Where to Get a Mortgage: Bank, Broker, Online, or Elsewhere?
Wake up, people! These days you can get a loan in lots of different ways, which may have you wondering: Where should you get yours? Back in the day, banks were the only route to getting a mortgage, but then credit unions and brokers came on the scene. These days, you can get a home loan online, much like you’d order up dinner from Seamless. But should you?
Each of these mortgage avenues has its pros and cons, so it pays to know what they are before you commit.
Bank
Most local and national banks have mortgage lending programs, some of them aggressive and highly developed.
Pros: If you already have a relationship with a bank (via a checking account, for example), you may be able to access discounted rates.
“If you’re a customer with good credit, you can get a competitive rate from your bank,” says Ginger Wilcox, chief industry officer for mortgage startup Sindeo.
Cons: Banks typically have a limited variety of mortgage products and more rigid credit standards than other types of lenders. The biggest banks may have a certain amount of bureaucracy to wade through, which can slow down the process.
Credit union
Credit unions are nonprofit organizations that offer financial services directly (and often exclusively) to their members.
Pros: Credit unions typically have lower overhead than banks, so they may be able to offer a mortgage with lower rates or fees. In the first quarter of 2016, for example, rates on a 30-year fixed mortgage at credit unions averaged 3.84%, compared with 4.02% on the same loans at banks.
Cons: Like banks, credit unions have a limited variety of loan products. You have to pay a membership fee (typically $5 to $25) and meet certain membership criteria, usually based on things such as your geographic area or employer in order to join. Use this tool to research a credit union and see whether you qualify for membership.
Mortgage broker
A mortgage broker has relationships with multiple lenders and works on your behalf to find you the right loan.
Pros: If you have a unique situation such as freelance income or poor credit, a broker will know all of the options that are open to you—and which lender might offer the best-fitting product.
Cons: Brokers receive fees, paid either by the borrower, the lender, or a combination of the two, that are generally 1% to 2% of the value of the loan. There is no guarantee that you’ll get a better rate than you would have gotten if you’d shopped around on your own, says Keith Gumbinger, vice president of mortgage site HSH.com.
Online lender
Like nearly everything else these days, it’s now possible to apply for and receive approval for a mortgage entirely online from lenders such as Quicken Loans or Loan Depot.
Pros: Streamlined document uploading and the ability to apply on your schedule can make the process less stressful. Plus, online lenders may be able to close your loan more quickly. Sindeo, for example, claims it can close loans in as quickly as 15 days, while the average lender takes about a month and a half.
Cons: There’s little human interaction, which could be tough for first-time buyers or others looking for an adviser to guide them through the process. Online lenders also don’t have the long-term relationships with local Realtors®.
“If you’re in a strong seller’s market where there are multiple offers on properties, having a lender with credibility in the local real estate community can help your offer rise to the top of the pile,” says Richard Redmond, author of “Mortgages: The Insider’s Guide.”
Keep in mind, however, that whichever route you go, you should always shop around to make sure you’re getting the best deal.
“Even if you’re getting a conforming loan and the rates don’t vary much, loan fees can vary lender by lender, and you can end up paying more than is necessary,” says Benjamin Beaver, a sales associate with Coldwell Banker Patterson Properties in San Angelo, TX.
Source: realtor.com
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