Credit Union Mortgage Rates

Allison Martin
Mortgage text on red keyboard

Are you planning to purchase a home soon? While searching for a mortgage, you may find that credit union rates are lower than what you'd find with traditional banks. However, this is not always the case and you should carefully evaluate your options before applying.

How Credit Union Mortgages Are Different

In an article on Bankrate.com, American Credit Union Mortgage Association president Bob Dorsa states, "You're likely to see lower fees and rates at credit unions because they pass on the savings to their members." A key distinction between banks and credit unions is that credit unions are nonprofit financial cooperatives, while banks are profit-seeking businesses. As such, as Dorsa points out, "a bank's sole purpose usually involves generating revenue for investors."

However, this does not mean that credit unions always have lower rates on home loans than banks. It is advisable to compare all options before deciding where to apply for a mortgage. Shopping for a loan through a mortgage broker can yield an assortment of favorable interest rates from both banks and credit unions since brokers sometimes have access to "hundreds of mortgage products," notes SF Gate.

Industry Averages

Don't automatically assume that credit union mortgage rates will always be lower than what you can get from a bank. According to industry averages based on average rates from active banks and credit unions across the United States, as of September 30, 2016 the average rate for 30-year fixed rate home loans are the same at banks and credit unions. For other types of mortgages, however, credit union averages are lower.

Loan Type Credit Unions (national average) Banks (national average)
30-year fixed rate 3.60 3.60
15-year fixed rate 2.94 2.99

5/1 year ARM

(interest rate is fixed for the first 5 years, then it changes once annually for the remainder of the loan term)

3.10 3.39

3/1 year ARM

(interest rate is fixed for the first 3 years, then it changes once annually for the remainder of the loan term)

2.98 3.37

1 year ARM

(interest rate is fixed for the first year, then it changes once annually for the remainder of the loan term)

2.82 3.30

A Closer Look at Mortgage Rates

Mortgage rates

According to Nerd Wallet, mortgage rates are determined by market performance, inflation, the economy and an assortment of global factors. As a result, credit union and bank rates fluctuate on a daily basis.

Credit Union Rates

As of December 2016, the 30-year fixed (conventional) mortgage rates for some of the largest credit unions in the nation are as follows:

Bank Mortgage Rates

As of December 2016, the 30-year fixed (conventional) mortgage rates for some of the largest banks in the nation are as follows:

Should You Apply for a Credit Union Mortgage?

When searching for a home loan, it's definitely important to look for the best mortgage rates. Depending on your unique financial situation and what is available in your area, you may find the best deal with a credit union. It's definitely a good idea to find out if a credit union you are eligible to join (or are already a member) offers a lower interest rate than what you'd find with a traditional bank or through a mortgage broker.

Beyond possibly saving money, you may also have access to the following benefits not offered by banks, as noted by Bankrate.com:

  • Special consideration for the credit impaired: Credit unions may be "more likely to make lower- and middle-income loans than other originators." This means you may get a yes when banks and other lenders say no.
  • Consistent loan servicing: Mortgages from banks are sometimes bounced around from lender to lender, but this is not a common occurrence with credit union mortgages. This minimizes confusion and makes it easier to manage your mortgage.

Be sure to inquire about additional fees, such as mortgage loan origination and document fees, that may apply as they will be tacked on to the cost of the loan if you don't pay them upfront.

Seeking a Mortgage From a Credit Union

In most instances, you don't have to be an account holder to apply for a mortgage with a traditional bank. You can simply submit your application online, at a branch or via phone. However, in order to apply for a credit union mortgage, you must become a member of the institution.

If you meet the membership qualification criteria, which typically means that you fall into a 'field of membership' category, you should be able to join. Your field of membership could include an employer, geographic location, family affiliation, church or school membership, notes MyCreditUnion.gov. To become a member, you will need to open a share account with at least a minimal deposit ($25).

Once you become a member, you can submit a loan application to apply for or refinance your existing mortgage. The application process is very similar to what you'd find with traditional banks and other mortgage lenders. While joining does not guarantee approval, it grants you the ability to explore your loan options with the credit union. If you wish to join a credit union so you can apply for a mortgage, use the NCUA's Credit Union locator tool to find a location near you.

Credit Union Mortgage Rates