Credit Union vs. Bank Mortgages: Which Is Best?

Read Time: 8 minutes

When it comes time to buy a home, getting a mortgage from a bank is a popular choice — but credit unions also offer their own unique set of advantages. Banks have the size and resources to offer competitive rates and better customer resources, while credit unions usually have lower fees, aren’t as motivated by profit, and serve a community purpose.

Let’s take a look at key differences and considerations when choosing between a bank vs. credit union mortgage, highlighting the advantages and disadvantages of each to inform your decision-making process.

Bank vs Credit Union Mortgages: What’s the Difference?

The main difference between banks and credit unions is that banks are for-profit institutions owned by shareholders, whereas credit unions are non-profit cooperatives that are owned by members and customers.

This means that banks are larger, have more money, and offer more services. These services include checking and savings accounts, home loans, credit cards, investment products, and more. Banks are also more accessible, typically offering a large network of branches and ATMs for their users. Since banks are for-profit and offer more services, they usually have higher fees than credit unions.

On the other hand, credit unions are smaller and have a limited range of services. Credit unions offer similar services to banks, such as loans and checking accounts, but you shouldn’t expect a single credit union to have the entire range of services your average bank has.

Though credit unions are smaller, this makes them more localized. Credit unions will often have better personal service and community involvement, and they often focus on a specific group or network — membership for some credit unions may be contingent on your occupation or where you live. Though they won’t have as large a network as a bank, a credit union’s non-profit status means they can offer lower fees and competitive rates.

Advantages of Getting a Mortgage With a Credit Union

Securing a mortgage from a credit union presents several compelling advantages, each offering unique benefits for prospective homeowners:

Competitive Interest Rates

Most of the time, credit unions are going to offer competitive interest rates. Credit unions are non-profits and want to pass on savings to their members, whereas banks need to charge interest rates to make them a profit.

However, banks are larger and have more financial power than credit unions. The standard 30-year home loan carries a lot of financial risk, so small credit unions may have to charge higher interest rates to mitigate their risk. The smallest credit unions won’t be able to take on as much financial risk and will have to charge higher rates, but a sizable credit union can stay competitive and even beat out bank mortgages.

Lower Fees

Though interest rates will vary based on the financial power of your credit union, you can confidently expect lower fees when you use a credit union to get a home loan. This could include reduced appraisal charges, private mortgage insurance, closing costs, and more.

April Gleason, vice president of lending for University Credit Union, states that their credit union charges $699 in home loan fees, versus $1,500 or more that banks charge in origination fees and other costs in processing the loan. On some occasions, mortgage brokers can charge $3,000 to $8,000 in fees, whereas University Credit Union’s additional fees are mostly third-party fees that are strictly required.

Easier to Qualify

Credit unions are more willing to work with borrowers who don’t have a strong financial profile. Banks may turn down applicants just because they don’t meet their minimum credit score requirement.

Chuck Price, vice president of lending at NEFCU, a credit union in Westbury, New York, notes that banks can work with customers who might have higher debt-to-income ratios, shorter job histories, and income sources that are more difficult to verify. Traditional banks might quickly pass on such borrowers, Price said.

More Personal Relationships

Because credit unions are smaller than banks and tend to focus on a specific community, you can expect a much better relationship with your loan team. The attention you receive could even translate into a faster process to close.

Less Likely to Sell Your Loan

Credit unions are less likely to sell home loans to other lenders because they prioritize long-term relationships with borrowers, whereas banks will often sell your home loan on the secondary mortgage market.

Finding out your loan was sold can be inconvenient and confusing, but this is just a minor problem at worst — even if your loan is sold, it won’t change anything about your loan’s terms.

Disadvantages of Getting a Mortgage With a Credit Union

Choosing a credit union to finance your mortgage also has some disadvantages to be aware of:

Limited Services and Technology

When you work with a credit union, you can expect them to have a narrower array of services than a bank — this is because of their non-profit status. While many banks have the resources to invest heavily in digital banking platforms and technologies, credit unions, especially smaller ones, may lag in this area.

