Securing a mortgage requires you to make many decisions. Aside from determining which program you want to use, such as FHA, USDA, or conforming, you need to determine who you will trust to process your application. After all, this is one of the largest investments you will make in life. Should you go with the smaller lender in town who knows you or the big national banks who have years of experience and thousands of employees to help them? The decision is a personal one, but here we will break down the pros and cons of each.
The Positives of Big National Banks
Big national banks have size on their side. They also have experience in most cases. Chances are you can hop online and read reviews of the biggest banks out there. You can read the good, bad, and ugly to help you decide which bank is deserving of your private information. Some banks work better with certain programs while others avoid programs, like FHA loans. You deserve to know what each bank offers; you can easily find this information online. In fact, you can arm yourself with a lot of information before you ever pick up the phone or set foot in the bank.
Generally, you can rely on big national banks for security as well. You know they have been around and you can research how many (if any) security breaches they had in the past. You also get the assurance of having service when you need it. The 1-800 number they provide you with will likely connect you to a live person almost any time you need one, which can be a major positive. You can probably handle a majority of your business online in a secure environment as well.
Big banks often have a streamlined process to get loans closed as well. You may have a hiccup here or there if you have a problem with the documents you provide. Generally, however, they work hard to get loans closed fast. This works well for them because they have a lot of employees as well as plenty of experience in various loan programs.
The Downsides of Big National Banks
There is one major downside when you deal with big national banks. There is no personal service. Sure, they call you by name when they contact you on the phone, but in the grand scheme of things, you are just a number. They have thousands of other loans to service amongst yours – you do not stand out.
Going along with the “big” aspect, you may work with more than one person at a time on your loan. This may not be ideal for you. For example, you may start the loan process with a loan officer, but then once you move to underwriting, you may deal with the loan processor. As you get further into the process, you might have other people involved. The banks have a system that works, but for you personally, it may get confusing.
Lastly, big banks usually have “cookie cutter” loans. If you don’t fit a standard mold, then you may not find a suitable loan with them. For example, if you need an exception for a higher debt ratio or your income is a little different than someone with a standard salary, the big bank might not want to work with you. They have fewer options for those who don’t fit the standard guidelines for conforming, FHA, and VA loans.
The Positives of Smaller Banks
Local banks any offer you similar products, but they have a whole new level of service. With these banks, chances are you will work with one person from start to finish. This gives you the opportunity to develop a relationship with your banker. As you get more comfortable with one another, you may learn the ins and outs of the bank and your loan. He may provide you with tips on how to save the most money or even help you in other areas of your financial life.
Small banks also have more options with various loans. Sure, they may have the same conforming, FHA, and VA loans, but they also provide what they call portfolio loans. These loans do not get sold on the secondary market. Instead, the lender holds them on their own books. This means they can make their own rules – there is no one to answer to. If you have that unique situation, you just might find a loan program that will fit it with a smaller bank.
Lastly, smaller banks are often more forgiving when you have less than perfect credit. They may not be able to provide you with a loan right away, but they may work with you to help you rectify the situation. Big banks usually just write off those who don’t qualify and move on – they have thousands of other applications to process. Smaller banks, however, thrive on each application that comes in, so they are willing to do whatever it takes to make sure you close a loan with them at some point in the future.
The Downsides of Smaller Banks
Just as the bigger banks have customer service available almost 365 days a year, the smaller banks don’t have this option. They have a much smaller staff and capability to answer your questions. Typically, you can only access them during normal business hours of 9-5 on weekdays. If you are lucky, you might be able to squeeze in a question or two on a Saturday morning.
Finding a local bank may also be a little harder for you. Sure, you know there are banks on every corner, but which bank offers which program? A quick visit to their website might or might not tell you what you need to know. Instead, you probably have to take the time to get out there and interview each bank. This could take you a lot longer than surfing the web and finding the big bank that suits your needs.
Either way, you are in good hands with big national banks or small lenders. It really depends on what you prefer. If you need personal interaction from one person from start to finish, a small bank is a better option. In addition, if your financial situation is out of the ordinary, working with a small bank will provide you with more options. On the other hand, if you have a cookie cutter case and you don’t need your hand held through the mortgage process, the big banks are a great choice as well.