Banks vs. Credit Unions: What You Should Know
In the search for a good mortgage offer, you should explore all of your options. Knowing some key differences between banks and credit unions, however, could help you focus on institutions that match your needs.
Credit Unions Often Have Better Interest Rates
As a general rule of thumb, credit unions have lower mortgage interest rates than banks. That’s because credit unions are non-profit organizations. When you join a credit union, you actually become a partial owner of the institution. In many cases, this ownership structure means better interest rates for members.
It’s important to keep in mind, though, that not all credit unions are alike. One might offer a terrific rate, while another could have an absurdly high rate. Take the time to do your research and weigh out your options before you sign any papers. You don’t want to be stuck with a rate that will torment you throughout your adulthood! Taking your time to find a bank or credit union you’re happy with in conjunction with using a site like AmeriSave Mortgage to compare rates may help to take some of the stress out of financing your first home.
Banks Have More Service Options
If you plan to open a savings or checking account with your mortgage provider (doing so often means a slight interest cut), then banks can offer you more flexible service options. A large bank usually has more ATMs and locations than smaller credit unions. Banks also typically have better websites that you can use 24 hours a day.
At the same time, many people feel that credit unions offer more personalized services. If you care more about knowing your bank teller by name than having ATM access in another town, then a credit union might suit you well. If you’d rather drive through an ATM than talk to a teller who knows your kids’ names and what you do for a living, then you might as well go with a bank.
Credit Unions Look at More Than Your Numbers
Banks have gotten very temperamental about giving loans to people who don’t have perfect credit scores. They changed their whole attitude after the financial crisis of 2008, making it very difficult for some people to get mortgages with decent interest rates.
Credit unions are usually a bit more permissive, especially if you already have a relationship with them. They have to protect themselves from loss, so they will look at your income and credit history, but you will probably get a better deal from a credit union. That assumes you have been using the credit union for some, though.
There’s a Movement Towards Credit Unions
It’s unlikely that credit unions will ever become as popular or large as banks. If they did, that would defeat the purpose of using them for personalized service. Still, a lot of people have decided to give up large banks in favor of smaller credit unions. A report from Q1 2012 shows that credit union membership jumped by about 667,000 people. If this trend continues, then credit unions will have more resources to compete with banks on all levels.
If you have already been through the mortgage process, which institution worked best for you?