If you're looking for a mortgage these days, either to buy a home or refinance your current home loan, one option you should definitely consider is a credit union.

Interest rates are often better than you can get from a commercial lender. And credit unions are often more flexible than big banks in who they'll lend to, making them a good choice for borrowers with less-than-perfect credit.

Nonprofit, member-owned

Credit unions can offer lower rates because they're nonprofit operations - they're owned by their members and so they strive to offer the best rates possible. Many members also feel they get more accommodating service at a credit union, perhaps because they tend to be smaller and less hierarchical than a big bank.

Credit unions can also offer better rates and more flexible credit arrangements because they didn't get involved in much of the subprime lending that triggered the crisis in commercial mortgage markets. Credit unions used to be at somewhat of a disadvantage to commercial lenders when it came to mortgages, but if you haven't checked out their mortgage rates in a couple years, you may be pleasantly surprised.

Credit unions also tend to be closed tied in to the communities where they're located. This means they're familiar not only with the local real estate market, but also with the local economy. This puts them in a good position to assess loan applicants on a case-by-case basis, as opposed to a more formulaic approach that a big bank might use.

Credit union membership

Of course, to get a mortgage from a credit union, you have to be a member. While that used to be an obstacle for many, given that you have some kind of affiliation with whatever group the credit union represented -teachers, state employees, university affiliation, etc. - there are so many different credit unions serving so many groups these days, and many have broadened their membership eligibility, that most people should be able to find at least one they can join.

It used to be that to benefit from a credit union, you pretty much had to live in the community where it was based. These days, however, electronic banking allows you to maintain a membership in a credit union in a distant community. Many credit unions belong to national networks that allow you to use ATMs for free nationwide and do your banking at network offices that function much like banks.

How to qualify

Membership demands are fairly minor - at many, all you need to do to maintain your membership is simply keep a nominal balance in a savings account. You don't necessarily have to take advantage of all the credit union's banking services, but you may find it advantageous to do so. Credit unions often offer attractive rates on savings and checking accounts, with overdraft protection and reasonable fees. Rates on car loans and credit cards can also be attractive, with fewer "gotcha" -type terms on the latter.

If you're not presently a member of a credit union, you can research ones in your area by going to www.culookup.com. You're almost certain to find one you can qualify for.

    Published on March 9, 2010