Image courtesy of Flickr, Alessandro Valli
Most people experience great customer service at their credit union and typically enjoy higher savings rates there and get better deals on auto loans. But what about mortgage loans?
All sorts of people, people from both ends of the political spectrum even, have a problem with big banks.
People's distaste for big banks started in a huge way after these banks were deemed ''too big to fail'' and received government bailout money. And even after the bailout, the big banks continue to alienate many people, from their impersonal service to the fees they charge their ''low-profit'' customers.
People who are fed up with big banks often join credit unions, not-for-profit financial cooperatives owned by their members. Most people experience great customer service at their credit union and typically enjoy higher savings rates there and get better deals on auto loans and home equity lines of credit. But what about mortgage loans? Are they better deals at credit unions? The answer is maybe but not necessarily.
We reached out to Steven Rick, chief economist at CUNA Mutual Group, which provides insurance and financial products for credit unions nationwide. Here's what we learned:
This proves that people these days really are flocking to credit unions, perhaps as an alternative to big banks. But should they get a mortgage through a credit union?
Personalized service: Some folks want personal service when they take out a mortgage, and many credit unions offer that. ''Because a credit union's mortgage department is local, it is likely you'll interface with the actual person that approves your loan,'' says Toby Hayes, VP of Marketing, SAFE Federal Credit Union. ''At a credit union, you're a person and not just a number. This is important when you are making such a large investment.''
Brady Popp, Senior VP of Lending at Texas Trust Credit Union, demonstrates how personal service works at his credit union: ''At Texas Trust, we won't process a loan application unless we talk to the borrower and make sure the loan meets their needs and requirements.'' He adds, ''Credit unions are interested in building a long-term relationship with a borrower/member, as opposed to being driven by quotas and profitability. This changes the dynamics of the lending process.''
Competitive rates: Rates should be, if not your biggest concern when taking out a mortgage loan, one of your top concerns. Credit unions often offer the best rates. ''Credit unions are highly competitive and offer great rates comparable to or better than national banks,'' says Hayes. ''Many credit unions keep their loans in their own portfolio,'' explains Popp. ''This allows us to offer better terms and rates.''
More flexibility: Many credit unions are more flexible regarding lending terms. If you have bad credit, for example, you might be automatically denied a loan at a big bank, but your credit union might be able to work with you. But the opposite is often true too. ''Credit unions' risk tolerance is typically lower than other lenders,'' says Popp. ''A borrower's credit quality will be scrutinized more and credit requirements may be tighter.''
Membership requirements: Credit unions come with membership requirements. Members need to share a commonality, such as working at the same place or living in the same community. So you might not be able to join the credit union you would like to get a mortgage from. ''Our field of membership is restricted to a geographic area,'' says Popp. ''So we cannot provide a loan for a property that is not located within our geographic boundaries.'' But there are ways around the membership restriction. Some credit unions, for example, are open to people who join an organization that includes membership in the credit union as a benefit. In this case, the old saying, ''Where there's a will there's a way,'' applies.
Not a deal: A credit union might not offer the lowest interest rates. In today's market, rates are low across the board. You might see the best rates at a credit union, and that's great if you do. But you should always shop around first. All sorts of organizations offer mortgage loans besides credit unions, such as banks, mortgage brokers, and online lenders.
If personal service is your top priority, then you'd be hard-pressed to find a better fit than a credit union. ''[A credit union's] primary concerns are truly in helping their partners (members), be it with simple share accounts or home mortgages,'' says Bob Sadowski, a CUSO marketing specialist with myCUmortgage.
But when you're in the market for a mortgage loan, your best course of action is to shop around. See which lender will give you the best rate. Check all the types of mortgage lenders to see where you will get the best deal. And where better to shop around than right here at BeSmartee!
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