Big bank or local lender? Deciding where to get your mortgage

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When searching 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 play a role, too. Although lenders can provide the same end product, not all are created equally. Depending on your needs, you could work with either a large lender, a local lender or another type altogether.

Where can you get a mortgage?

First thing’s first: Let’s talk about where you can get a mortgage. The 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 space. These are well-known brands and typically available nationwide — think Chase or 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 go by another name. PrimeLending, for example, is a mortgage lender subsidiary of PlainsCapital Bank.
  • Credit unions – In some cases, credit unions can offer fewer fees and lower rates than big banks.
  • Independent mortgage companies – An independent mortgage company is one that isn’t affiliated with a bank. One example is Fairway Independent Mortgage Corporation.
  • Online lenders – Online mortgage lenders don’t have extensive overhead costs, which often translates to more affordably-priced loans. One example of an online lender is Better.com.

Big banks and national lenders: Pros and cons

Big banks and national mortgage lenders can come with some sense of security, especially if you’ve heard the name or see branches everywhere. If you need help determining which kind of mortgage to get, for instance, the convenience of heading to a branch to speak with someone in-person can be valuable.

Additionally, large banks tend to have extensive customer service hours. If you’re facing a pressing issue concerning your loan after banking hours, chances are you can get a hold of someone over the phone or via online chat.

Big banks and national lenders often offer a streamlined online application experience, as well, and once approved, you’ll likely be able to manage your loan payments entirely online.

Going bigger isn’t always better, though. Although big banks are convenient and familiar, you’re likely to find yourself among thousands of other borrowers. With that, you might not find as personalized an experience as you’d like, or an overt willingness to help you through the process.

Going local: Pros and cons

On the flip side, a local mortgage lender can lend a more personalized approach, as most loan officers at local lenders live in the community where they work.

Your loan officer might have fewer clients to keep up with, too. If you have a more complicated loan, this can play in your favor, as you’ll have easier access when questions pop up.

A potential downside of working with a local lender, however, is that you might have to spend some time sorting through and vetting your options compared to simply going with your existing bank.

What about credit unions?

Credit unions are another option when taking out a mortgage. A credit union is a nonprofit financial institution controlled by its members, and typically offers lower mortgage rates.

However, at a credit union, you might only have to access to a limited line of loan products, meaning you might not find exactly what you’re looking for. Plus, you’ll need to qualify for membership. That member-focused experience, though, could lead to more case-by-case flexibility that can help you with your mortgage needs.

Are online lenders better?

An online mortgage lender allows you to move through the loan application process quickly, usually with an entirely (or almost entirely) digital experience. This can be especially valuable today, when in-person contact is being minimized. They’re also worth considering if you want to take advantage of lower rates.

Convenience, cost and speed matter, but you might also need human interaction at some point in the process. With no branch locations, this can be difficult to come by with an online lender.

How to find the best mortgage lender

When searching for the best mortgage lender — either a big bank, local lender or another 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 could use improving, look into lenders who have options for low-credit score borrowers. They’ll typically have more experience qualifying those who don’t fit the standard borrower profile.
  • Compare quotes from multiple lenders. Studies show that shopping around for a mortgage could save you thousands. Don’t skip this step!
  • Look at how lenders communicate with you. As you seek out preapprovals from different lenders, pay attention to how they communicate with you. The right lender shouldn’t be difficult to work with, and should be able to answer your questions promptly and keep you updated throughout the process. The right lender won’t ever pressure you with a hard pitch, either.
  • Weigh out the lender fees. Many lenders charge an origination fee, and some charge an application fee, as well. Take this into account when comparing your options. Be sure to watch for fees that seem high — this can be a sign that you’re not getting the best deal out there.

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Written by
Sarah Sharkey
Contributing writer
Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a range of subjects, including banking, savings tips, homebuying, homeownership and personal finance.
Edited by
Mortgage editor