Consumers have been voicing their anger and frustration with big banks by moving their accounts to smaller banks and credit unions. Should you consider doing a home refinance through a local credit union instead of choosing from mortgage lenders? Here are some things to consider.
Credit Unions vs. Banks
Both credit unions and banks are in the business of lending money. But they differ in how they are structured. Credit unions are owned and run by their members, who have a say in how the organization is run. Banks are for-profit institutions that are responsible to shareholders.
Credit unions may serve only select groups of people, such as employees of a company, members of a church, or people who live in the same community. Because they are smaller, you may get more personal service than at a larger bank. You may find that when you apply for a mortgage refinance the process won't be as tough as at a bank.
A Second Look
Keep in mind that you still need to have good credit, a steady income, and an acceptable debt-to-income ratio to get approved for a mortgage refinance. However, if your loan application gets rejected for any reason, you may have a better chance of appealing that decision at a credit union than you would at a bank.
Mortgages and Other Financial Products
Take time to shop around for a credit union so you can become familiar with the policies and products being offered. In addition to mortgages, credit unions offer other products that include checking and savings accounts, personal loans, auto loans, credit cards, and certificates of deposit. While deposits at banks are insured by the Federal Deposit Insurance Corp., funds at federal credit unions are insured by the National Credit Union Share Insurance Fund.
While credit unions usually have small networks of ATMs, you may find one that reimburses you for fees related to using other ATMs. The National Credit Union Association has a tool to help you search for a credit union in your area.
Getting a Mortgage
Get mortgage quotes from banks and credit unions when shopping for a home refinance deal. In many cases you may find that credit unions offer the best mortgage rates. If you use a mortgage broker, ask if he or she can get quotes for refinancing from both banks and credit unions. You may find that you have to contact credit unions directly to get information on home loans. That could be as easy as walking over to its office during a break at your workplace.
When you compare one mortgage quote against another, look at details such as the interest rate, closing costs, points, or prepayment penalties. Ask for Good Faith Estimates (GFEs) to compare loan deals. As with any refinance deal it's important to determine how long it would take to break even on the closing costs. Do not apply for a mortgage refinance if you plan to sell your home before that break even point.
In addition to financial products, some credit unions also sponsor events or classes to help members become more financially savvy. You may find credit unions offering seminars on how to get mortgages, resolve retirement issues, or pay off debt.
- Many people are fed up with big banks and moving their deposit accounts to credit unions and smaller banks.
- Credit unions are owned and run by members. Banks are for profit institutions that answer to a board of shareholders.
- You may get more personalized service at a credit union, which could restrict membership to people who work at a certain company, belong to a church or community organization, or simply live in the same community.
- Credit unions offer mortgages and other financial products like checking and savings accounts.
- Compare mortgage quotes from banks and credit unions when shopping for refinancing.
- Credit unions may offer classes or events to help you manage money better and build wealth.