So you're ready to buy a home. Congrats! You know you need a great Realtor by your side, and odds are you need a loan. But from whom? You know that big banks offer mortgages, but so do small, local lenders. And there's more to consider than size alone.
So we'll help you weigh these two critical options. First, let's look at the big guys:
What big banks can offer
National lenders have plenty of nice benefits. Since you're forking over so much highly personal information, it's certainly calming to know they've built a solid reputation over the years, and probably aren't going anywhere. And since these are such a well-oiled machine with lots of money behind them, you'll reap the benefits in terms of convenience and support: You know you'll get a 1-800 number to call on nights and weekends when you have a question, and there will be loads of loan officers ready to help you. You'll largely be able to do everything online, from your application to account management.
The national brands may also be able to offer something you can't get anywhere else. "The big banks may come up with a specialty program that only they are offering," says Bruce Ailion, broker and real estate expert with Re/Max Town and Country in Atlanta.
For example, Wells Fargo offers a mortgage exclusively for its members: The Union Plus Mortgage comes with benefits such as hardship assistance and the possibility of earning a $500 first-time homeowners award. Mountain West Financial offers the Advantage Mortgage Program, which comes with lowered underwriting fees and competitive rates.
One last perk if you're in a rush: Your loan may go through quickly, since the bigger banks have in-house underwriters and large teams to process loans.
Where they fall short
The downside to the big banks? They're, um, big. The bigger the bank, the more business they do, which means you're just one of thousands of clients. So, they may not bend over backward to attend to your every whim. "If you go to the big guys, you're client No. 1,049 -- they don't really know you," Ailion says.
The upshot is you may not have one loan officer who works with you through the whole process -- someone who remembers to call and remind you to send in your paperwork. But that may not be a bad thing, provided your loan needs and borrowing profile are fairly run of the mill.
"The national companies are better if you've got a standard profile," Ailion says. "That typically means a job with a steady salary and a W2 that you've been at for a while and a good credit score."
Got it? Now let's take a look at the smaller players:
Where local lenders excel
Smaller, local lenders typically have one major advantage over the big guns: Because they're a smaller operation, they may be able to offer you a more personal touch.
"A smaller lender lives off your future business," Ailion says. "They want to have you feel like you're being treated as a person as opposed to a number."
This can be a very good thing if you don't fit the standard profile. Say, for example, you're self-employed. Digging up tax returns, profit and loss statements, and business balance sheets isn't a walk in the park for any self-employed home buyer, but a local lender may be more willing to help you through it.
If you have a few credit goofs on your credit report, your local lender might be a good bet, too. They might be more willing to work with you over a period of weeks or even months to raise your credit score. Or if you're on the cusp or don't have an established credit profile, they may still be willing to work with you.
"These lenders are more likely to take the time to look at your bill payment history on your cellphone, utility companies, rent, and other alternate forms of verification," says Ailion.
And don't worry, local lenders usually have access to all the major loan programs. Whether you want a conventional loan, an FHA loan, or even something less common like a USDA loan, a local lender can help.
What they can't do
Being smaller has some downsides, however. While everyone knows the names of the big banks, finding a local lender can be a bit tougher. "You're basically going to them based on word of mouth," Ailion says.
The offices will also be staffed with fewer people, meaning they simply don't have the personnel to be open 24/7 -- and that could be irksome (or worse) if you have a burning question at 7:30 p.m. on a Saturday. And they may not have access to as many products as the bigger lenders.
Ultimately, your choice really depends on what kind of borrower you are, both from a credit profile standpoint and a personal standpoint. Do you want round-the-clock access to a 1-800 number in case you have a question keeping you up? Then a national lender might be a right fit. But if you want more personal service where everyone knows your name, then a local lender might be right. Consider it from both angles before you decide.
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