So, you’re ready to take the plunge and finance your first home purchase. Where is the best place to start looking for a home loan? Should you go the path of a mortgage lender or a banking institution?
The answer depends on your needs and finances. Let’s go over the advantages and disadvantages for both mortgage lenders and banks.
Banks
Pros
A potential homeowner will usually reach out to a bank if they have a long-standing relationship with the institution. Usually banks will offer special benefits for existing customers.
Banks also promote additional products to their customers if they choose to undergo the home loan process through them. These products can range from credit cards to special checking and savings accounts.
Cons
A major downside to choosing a bank for your home loan would be that they have stricter rules and qualifications. This is typically because they are subject to federal compliance. This makes banks a difficult option for those who have an iffy credit history.
Also, since banks have stricter reporting laws it usually takes longer to close on the loan.
Mortgage lenders
Pros
Mortgage lenders tend to offer more flexibility in loan terms as well as speedy closings. Because of this, lenders have increasingly become a more popular option amongst home buyers.
Due to this flexibility, lenders can work with buyers to tailor their home loan to fit their needs and financial scenarios. Loan originators are also required to have extensive training, so you can be sure you are speaking with an expert in the industry.
Cons
Not often, but some mortgage lenders provide their services solely online so you may not always have that one-on-one interaction.
Additionally, some lenders sell their loans to servicing companies after closing which means you may not have a say in who you finish the deal with.
The “other” guy
You may have also heard of a mortgage broker. What makes them different from banks and lenders? Essentially, they are the middleman between the homeowner and the lender. A mortgage broker works with several mortgage lenders and banks and submits your loan file to them to issue the loan. Brokers get paid commissions from lenders for completing your mortgage application and documents.
Every homeowner faces a unique financial situation. It is based on this fact that determines the right option for you as far as which loan option you choose.
