When you’ve determined you’re ready to buy a house, you’ll need to figure out where to shop for a home loan. Finding a lender and getting preapproved is one of the first and most important steps of the homebuying process. With multiple types of mortgages and lenders accessible to you, choosing the perfect option to help finance the home of your dreams can get overwhelming.
Although the number of lending options is seemingly endless, they generally fall into two main categories—mortgages brokers and banks or credit unions.
Ultimately, the decision to go with a credit union vs. mortgage broker is dependent on your financial situation and your preference. Below, we’ll delve into the differences between a mortgage broker and a credit union, along with the pros and cons of each, to help you find a lender that will fit your specific needs.
What Is A Mortgage Broker, And How Do They Work?
Mortgage brokers are not lenders themselves but exist to be the middleman between you and the lenders they are partnered with. Mortgage brokers partner with a variety of lenders to offer their clients more choices than they may be able to find on their own. Their relationships with lenders also allow mortgage brokers to find options for clients with particular circumstances such as bad credit.
However, much like a real estate agent or lawyer, a mortgage broker charges a fee for their services. This means that there will be an added fee on top of the mortgage you receive. Additionally, many mortgage lenders work on commission from lenders, which may cause them to try and sell you on a mortgage or rate that may not be ideal for you. To avoid these pitfalls, make sure to thoroughly vet the broker you are interested in.
What’s the difference between a mortgage broker and a credit union?
The main difference between a mortgage broker and a credit union is that credit unions can offer mortgage loans directly to customers. In contrast, mortgage brokers work with lending institutions on behalf of their customers to offer multiple mortgage loan options for a fee.
Top 5 Benefits Of Getting A Mortgage Through A Credit Union
Now that you know what a mortgage broker is, how they work, and how they differ from credit unions, it’s time to go over the main benefits of receiving a mortgage through a credit union:
1. Easier credit approval
Credit unions are great options for those that don’t have the best credit. This is because credit unions are more willing to issue mortgage loans to members with less than ideal credit than other financial institutions. According to the National Credit Union Association, credit unions require slightly lower credit scores on average than other lending institutions.
One of the reasons credit unions have more flexible qualification options is because, unlike other lending institutions, credit unions don’t often sell their loans to other institutions. When a lending institution, such as a bank, sells a mortgage they originate, they lose the ability to control interest rates and underwriting standards, limiting the bank’s flexibility with mortgage terms.
2. Access to other financial services
As a member of a credit union, you have access to other financial services that a mortgage broker would not be able to offer. For example, you can start and manage a savings or checking account or start a credit card with the same credit union that offered your mortgage loan.
3. More personalization
While mortgage brokers pride themselves on their ability to tailor a mortgage loan to their customers, they are, at the end of the day, tied to the interest rates fees offered by the financial institutions they are partnered with. On the other hand, credit unions can finely tune the mortgage loans they offer to fit each individual because they originated and own the loan.
4. Lower interest rates
Unlike banks and other financial institutions, credit unions don’t prioritize profit when determining interest rates. That’s why credit unions can offer lower interest rates on average than other financial institutions. This is also the same for personal loans, credit cards, and other financial products offered by a credit union.
5. Lower fees
Along with lower interest rates, credit unions also tend to offer lower fees than banks and other financial institutions. This is because credit unions are more interested in customer satisfaction rather than making a profit. Banks and other financial institutions charge additional fees such as processing costs and origination fees to make more money, but most credit unions limit these.
Consider Arizona Central Credit Union As Your Home Financing Partner
There are both pros and cons to choosing a credit union or a mortgage broker for your mortgage loan. It’s important to take a good look at your financial situation and determine any financial goals to ensure that the lender you choose is the right fit for you. Hopefully, the guide above will help you understand the differences between a credit union and mortgage broker when it comes to mortgage loans and make it easier for you to make a decision.
Arizona Central Credit Union has helped individuals and families secure the home of their dreams for nearly a century. We offer various home loan options with some of the best terms and rates throughout the state. If you’re ready to shop for a home loan, learn more about getting prequalified or contact a mortgage specialist.
