1. National banks – Larger banks typically offer lower fees because they do so many loans. The downside is the potential lack of personal attention. You often need to talk to multiple employees at a large bank, which can be frustrating. They may lack flexibility, too, because they’re overwhelmed with business right now, so it’s best to stay away from a big bank if you have a credit issue or are self-employed.
2. Community Banks – Community banks tend to be more flexible in their lending standards than larger banks. They often hold more of their own loans rather than selling them on the secondary market, which makes them more flexible. He says you’re also likely to get more personal attention from a local bank. On the downside, a community bank might charge more since it doesn’t handle the volume of a larger bank. There’s also a chance you would end up working with a less experienced loan officer because of the lower volume of loans.
3. Credit unions – Credit unions offer a similar experience to a community bank, but you need to belong to the credit union to borrow money. You’ll likely get more personal attention as a member of a credit union. Credit unions typically keep their loans in their portfolio and service your loan themselves. The flexibility of a credit union can make it easier to qualify for a loan, especially if you have some credit issues or are self-employed. The disadvantages potentially include higher fees and fewer loan products.
4. Online Lenders – The fact that a lender handles all transactions online shouldn’t be a determining factor unless you prefer a face-to-face meeting. There’s nothing inherently good or bad about online-only lenders, although it’s best if you can deal with the same person throughout the loan process. Borrowers prefer the anonymity of applying online if they have credit problems that they don’t want to discuss in person. But that impersonal relationship is often why real-estate agents don’t recommend online-only mortgage lenders. Realtors are relationship-oriented, so they usually recommend local lenders who they know.
5. Direct lenders – Many small mortgage-lending companies refer to themselves as “direct lenders” who deal directly with borrowers and originate their own loans, unlike mortgage brokers. These companies only offer mortgages and not other bank services. A direct lender offers you the advantage of working with one person who can speak directly to the underwriters, but if you’re turned down by this lender, you’re done.
6. Mortgage brokers – If you expect a challenge in qualifying for a refinance, a mortgage broker may be a good option because mortgage brokers know the guidelines different lenders have. The best thing a mortgage broker brings to the table is the ability to work with 20 different lenders who have 20 different loan programs. Some loan companies specialize in working with people with a high debt-to-income ratio, some specialize in Federal Housing Administration loans. If you don’t qualify with one lender we can try with another. Before you start comparing mortgage rates, decide which type of mortgage experience you would prefer. That decision can drive your choice of lending institution and can help you succeed in refinancing.
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