When you’re looking for the right home, you’ll likely have a list of must-haves or nice-to-haves. When shopping for the right mortgage lender, your preferences also play a role. Although lenders may provide the same end product, not all are created equal. Depending on your needs, you can work with a large lender, a local lender, or any other type.
Where can you get a mortgage?
First, let’s talk about where you can get a mortgage. Different types of mortgage lenders include:
- Big banks – One of the most common places to get a mortgage is through large lenders in the banking industry. These are well-known brands and generally available nationwide – think Hunt Where Capital one.
- Local banks – Many community and regional banks also offer mortgages, but these can sometimes be confined to a specific service area.
- Affiliated mortgage companies – Some mortgage companies are affiliated with a bank but have a different name. PrimeLending, for example, is a mortgage lending subsidiary of PlainsCapital Bank.
- credit unions – In some cases, credit unions may offer lower fees and lower rates than large banks.
- Independent mortgage companies – An independent mortgage company is a company that is not affiliated with a bank. An example is Fairway Independent Mortgage Corporation.
- Online lenders – Online mortgage lenders do not have large overheads, which often results in more affordable mortgage prices. An example of an online lender is better.com.
Big banks and national lenders: pros and cons
Big banks and national mortgage lenders can provide a sense of security, especially if you’ve heard the name or see branches everywhere. If you need help determining what type of mortgage to get, for example, the convenience of going to a branch to speak with someone in person can be invaluable.
Also, big banks tend to have long customer service hours. If you have an urgent problem with your loan after banking hours, chances are you can reach someone by phone or online chat.
Major banks and national lenders often offer a streamlined online application experience, and once approved, you’ll likely be able to manage your loan payments entirely online.
Going bigger isn’t always better, however. Although the big banks are convenient and familiar, you are likely to find yourself among thousands of other borrowers. With that, you might not find as personalized an experience as you would like, or a clear willingness to help you along the way.
Being local: pros and cons
On the other hand, a local mortgage lender may take a more personalized approach, as most local lenders’ loan officers live in the community where they work.
Your loan officer might also have fewer clients to track. If you have a more complicated loan, this can work in your favor as you will have easier access when questions arise.
A potential downside to working with a local lender, however, is that you may need to spend some time sorting through and checking your options versus just going with your existing bank.
What about credit unions?
credit unions are another option when taking out a mortgage. A credit union is a not-for-profit financial institution controlled by its members and generally offers mortgage rates.
However, at a credit union, you may only have access to a limited range of loan products, which means you may not find exactly what you are looking for. Additionally, you will need to qualify to become a member. However, this member-focused experience could lead to greater flexibility on a case-by-case basis that can help you meet your mortgage needs.
Are online lenders better?
An online mortgage lender lets you navigate the loan application process quickly, usually with a fully (or almost fully) digital experience. This can be particularly useful today, when in-person contact is minimized. They are also worth considering if you want to take advantage of lower rates.
Convenience, cost, and speed are important, but you might also need human interaction at some point in the process. With no branches, this can be difficult to find with an online lender.
How to find the best mortgage lender
When searching for the best mortgage lender – whether it’s a major bank, local lender or some other type – cost is important, but so are your needs and preferences. Here are some ways to narrow down your options:
- Consider your credit. If your credit score can be improved, look for lenders who have options for low credit borrowers. They will generally have more experience to qualify those who do not fit the standard borrower profile.
- Compare quotes from multiple lenders. Studies show that shopping for a mortgage could save you thousands. Do not skip this step!
- Watch how lenders communicate with you. When seeking pre-approvals from different lenders, pay attention to how they communicate with you. It shouldn’t be difficult to work with the right lender and they should be able to answer your questions quickly and keep you informed throughout the process. The good lender will never pressure you with a hard pitch either.
- Weigh the lender’s fees. Many lenders charge an origination fee, and some also charge an application fee. Take this into account when comparing your options. Be sure to watch out for fees that seem high – it may be a sign that you’re not getting the best deal.
