Smart Money Podcast: Credit Union Perks, and Getting Into the Housing Market

When members rather than stockholders own a financial institution, results are often lower rates on loans.
Sara Rathner
Liz Weston, CFP®
Sean Pyles
By Sean Pyles,  Liz Weston, CFP® and  Sara Rathner 
Edited by Courtney Neidel

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Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.

This week’s episode starts with a discussion about credit unions.

Then we pivot to this week’s money question from a listener’s voicemail:

“Hi, my name's Ann. Basically, I am somewhat priced out of the housing market of what I want. So my question is, should I move to a location that's less desirable or buy more of a fixer-upper that might take a long time or might be more costly than I might understand? I passed on a house that was maybe not in the best neighborhood, but now I'm wondering if maybe that's something that I should look at. I am in the Seattle area and I am single, but I do have a girlfriend who works up north. So the commute will be far if I move to the neighborhood that is less desirable because it's far set, and I have a little dog, which is partially why I want to buy a house. Thank you so much.”

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Our take

Credit unions and banks offer similar services, but their impacts on local communities can vary greatly. The profits from banks go to shareholders, while the profits at credit unions are returned to its members, for example. Additionally, Community Development Credit Unions, or CDCUs, have a mission to improve their communities by providing financial services to those who have been historically excluded from the financial system. You can find local credit unions at the National Credit Unions Administration website.

If you’re deciding between buying a house that’s a fixer-upper or one that’s a little farther from the city center, think about the pros and cons of each option. When you go to buy a house that needs some work, you might look into a renovation mortgage that would roll the amount you need for home repairs into your mortgage. But be sure to get inspections on any fixer-upper so you know exactly what you’re buying.

Buying a house farther from the city and your job might allow you to get more for your money, but mind the trade-offs. Long commutes can put a strain on your mental health and your relationships. Also think about how living further from the urban amenities you’re used to could change your lifestyle. Regardless of which type of house you end up buying, realize that rising interest rates could affect home affordability.

Our tips

  • Explore your options: Two types of renovation mortgages exist for buying and renovating homes. One is FHA-insured and the other is conventional.

  • Be smart about inspections: Tackle fixer-upper inspections in two stages: Start with the general inspection, then have a contractor or consultant inspection.

  • Keep an eye on the Fed: Mortgage rates will rise this year, and already have risen. This harms affordability, and you might have to adjust your price range downward.

More about home buying on NerdWallet:

Have a money question? Text or call us at 901-730-6373. Or you can email us at [email protected]. To hear previous episodes, go to the podcast homepage.

Episode transcript

Liz Weston: Welcome to the NerdWallet Smart Money Podcast, where we answer your personal finance questions and help you feel a little smarter about what you do with your money. I'm Liz Weston.

Sean Pyles: And I'm Sean Pyles. Do you want the Nerds to answer your money questions? Well, hit us up on the Nerd hotline. You can call or text us at 901-730-6373, that's 901-730-N-E-R-D, or email us at [email protected], and to get new episodes delivered to your devices every Monday, be sure to subscribe. And if you like what you hear, leave us a review and tell a friend.

Sean: This episode, our occasional co-host, Sara Rathner, and I answer a listener's money question about getting into the housing market right now. But first, in our This Week in Your Money segment, Liz and I are talking about how where you bank can have a big impact on your community.

And we also want to share something that NerdWallet is doing to counter financial inequality. It is no secret that I am a big fan of credit unions. Last year, I made the switch from the large national bank I had been using for ages to a local credit union in the Pacific Northwest, largely because of the community aspect of the credit union. That, and I was tired of my old bank charging me for using ATMs that were not a part of their network.

Liz: That gets expensive.

Sean: Yes, $5 a pop every time I want my own money — I was not having it anymore. Let's start by outlining the difference between credit unions and banks. Essentially, a bank is a business focused on managing and making money from, well, money, and banks tend to have more branches and are quicker to adopt newer technologies— like glossy apps and well-designed websites — compared with credit unions. But the catch is that the money you put into a bank largely does not stay in your community.

Liz: Banks tend to be owned by their shareholders, so that's where the money goes. Credit unions, by contrast, are owned by their members. They exist to serve their community. And these communities are based on something called a bond of association. So, it can be the people who work at the same place, that they have the same religion or maybe they're just in the same area.

And in general, they offer the same services as a bank. They'll have checking and savings accounts, they offer loans. In fact, a lot of people first find out about a credit union when they go to get an auto loan and one of their friends says, "Hey, you should check out the credit union. They've got great rates." So, basically, the profits are being returned to members in the form of higher interest on their savings, lower interest on their loans and other perks.

