What your bank won’t tell you about how to get a mortgage

Buying a home is likely the biggest purchase you will ever make. For this reason, it's important that you choose the right financial partner for your mortgage. 

Deciding which partner is right for you means doing your homework, and knowing the ins and outs of how to get a mortgage. While most financial institutions offer mortgages, there are some key differences to consider among lenders.

At banks, you are a customer. At credit unions, you are a member. Their experts have your best interest at heart. They work with you to help you succeed in all areas of your banking, including finding you the right mortgage. This approach means that finding a mortgage at a typical bank could involve tactics that are not aligned with your financial situation. 

So, what are those exactly? We’re here to help you find out. Here are five things your bank probably won’t tell you about how to get a mortgage.

1. Some lenders will help you pay off your mortgage quicker

Most financial institutions generate their revenue through interest rates and service fees. Because mortgages are such a large loan, they carry a lot of interest. For banks that have an obligation to generate as much shareholder profits as possible, longer-term mortgages that take homeowners longer to pay off means big revenue for them.

By contrast, credit unions operate with a member-first approach. That means you are their top priority, and their first goal is always to ensure you are in the best-possible financial situation. 

That means finding a mortgage that is not designed to maximize their profits, but designed with you, your future home and your budget in mind. Credit unions will also ensure to give you the info you need to help you pay off your mortgage faster. 

2. The best mortgage isn’t always the one with the lowest interest rate

A bargain-bin interest rate can come with a ton of other restrictions and stipulations which, depending on what they are, can end up costing you a lot more money in the long run. And while credit unions can offer competitive mortgage rates, they may not be as low as other financial institutions. 

The rate you are quoted will depend on a few factors. The process of how to get a mortgage with bad credit, versus with no credit, versus when self-employed can look very different, both in terms of how much your lender will approve you for and the rate they will lend it to you for. 

Here’s why that can be a good thing: The terms and conditions offered by credit unions are much more flexible than traditional banks. This can take the stress out of finding the right mortgage for you. Make sure you know what you’re signing up for and consider looking beyond just the lowest possible interest rate when choosing a lender for your mortgage. 

3. A low payment isn’t necessarily the best way to go

While your monthly mortgage payments depend on the total amount of your mortgage, your interest rates can also factor into the amount you are paying. This mostly happens on variable mortgages, where your interest is not “fixed” (or locked in) for the term of your mortgage.

As interest rates fluctuate, and when they decrease, this lowers your monthly mortgage payment. And if they ever increase, your monthly payments will increase as well.

These fluctuations are common over most standard 25-year mortgages, as interest rates rarely stay the same. Because these changes will happen several times over your full mortgage term, the majority of mortgages offered by credit unions and other lenders need to pass a stress test—a simple calculation that shows you can afford your mortgage if rates increase. 

It may sound stressful but, by passing this test, you’ve made sure you can afford your monthly payment—regardless of how interest rates may change. Credit unions will also work with you to find what monthly payment works with your budget, so you won’t end up with more mortgage than you can handle. 

4. Your mortgage is about more than just the terms of repayment

Key to understanding how to get a mortgage to buy a home is how a mortgage works as a financial agreement. At its core, a mortgage is a contractual document between you and your financial institution. 

Mortgage documents cover things like the amount of the mortgage and the terms of your repayment. They can cover other things like the type of insurance you’re required to have, information about reasonable upkeep of the property, and what happens if you’re unable to keep up your end of the agreement. 

Signing documents for a mortgage can feel overwhelming and even intimidating, but it’s important to read the fine print and understand exactly what you’re agreeing to. It’s ok to ask a ton of questions. We’d even go so far as to say that you should ask a ton of questions. Financial literacy is very important to credit unions, who want to make sure you are informed on how financial products (especially mortgages) work. 

5. You are more important than your mortgage

Like any business, credit unions care about the bottom line. But unlike most banks and businesses, credit unions care far more about their members and members’ financial well-being than simply closing another sale. 

When it comes to how to get a mortgage estimate, and later how to decide which mortgage lender is right for you, consider working with a credit union. They will work with you to ensure you have the mortgage that’s right for you and that you understand the process, the paperwork, and the other requirements (think home and fire insurance, property taxes, etc.) you need to have in place before you go house-hunting.