Local Lenders vs. Big Banks vs. Online Lenders
What’s Best For Your Buyers?
When it comes to choosing a mortgage lender, modern buyers have more choices than ever. If you’re wondering which option to recommend to prospective clients, consider the following advantages and disadvantages associated with today’s available options.
- Unlike brick-and-mortar institutions, online mortgage lenders usually operate without a ton of overhead. In turn, they can sometimes pass the savings onto customers by offering lower fees or interest rates.
- Application and processing times are much faster. In most cases, you can simply upload all relevant documentation to the lender’s website.
- While conventional USDA, VA and FHA loans have minimum credit score guidelines, an online lender may be more willing to grant a loan even if your credit is less than perfect.
- With a local bank or broker, you’ll probably have a much easier time getting help during business hours. With an online lender, it can be harder to get someone on the phone when you need attention.
- Since your quoted rates aren’t necessarily guaranteed, you might learn that your mortgage will be costlier than expected while already deep in the home buying process.
- You may end up paying extremely high interest rates if your credit isn’t up to par.
- Local banks and credit unions offer greater responsiveness to their customers.
- Local lenders tend to be more flexible in their loan guidelines.
- Small lenders often focus on niches the big banks tend to pass over.
- Local banks are more familiar with local market conditions and will factor this information into your loan approval.
- Some small lenders may have cut back on their offerings, as they grapple with the challenges of new regulations
- Community banks may offer fewer financial products that could limit your selection.
- Some local banks have razor-thin profit margins that might make them wary of high risk loans.
- Because they have entire compliance departments to help deal with new regulations, big banks may be more willing to back certain loans.
- Many big banks offer the full spectrum of loan products, which could give you a better option for your unique needs.
- Large banks aren’t likely to saddle you with so-called junk fees that could come from an online lender.
- Because they must efficiently process numerous loan applications, large banking institutions use rigid guidelines to help identify qualified borrowers with minimal fuss.
- Big banks may not fund the same specialized loans that could interest local or online lenders.
- You won’t get the same sort of personalized service you would at a local bank, and processing will take much longer compared to an online lender.
Which Should You Recommend?
When it comes to deciding on a mortgage lender, it all depends on what your clients value. If they want a deep menu of financial services, a big bank is their best bet. If, on the other hand, they prefer personalized attention and less stringent loan guidelines, local institutions make a lot of sense. If they value fast loan processing or have questionable credit, you might consider recommending an online lending operation.