Sean: Beyond regular credit unions, there are also community development credit unions. CDCUs, as they're called, are a more mission-driven version of your standard credit union, and these credit unions are members of an organization called Inclusive, that's a nonprofit association of CDCUs. Their mission is to serve people who have historically been shut out of the financial system, whether because they are low income or part of a marginalized group.

CDCUs are trying to solve a pretty significant problem, which is that in the U.S., 22% of adults are unbanked or underbanked and they have little access to cash or credit. This population has fewer options when they go to try to buy a house or start a business.

Liz: So this is something that NerdWallet is really dedicated to. To combat financial inequality, NerdWallet has deposited $2 million with the Self-Help Federal Credit Union to fund personal loans, mortgages and commercial loans for their members. We're asking other companies across the country to join us. If you are a business owner and interested in this, or you think your employer would be interested, you can learn more at

Sean: And if you are interested in switching to a credit union yourself, you can use a credit union locator at

Now, let's pivot to our no-spend month check-in. As we've mentioned before, we are doing a no-spend month for the month of February, where we try to not spend money on things that we truly, sincerely do not need at all. It has been, let's say, a challenge for me so far.

This past week has been a week of saying no, except for the times that I said yes. There were a couple instances where I said no and was proud of myself. One was, this might sound a little bit weird to you, Liz. It was this LEGO set that I've had my eye on for a while of a bonsai tree. LEGO has this insanely beautiful series of LEGOs that are botanical themed. I have one that is a bouquet of flowers that I just adore and they sell out almost instantly. And then they are listed again on eBay for twice the price that you would actually get it from LEGO directly.

Liz: Ouch!

Sean: So I had an email alert from LEGO saying, "Hey, I'm back in stock. Come and get me." And I didn't do it. So that saved me like $50, I think.

Liz: Wow!

Sean: So I added that to the running list that I have of times where I didn't spend money that I wanted to spend. So I felt good about that. But that said, I did say yes to a few things. One of our friends had a going-away party this past week, and we went out to a bar and I had a couple drinks, but I didn't get the Cajun tots. That's usually my go-to when I go out to a bar, is buying a bunch of tater tots for the table. And I said no to that to try to find a middle ground between spending and not spending.

Liz: Oh, good for you.

Sean: Yeah.

Liz: Now, see, I had the same trigger, but I came to the opposite conclusion.

Sean: What was it?

Liz: I make miniatures, like for dollhouse miniatures, things like that. And there was a specific item that came up that had instantly sold out the first time it was offered. It came back up and I just pounced on it, because it was like, "I have no idea when this is going to be back in stock again." So my hat's off to you for saying no, because I was just totally sucked in.

Sean: Thank you. Yeah.

Liz: The other thing was I completely forgot about our no-spend month when I agreed to have lunch with a friend. So, that was another $40 I hadn't planned on.

Sean: Yeah.

Liz: On the plus side, there are a lot of things I've been saying no to, and I've been using your trick of writing it down in my phone. So I have a running list. The things I'm saying no to at the moment and how much I have saved so far and we're already into $200, $300. So it's adding up.

Sean: Oh wow.

Liz: Yeah. It's no small amount.

Sean: Oh wow. Oh wow, okay. I'm going to check mine right now.

Liz: OK.

Sean: I mentioned last week that I was about to win this eBay bid, and I lost it.

Liz: Oh yeah. Oh!

Sean: So I'm debating whether or not I want to count that as money saved because it technically was not even money I could have spent because I lost the bid. But if I had won that, I would've spent $80 on this thing that I didn't end up buying. So that made me feel good. So far, I have saved $65 on things I didn't buy. I canceled a free trial subscription that I was going to let lapse. So sorry, Apple TV, I'm not a subscriber. I didn't get lunch when I wanted it, and that LEGO kit. So 65 bucks so far. I'm feeling good about it.

Liz: I would feel good. Yeah, that's great.

Sean: That said, I'm about to head to Florida, and that will be the real test of my dedication to not spending money on things that I truly, sincerely do not need.

Liz: Hopefully, this little discussion here will propel you forward.

Sean: Thank you. Looking forward to checking in after my vacation. I think that about covers it for now. Let's get onto this episode's money question.

Liz: All right. Sounds good.

Sean: This episode's money question comes from a listener's voicemail. Here it is.

