You are in the market for a mortgage and you think the FHA loan is the way to go. You know that your local credit union offers lower rates than other banks, but do they offer the FHA loan that you need?
Luckily, credit unions do offer FHA loans. This only applies to those credit unions that applied to be FHA approved, though. You’ll have to check with your local credit union to see if they offer them.
If your credit union doesn’t offer FHA loans, you may find an alternative with them. Most credit unions offer programs that cater to the needs of the members of the credit union. If you cannot get an FHA loan, it doesn’t mean that you can’t get a loan that suits your needs. Credit unions operate a little differently and it can work to your advantage.
Credit Unions are Non-Profit
For starters, credit unions are non-profit. They also have a lower tax liability. These two factors help credit unions give members lower interest rates on their mortgage. You may be able to secure lower interest rates than what you could get at your local bank. If you opt for a non-government-backed loan, you may even be able to get away without paying mortgage insurance.
If you do get an FHA loan, you’ll pay the mortgage insurance, as this is an FHA requirement, not an individual bank/credit union requirement. FHA loans require upfront and annual mortgage insurance. You’ll pay 1.75% of your loan amount up front. You’ll also pay 0.85% of your outstanding loan amount each year, but broken down into 12 monthly payments.
Credit Unions Make Their Own Rules
Credit unions that offer FHA loans obviously have to abide by the FHA rules. Where you may benefit, though, is in the lack of lender overlays. These are rules lenders put on top of what the FHA already requires. Because credit unions are more relaxed in their guidelines, you may find fewer restrictions.
If you opt for a loan other than FHA loans, you may see even more relaxed guidelines. Credit unions generally keep the loans they write. In other words, they don’t sell the loans to a secondary market. This means there aren’t any investors that you have to please, by requiring certain guidelines. Credit unions can make up their own guidelines in order to suit the needs of their members.
You may find more creative programs that suit your needs even more than an FHA loan. For example, many credit unions offer 0% down payment programs. With standard lenders, the only options you generally have for no down payment loans are the VA and USDA loans, both of which are only for veterans or rural, low-income homebuyers respectively.
You May Get Better Customer Service
Since you have to be a member of the credit union in order to secure a mortgage there, they probably know you. Unlike at your big-name banks where you are treated like a number, credit unions treat their members with personal service. They know your name, know your financial status, and are always willing to help you with any financial needs.
This can come in handy if you find yourself having trouble qualifying for a mortgage. Your representative may fight harder to get you the mortgage loan that you need. Of course, you’ll have different experiences at different credit unions. If you don’t feel as if your credit union is suiting your needs, you may want to look around to see if there are others that can satisfy your needs.
Of course, in order to be eligible for any type of loan at a credit union, including FHA loans, you must be a member of the credit union. Each credit union has a membership requirement. Some are only for members of the military, others are for employees of a specific company. You may find broader requirements at select credit unions, though, including those that allow anyone within a specific town or county to join.
Credit unions can be a viable source for any mortgage program, including FHA loans. As with any loan program, you should shop around. You need to find the lender that offers the best interest rate, closing cost, and mortgage program. Try to shop for similar loan programs and terms with each lender so that you can compare the programs side-by-side and find the program that is just right for you.