In a tight housing market, it’s important to capitalize on every advantage you can. For many people, this will include shopping around for the best mortgage rates and looking especially hard at the advantages of choosing a mortgage loan provided by a credit union.
Why Choose a Credit Union for Your Mortgage?
When you are ready to buy a home, it is important to consider several factors related to your mortgage. Large banks often have large advertising budgets that allow them to attract new customers, but applying for a mortgage at a credit union offers some unique advantages.
Lower Interest Rates
Credit unions are unique because they serve as nonprofit, community institutions owned by the members they serve. As a result, the executives in charge are less motivated by profit when compared to banks who must answer to their shareholders. As a result, credit unions can offer lower interest rates and fees to their members who need to take out home loans.
Personalized Customer Service
Credit unions’ community engagement extends to their approach to customer service, as well. Because they are a smaller operation based in or around a specific community, credit unions take a more personalized approach to their financial services. This translates to financial professionals who know their customers by name and understand the context of their lives.
Flexible Terms and Conditions
Similarly, when a financial institution understands its members, it’s possible to establish and offer products that meet their needs. As a result, home loans from credit unions are more likely to offer flexible terms and conditions, such as adjusting repayment schedules to reflect changing financial situations for borrowers as well as shortening and extending the loan’s terms, if needed.
Community Focus
Because membership requirements for credit unions are often job- or community-based, members and employees feel a connection to one another. For example, members of Hudson River Community Credit Union (HRCCU) must live, work, attend school, or worship in Saratoga, Warren, Washington, and Rensselaer counties or the Towns of Cohoes, Watervliet, or Green Island or be the immediate family member of someone who does. As a result, members are literal neighbors, allowing HRCCU to meet the specific needs of our region.
Steps to Applying for a Mortgage at a Credit Union
Aside from the financial benefits of the loan itself, the mortgage application process at a credit union is simple and straightforward. As an added advantage, the friendly, customer-focused nature of credit union staff means that there is always someone to assist you through the process.
Step 1: Become a Member
The catch about getting a home loan through a credit union is that you must be a member to qualify. The good news is that most credit unions have simple, straightforward paths to becoming a member, and they do not charge members any fees for that membership. Individuals simply need to fill out some basic financial paperwork and open a checking account to get started.
Step 2: Gather Necessary Documentation
As a credit union member, your next step for getting a mortgage is gathering the appropriate financial documentation to pre-qualify for your loan. Generally, this documentation includes proof of income (e.g., W-2s or tax returns), proof of assets including your down payment (e.g., bank statements), a list of current debts (e.g., outstanding loans and credit card statements), and a credit report.
Step 3: Pre-Qualification
With the necessary documentation in hand, your credit union can offer you a pre-qualification letter that states how much money you qualify to borrow and at what interest rate. A preapproval letter is helpful when it comes to making an offer on a home, as it shows sellers that you are a serious buyer who has access to the funds needed to complete the purchase.
Step 4: Mortgage Application
Once you have found a home and have made an accepted offer, it is time to start the full loan application process. This is when you will submit all the paperwork you gathered in step two. Throughout the process, your credit union loan officer will help you with filling out the details and support you through the experience. They will also be able to “lock” a mortgage rate for you for a set period (usually 30 to 90 days) so that fluctuations in the market will not affect the final price of your mortgage.
Step 5: Mortgage Approval and Closing
Once everything is approved, you will move on to the final stages of the home buying process where the bank will draw up the check for your loan to give to the seller and close everything out. During closing, depending on your loan terms and your terms with the seller, you may have some closing fees to pay, as well. You will then begin repayment of your loan the next month.
Comparing Credit Union Mortgage Rates to Traditional Banks
Ultimately, for many homebuyers the best mortgage will be the one with the lowest rate and best terms. For those factors, credit unions continue to offer advantages over traditional banks with lower mortgage rates that are easier to qualify for, even as a first-time homebuyer.
Current Mortgage Rate Trends
Mortgage rates can change daily, and as most people know, they have been steadily increasing over the past few years. However, despite this upward trend, credit union mortgage rates have remained lower, on average, as compared to banks. In fact, according to Newsweek,2 the national average for credit union mortgages is usually about 0.1% or more below traditional banks.
Factors Affecting Mortgage Rates
No matter how much a bank or credit union wants to help its customers, it is important to remember that mortgage rates change according to outside, economic factors that are beyond these institutions’ control. The U.S. Federal Reserve Bank (the Fed) sets interest rates each quarter, and as those rates rise, mortgage rates also rise across the board for all institutions.
Choose HRCCU for Your Mortgage
For many homebuyers, getting a mortgage from a credit union is a safer and more affordable option than going with a traditional bank. The lower rates and fees provided by credit unions and their community-oriented service make the mortgage application and repayment process easier and more accommodating.
At HRCCU, we are similarly committed to helping our members not only buy the home of their dreams, but also feel confident in their ability to pay for that home and live in it happily for years to come. Are you ready to learn more about how to get a mortgage at a credit union? Contact us today.
