Mortgage Tip: Use a Credit Union

Of course, it’s possible to exaggerate the extent to which credit unions are ‘on your side.’ Member-owned or not, they still use the same criteria as banks to determine who gets approved for a loan. And while the customer service might be better at credit unions, they’re generally too small to handle the servicing of the loan on their own and are therefore more likely to sell your mortgage to a third party. So if you default on your mortgage, don’t expect better treatment during foreclosure proceedings just because the loan originated at your friendly neighborhood credit union.

Don’t expect it to be any worse, though. Cecala downplays the significance of the involvement of a third party servicing company, noting that the servicing transfer is regulated by federal law, that you’ll only interact with them if you’re late on a payment, and that the customer service you’d get from a large bank that services its own loans wouldn’t be materially different.

Still, it’s absolutely worth exploring the rates at your local credit union when shopping for a loan. Cecala recommends getting quotes from a small bank, a big bank and a credit union, and going with the credit union even if there are no apparent differences in rates and fees. Sure, you probably won’t have any further interaction with the credit union about your mortgage, but many who develop relationships with a credit union wind up coming back for an auto loan or other banking services later on.   

“All things being equal, I think [a credit union] is a good move,” he says. “I don’t know anybody who has used a credit union and hasn’t recommended the experience.”

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