Compared to traditional lenders, credit unions prove to offer lower mortgage rates and closing costs. However, they are also known to be more conservative in their lending practices which mean that it may take more patience and effort to qualify a loan through one.
Are you better off with a credit union? Here are the pros and cons according to Trulia:
Pro: Personalized Service
"If a consumer is interested in knowing his lender on a personal level and being able to talk with the people making the decisions about their loan, a credit union will deliver a higher level of service than other mortgage entities," says Brady Popp, senior vice president of lending at Texas Trust Credit Union.
According to Popp, his credit union makes sure to take the time to have the talk with borrowers to ensure that the loan is right for them.
"[Credit unions] offer a variety of educational supports for first-time homebuyers, from online resources to seminars to one-on-one conversations," says Chris Arenz, director of mortgage payment protection for CUNA Mutual Group, a major provider of financial products to credit unions.
Con: The Eligibility Issue
You need to be able to meet the membership requirements before tapping into a credit union. Some require you to belong to a certain group like an employee group or an association (church, HOA, school, etc.), or you have to be in a particular geographical area.
If you fail to meet the membership requirements, then you are just out of luck. "Our field of membership is restricted to a geographic area, so we cannot provide a loan for a property that is not located within our geographic boundaries," says Brady Popp.
Pro: Non-profit business model
Credit unions, in general, appeal to a vast audience because of their nonprofit, cooperative business model," says Bob Sadowski, a CUSO marketing specialist with myCUmortgage.
Being a member, you are also considered a partner (owner) of the credit union. "People honestly come before profits, and credit unions make certain to treat partners as their number one priority," says Sadowski.
Con: Lack of broadness
Some credit union groups, especially small ones, have limited scope and don't cater to specialized loans.
"Some people have very specific lending needs, such as commercial or rental property, and not all credit unions are equipped or familiar with these types of specific transactions," says Toby Hayes, vice president of marketing at First Service Credit Union in Houston.
Pro: Better rates
When shopping for mortgage, you may find credit union to have the best rates. "Many credit unions keep their loans in their own portfolio. This gives us more flexibility and allows us to offer better terms and rates," says Popp.
Con: Tougher to qualify
Compared to other lending companies, credit unions are on the less lenient side. "Credit unions' risk tolerance is typically lower than other lenders'. A borrower's credit quality will be scrutinized more, and credit requirements may be tighter," says Popp.
