Routing # 256078446
MORTGAGE KNOWLEDGE CENTER
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MORTGAGE
Is a Credit Union Mortgage Right for You?
What you'll learn: What to know about the differences between bank and credit union mortgages.
EXPECTED READ TIME: 8 MINUTES
May 10, 2024
If you are in the market for a home, you have probably already started taking a peek at the listings in your area. However, shopping for a mortgage lender should be at the top of your priority list. In most cases, you will be making mortgage payments for years to come, so it is important to choose a lender that can satisfy your home loan needs and act as a partner throughout your homeownership journey.
As you start researching, you will find you have a number of different lenders to choose from, each with their own selection of mortgage options and financial services. Most lenders will fall under two categories: classic banks and credit unions. Keep reading to learn the similarities and differences between each one and discover if a credit union mortgage is right for you.
Bank mortgages vs. credit union mortgages
Credit unions operate on a different business model than banks, but they do share similarities. For example, the process of applying for a loan is the same: you will complete a loan application and submit your qualifying financial documents for an underwriter to review and determine if you are a good fit. Most banks and credit unions offer fixed-rate and adjustable-rate mortgage options, plus a variety of loan programs. The type of mortgages available will vary depending on the lender, and each has its own requirements for borrowers to meet, including different down payment minimums and credit score qualifications.
When you are considering a credit union versus a bank mortgage, there are some key differences to evaluate before making your choice. The biggest distinction between the two are their business structures. Banks are for-profit entities, so in many cases they will have higher rates and more fees. Credit unions are not-for-profit organizations, meaning they can pass more savings on to their members with lower rates and fees. However, while anyone can use a bank, credit unions typically require you to join as a member in order to use their loan products.
Membership requirements to join a credit union will vary—you may need to live in a certain area, be part of a particular organization, or employed in a specific profession. That said, there are online credit unions in which membership is open to everyone.
Though banks have historically been a popular lender choice, many homebuyers in recent years have been turning to credit unions for their numerous advantages.
What are the advantages of a credit union home loan?
Credit unions act as a partner to their members, delivering products and services that help you achieve your financial goals. Although they are structured differently than traditional banks, credit unions offer a number of benefits.
- Quality customer service
Given that profit is not their top priority, many credit unions focus on providing their members with top-tier customer service and financial guidance. It is an opportunity to work one-on-one with a lender who will walk you through your mortgage options to find which works best for your needs. As a member, you will continue that relationship well after you have moved into a new home.
- Lower interest rates, less fees, more savings
Since credit unions are not-for-profit, they are able to pass on more savings to their members. This means you may be able to secure your mortgage at a lower rate than you would with a bank and enjoy fewer closing fees, saving you more money up front.
- Wide variety of loan products
With the focus on providing the best services for members, credit unions offer a variety of mortgage products for you to choose from. That way, you can obtain a home loan that is tailored to your specific requirements.
Credit union disadvantages
While credit unions offer numerous, cost-effective benefits, there are a few disadvantages you should consider, including:
- Membership requirements: Depending on the credit union you are interested in, there may be membership requirements you must meet to access their financial services. However, the good news is there are credit unions who provide open membership enrollment to everyone!
- Limited branch and ATM access: In many cases, credit unions are locally based so they will have limited branch locations. It is important to note, though, that some credit unions are strictly online so you can access or join from anywhere in the country.
How to choose the right mortgage lender
Choosing a lender for your mortgage is an incredibly personal journey for every homebuyer. Whether you are deciding between a bank or a credit union mortgage, it is important to thoroughly research every lender on your list. That way, you will have a solid idea of the services they can provide and the home loan products they offer so you can be confident you’re getting everything you need out of your mortgage.
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Home Buying Steps
Mortgage Products
Disclosures
1Conventional Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
2FHA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.375 discount point, which equals 1.375 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 96.5%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
3VA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of $995.
4Jumbo Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 0.75 discount point, which equals 0.75 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, non-conforming, fixed-rate loan. Loan amount of $1,009,000; loan-to-value ratio of 70%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.
Routing #256078446
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