Are Credit Unions a good partner for long term financing?

5 Replies

How can you be sure you’re using the best funding source possible? Are credit unions safe over time since run by state? Are they better than your smaller bank that could change ownership over time & give you the boot?

Credit unions aren't run by the state. They are non-profit in terms of distribution of profits at the end of the calendar year (after salaries/commissions/bonuses/etc are done being paid out, of course), but for 11.9 out of 12 months, they function as for-profit institutions like any other. You can more or less see this for yourself by google searching "[credit union name] IRS form 990," to confirm that these are neither lowly gov't bearcats, nor are they starving do-gooder charity worker volunteers acting purely out of the kindness of their hearts. Note that I have absolutely no problem with folks earning what they are worth (hey, power to you!), this is just to illustrate that in terms of day-to-day operations, credit unions are banks like any other, run by bankers, etc.

There is a credit union near me that stopped doing refinances, FHA loans, VA loans, and investment property financing, in March 2020. All they would do is owner occupied purchase with 5% or more down, on a single family home (guess who established a solid referral relationship with that CU in about April 2020? This guy. :P They were also the last hold-outs doing 5% down jumbo purchases in CA [since stopped], so we each helped each other's clients that we ourselves couldn't.). That's an anecdote, but it highlights that there's nothing special or magical there, lots of regional banks made similar decisions in 2020, and the big banks too: for a while, Wells Fargo would only do your "jumbo" refinance if you had $1,000,000 in a WF account. 2020 was an interesting "stress test" for a lot of things, it turns out. That exact thing (a pandemic) isn't going to happen time-and-time again, but it's not a bad hint if the question is "when/if things go wonky, is this-or-that institution still likely to be there for this-or-that?" -- well, things just did go wonky, what happened? 

It depends on the credit union. Most are pretty conservative, but I know a couple investors that have a great relationship with the CU and do loans with them. I think only a very small minority of CUs are like this, but worth a try talking to your local CU or community bank.

Originally posted by @Noah Kellar :

@Chris Mason

Thanks for your feedback. Obviously, I am learning as I go. What types of banks do you recommend? I am ready to get started but having trouble finding the right financing.

 Local mortgage broker. I'm of course heavily biased. I've got the licensing stuff to do mortgages any which way I want. I'm a mortgage broker because the net impact is that I help the most people and do the most business this way, not being beholden to any particular institution's offerings. I really don't care if Institution A gets stupid for Business Type Z. I'll just send my Z business to Institution B moving forward. B gets stupid, pivot on a dime to C, and when they get stupid maybe A is back in it, great, no sweat. 

When you're a mortgage banker (inclusive of at credit unions) and your employer doesn't want more of Z type business, there's nothing you can do but turn away those customers until the employer gets hungry for Z again (or try to sell crappy loans, they b/c usually continue to offer Z-type loans, just with horrible rates/fees/terms). Or, you can do what I did, which was a major pain in the butt and interrupted transactions: back when I was in that world, I had to switch employers every 2 years or so to keep my clients happy, because all financial institutions have good years and dumb years. "What happens to folks in the middle of the process, when you do that?" is of course a very big question.