Do Lenders Matter When Shopping For A Mortgage?
Variety is the spice of life as they say, and whether you are buying a home or refinancing, today’s homeowners have a lot of choice when it comes to potential lenders. Times have moved on considerably from the days when big banks were the only options for consumers. Credit unions, mortgage brokers and alternative lenders now offer residential mortgage options, and the market is continually expanding.
But does it matter which lender you choose? And how do you know which one is right for you?
In a word, yes, it matters which lender you use. A mortgage is probably the most significant financial commitment that you will make in your lifetime, and not taking the time time to find a lender with terms that suit your financial situation can have far-reaching consequences. So what are your options?
Direct Lenders & Mega Banks
When you think of direct lenders, you should think about the traditional banks, mortgage banks, and nonbank lenders. When applying for a mortgage through this type of institution, they review your application and then decide whether they want to lend you money, and how much. There are many benefits to lending from big bank, such as the peace of mind knowing that you are sourcing your mortgage from a federally regulated institution. It is also possible to save loan origination fees by dealing directly with the lender. On the other hand, mega banks typically have a limited number of mortgage products to choose from, and you will need to source several quotes from several different lenders to ensure that you are getting the best deal. If you have a low credit score or are self-employed, getting a mortgage approved by a traditional can also be more difficult, so it is essential that you find a lender that is willing to work with you to overcome this.
Smaller banks typically cater to a particular customer and tend to place a big emphasis on customer service. Not unusual to have one dedicated point of contact for your loan, smaller banks aim to work through each step with you personally. Because smaller lenders need your business and thrive off customer referrals, it is important that they ensure a positive experience with them. Smaller lenders can also take the time to focus on getting to know you and fostering a relationship. On the other hand, you may find that smaller lenders cannot accommodate larger loans, or cannot offer rates as competitive as larger banks.
When you utilize the services of a mortgage broker, you are effectively using a go-between who is able to present you with the mortgage loan products of many different lenders. The goal of a mortgage broker is to source the best loan product for your needs. One of the benefits of using a mortgage broker is that they can find and compare mortgage products for you, saving you time and hassle. However, mortgage brokers also need to be compensated for their work so be sure to ask questions about their fees and who is responsible for them.
Digital lenders focus their mortgage services online via the internet. Instead of masses of paperwork and postage, you can complete the entire process online and potentially save yourself time. A benefit to this is that a lot of consumers find it convenient and the closing process can be streamlined. However, technology is not infallible, so it is important that you keep records of your application and all financial documents. It is also vital that you read the fine print of anything that you sign, whether you are on or offline.
Which lender is the right for you?
There is not a one fit solution when it comes to mortgage lenders; it is essential that you understand your finances and what your needs are. There are a few things to consider when looking at potential lenders, such as ensuring that the lender is in good professional standing. The Better Business Bureau is a great resource to find out if a lender is reputable and that their record is clean.
It is also vital that you take your time to learn about the types of mortgage product available, especially if you are doing your shopping online. Do not fall prey to unscrupulous internet businesses advertising fictitious rates or adding unnecessary costs. Ask questions and query lenders if you don’t understand the terms that they are offering. If something seems too good to be true, it usually is!