Which is better—a local bank or an online mortgage lender—when looking for a new house or when it’s time to refinance? Not too long ago, the only option available to borrowers was to apply for a mortgage loan in person at their neighborhood bank. More consumers have chosen online mortgage lenders in recent years, but is this a better option than going to a neighborhood bank?
Let’s examine each one’s benefits and drawbacks to determine which is ideal for you.
Mortgage Lender Online
Finding a lender online may seem daunting, but by being aware of some fundamental information, you’ll feel much more at ease. Be sure to seek for a real address and a phone number where you can speak to a live person when you are browsing the website in your search. Never submit an internet form that requests your Social Security number. Although you will eventually give this information to your online lender, you should first make sure you feel at ease speaking or calling the person on the other end of the line. Websites that promote letting lenders compete for your business by selling your contact information to various brokers are actually lead suppliers. The claim that multiple lenders will compete for your loans in Bend; it only appears in marketing.
However, there are a large number of bank mortgage loan packages available to online mortgage lenders. You, the borrower, stand to gain greatly from this because you just have to deal with one point of contact while shopping at hundreds of banks. It would be comparable to traveling to every bank in the nation and asking the bank teller to demonstrate their greatest loan offerings. The rates that are accessible to you online will typically be the same as those offered by your neighborhood bank, and frequently they are even better.
You should pay the same amount online as at your bank because an online mortgage lender or broker often charges the same origination fee as the neighborhood bank. You should always be handled with respect and have all of your inquiries addressed to your satisfaction; you should never feel like just another number in the system. Never feel forced to work with a loan officer who causes you any kind of discomfort.
Contrast large national banks with smaller, regionally owned institutions. The large box banks are the ones that have locations across the state or possibly the entire nation. Locally held banks typically only have branches in the city and its surrounding areas. They rarely have branches in other cities, let alone other states. Due to their size and location, the national banks originate a significant amount of mortgage loans. Large banks sell their loan products on the wholesale market in addition to providing loans to their normal banking customers. This indicates that they advertise their loans to consumers via brokers, many of whom operate online.
In any instance, they do not hold onto the mortgage for the duration of the loan and instead sell a sizable portion of their loan portfolio to the secondary market. Simply put, this implies that they pool together a lot of mortgages totaling millions of dollars, sell them at a discount to Wall Street investors, and pocket the difference as a profit. After the set of mortgages has been sold, the bank uses the proceeds to make new loans, which restarts the cycle. The big banks must keep the collection of loans as clean and conservative as possible to make them desirable to Wall Street investors because they will be selling the loans, which tends to limit their underwriting options.
Locally owned banks can and do sell part of their loans, but frequently they will hold the loans until they are paid off. They can be a little more lenient when underwriting their loans because they do not have to worry as much about making their loans sellable to Wall Street. The bank may have chosen to target niche areas that the major banks are hesitant to enter. First-time home buyers, entrepreneurs, and people looking to buy investment property are some of the typical specialized markets.
When looking for a mortgage loan, borrowers who often play golf with the bank president, have strong banking links with a local bank, or have a sizeable amount of money on deposit might choose to start there. The best option for the rest of us is to search online for a trustworthy mortgage lender, then delegate the task to them.