Ann: Hi, my name's Ann. Basically, I am somewhat priced out of the housing market of what I want. So my question is, should I move to a location that's less desirable or buy more of a fixer-upper that might take a long time or might be more costly than I might understand? I passed on a house that was maybe not in the best neighborhood, but now I'm wondering if maybe that's something that I should look at. I am in the Seattle area, and I am single, but I do have a girlfriend who works up north. So the commute will be far if I move to the neighborhood that is less desirable because it's far set, and I have a little dog, which is partially why I want to buy a house. Thank you so much.

Sara Rathner: All right. To help us answer Ann's question, on this episode of the podcast, we are joined, once again, by our favorite mortgage Nerd, Holden Lewis. Welcome back to the podcast, Holden.

Holden Lewis: Aw, thank you so much.

Sean: Holden, it's great to talk with you. I am wondering what you think about our listener's situation. It kind of touches on how hard it can be to balance different priorities when you're hoping to buy a house. What do you think?

Holden: It's exactly what it is. Ann is caught in a dilemma. And by definition, there are no cleanly good options. There's tradeoffs in anything she does, but it's an intensely personal decision. Needs to be made not by just her, but two people who are communicating well.

The first thing that runs through my mind when I hear this is that I have this philosophy, people before things. Now, I don't always live up to that, but in this case I might modify it to people before places. Long commutes, they're not helpful for relationships and they're not helpful for commuters' bodies either. The divorce rate is higher for people with long commutes, they can't be good for friendships. So my first reaction is that it is better to prevent a long commute even if that means buying a fixer-upper. Man, that is easy for me to say, because fixer-uppers are expensive and time-consuming.

Sean: And especially a fixer-upper in the Seattle market, which is expensive no matter what you're looking at buying. And one thing I wanted to clarify is that a long commute is anything over 45 minutes.

Holden: I can't even remember where I saw this research, but that was kind of the dividing line: 45 minutes each way. And if you have a commute longer than that, then there is a measurably larger divorce rate.

Sean: Our listener mentions that they are not married, but they have a girlfriend. So how I interpreted that is that they are single for the sake of filing taxes and buying this house that they want to get, but they are considering their partner in this entire process.

Holden: Right. Yeah, that's the way I saw it, too.

Sara: If they are planning on moving in together in this house, then obviously there are other things to discuss: who pays for what, who's on the title for what. Those are all conversations that are a little bit more complicated when it's not this cut-and-dried situation where it's either you're single and it's just you buying this house and it's by yourself, or you are in a more serious relationship or married and you know you're buying this house together.

Sean: It would probably be a good idea for whatever situation they want for our listener and their partner to have some sort of written agreement for who has what amount of a financial obligation for this house in terms of paying rent or a mortgage so that you can get things in writing in case things go south, which can happen.

Sara: Holden, you kind of touched on the whole idea of the fixer-upper, and I know, thanks to HGTV, it feels like you buy this house that looks like it's definitely haunted and you make it your own. And it's such an exciting process and you're picking all the things and it's so fun, but what's the reality of buying a fixer-upper? What are people signing themselves up for?

Holden: Oh boy, is it exciting? It's exciting the way like getting in a car crash can be exciting, I guess. No, it's probably not that bad, but you know what? Actually, I'm involved in a fixer-upper right now.

I just inherited a house and it has needed a lot of work and it's taking a lot longer than I expected it to. That's an inherited house — a little easier situation. And the first thing to think of when you're thinking about buying a fixer-upper is how much it costs, and that's the price of the house plus the total of all the work that's done. And then you also have to factor in the cost of displacement. You might have to find another place to stay for a few days, several times during the whole process, like when the floor is sanded and refinished, or when the windows are replaced. Take into account those costs and, frankly, the hassle.

Sean: And you also have to be really careful about inspections for any house that you might want to get when it's a fixer-upper. Can you talk through the inspection process?

Holden: Let's back up a little bit and talk about renovation mortgages, because those exist. And a lot of people, they don't know about them. A renovation mortgage is a home loan where you borrow the money for buying the house and also for the cost of fixing it up after you buy it. And then that's all rolled up into one mortgage. So it might work this way: Let's say you buy a house for $300,000 and it has $200,000 of work that needs to be done. The house is only worth $300,000, but you can get a renovation mortgage and borrow the $500,000 to buy the house and fix it up.

There are two basic types: the FHA-insured version is called the 203(k) loan and the non-government version is called the HomeStyle loan. Both are more complicated to apply for and qualify for than a regular mortgage. And if you don't know where to start, an FHA 203(k) loan might be better because it requires you to hire an approved consultant who will advise you.

You asked about inspections.

Sean: Yes.

