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I'm Not a Member, Can I Get a Mortgage

What you'll learn: Even if you’re not a member, it’s easy to join and apply for a home loan.

EXPECTED READ TIME: 9 MINUTES

This question is pretty easy to answer: Yes! However, if you are looking for a mortgage, you should become a member of a credit union because when you do, you will unlock some fantastic benefits. These benefits will reduce your mortgage costs as well, potentially saving you hundreds or even thousands of dollars over the life of the mortgage. Let’s take a look at credit unions and see how they can benefit you if you obtain your mortgage through one.

Do I Have To Be a Teacher or Veteran To Join a Credit Union?

In the past, credit unions were limited to members who had commonalities — working for the same company, having military service or living in the same area. More recently, credit unions have begun to loosen their membership enrollment criteria, allowing nearly anyone to join.

To do business with most credit unions, you will have to join the CU, which requires opening an account. There may be a nominal deposit amount to do so, and to be fee-free, the account may require you to keep a minimum balance (usually between $500 and $1,500). When you join, you become a part owner of the credit union and can participate in the union’s votes. Votes are on a per-person basis, not proportional to the funds deposited, so everyone has an equal voice. Also, membership means you can obtain lower costs for mortgages because fees and rates are reduced.

Is It Easy To Become a Member?

Some credit unions require you to be an employee, veteran or family member of a specific company/organization. Still, you will probably be surprised to know there are over 100 credit unions you can quickly join without any particular prior affiliations.

Some credit unions require you to make a small donation or join an organization to become a member. Often, this is a $3-$5 (up to $30) donation to a defined charity or their membership fee. But even this donation may be provided on your behalf by the credit union, so for some CUs, you don’t actually pay anything. Most credit unions want to build their membership numbers so that they can have more influence and help provide better services to their members by benefiting from economies of scale.

Credit Unions Are Growing

Especially since the 2008 financial crisis, the popularity of credit unions has been growing. Many consumers blame the banks for the financial crisis and have therefore chosen to be part of nonprofit credit unions where they have a say in the operations.

As of the end of 2021, according to the National Credit Union Administration, the governmental organization that insures credit union deposits, the assets that are held in federally insured credit unions have reached $2.06 trillion. That is up more than 20% over the previous two years. Memberships have also grown to almost 130 million members — 5.3 million more than the year prior. This total is over one-third of the U.S. population.

What is the other reason for this phenomenal growth? High banking fees. Much of these fees were the banks’ response to a congressional amendment made to the Dodd-Frank Act that capped fees banks can charge for processing their merchants’ debit card transactions. The result was that banks then passed those lost fees onto their account holders who responded by moving to credit unions known for lower fees and better service.  

CUs’ cooperative model has provided surprising results through the pandemic, with credit unions’ asset quality improving while banks are warning of coming bad times. The Credit Union National Association attributes these better-than-bank results to stimulus payments, loan growth and credit unions taking an active stance to work with their members to modify or defer loans, which prevents delinquencies and charge offs.

Why Consumers Love Credit Unions

This answer all comes down to the focus of a credit union versus a bank. The main difference is banks are profit-making enterprises with shareholders who own the bank while credit unions are cooperative and the members are the owners. These different structures mean the focus of a bank is to make profits for its shareholders while the credit union’s focus is its customers (the members) — their satisfaction and their financial results.

Credit unions and banks both offer financial services to clients, and deposits in both are insured (the FDIC for banks and the NCUA for credit unions). The nonprofit structure of credit unions means they return their earnings to the members, not shareholders.

Credit unions return these earnings with lower fees. Additionally, interest rates provided to members for their deposits are higher and the interest rates that credit unions demand for their loans and mortgages are lower than for most banks. Over the life of the home loan, which can be 30 years, the savings on a mortgage made through a credit union can be significant.

Advantages of Credit Union Loans and Mortgages

Because a credit union is trying to help its members, it wants its members/borrowers to be successful. Before the 2008 crisis, banks were chasing profits, and 24% of all banks’ mortgages were considered subprime (made to more risky clients) while credit unions had a 3% ratio. When the recession began, bank funding dried-up, but credit unions continued to serve their members because it is part of their mission.

No matter what the economy does, CUs’ mission stays the same. As a borrower, credit unions will work with you to get the mortgage needed to purchase a home. Credit unions’ lower fees and rates make them even more attractive to borrowers. If the pundits are correct and we are heading into a new recession, obtaining bank loans will become harder, especially for those deemed to be riskier by banks. This shift is why choosing a credit union to provide your mortgage may make the difference between obtaining the mortgage or not.  

Joining a credit union for the specific purpose of obtaining a home loan is a smart move for the present and the future.
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