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Benefits of an ARM Mortgage - Especially With a Credit Union

What You'll Learn: The Basics of ARM Mortgages and Their Advantages

EXPECTED READ TIME: 7 MINUTES

If you're considering getting an adjustable-rate mortgage (ARM), the first place to look is your trusted credit union. Credit unions often have several different home loans and their other financial services like checking and savings accounts, auto loans, and credit cards.

Let's take a look at some of the advantages of ARM home loans combined with why consumers choose credit unions over other options.

Credit Union Convenience

Whether you're getting an adjustable-rate mortgage or fixed, credit unions offer benefits that mortgage brokers and mortgage bankers don't. And that's the convenience of other services. Having a financial institution with multiple products makes shopping and paying bills much more manageable.

For example, if you have your checking account with the credit union - all you have to do to pay your mortgage is transfer money internally. And it makes it easier to track because you see when it's due, getting ready to be paid, and paid.

Compare that to getting a home loan from a mortgage broker or mortgage banker – that's the only service they offer. So, you'd be going someplace else for your other financial needs. In today's busy world – convenience is one of the most significant advantages of using a credit union.

Groups in Common

When you shop for products and services at a credit union, in most cases, you'll have something in common with the organization. For example, some credit unions cater to:

  • Veterans
  • Teachers
  • City and county employees
  • Residents of a particular area
  • Often consumers like shopping locally or with a group with shared interests instead of a big bank or a mortgage lender.

    Charity Work

    Although many financial institutions support charities, it may be much easier to find a credit union that supports the causes that are most important to you. For example:

    • Local homeless shelters
    • Veteran outreach programs
    • Local economic development
    • Food banks and food delivery

    Credit Unions May Have Better Interest Rates

    Besides the lower initial interest rate of an adjustable-rate mortgage, credit unions may offer lower rates than banks or mortgage lenders. That's because they are non-profit. At the same time, banks and brokers are for profit. So when you're buying a home in a seller's market – getting the lowest rates so you can qualify for a higher loan amount becomes even more critical.

    That's why as a consumer, it's essential to compare offerings. An easy way to do that is to compare the APR, which reflects the total cost of borrowing the money.

    Check for Lender Incentives

    Many lenders, including credit unions, often offer incentives for home loans. It's wise to check your credit union first to see if any incentives could save you money. Incentives could include lower lender fees or credit towards some of the costs of getting a home loan.

    And if you don't see incentives on the lender's website – ask the loan officer you're working with to see if there are any upcoming specials.

    Borrowers with Credit Challenges

    When it comes to home loans, whether you're looking for government or conventional loans, many credit unions are less strict on credit guidelines than a bank. Each credit union has its requirements, but it's always a good idea to reach out to a credit union first if you have less than stellar credit.

    And you may be pleasantly surprised. Often consumers that think they'd never be able to buy a home discover that their credit isn't as bad as they thought. So, it's always a good idea to reach out to a lender to see where you stand.

    General Benefits of Variable Rate Loans

    • Not Your Forever Home

      Many first-time homebuyers purchase a home only to move within a few years. Often the first home is a starter and can be a bit too small for a growing family. Other reasons to move may involve having to do with work or being in the military and getting transferred to a different location.

      When you know you're going to move in 3 years, a 3/1 ARM is a good choice. The same is true for a 5/1 ARM, 7/1 ARM, or 10/1 ARM.

    • ARMS Have Lower Initial Rates

      Generally, an ARM interest rate has a lower initial rate than a fixed interest rate. That means a borrower may qualify for a higher loan amount which is especially helpful in a competitive real estate market when prices are rising, and there are bidding wars.

      In a seller's market, homes often have more than one offer. Having the leeway to put in a higher bid because you can qualify for more – may mean getting the home you want.

    Credit Unions Can't Be Beat

    From convenience to shared goals, beloved charities, and a variety of available financial products – always check your local credit union when you need a home loan, bank account, auto loan, or credit card. And when you're shopping for a home loan, take a look at the rates for ARMs. These mortgages may get you into a home that you wouldn't be able to afford or qualify for if you were getting a fixed-rate mortgage.

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