Is a Big Bank or Local Lender Better for a Mortgage? (2024)

So you’re ready to buy a home. Congrats! You know you need a great real estate professional buy your side, and odds are you need a loan.

But from whom?You know that big banks offer mortgages, but so do small, local lenders. And there’s more to consider than the size of an institution alone.

So we’ll help you weigh these two critical options. First, let’s look at the pros and cons of big lenders.

What big bankscan offer

National lenders have plentyofnice benefits. Since you’re forking over so much highly personal information, it’scertainlycalming to know they’ve built a solid reputation over the years, and probably aren’t going anywhere.And since these aresuch a well-oiled machine with lots of money behind them, you’ll reap the benefits in terms of convenience and support:You know you’ll get a 1-800 number to call on nights and weekends when you have a question, and there willbe loads of loan officers ready to help you. You’ll largely be able to do everything online, from your application to account management.

The national brands may also be able to offer something you can’t get anywhere else. “The big banks may come up with a specialty program that only they are offering,” says Bruce Ailion, broker and real estate expert with Re/Max Town and Country in Atlanta, GA.

One last perk if you’re in a rush: Your loan may go through quickly since the bigger banks have in-house underwriters and large teams to process loans.

Where theyfall short

The downside to the big banks? They’re, um, big. The bigger the bank, the more business they do, which means you’re just one of thousands of clients. So, they may not bend over backward toattend to your every whim.“If you go to the big guys, you’re client No.1,049—they don’t really know you,” Ailion says.

The upshot is you may not have one loan officer who works with you through the whole process—someone who remembers to call and remind you to send in your paperwork. But that may not be a bad thing, provided your loan needs and borrowing profile are fairly run-of-the-mill.

“The national companies are better if you’ve got a standard profile,” Ailion says. “That typically means a job with a steady salary and a W2 thatyou’ve been at for a while and a good credit score.”

Got it? Now let’s take a look at the smaller players:

Where local lenders excel

Smaller, local lenders typically have one major advantage over the nationally known lenders: Because they’re a smaller operation, they may be able to offer you a more personal touch.

“A smaller lender lives off your future business,” Ailion says. “They want to have you feel like you’re being treated as a person as opposed to anumber.”

This can be a very good thing if you don’t fit the standard profile.Say, for example, you’re self-employed. Digging up tax returns, profit and loss statements, and business balance sheets isn’t a walk in the park for any self-employed home buyer, but a local lender may be more willing to help you through it.

If you have a few credit goofs on your credit report, your local lender might be a good bet, too. They might be more willing to work with you for weeks or even months to raiseyour credit score.Orif you’re on the cusp or don’t have an established credit profile, they may still be willing to work with you.

“These lenders are more likely to take the time tolook at your bill payment historyon your cellphone, utility companies, rent, and other alternate forms of verification,” says Ailion.

And don’t worry, local lenders usually have access to all the major loan programs. Whether you want a conventional loan, an FHA loan, or even something less common like a USDA loan, alocal lender can help.

What they can’t do

Being smaller has some downsides, however. While everyone knows the names of the big banks, finding a local lender can be a bit tougher. “You’re basically going to them based onword of mouth,” Ailion says.

The offices will also be staffed with fewer people, meaning they simply don’t have the personnelto be open 24/7—and that could be irksome (or worse) if you have a burning question at 7:30 p.m. on a Saturday.And they may not have access to as many products as the bigger lenders.

Ultimately, your choicereally depends on what kind of borrower you are, both from a credit profile standpoint and a personal standpoint.

Do you want round-the-clock access to a 1-800 number in case you have a question keeping you up? Then a national lender might be a right fit. But if you wantmore personal service where everyone knows your name, then a local lender might be right. Consider it from both angles before you decide.

—————

More fromrealtor.com: What Your Mortgage Broker Wishes You Knew

Is a Big Bank or Local Lender Better for a Mortgage? (2024)

FAQs

Is a Big Bank or Local Lender Better for a Mortgage? ›

Local lenders may be more flexible in their underwriting criteria—things like the minimum credit score or debt-to-income ratio requirements. Because they're smaller and more independent than big banks, they can consider unique circ*mstances or non-traditional loan scenarios for buyers in their community.

Is it better to use a local lender or bank? ›

You'll get more personalized service.