Holden: That fits into these things. I recommend doing the inspection work in two stages. First, hire a general and pest inspectors, and in the Seattle area, ask for an inspector who has expertise in doing a seismic inspection, just to identify vulnerabilities from earthquakes.

If you want to proceed after those initial inspections, list the improvements you want to make and then find an FHA consultant or interview general contractors to give you estimates of the renovation costs.

Sean: Is there anything that might come up in an inspection that for you would be a red flag that would tell you, "This house just is not worth it," even if you can get a renovation mortgage?

Holden: Indeed there are. Extensive termite damage, really bad foundation problems. Frankly, if it just looks like an earthquake would send the chimney through the roof and into your living room, that might be a case where yeah, you could probably pay to brace it, but maybe you just want to pass and move on to a different house.

Sean: OK.

Sara: Holden, one thing I wanted to ask you about, especially with fixer-uppers or really any work that you need to do your home, and this is something I'm seeing anecdotally and experiencing as a homeowner, but labor shortages and material prices going up. How is that affecting decision making when it comes to taking on these massive home repair projects?

Holden: Let's say you want to buy a fixer-upper that you're not comfortable living in from the outset until some work is done. It could really push off the date when you can move in, because yes, there really are shortages of not only labor, but materials: anything from doors and windows are short right now — to just simply electricians. You call an electrician and they tell you they'll see you in three weeks. So those things are making it more expensive and more time-consuming to get extensive work done.

Sean: And I think that people might find that they would be willing to live with less than they would expect in terms of quality of a house. When my partner bought his house in Portland, a number of years ago at this point, the house didn't have insulation. It barely had a functioning furnace. It didn't have more than two three-prong outlets in the house. And those are things that we were expecting in a home, but we couldn't afford right then and there. And gradually we got them over time, over the past three or so years. But to begin with, it might be worth lowering your standards for what you would want or accept in a house just so you can get in.

Sara: And even once you're in the house, I don't know if anyone's tried ordering furniture or over the last year or so, but the backlogs are pretty intense at times.

Sean: Oh, yeah.

Sara: And you might have this house full of empty rooms to fill and all the furniture you ordered to fill those rooms, you're going to wait an extra six months.

Sean: Oh gosh, and refrigerators, washers and dryers, dishwashers, oh, it's a nightmare.

Sara: It is hard. If you've moved from another place, maybe just hold onto that rental furniture and other things that you thought you might replace once you were in your forever home, you might want to use them for another year or so, and don't give them away or donate them or sell them off until you receive your new furniture.

Holden: And there's another factor to consider with fixer-uppers in that you're facing a lot of competition, no matter if you're buying something brand new or something that needs to be fixed up. With a fixer-upper, you might face competition from flippers; from people who really, really are experienced in figuring out how much a house is worth before the work is done, how much it's going to cost to fix it up and how much profit they can make when they sell it. You're kind of swimming with sharks when you're in this situation. But on the other hand, you might be willing to pay a little bit more than a house flipper because you're just looking for a place to live, you're not looking for a profit.

Sean: So far we've talked a lot about what might happen if they go the fixer-upper route. And let's say that the house that they're looking into, it's a little further away, is under 45 minutes for a commute and is still a feasible option. What do you think they should think about if they want to go that route and get a house that's maybe in the boonies?

Holden: You’ve still got to think about commute times. And then if you're accustomed to living where the action is, think about being farther away from that. I'm imagining living in Seattle. And then she's thinking about moving to Des Moines or Federal Way, she might miss the cultural amenities of Seattle.

Sean: It's a lifestyle change.

Sara: You saw a lot during the pandemic, people leaving cities entirely, but moving to smaller cities with lower costs of living, they're still able to live city center or close to it, just at a lower price. So they get those cultural amenities, they get that walkability, but without paying top dollar to live in one of the most expensive cities in the country. I don't know if that's a possibility for Ann, because there are many jobs that are not fully remote. They might be tied to the Seattle area for all of their work opportunities.

Holden: Or family obligations. We really don't know.

Sara: Or just, you love it there. Don't leave a place you love just to save money on a house in a city you've never been to. You talk about people over places. You are also one of those people to think about. If you're very happy where you are, then ideally you can find a way to stay that works for you.

Holden: And it just reminds me of that saying at the beginning of the pandemic where a lot of people moved from New York City to Florida, and the saying was, "Yeah, but then you have to live in Florida."

Sara: I'm a Miami native. So I'm going to say that I give them one, maybe two, hurricane seasons before they regret that choice. Just paying for flood insurance alone — really fun.

Holden: I'm moving from Florida to Texas, and I really, really hope to make that move before June 1 and finally get out of Florida before hurricane season.

