Credit Unions: An Unexpected Source of Mortgage Loans
October 20, 2008 · Print This Article
According to conventional wisdom and common sense, you go to a mortgage broker to get the best deals on mortgage loans. These brokers do offer a diverse array of options. However, there’s one type of loan that mortgage brokers ordinarily neglect to mention: the credit union mortgage.
Credit unions have a few important advantages over most lenders. One advantage of credit unions is that they operate on a small scale and focus on relatively low-risk loans. As a consequence, credit unions have not suffered as much as other institutions during the subprime crisis.
However, the most important advantage of credit unions is that they are not run for profit. They are community organizations that exist for the mutual benefit of their members. Consequently, credit unions can loan their members money at lower rates.
Credit union members can most clearly see this difference when they sign up for credit union mortgages. An adjustable-rate mortgage (ARM) with one Long Island-based federal credit union carried with an initial interest rate of only 4.875% at the end of July. The mortgage guaranteed that this initial interest rate would stay constant for at least three years. Afterwards, the rate could change by no more than 2% every year (or, in some cases, every 3 years).
Other, for-profit lenders operating in Long Island at the same time, offered similar adjustable-rate mortgages with interest rates starting at around 6.375%, on average. That’s a difference of 1.5%. With the credit union, you’d be saving about $300 a month on a $350,000 home.
A comparable story applies to fixed rate mortgages. That same Long Island-based credit union from the previous example (specifically, Bethpage Federal Credit Union) offered 30-year fixed-rate mortgages with a 6.5% interest rate. This is virtually identical to the going rate for 30-year fixed-rate mortgages with other Long Island institutions, except that the credit union–unlike most for-profit institutions in Long Island–did not demand any additional fees to be paid upfront.
Credit unions are easy to join. To become a member, you generally have to pay a low initial fee (new member must pay $5 to join Bethpage Federal, for example). You also need to prove that you live, work, or own a business as part of whatever local community the credit union serves.
Local credit unions have seen increases in membership over the course of the past year. More significantly, they among the few financial institutions to have sold more mortgages this year than during previous ones. In a troubled economy, potential members are attracted to the credit unions’ low interest rates on mortgages, especially adjustable-rate mortgages. Moreover, credit unions–like local banks–have weathered the subprime crisis better than other financial institutions, and this attracts new members.
The only disadvantage of credit unions credit union lies, again, in their conservative nature. They do not offer as many options as you would find with a commercial bank or broker. However, if you are contemplating buying a home, credit unions are one of the best sources around for low-interest mortgages.
Low interest mortgages are diffilcult to come by and residents of the UK can have a free mortgage quote with glitec.co.uk. Also offering other finance in secured and personal loans.
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the black population is 10%,if every black was on welfare,it would only be maybe 20-30% of total welfare recipients,the rest is either hispanic or white.
Credit Unions aren't open only online. You have to join a 'brick and mortar' credit union. However, once you've joined, most of them have an online presence.
The Balloon mortgages are short term based loan which acts similar to the fixed rate mortgages. First mortgage mostly has a loan term of about five to seven years. Fixed rate mortgages mostly have a loan period of 30 years. In the Balloon mortgages, final payment is larger than the regular payment. After scheduled period, remaining balance would be due in the full. Mostly, balloon mortgage, whether first, second or even third, could have a loan term anything from one to twenty five years. If living in Wisconsin then Wisconsin Balloon mortgages is right for you.
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Refinance or Second Mortgage? Combining 1st & 2nd Mortgages Together Image : I had a recent conversation with one of my clients, Mr. Jackson, who is a finance savvy homeowner from Virginia Beach, VA.
Gallup presents some troubling statistics for the democrats as we approach mid-term elections (a mere three months away). In a nutshell, the party of a president who has a sub-50% rating into midterms, has lost, on average, 36 seats since 1946. Alternatively, presidents with a popularity rating over 50%, lose just 14. As Gallup says: “The clear implication is that the Democrats are vulnerable to losing a significant number of House seats this fall with Barack Obama’s approval rating averaging 45% during the last two full weeks of Gallup Daily tracking. The Republicans would need to gain 40 House seats to retake majority control.” Of course, the administration (and its dwindling members) is well-aware of this fact, which is why the next three months will likely see a record amount of pandering, populism and outright manipulation of everything that can be manipulated: that includes mortgages rates, and of course, stocks. Which leads us to observe the calendar of FOMC meetings until…
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RT The Big Mistake #CreditUnions Make in Social Media: Social media is hre 2 stay & it needs 2 B p…
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A mortgage broker will definitely help.
Not, home mortgage new, just owning a home is part of the American dream, but our house is probably the biggest purchase you will ever and its greatest asset,
Fewer U.S. homeowners have 'underwater mortgages' – Business …: A smaller percentage of US …
AmericanNewsProject, thanks for getting this out there–even though it’s pretty nauseating to watch. These “trade associations” as they call themselves are the same people who villainize unions and union members among the working class.
Great video!
