing needs like a jumbo loan or a special program.

3. Membership Requirements: To become a member of a credit union, you must meet the specific eligibility criteria established by the credit union. That said, many credit unions have broad membership criteria, such as living in a particular community or working for a certain employer. In short, you need to qualify for membership in the credit union before applying for the mortgage loan.

4. Potential for Slower Processing: Some credit unions, especially the smaller ones, may have fewer resources and their technology could be dated compared to other larger mortgage lenders. Fewer resources and lack of technology may lead to slower processing times for mortgage loan applications.

5. Limited Online Services: Many credit unions have improved their online banking services in recent years, especially during the pandemic. However, some smaller credit unions may still offer fewer online tools and resources compared to larger banks. If you prefer banking online, make sure the credit union’s online platform and other online activities meet your financial needs.

Overall, we believe that the pros outweigh the cons of a credit union, and we are strong proponents of the local credit union. We think most homebuyers should consider a credit union for their mortgage loan; however, each homebuyer is unique and a credit union is not for everyone.

We have worked with a number of great credit unions including Michigan Schools & Government Credit Union, Lake Michigan Credit Union and Genisys Credit Union. If you would like more information on our preferred mortgage lenders, including credit unions, contact Jeff Higgins today.