Sara: Yeah.

Sean: I want to zoom out a little bit and talk about your general thoughts about buying a house in 2022, Holden. As we know, things are competitive, houses are expensive and we are anticipating some interest rate hikes over the coming year. How do you think all of this factors into buying a house?

Holden: It's not negative thinking to brace yourself ahead of time with the knowledge that it's going to be a frustrating journey. You're going to be driving in your car and screaming at the windshield at times in frustration. It's not very pleasant out there, and a lot of it has to do with competition. You can expect to make offers on houses and not have them accepted. My advice is just know your budget and stay strong because if you don't succeed the first few times you make offers, you might be tempted to exceed your budget. And when that happens, just stop making offers for a while. Cool down. A lot easier said than done. A lot of it really is just regulating your emotions. Now, at the same time that I'm saying, "Oh, take a break if you get frustrated," you're probably also realizing that mortgage rates are rising.

Sean: Yeah. Time is of the essence, even beyond the interest rate hikes. If you sit out too long, the house that you might be able to afford could be off the market.

Holden: That's right. It's not just the Fed, it's just the mortgage market as a whole — the 30-year fixed is likely to reach 4% this year. It's been years since it's been that high. Rising rates, they're going to decrease affordability. People are going to have to revise the price ranges as rates rise. You might be looking at $300,000 to $320,000 and you might have to adjust that from $290,000 to $310,000. And that's just to stick to affordable monthly payments. If anything good comes from rising rates, it might take some investors out of the market, so you might end up facing less competition from landlords and flippers.

Sean: Do you think that would also mean that people would maybe be pricing their houses lower when they do go to sell them?

Holden: That's not going to happen anytime soon.

Sean: OK.

Holden: People are going to be stuck with considering what their house was worth a few months ago. People are going to ask for the asking prices that they're accustomed to hearing about in their neighborhood. So that downward adjustment, if it ever comes, it's going to take a while for that to happen, probably after this year's buying season.

Sean: So do we have any good news for our listener or anyone else hoping to buy a house in 2022?

Holden: House prices went up in double digits in 2021. That's probably not going to happen in 2022. They might rise 5% or 6% or 7%, but 13%? No, that's not likely. And a lot of that has to do with the rising interest rates. Does that mean you're going to get a big break on monthly payments? Maybe not, but hey, look, you've got to look for any silver lining you can find.

Sean: Yeah. Yeah.

Holden: We need more houses. We need more houses. They need to build more houses. And there's just a lot of things that prevent that from happening. There's just a lot of regulatory stuff. I wish there was an easy fix.

Sara: I see that where I live. It's just like I'm a huge fan of mixed-use development. And it's hard because people really do need different types of housing, not just housing in general, but different cities have different levels of demand for apartments for one or two residents versus families that might want to stay in the area. Therefore, you need two- to four-bedroom houses and things like that or apartments or condos. It's nice to have a mix so people can stay in different neighborhoods, but that's just hard to find.

Sean: Holden, do you have any final thoughts for our listener or anyone else that's hoping to actually get into the housing market this coming year?

Holden: When it comes to buying a home, so much of what you're doing is emotional rather than financial. Regulating your emotions because it's just an incredibly emotional time, buying a house. And it can be unexpected. The highs and the lows are just something that you have to learn to manage, to deal with, and knowing that going in, it's just really helpful.

Sean: All right. Thank you so much for talking with us.

Holden: You're welcome.

Sean: With that, let's get onto our takeaway tips and I'll kick us off. First up, explore your options. Two types of renovation mortgages exist for buying and renovating homes. One is FHA-insured and the other is conventional.

Sara: Next, be smart about inspections. Tackle fixer-upper inspections in two stages. Start with the general inspection and then have a contractor or consultant inspection.

Sean: Lastly, keep an eye on the Fed. Mortgage rates will rise this year and already have risen. This harms affordability, and you might have to adjust your price range downward.

Sara: And that's all we have for this episode. Do you have a money question of your own? Turn to the Nerds and call or text us your questions at 901-730-6373, that's 901-730-N-E-R-D. You can also email us at [email protected]. And visit for more information on this episode. Remember to subscribe, rate and review us wherever you're getting this podcast.

Sean: And here is our brief disclaimer, thoughtfully crafted by NerdWallet's legal team: Your questions are answered by knowledgeable and talented finance writers, but we are not financial or investment advisors. This Nerdy info is provided for general educational and entertainment purposes, and may not apply to your specific circumstances.

Sara: And with that said, until next time, turn to the Nerds.