Because the democrats currently in control of congress don't believe we are smart enough to negotiate our own contracts. While that may be true in some cases, the courts shouldn't be stepping in to alter them.
http://www.saveonrefinance.com/
You can put in the cost of the home you are looking for and the payment will come up. On http://www.realtor.com you can find a home. Sometimes it even lists the taxes. Mine run about 1400 a year and insurance is about 1200. That should help you out.
If your credit isn't that great, you can get a loan to pay off debt first so that you can get a mortgage at This is a site where people lend you money at a % that you pick to consolidate and pay off debt. It is excellent!
I bought my first house at 24 as a single parent who didn't get child support. It was hard, but the BEST thing I ever did in my life! Get a fixer upper and put some work into it. You will make money when you sell it.
Good luck….
is it true the credit union doesn’t have to issue me another debit card?
I lost my last one and when I called to freeze it, the woman informed me I’d have to come in and fill out an application for another card in person. When they denied me, preferring to issue me a plain old ATM card, I noted that they made plenty of money off me. She glanced down at the sheet in front of her and mumbled that I’d lost seven [in twelve years] and they couldn’t be liable. I thought they weren’t liable anyway–isn’t it just credit cards that pay for charges when lost? How is the credit union responsible? Or am I missing something? Anonymous because although I’m trying hard to learn about the culture and language of money and be more responsible, I feel chided. I thought credit unions were superior to banks. Can I protest this?
The difference between a credit union and a bank is this:
A credit union is a non-profit financial corporation. Being non-profit makes for more strict guidelines on all financial matters. Whether it's an auto loan, home loan or credit card. Because of the more strict underwriting guidelines, credit unions tend to only lend to individuals with higher credit scores. This helps mitigate losses more effectively than with banking institutions.
Banks are for profit, and are more often than not publicly traded. So the performance of the company is pressured by share holders. At times banking institutions will loosen underwriting guidelines in order to help generate more deposits. Banks are always pressured for more returns to shareholders, so they at times become more risky with their deposits.
When dealing with money. Any financial company can make a lending decision based upon:
Income (Debt to income ratio)
Credit (History of repayment for loans, also helps determine the ability to repay)
Balances within accounts
However, what a bank or financial institution cannot predict is the job security of the customer. Even though things might appear to be in line and that the customer is an "exceptional" credit risk. If that said customer loses his/her job or the annual income is negatively impacted because of a major "cost", this is something that cannot be determined from the qualifying criteria.
Just my two cents.
As I travel around the country, I meet many small business owners who are poised to take that next step to grow their business and create jobs. In fact, this morning’s USA Today looks at one of those business owners – Amarjit Kaur who runs a convenience store and gas station in Wood Village, OR. Amarjit has been approved for an SBA loan so she can buy the property she now leases. But today her application sits in a queue waiting for passage of the Small Business Jobs Act currently before the Senate.
Here’s what’s happening: Up until a few months ago, SBA was able to waive the fees for SBA loan borrowers. This allowed small business owners to put more money back into their business. In fact, these fee reductions will save Amarjit about $35,000. At the same time, we were able to increase the government guarantee on SBA loans, to encourage more banks and credit unions to go ahead and make SBA loans to good, creditworthy small businesses.
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while the content is good information, the delivery lacks any form of Diversity. Bob, Sally and Bill…. Are we back in the 50′s?
Well, it is complicated, but basically, the loan is discounted. In other words, the loan that is made has an amount of interest that will be paid over the term of the loan. This interest is the profit a company can make.
For example, if you made a loan for $50,000 and over the term of say 10 years, you pay back $75,000 then there is a $25,000 profit. The banks and mortgage companies would sell the loan to the investors for this amount and a fee of say $2,000. Now, the investor will make a profit of only $23,000. The bank basically makes $2,000 for putting all the paperwork together and the investor makes $23,000 for the use of their money over the next 10 years.
If the mortgage is defaulted, then the investor has to deal with selling the home, covering the costs of that foreclosure and etc. The bank however, has already made their $2,000 profit for doing the paperwork and is now moving on to the next customer.
1. The people who are defaulting on their motgages are not able to make the mortgage payments.
2. Too many lenders involved to list!
3. California and florida have the highest default rates because of housing being overpriced!
4. Most consumers are tapped out for cash and have less to spend, this will drive the economy downward.
5. Borrowers have to live within their means! Not everyone can afford a McMansion! Lenders will have to offer a longer term like 40 years on a mortgage at fixed rates the buyers can afford to stop the market from tumbling!
6. This is the big one! What could have been done earlier in this crisis to prevent it is lenders not doing just MANUAL UNDERWRITING and not checking peoples credit reports and score!!!! This practice led to the "liar loan" and consumers got drunk with greed and spent more than they could afford!!!! No one bothered to check a consumers debt to credit ratio while being prequalified for a mortgage! This is why credit reports and scores are so important! Lenders took advantage of the shortsightedness of buyers just to collect their commissions and soon went out of business!
7. Those who forget the past will be doomed to repeat it!
Borrowers will have to learn to live within their means and spend what you can afford and learn how to use credit wisely! That is the only thing that will fix this in the long run!