Getting a mortgage? How credit unions stack up against banks

You already have your dream house in mind, but have you considered whom you'd like as your lender?

Commercial banks aren't the only financial institutions that originate mortgages. Credit unions are another option.

These not-for-profit, member-owned cooperatives have been beefing up their presence in the mortgage lending market: 11 percent in the first quarter of 2015, compared with 7 percent just two years earlier.

"I think more and more Americans are becoming aware of the credit union difference," says Curt Long, director of research and chief economist for the National Association of Federal Credit Unions in Arlington, Va.

Should you tap a credit union for your home purchase? Consider how they stack up against bank mortgages.

1. You could save money

Credit unions are known for their lower fees. You're likely to see lower fees and rates at credit unions because they pass on the savings to their members. This is different from banks, whose sole purpose usually involves generating revenue for investors, says Bob Dorsa, president of the American Credit Union Mortgage Association in Las Vegas.

"(A credit union's) 'stockholders,' per se, are the members, the customers," he says.

2. Not just a number

There's a greater chance that you'll know your servicer. With bank mortgages, it's common for the company that collects your mortgage payments to change several times over the life of your loan. That's usually not the case with credit union mortgages.

"If you get a loan at a credit union, you're more likely to know who's going to service your loan," Long says. "It's probably going to be the originating credit union."

Sticking with the same servicer can save you from late fees that could arise due to confusion over where to send your payments.

3. Credit-impaired? OK

Credit unions appeal to borrowers with less-than-stellar credit.

Potential homebuyers who don't have a traditional profile, such as an excellent credit history, can benefit from getting a credit union mortgage, Long says.

"(Credit unions) are more likely to make lower- and middle-income loans than other originators."

And they also offer special programs that appeal to first-timers.

For example, a large credit union in Raleigh, N.C., has a first-time buyer program that provides 100 percent financing up to $400,000 with no private mortgage insurance, and includes an option to borrow extra funds to cover closing costs, according to The New York Times.

One more thing ...

Joining a credit union isn't as difficult as you may think. There are specific credit unions for alumni associations, communities, places of worship and other types of affiliations. Check CULookup.com to see whether you meet the criteria to join a credit union in your area.