When you are shopping for a home loan, you have more options than your standard bank. You can also try a credit union near you. Many people forget about this option because they think they have to be affiliated with a specific employer in order to qualify.
Today, many credit unions offer membership to people just for living in a certain county or city. There are also credit unions that allow relatives of those with a membership to join as well. You never know when you may have the benefit of a non-profit entity such as a credit union at your disposal.
Credit unions have many benefits, but one of the largest is the ability to secure a mortgage. The process works the same as it does with any other lender. The only difference is you have to belong to it. Once you are a member, you have many benefits others getting a mortgage elsewhere do not have.
It is no harder to get a loan from credit unions than it is from any other type of lender. In fact, it may even be easier for you. Keep reading to learn why.
Many credit unions keep the loans they write on their own books. This benefits you in one major way. The credit union can be more flexible with their underwriting. When they don’t sell the loans to an investor, they don’t have anyone they have to answer to. Instead, they can make up their own rules.
This doesn’t mean they won’t have rules, because they will. They will just have more flexibility to ‘bend’ those rules should they so decide. For example, let’s say their credit score requirement is 680, but you have a 670. Many lenders would just decline the loan. They know they have to answer to their investors and they don’t want to be stuck with the loan on their books.
A credit union keeping the loan on their books, though, could look at that 670 and the other qualifying factors and take your loan. They may require that you have some sort of compensating factor, such as a low debt ratio or high down payment, though. If you meet the compensating factor requirements, you likely have a good chance at getting the loan.
Lower Interest Rates
Credit unions are often known for their lower interest rates. Again, because they operate as a non-profit entity, they aren’t out to make money on your loan. They are there to help the members get and stay financially secure. This could mean a lower interest rate, which could help you get qualified easier. A lower rate means a lower payment. A lower payment means a lower debt ratio. This could work to your advantage when applying for the home loan.
Greater Customer Service
Credit unions often know their members by name as soon as they walk through the door. Operating as a non-profit agency, they want to do what helps the consumer rather than what fills their pocketbook. This often means helping the borrower find the loan that works for them.
At a credit union, you are not just a number. You are not a face without a name, either. The representatives often have warm relationships with the clients, which helps them want to help you. This could work to your advantage if you have a unique situation in which they need to look at closer in order to decide if they should lend to you.
The Same Applicant Process at a Credit Union
At the end of the day, though, you go through the same application process and basic underwriting process as any other lender.
You have to disclose your personal and financial information to the credit union, which includes:
- Name, address, and social security number
- Employer information
- Gross monthly income
- Asset totals
- Estimated credit score
- Type and value of the home you want to buy or refinance
The credit union will take this information and upon your approval pull your credit. They will then go through the underwriting process much like you would anywhere else. You’ll deal with a loan officer and an underwriter. The loan officer will give your application a quick evaluation to determine how well you qualify for the loan. But, it’s the underwriter that determines if you get the loan or not.
Overall, getting a home loan from a credit union is sometimes easier than getting one from a big lender. They often have more relaxed guidelines or a little more ‘wiggle room’ to get your loan approved.