Obtain a mortgage loan from a credit union

You are ready to take out a mortgage and you shop with banks and lenders large and small. But maybe you shouldn’t limit your mortgage search to these traditional finance providers. There is another type of mortgage lender that many overlook when looking for a home loan: credit unions.

Credit unions operate much like banks, but they are not-for-profit organizations. They also offer mortgages, and supporters of these institutions claim that because credit unions are not-for-profit, they can often offer loans at lower mortgage fees and rates.

Advocates of credit unions say these institutions often hold their mortgages instead of selling them to third parties, as banks tend to do. This means, they say, that credit unions can be more flexible with borrowers who might have higher monthly debts or more difficult sources of income to verify.

“What sets us apart is the levels of service we provide,” said Theresa Williams-Barrett, vice president of consumer loans and loan administration at Affinity Federal Credit Union in Basking Ridge, New Jersey. . “Credit unions generally provide a lot of service to members. They are more concerned with how they can get a person into a house than with reviewing guidelines to see if they can decline a loan application.”

Consumers are still much more likely to take out a mortgage with a bank or traditional lender. But a growing number of borrowers are turning to credit unions. Research firm Callahan & Associates said that in the second quarter of 2016, credit unions across the country had a loan balance of more than $ 340.7 billion in first mortgage loans. This is the highest this number has been for a quarter.

Yet credit unions only claimed 11% of mortgages originating in the United States during the first quarter of 2015, according to a report from TransUnion, proof that most customers still seek traditional sources of financing when they are looking for home loans.

Is a Credit Union Mortgage Right for You?

Why should you consider a credit union when you’re ready for a mortgage? Chuck Price, vice president of loans at NEFCU, a credit union in Westbury, New York, points out the fees and lower interest rates that credit unions often offer.

“We tend to be a little less aggressive from a fee standpoint,” Price said.

The reason? Credit unions are not-for-profit organizations, so they can afford to offer mortgages at fees that allow them to break even. Traditional lenders and banks need to focus on making profits, which means they might have to charge mortgage borrowers higher fees.

Price also emphasizes the flexibility offered by credit unions. NEFCU keeps the mortgages it originated from, he said. This means it can work with clients who might have higher debt ratios, shorter work histories, and more difficult sources of income to verify. Traditional banks could quickly pass on these borrowers, Price said.

“We have tremendous flexibility,” Price said. “We can often make exceptions to work with borrowers who might not qualify at the big banks. “

The personal touch

J. Paul Leavell, senior strategic analyst at Charlotte Metro Federal Credit Union based in Charlotte, North Carolina, said credit unions often charge less for ratings and other closing costs. Some will forgo the demands of expensive private mortgage insurance, even if borrowers take out loans of up to 95% of the value of the homes they buy.

Then there is the personal touch. Leavell said loan officers who work with credit unions tend to slow down as they walk clients through the lending process. Many borrowers appreciate this, Leavell said.

“Credit unions not only collect information relevant to mortgage approval and processing, they are more willing to hold the customer’s hand throughout the process,” he said. “They will explain, for example, why certain information is needed. Credit unions are also willing to offer advice on what type of loan consumers should take out based on the consumer’s particular circumstances.”

Not the only option

This does not mean, however, that credit unions are necessarily the best option for your mortgage. Yes, credit unions can offer lower rates and fees. But the big banks and lenders can often do the same. Your best bet is to shop with several different lenders, of all types.apply for a credit union mortgage

You may find that the large national bank actually offers a better interest rate than the smaller local credit union.

Kyle Kamrooz, co-founder and COO of “cloudvirga”, an Irvine, Calif. Based company whose goal is to automate mortgage lending, said it’s true that credit unions , because they are generally smaller, offer a more personal touch that can help alleviate the stress some borrowers face when applying for a mortgage.

But Kamrooz also said there is no guarantee that a credit union will offer lower rates or fees than a traditional bank or lender. Consumers need to shop from multiple lenders if they want to find the best rate and lowest closing costs, he said.

A satisfied customer

Bill Schoolman, a retired executive, says he doesn’t regret taking out a mortgage with his local credit union, NEFCU. Earlier this summer, Schoolman took out a loan of around $ 1.5 million to buy a house on the Port of Setauket in New York. Schoolman says he was delighted with both the service and the interest rate he received on his jumbo mortgage, 3.3%.

Schoolman had tried to take out his loan from traditional banks. But complications over prior privileges constantly scuttled his efforts.

NEFCU, however, was able to overcome these difficulties and secure his loan to Schoolman, he said.

“They were very involved in the whole process,” Schoolman said. “They weren’t afraid of obstacles. They showed great patience. They really rose to the challenge, and I would never go back to a traditional bank for a mortgage again.”

If you’re interested in taking out a mortgage with a credit union, you have options. The Credit Union National Association says there are now more than 6,000 credit unions operating across the country.

Some credit unions require you to be part of a specific union or member of the United States military. But most are open to anyone who lives in the credit union service area.

About Nell Love

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