Bank or Credit Union? Which is Better for a Mortgage Loan?

house modestDear Carolyn,

We are getting ready to buy a house and want to get pre-approved. Do you recommend going to a bank or a credit union?

That is a good question, especially since one of my coaching clients came to me last week with Cost Estimates from a large national bank, a small community bank, and a local credit union.

Because each lender used a different format for their upfront cost estimate, it wasn’t clear to her which was the best choice; and that is precisely what my Estimate Review and Consultation Service is for. Curious about how the numbers came out?

I’ll show them to you below, but first, it is important to know that these numbers are for these particular lending institutions only. Not all of the three Big Banks (Bank of America, Chase, Wells Fargo), not all community banks, and not all credit unions are the same. Some banks and some credit unions are better or worse than others, so no “lender profiling” allowed.

For my client’s loan, a 15-year fixed rate refinance, 80% Loan-to-Value, no extra cash out, here is what she was offered:

BIG BANK

3.5% 15-yr fixed rate
$1,854 points & lender fees

COMMUNITY BANK

3.75% 15-yr fixed rate
$1,400 lender fees, no points

CREDIT UNION

4.25%  15-yr fixed rate
$2,007 lender fees, no points

The credit union showed $1,954 on one line and then hid three additional lender (junk) fees in another spot. I call them junk fees, because when you’re charging $1,954 to process and underwrite a loan, there is no reason to tack on additional fees. It is nonsense and garbage. It seems they didn’t want to put a number beginning with a 2 on the lender fee line, so they scattered $53 in three fees elsewhere on the form.

Are you surprised to see that the credit union had both the highest rate and highest fees?

Personally, I am not thrilled with any of these three offers, because all the fees are too high.

On the other hand, the interest rates that start with a 3 are excellent.

Soon — possibly my next blog post — I am going to expose a brand new scam, a bait-and-switch. You won’t want to miss it, so please consider subscribing to the blog. I post only once a week (occasionally twice) so that your email is not inundated with messages.

3 responses

  1. Thanks for your clarity Carolyn. I love it when cleints are informed and empowered with facts!

  2. I honestly prefer a credit union over big banks. For me, a credit union is a lot easier to deal with compared to banks and the folks at Oak Trust in Plainfield, Illinois just make the experience even better. Check out their site at http://www.oaktrust.com

    1. Thank you for the recommendation of a good credit union, Annie. Please send me a sample Cost Estimate or Good Faith Estimate so I can see their pricing. If I see that they are competitive and fairly priced with no needless junk fees, then I will recommend them as well. Use the Ask a Question page on this site to contact me.

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