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Couple talking to loan officer
Credit union mortgages have better rates, but it's tougher to qualify.
Ariel Skelley—Getty Images/Blend Images

Credit unions have historically offered lower mortgage rates and closing costs than traditional lenders. Anyone searching for a mortgage to buy a home for sale in Seattle, WA, or anywhere across the U.S. can’t turn down that deal. But credit unions also tend to be more conservative in their lending practices, meaning that you might need to jump through more hoops — and have an excellent credit history — to qualify for a loan through one.

Take these pros and cons of a credit union mortgage into consideration when you’re shopping around for a loan — you may find that these loans are the right ones for your home purchase.

Pro: Personalized service

If you like shooting the breeze with the owners of local mom and pop establishments, you’ll probably like dealing with credit unions too. “If a consumer is interested in knowing his lender on a personal level and being able to talk with the people making the decisions about their loan, a credit union will deliver a higher level of service than other mortgage entities,” says Brady Popp, senior vice president of lending at Texas Trust Credit Union.

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Popp explains that at his credit union, which is not unique, loan officers take the time to speak with borrowers to make sure the loan is right for them. Here’s another example: “[Credit unions] offer a variety of educational supports for first-time homebuyers, from online resources to seminars to one-on-one conversations,” says Chris Arenz, director of mortgage payment protection for CUNA Mutual Group, a major provider of financial products to credit unions.

Con: That eligibility issue

You can’t just walk into the nearest credit union and join unless you meet the membership requirements. Most credit unions require you to belong to a certain group, such as an employee group or an association (church, HOA, school, etc.). Others require that you live in a particular geographic area. Don’t meet those membership requirements? You’re out of luck. “Our field of membership is restricted to a geographic area, so we cannot provide a loan for a property that is not located within our geographic boundaries,” Popp says.

Pro: Nonprofit business model

“Credit unions, in general, appeal to a vast audience because of their nonprofit, cooperative business model,” says Bob Sadowski, a CUSO (credit union service organization) marketing specialist with myCUmortgage. As a credit union member, you are also a partner (an owner) of the credit union. “People honestly come before profits, and credit unions make certain to treat partners as their number one priority,” Sadowski says.

Con: Lack of breadth

Credit unions, small ones in particular, might not offer certain types of specialized loans. “Some people have very specific lending needs, such as commercial or rental property, and not all credit unions are equipped or familiar with these types of specific transactions,” says Toby Hayes, vice president of marketing at First Service Credit Union in Houston, TX.

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Pro: Better rates

It’s always smart to rate-shop when you’re looking for a mortgage, and you’ll often find credit union mortgage rates win. “Many credit unions keep their loans in their own portfolio,” Popp says. “This gives us more flexibility and allows us to offer better terms and rates.”

Con: Tougher to qualify

It might not be 2005 anymore, the peak of subprime lending, when a pulse was pretty much all you needed to qualify for a mortgage loan. But still, some lenders are more lenient than others, and credit unions generally aren’t on the lenient side. “Credit unions’ risk tolerance is typically lower than other lenders’. A borrower’s credit quality will be scrutinized more, and credit requirements may be tighter,” says Popp.

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Pro: Speedy closings

Many credit unions offer faster closings than other financial institutions. You’re often in the driver’s seat if you can offer a quick closing to your seller. Many sellers want to close quickly to avoid an extra month of carrying costs, which gives you a negotiation advantage if you can accommodate them. “We make every effort, as do our vendors, to expedite processes and to close loans as quickly as possible,” says Chuck Price, vice president of lending at NEFCU.

The bottom line: Credit unions have some definite advantages, making them at least worth your while to check out. And many homebuyers are doing so. “The credit union industry’s share of the mortgage market nearly quadrupled over the last decade and continues to grow,” Chris Arenz says.