When my husband and I decided to buy our first home in summer 2023, we knew we’d need a mortgage. At the time, mortgage rates were fast rising toward 7 percent, and our local housing market was especially competitive. We knew that finding a lender we liked and trusted would be just as important as finding an affordable loan.

Getting a mortgage from an unexpected source

There are many types of mortgage lenders, from big banks and independents like Rocket Mortgage to smaller brokers. As my husband and I researched options — including his bank — we came across another type of lender that advertised great rates: credit unions. These are membership-based financial institutions that offer banking, loans and sometimes investment and wealth services.

We got to work comparing local credit unions, including a recommendation from family. Ultimately, we narrowed our list down to two.

We met with Credit Union 1 virtually in a video chat. I rattled off my list of questions about loan options and rate locks, and we ended up applying for a prequalification right on the call. Later that day, we had a letter stating how much loan we could qualify for, along with the interest rate the credit union could offer us.

Depending on the mortgage lender, you might have the option of getting prequalified or preapproved. Typically, lenders base a prequalification simply on information you tell them, versus a preapproval, which involves a credit check and formal review of your finances. The prequalification provides a general idea of what you can afford; the preapproval is a conditional offer for a loan, and necessary to have to make offers on homes. In our case, the prequalification was the preapproval. If your lender offers one or both options, be sure to clarify what you’re getting.

With Credit Union 2, we met in person with a loan officer, who told us the credit union was offering a promotional 30-year mortgage rate as part of a new branch opening. That rate — while not anywhere near pandemic-era lows — was still extremely competitive, roughly a full percentage point lower than the national average at the time. It was also lower than the rate Credit Union 1 quoted us. On top of that, Credit Union 2 gave us a $500 discount on closing costs.

Since both credit unions offered similar loan types and customer experience, the promo rate and closing cost discount with Credit Union 2 made our decision a no-brainer.

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Keep in mind: Promo rates aside, mortgage lenders determine your specific rate based on many factors, including your credit score and debt-to-income (DTI) ratio.

Navigating a delayed closing and rent-back period

Things got a little tricky when we found our home. The sellers were building a new home that wouldn’t be ready for another three to four months. If we wanted to make the deal work, we’d have to delay the closing. With that came the risk of losing our competitive promo rate, which was set to expire well before closing.

Before we started to panic, we disclosed our situation to our loan officer right away. The credit union worked with us and courtesy locked the promo rate for two months — without charging a rate lock extension fee.

We used that deadline to establish our closing date, as well as the start of a month-long rent-back period. This rent-back agreement allowed the sellers time to finish construction of their new home.

Receiving top-notch customer service

Our homebuying situation was more complicated than expected, and my husband and I might not have benefitted from the same flexibility with another lender. The area we were buying in was highly competitive — listings were getting multiple offers and often sold within a week. That meant we needed to work with a lender who was very responsive. Our loan officer was available via email, phone and in person, and especially communicative when we needed to delay the closing. It might not have been as easy to get timely responses from a bigger, national lender with a larger volume of borrowers.

As first-time homebuyers, we also appreciated the ability to meet in person with our loan officer. She was able to show us paperwork and information on her computer that might’ve been harder to follow along with on the phone or a video call.

Along with the in-person touch, it was quick and easy to become members of the credit union. We simply scheduled a time to visit a branch and opened a bank account with a minimum $25 deposit.

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Keep in mind: Some credit unions have more specific requirements for membership. One might be open only to workers in certain professions, for example, or those living in a certain location. Before comparing credit unions for a mortgage, verify whether you’re eligible for membership.

So, is it better to get a mortgage from a credit union?

When shopping for the best lenders and rates, know the differences between national and local lenders and banks and credit unions. Ask yourself:

  • What type of mortgage do you need? Are you looking for a range of loan options?
  • Do you value flexibility and personalized and prompt service?
  • How easy is it to become a member of your chosen credit union?
  • Do you need access to a branch location?
  • Do you want the convenience of an app or online application portal?
  • Does your credit need work? (Some lenders offer free credit counseling or low-credit loans.)
  • Do you want to have your bank and mortgage accounts all in one place, or are you OK with accounts at multiple institutions?
  • Does the lender offer auto-pay?
  • Does the lender charge for rate locks?
  • What are the lender’s reviews like? Are there concerns from past customers

Generally, if you’re looking for a variety of mortgage types and don’t need in-person help, a national or online lender might be right for you, provided you like the rates. If you want lower rates, the ability to go into a local branch or anticipate needing more flexibility with the transaction, a credit union might be the better choice.

For us, had we chosen a bigger bank or lender, I’m not sure we would have received the same level of customer service and accommodation as we did with our local credit union. Don’t overlook this type of lender for your next mortgage.