Where to Apply for Your Mortgage Loan: National Lenders vs. Brokers vs. Local Banks

Applying for a mortgage loan is the first official step in the home buying process, and it sets the stage for everything that follows. But where should you apply? There are several options available, and each will affect your experience in different ways. If you’re unsure of where to apply, you’ve come to the right place! This article will explore your loan application options. We’ll also walk you through the advantages and disadvantages of each option, so you’ll have all the information you need to make an educated decision.  

Your Options for Applying for A Mortgage Loan

There are a number of options for loan providers, each with a unique mix of benefits and drawbacks. This section will dive into some of the most common and break down the pros and cons of each. 

Mortgage Lenders

Mortgage companies are direct lenders who originate, fund, and service a loan over the course of its life. Unlike big banks, mortgage lenders only provide mortgages. As a result, they’ve streamlined the process and have access to a broad selection of loan offerings. They also have an in-house team of underwriters and employees ready to finalize your loan. 

Mortgage companies are a one-stop shop for your mortgage needs, as they handle everything from preapproval to processing your payments. Direct mortgage lenders are highly efficient and make securing your mortgage quick and relatively painless. 

Pros

• Because they’re large organizations with a lot of resources, many mortgage lenders offer low mortgage rates and make it easier to save money. 
• Reputable mortgage lenders are easy to contact in person, over the phone, or online. 
• Mortgage lenders exclusively handle mortgages, so they tend to have a much faster loan application and acceptance process than indirect mortgage providers. 
• The best mortgage lenders typically have an array of online tools and 24/7 customer service.

Cons

• Large mortgage lenders have thousands of clients, so you will probably feel more like a number than an individual client. 
• The loan application and acquisition process won’t be as personalized as it would be with a smaller organization. 
• Big mortgage lenders have to sort through thousands of applicants, so they tend to be less willing to work with complex financial situations and needs. 

Local Banks

Many regional and community banks offer mortgages to members of their community. Local banks are smaller, don’t have as many branches, and are often restricted to a specific service area. Local banks know your neighborhood well and have relationships with developers, real estate agents, and contractors in your area. While they might not offer as many loan products as national banks, local banks are typically more willing to work with your unique financial situation.  

Pros

• Local banks have fewer customers, so you’re more likely to enjoy a personalized experience.
• Most local banks understand your local market from the inside out. 
• Neighborhood lenders tend to be easy to contact. 
• Local banks tend to be less expensive than national mortgage providers. 

Cons

• Local lenders have limited locations, which is inconvenient if you’re moving from out of state.
• These lenders tend to have a smaller selection of loan types, so you might have difficulty finding particular types. 
• Local banks have smaller teams, so they may take longer to process your loan application than a national mortgage lender. 

Independent Mortgage Brokers

Independent mortgage brokers work with you to find your best possible loan option. They pull from a network of banks and lenders and can be extremely helpful in navigating your loan options and educating you on the loan process. They also communicate and advocate on your behalf from preapproval to closing. 

Unlike national mortgage lenders and banks, independent mortgage brokers don’t put up the loan money. Instead, they find, negotiate and secure mortgage loans from an external source. Although they have substantial upfront costs, mortgage brokers make the process of acquiring a loan as simple as possible. 

Pros

• Independent mortgage brokers develop personal relationships with local lenders, giving them access to broker-only deals and a broad network of potential lenders. 
• They are flexible and can work with borrowers with issues like a low credit score, inconsistent employment, and bankruptcies. 
• Brokers handle all the paperwork and number crunching, so you don’t have to. 
• Mortgage brokers are available at any time to answer questions you have about the homebuying process. 

Cons

• You’ll have to pay commission and broker fees, leading to higher upfront costs.
• Because mortgage brokers are paid a fee, they might not always work in your best interests and could potentially get you into a mortgage you can’t afford over time. 
• Some lenders don’t work with independent mortgage brokers, which can limit your options. 

Factors to Consider When Choosing Where to Apply

Now that you’ve heard the pros and cons of independent mortgage brokers, local banks, and national lenders, you might be left wondering how you’re supposed to decide between them. 

Here are a few factors you should consider when deciding where to apply for a mortgage. 

Your Credit History 

If you have a checkered credit history, you might want to pick one of the more flexible options. While big banks and national lenders are quick to turn applicants away, independent mortgage brokers do the legwork to find you a better deal than you can find elsewhere. One reason for this is that mortgage brokers don’t lend money themselves. Therefore, working with someone who has a not-so-good credit history doesn’t carry very much risk. 

Mortgage brokers still make money from connecting you with a mortgage provider, so they’ll work hard to ensure you’re approved. Local banks are another excellent option for anyone with a less than stellar financial history. National banks and lenders have to process thousands of applications. As a result, they have rigid guidelines to filter out unqualified borrowers quickly. Local banks have fewer clients, so they’re more willing to work with borrowers to find a mortgage that meets their unique needs. 

How Involved You Want to Be 

Another way to decide between mortgage providers is to determine how comfortable you are comparing offers and handling the paperwork on your own. Working with a large mortgage lender or local bank usually means you’ll have to keep track of the offers yourself. You’ll have to process the information and decide which loan you want to go with. If avoiding paperwork is a priority, an independent mortgage broker is probably your best choice. 

The Type of Loan You Want 

Do you already have a particular type of loan in mind?  If so, you might find the loans local banks offer too limited. National lenders have a much more extensive network and a more comprehensive array of offerings. Independent mortgage brokers are also a great option in this regard since they can shop around for a loan that meets the criteria that you select. 

Whether Personalization is Important

If personalization is essential to you, stick with local or independent mortgage providers who don’t work with as many clients. Since national lenders work with such a high volume of borrowers, they’re less likely to give you one-on-one attention. On the other hand, local mortgage lenders work with fewer borrowers, so they are able to provide a personalized lending experience. 

So, there you have it! Deciding on where you get your loan is an important decision. So, don’t rush through it; make sure you take full stock of your financial situation and the options available to you. Regardless of where you choose to apply, we hope this article has provided you with all the information you need to feel confident in your decision.