Is It Better to Get Your Mortgage Loan Through an Credit Union or a Traditional Bank?
Whether or not it's better to get a mortgage financed through a federal credit union or a traditional bank will depend on your personal preference.
If you prefer more personalized financing plans and potential membership benefits, a federal credit union may be a better option to get your mortgage loan.
Credit unions are generally able to provide lower fees and more personalized financing plans to their members, which may give you access to a better mortgage rate. However, membership is generally limited to people who meet certain criteria (like living or working in or near New Orleans).
What is the Difference Between a Federal Credit Union and a Traditional Bank?
The main difference between a federal credit union and a traditional bank is that traditional banks are typically for-profit while credit unions are not-for-profit.
This means that credit unions can share the profits they make with their members, in the form of discounts, promotions, more competitive rates on interest-bearing savings and loans, and fewer fees for loan financing.
What Makes a Credit Union Mortgage Different?
Credit unions are not required to pay federal income taxes and aren’t focused on driving profits for investors, which means the emphasis they place on generating revenue from their customers is very different from that of a traditional bank.
Understanding that the profit they do make gets reinvested back into their members is the foundation of what makes a credit union mortgage different.
One of the ways they reinvest their profits into their members is by offering some of the lowest mortgage rates. In some cases, they even provide more flexible financing options to members who have less-than-perfect credit situation.
Benefits of Financing Through a Credit Union
There are many benefits to financing your mortgage loan through your local credit union. This is because credit unions use the profit they make to help their members save money.
Personalized Financing
Federal credit unions are focused on their customer service experience because they exist to serve their communities. For this reason, you're likely to receive more personalized financing options as well as individualized communication concerning banking in general.
Increased Credit Approval Odds
Your local FCU may be more likely to lend to those with poor credit scores and offer flexible options for down payments. This is because they are serving their members who already have a documented history with the bank. You may even be able to acquire pre-approval for a mortgage rate based on your account activity.
Federal credit unions can also afford to give loans to more people because they are less likely to sell the loan to make a profit off the interest later. This means they have more flexibility when it comes to who they lend to as well as the rates that they offer.
Fewer Fees
Because there's less of an emphasis on turning a profit with federal credit unions, you may be able to secure a mortgage with lower fees than you would with a traditional Bank. You may benefit from fewer origination or processing expenses, which can save you thousands of dollars at closing.
Member Benefits
There are benefits to being a part of a local financial institution, particularly when you are comparing rates for home mortgages. Credit unions may have more context of the local demand for mortgages and may be able to help you find the best option for your budget and needs.
Additionally, your history with your credit union may improve the terms of the loan that you are eligible to secure. You're likely to be working with a credit union for the lifetime of the loan, so being in good standing with the credit union is a positive when it comes to getting the best mortgage features.
Choose OnPath Federal Credit Union for Your Mortgage Loan
At OnPath FCU, we're committed to serving New Orleans residents in their financial affairs and helping them get the best terms and rates for their mortgages. If you're ready to see your options for a home loan, give us a call at (504) 733-7274 or contact us online.