This can affect the ease of managing mortgages online, accessing digital loan applications, or using other online financial tools that larger banks typically offer.

Less Accessibility

Credit unions are typically localized institutions, serving specific communities or groups. As a result, they might not have as extensive a network of branches or ATMs as national banks, which can limit their accessibility for some borrowers.

Membership Requirements

Lots of credit unions have some kind of membership requirement — some are only available to people who live in specific regions, while others are only for people with specific occupations.

The membership requirements aren’t a significant problem if you decide to get your loan with a credit union, however. “It may sound like a barrier, but there’s a credit union for everyone,” April Gleason says.

Advantages of Getting a Mortgage With a Bank

Banks offer several distinct advantages when it comes to mortgage financing. Let’s explore why banks are an attractive option for many potential homeowners.

Better Branch and ATM Access

Since they have more resources, banks can afford to have widespread branches and ATMs at more locations. This is especially the case for national banks, where branches and ATMs will be available almost anywhere you go.

Keep in mind that branch and ATM access may still be limited if you go with a local or regional bank instead of a national bank.

Wider Array of Loan Options and Services

At a credit union, you might be limited in what type of loan you can get. However, a bank can afford a wide variety of services and loan types.

Almost all banks will offer government-backed loans like FHA, VA, and USDA loans, but you might not find that credit unions do the same. Banks also offer a large array of financial services that may be more limited at credit unions, such as checking and savings accounts, personal loans, blanket loans, and more.

By working with a bigger bank, you can consolidate your loans, accounts, and payments with one institution, making it easier to take advantage of a large array of financial services. While convenience shouldn’t be the most important factor in deciding where to get your home loan, it makes a small difference.

Up-To-Date Technology

Banks will be able to afford the latest technology, which will make your loan process much easier. In fact, it’s not uncommon for the application, processing, and closing processes to be completed entirely online, which may not be an option for credit unions.

Depending on the credit union, you might not even have mobile banking services. Larger banks are sure to have mobile banking services, automatic payments, and better apps to handle your loan and finances online.

Disadvantages of Getting a Mortgage With a Bank

It’s important to also consider the potential disadvantages that come with obtaining a mortgage from a bank. Despite their extensive networks and diverse offerings, there are certain aspects where banks might not always align with the needs of every borrower.

Higher Rates and Fees

Because banks are invested in making a profit, they’re more likely to give you higher rates and fees than a credit union. This means that your overall cost throughout the life of the loan will be higher with a bank, as will the upfront costs at closing. Even a small difference in your interest rate can cost you thousands of dollars in the long run.

Less Customer Service

Most banks operate at a larger scale than credit unions. Bank loan officers usually have more clients and less time for you. Credit unions specialize in fostering a community of members, so you’ll probably receive better customer service there.

Applying with a local or regional bank is a good way of still receiving the personal touch you want while getting access to some of the benefits a bank offers.

Should I Get a Mortgage at a Bank or Credit Union?

Choosing between a bank and a credit union for your home loan comes down to your priorities in a lender. If you want better customer service and lower upfront fees, a credit union is the way to go. On the other hand, banks will be the right choice if you want convenient ATM/branch access and access to better technology.

If you’re looking for the best interest rate, credit unions are likely to offer competitive, low rates. However, smaller credit unions won’t be able to keep up with big banks. Make sure to carefully consider the interest rates of the credit unions and banks you’re applying with and compare them to rates offered at other institutions.

Dan Rafter

Dan Rafter has covered real estate, mortgage and personal-finance news for more than 15 years, writing for the Chicago Tribune, Washington Post, Consumers Digest and many others. A graduate of the University Illinois with a degree in journalism, he is editor of Midwest Real Estate News magazine and blogs on commercial real estate for that publication at, in addition to being a contributor for

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