Many potential homeowners are still holding on to the American dream of home ownership despite the challenging economy. If after long consideration, you’ve finally decided to buy a home, it’s imperative that you’re fully prepared to take the next step: Securing a mortgage.
Likely, you’ll need to take on a mortgage loan in order to finance this big-ticket purchase, and seeking out a credit union mortgage is an option that can help you save money across the entire life of your mortgage loan.
Are Credit Unions Better than Banks?
Borrowers often ask: “Are credit unions better than banks?” when determining where they will apply for a home loan. Often, the answer is yes. The benefit of working with a credit union to finance your home is that these institutions serve a specified member group, meaning your financial success is a high priority. Also, credit union mortgage rates are among the most competitive in the nation.
Pentagon Federal Credit Union, commonly known as Pen Fed, is an example of a financial institution that tailors their mortgage loan products to a specific group. Members of the Department of Defense and Homeland Security, both non-uniform and uniformed service members (including immediate family members) are guided through the mortgage loan process and educated about the impact mortgages have on their future.
Borrowers belonging to credit unions like Pen Fed receive individualized care and assistance in achieving their financial goals. Individuals and families within Pentagon Federal Credit Union’s field of membership and who are first-time home buyers may qualify for the credit union’s “Dream Makers” grant program, wherein the institution offers aid to those who have a demonstrated financial need. It is initiatives like these that highlight the contrast of credit unions vs. banks.
Finally, credit union mortgage rates are typically kept at low levels for prospective homeowners. This is due to the fact that credit unions operate as non-profits, so members receive the benefit of a added savings through highly competitive local mortgage rates.
Credit Union Mortgage Insight from Pen Fed Credit Union
To help you become financially literate about the best mortgage loan practices, Pentagon Federal Credit Union offers tips for borrowers new to buying a home and the process it involves. Understanding these requirements can help your credit union mortgage and home search be a positive experience.
Inspections Versus Home Appraisals
It’s easy to assume that an inspection and an appraisal are one in the same — after all, both are professional reviews of the property in question. However, Pentagon Federal Credit Union explains that they both serve two very different purposes.
According to Pen Fed, home appraisers “will make note of obvious construction problems such as termite damage, dry rot or leaking roofs or basements.” Additionally, they assess and report on other interior and exterior damages that may affect whether the home can easily be sold in the future.
While property appraisers have experience with estimating the worth and value of a home, they are not necessarily technical experts in the area of construction. For example, Pen Fed shares that unlike home inspectors, appraisers “won’t turn on every light switch, run every faucet or inspect the attic or mechanicals” of the home.
It is this detailed home inspection that helps validate whether a potential dream house can turn into a health or financial hazard. The education gained from conducting a separate home appraisal and inspection alerts home buyers to possible threats and concerns that they may otherwise overlook before buying a home.
Mortgage Underwriters are Your Friends, Too
As the primary decider on the fate of your mortgage loan, underwriters have developed an uneasy reputation. While it is true that financial institutions like credit unions rely on underwriters to scrutinize a mortgage application, home appraisals and borrower’s credit history, underwriters are also doing potential home buyers justice by offering an honest assessment of a home’s ability to sell later down the line.
When borrowers of Pentagon Federal Credit Union request a mortgage loan, mortgage underwriters evaluate the risk involved in financing a specific home in question.
“We’ll review the features of your home and compare them to the features of other homes in the neighborhood. For example, if your home is on a 20-acre lot, or has a large accessory building, we’ll want to make sure that there are other homes in the area on similar size lots or with similar outbuildings.”
These considerations give buyers perspective as to how likely the home in consideration will sell in the housing market, in the event borrowers need to relocate or bump up to a bigger home years later.
Is a Credit Union Mortgage Right for You?
Mortgages can be as long as a thirty-year commitment and can lead to difficulties down the line if a problem home is purchased or the mortgage is too expensive. By looking into how a credit union mortgage can benefit you, you’re only opening more opportunities at landing your ideal home.
This article is part of the Go Banking Rates Financial Literacy Movement, helping Americans get smarter and grow richer. Take our mortgage quiz to test how knowledgeable you are!