When you work with a large bank or online lender, you're just another number. But when you work with a local lender, they'll get to know you and your needs. They'll be invested in helping you find the right home and getting you the best loan possible.

Is it better to use a mortgage lender or bank? ›

A full service bank ensures your loan will stay with the same company for the entire term. Do be sure to make sure that the bank does service their own loans. On the other hand, a mortgage company can offer fast closings, product availability, and loan originator expertise.

Is it better to go with a big bank for a mortgage? ›

Big banks and small banks each offer different advantages; the right one for you depends entirely on your personal circ*mstances and what you want from the mortgage. Big banks offer security and bundle deals, while smaller lenders might provide a more individual experience and flexibility.

Do big banks have better mortgage rates? ›

Since banks are large institutions, they have the financial means to potentially offer lower interest rates. This is beneficial if you clearly meet and exceed the criteria for pre-approval.

Why use a local lender for a mortgage? ›

Local lenders have an array of market knowledge for the area they are in. They will have a better understanding of the value of properties, and can provide expert advice for the region you are buying in. Likely, the local lender will have a team of professionals in their network that are also knowledgeable in the area.

Should you use local bank for mortgage? ›

Local Economy Assessed Daily

Your local community bank lenders are assessing the financial risks and opportunities in your area daily because this is where they work and live. Unlike big banks, their understanding of the local economy is used when approving home mortgages.

Does it matter what bank you use for mortgage? ›

It's also important to make sure you're comfortable with the company that's originating the loan. Although many parts of the mortgage process are the same across all lenders, there are some differences that can affect the fees you are charged and the service you receive that are worth considering when you shop around.

Is it best to go to a bank for a loan? ›

If you favor a face-to-face experience, opt for a traditional brick-and-mortar bank or credit union. No matter how you apply, the best choice of lender is usually the one that offers the lowest interest rate, so it's a good idea to compare personal loans from multiple lenders.

Who is the best mortgage broker? ›

Best mortgage brokers
  • Habito* – Online first. – Fee-free. – Rated 4.8 on Trustpilot with 6,855 reviews. ...
  • L&C Mortgages* – No fees. – One of the UK's largest mortgage brokers. – Founded in 2002. ...
  • Better.co.uk* – Online first. – Fee-free. ...
  • John Charcol* – £699 standard advice fee – but this can vary. – Been around for over 45 years.

Do local banks have lower mortgage rates? ›

Local banks may also have better rates or lower fees than online options do. Both types of lenders offer mortgage pre-approval.

Should you ever have more than $250000 in a bank? ›

Bottom line. Any individual or entity that has more than $250,000 in deposits at an FDIC-insured bank should see to it that all monies are federally insured. It's not only diligent savers and high-net-worth individuals who might need extra FDIC coverage.

What bank gives out the most mortgages? ›

Rocket Mortgage is the largest mortgage lender in the United States, originating 464,363 mortgages worth $127.6 billion in 2022.

Will banks negotiate mortgage rates? ›

Are mortgage rates negotiable? Yes, to some degree, mortgage interest rates are negotiable. Mortgage lenders have some flexibility when it comes to the rates they offer. However, in many cases getting a lower rate on your loan will come with a price, such as paying “points” to get a lower rate.

Is it better to go with a small or big bank? ›

Smaller Lenders – often offer better rates and fewer fees because of the reduced costs of running their business (due to fewer branches, less marketing expenses and employee expenses). Reduced layers of management & decision makers can also help first home buyers negotiate a better interest rate on their loan.

Are you more likely to get a loan from your own bank? ›

Your lender already knows you, so approval may be easier

In some cases, having an established relationship with the lender could make it more likely you'll be approved for the loan. Since you're an existing customer, the bank will be able to see your past habits.

Is it better to go into the bank to apply for a loan? ›

Online loans may come with better terms, which can mean lower interest rates and fees. However, applying online for a mortgage does mean there's less personalized help available. If your financial situation is complex, applying in person could be a better option.

Should I go with a private lender? ›

Private individual lenders are generally more willing to work with people with a lower credit score or more difficult lending situation. They do this in exchange for a higher interest rate and they have a higher rate of acceptance on the loan as well.

Does it matter what lender you use? ›

Although many parts of the mortgage process are the same across all lenders, there are some differences that can affect the fees you are charged and the service you receive that are worth considering when you shop around.

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