Financial institutions have pulled back on mortgage lending
since the housing bubble burst, but credit unions have increased
their mortgage lending substantially.
According to CreditUnions.com
, credit unions originated 60 percent more first mortgages during
the first nine months of 2012 compared to the first nine months of
2011.
While bank customers should shop around for a mortgage lender to
ensure they get the lowest rates and fees,
credit union
members may want to check with their credit union first. Credit
unions often offer lower interest rates and fees than other
financial institutions, and typically work with members on an
individualized basis.
Mary Waterman, lending director of the Montgomery County
Employee Federal Credit Union in Germantown, Md., says credit
unions can offer closing cost assistance to their members or a
credit at the settlement table.
"The underlying philosophy of a credit union is people helping
people," says Jeanette Mack, manager of corporate communications
with Navy Federal Credit Union in Vienna, Va. "Our members are
partners in our non-profit business and any fees we charge go back
into the credit union in the form of reduced interest rates."
Mortgage programs
"Credit unions offer every product that other financial
institutions offer, including FHA and VA loans, fixed-rate
conventional loans for 10, 15, 20 and 30 years and a variety of
adjustable rate mortgages," says Scott Toler, president and CEO of
the Credit Union Mortgage Association (CUMA) in Fairfax, Va., which
supplies mortgage services to 60 credit unions. .
In addition, many
credit unions
offer their own loan programs to meet member needs.
"We offer our 'Homebuyer's Choice' mortgages with a zero down
payment requirement, no private mortgage insurance and up to six
percent in seller contributions for closing costs," says Mack. "We
also offer refinancing on home loans up to $1 million with 97
percent loan-to-value."
Navy Federal pays up to $2,500 in closing costs for members and
will match any loan approval at a lower interest rate. Toler says
some credit unions offer a $500 rebate at settlement or even pay
all closing costs for members.
"We offer the 'Harmony Loan' to members of credit unions we work
with, which allows borrowers to reset their interest rate as often
as every 120 days if mortgage rates decline," says Toler. "Instead
of
refinancing
, borrowers can check rates online and reduce their interest rate
with the click of a button. There's no loan approval or appraisal
process and no closing costs."
Membership options
While credit unions were traditionally restricted to employees
in certain industries or residents in a particular area, "credit
unions are a lot easier to join than they used to be," says Toler.
"For instance, the Fairfax County Federal Credit Union in Virginia
used to be open only to county employees, but membership is now
open to anyone who lives, works, worships or goes to school in the
county. Some credit unions are more closed, but others are
affiliated with an association and open to anyone who makes a small
donation to the association."
You can find a credit union to join at the National Credit Union
Association. Membership fees are very reasonable, usually ranging
from just $5 to $20.
However, just as with banks, credit unions vary widely in their
fees and services. The credit union you qualify to join may not
necessarily be the one with the best mortgage products.
Customer service
"Credit unions are fiercely pro-customer," says Brian Martucci,
a mortgage lender with GetLoans.com in Washington, D.C. "However, a
credit union with regional or centralized operations will be less
likely to give their customers special attention than a direct
lender."
Martucci says even if a credit union doesn't have centralized
operations, the size of the credit union can impact its ability to
provide individualized attention. "Big entities just don't work as
well as small ones," he says.
Some Realtors say that a large credit union can be just as slow
to respond to customer needs as a large bank.
Toler says that while credit unions use the same computer system
to underwrite their mortgage as banks, credit unions keep about 25
percent of their loans in their portfolio rather than selling them
to investors. Maintaining a substantial portfolio of loans allows
credit unions to be more flexible with customers.
"In a credit union, we can use old-fashioned banking methods for
our members," says Toler. "For example, if a 20-year member of the
credit union is rejected by the desktop underwriting system because
of a slightly low credit score, we can evaluate that loan
personally and choose to keep it in our portfolio."
Individualized mortgage approvals, closing cost assistance and
low lender fees are all reasons to consider becoming a member of a
credit union. However, be sure to compare all your options between
a bank, a direct mortgage lender and a credit union to see which
works best for your needs.