If you’re looking to buy a house, there are a wide range of companies that would likely be happy to give you a mortgage. Well-known national lenders approve loans for customers across the United States, but a smaller, local bank or credit union may offer you several advantages that a larger institution can’t.
Qualification Requirements and Loan Terms
Credit unions prioritize customer service over profits. They are often less strict than banks when it comes to loan approval requirements and down payments. They also generally offer loans with lower interest rates and fewer fees. A local credit union may also be able to give you advice on mortgage incentives or other programs you may qualify for, such as a home loan program for veterans.
If you get a mortgage through a bank or credit union where you are already a customer, you may be eligible for a reduction in closing costs. A local credit union may also offer you a lower interest rate than a national mortgage lender. Even a small difference in the interest rate can mean thousands of dollars in savings over the life of the loan.
A credit union may offer a more attractive interest rate than other lenders, but you may not qualify if you don’t meet the credit union’s membership criteria. Banks and online lenders, on the other hand, will work with anyone who qualifies.
Other Financial Services
If you take out a mortgage through a bank or credit union, you will have access to other services the institution offers, such as checking and savings accounts, credit cards, investment accounts, home equity loans and home equity lines of credit. You will likely have an easier time getting approved for those financial products if you already have a mortgage with the same institution.
If you get a mortgage through a bank or credit union, you will be able to go to a local branch and speak with someone face to face. Credit unions have fewer locations than banks, while online lenders have no physical branches.
Nowadays, many people like to handle their finances online. Banks and online lenders may have more advanced technology, including mobile apps, than credit unions.
Large banks and online mortgage lenders often sell loans to other servicers. That should not change anything for customers, except where payments are sent, but clerical errors sometimes lead to headaches. Credit unions tend to hold onto loans to generate long-term income, rather than selling them to collect a one-time fee. That can give borrowers more continuity and consistency.
When it comes to mortgages, many individual factors, such as income, credit score and debt-to-income ratio, influence a lender’s decision. Some customers will get the best terms from a national lender, while others will be better served by a local bank or credit union. Request quotes from a variety of lenders to figure out which is right for you.