Credit Union Mortgage Loans vs. Traditional Bank Loans
Buying a house is a big decision, and it’s not one that comes cheap! As such, it’s in your best interest to find the right financial assistance to make this purchase possible. One of the biggest decisions you will have to make is where to get your mortgage loan from. You have the option of either using a credit union or a traditional bank loan.
Both options have their advantages and disadvantages, but which one is better? We’ll compare credit union mortgage loans and traditional bank loans to help you decide which option is right for you.
Interest Rates
One of the most significant differences between credit union mortgage loans and bank loans is their interest rates. Credit unions are often known for offering lower interest rates on mortgage loans compared to banks. This is because credit unions are not-for-profit organizations.
In contrast, traditional banks want to make a profit. This commonly results in higher interest rates on loans. Therefore, if you are looking for a lower interest rate on your mortgage loan, a credit union may be the better option for you.
Membership Requirements
Credit unions are cooperative financial institutions owned and controlled by their members. Banks are owned by shareholders.
Before opening any accounts, you must become a member of the credit union. Each credit union has membership criteria that prospective members must meet, such as living in a particular area or working for a specific employer.
Traditional banks do not require membership to obtain a mortgage loan. Loans from these institutions are more obtainable because there are no definite criteria to meet in order to gain access to these services.
Loan Terms
Loan terms refer to the length of your mortgage loan, the interest rate, and the repayment schedule. Credit union mortgage loans and traditional bank loans often offer similar terms, but there are some differences.
Credit unions often offer more flexibility since they are not profit-driven. Accommodations and personalized services make credit union members feel more comfortable and understood during the repayment process.
Typically, banks have strict loan terms due to their desire to make a profit. These terms are regulated by federal and state laws that may enforce rigorous rules to maintain financial stability. Banks are also more rigid with their borrowing criteria, requiring higher credit scores, stable income sources, and substantial down payments.
Loan Servicing
Loan servicing refers to the entity that manages your mortgage after it has been issued. Credit unions often service their mortgage loans, which means they will be your primary point of contact throughout the term of your mortgage. Banks often sell their mortgage loans to other institutions. As a result, your mortgage might be managed by a different entity. Loan servicing is an essential factor to consider when choosing between a credit union and a traditional bank because it can affect your overall mortgage experience.
Customer Service
The last factor that can greatly influence your decision is the quality of customer service. There will be times when you have questions that need immediate answers. Which service will get back to your queries in a timely manner?
Credit unions are often highly regarded for their exceptional customer service. They have a personal interest in their members' financial well-being.
Banks may have a more corporate approach to customer service. The less personalized customer service experience can lead to long wait times, vague answers, and substantial confusion.
If you decide that a credit union is the right choice for you, GFA is here to help! Our dedicated team of mortgage lenders in Massachusetts will help you every step of the way so that you can purchase a house you love.