How Does Getting a Mortgage Work Through a Credit Union?
If you belong to a credit union, you may think about it first when purchasing a car. Many people may not realize that credit unions offer mortgage loans. Credit unions differ from banks and one of the biggest differences is that credit unions are nonprofit companies. Because they do not have profit expectations like banks, they often offer lower interest rates than banks. Also, credit unions are member-owned; when you borrow money from your credit union, you are borrowing money from yourself and the other members.
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Talk with a Loan Officer
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Go to your credit union and ask to speak with a mortgage loan officer or banker. Explain that you wish to purchase or refinance a mortgage and ask about the options. The loan officer can explain your loan options and details. The customer service and time it takes to receive approval and close on the loan may be faster. Also, the interest rate and closing costs may be less than other lenders' due to the the credit union's nonprofit status.
Government Loans
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Credit unions offer all types of loans, including loans from the Federal Housing Administration (FHA) and Veteran's Affairs (VA). These agencies often offer conventional financing, as well. The FHA and VA must approve all lenders that offer their products. You can find out if your credit union provides FHA loans on the FHA website.
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Second Mortgages
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Credit unions offer second mortgages as well as first mortgages. Typically, credit unions offer lower interest rates on second mortgages than their banking competitors. There are two main types of second mortgages: fixed-rate and home equity lines of credit (HELOCs). Fixed-rate second mortgages work like most other installment loans: you borrow a certain dollar amount and pay it back over a number of months. If you want to use the loan again, you have to reapply and reclose the loan. HELOCs are a line of credit, like a credit card, against the home's equity. Often these loans come with a credit card and checks to access the equity. Fixed-rate second mortgages have fixed interest rates for the term of the loan. HELOCs typically are adjustable rate mortgages, so the interest charges rise or fall depending on market conditions.
Alternative Financing
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Credit unions want to serve the community. Many credit unions provide financing for homes that may not be eligible for financing through banks. If you own a unique property, you may find traditional financing hard to obtain. The big banks and lenders might not be sure of your property's value, so they usually pass on offering these kinds of mortgages. Your local credit union knows your market better than other lenders do, so it may approve a mortgage for your geodesic or underground home, when a traditional lender might not.
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