When looking for a new home, or when it's time to refinance, which is better - an online mortgage company or the local bank? There was a time, not too long back, that the only choice a borrower had was to visit their local bank and make an application for their mortgage loan in person. In the last several years, more people have chosen an online mortgage lender, but is this a better choice than the neighborhood bank?
To discover which one is best for you, let us check out the advantages and disadvantages of each.
Online Mortgage Lender
Shopping for a lender online might seem like a scary prospect, but understanding a few basic facts will make you feel convenient. When exploring the website in your search, be sure to look for a physical address and telephone number where one can contact a live human. Do not fill out an online application which requests your Social Security number. Although you will eventually be providing this information for your online lender, you will want to make sure you are comfortable using the person on the other end of the internet connection or phone line before you decide to do. Websites that advertise that they will let the lenders compete to obtain your business are actually lead providers that sell your contact information in order to multiple brokers. The idea that several lenders will be bidding for your loan is just true in the advertisements, it is not reality.
Online mortgage lenders do however get access to hundreds of bank mortgage loan products to choose from. This is an enormous advantage to you, the borrower, because you benefit from shopping at countless banks while only working with one point of contact. It is like driving to every bank in the united kingdom and asking the bank officer to show you the bank's best mortgage products. The rates available to you online will usually be the identical to the local bank, and many times they are even better online. An online mortgage company or broker will generally charge the same origination fee as the nearby bank, so the cost for you should be the same online as at the bank. You should never feel like another number in the system, but should be treated with respect and have all your questions answered to your satisfaction. Do not feel obligated to continue to utilize any loan officer who makes you uncomfortable in any way.
Local Financial institution
Do not confuse the big box national banks with smaller locally possessed banks. The big box banks are the ones with branches throughout their state, or even throughout the country. Locally owned banks as a rule only have branches around the city, usually do not have branches in other cities, and particularly not in other states. The national banks originate a huge number of mortgage loans because of their size and number of locations. In addition to offering their loans for their regular banking customers, big banks market their loan products in the at wholesale prices market. This means that they market their loans to the consumer via brokers, many of whom are online.
In either case, they sell a great majority of their loan portfolio to the secondary market and don't hold onto the mortgage for the entire term of the loan. The bottom line is, this means that they bundle a large group of mortgages together into many huge amount of money worth of mortgages and sell them to Wall Street investors at a discount and keep your difference as a profit. Once the group of mortgages has been offered, the bank takes the money from the sale and loans it away again, starting the cycle all over again. Because they will be promoting the loans, the big banks must keep the group of loans as clean and conservative as you possibly can to make them marketable to Wall Street investors, which tends to restrict their flexibility in underwriting.
Locally owned banks certainly can and do sell a number of their loans also, but in many cases they will keep the loans throughout to maturity. Because they do not have to be as concerned regarding making their loans sellable to Wall Street, they have the ability to become a bit more flexible when underwriting their loans. The bank may have chose to market to certain niche markets which the big banks are not comfortable dealing with. Some of the common niche markets are first time home buyers, small businesses, or individuals looking to purchase investment property.
For borrowers who play golf using the bank president, have longstanding banking relationships with a local bank, or who have a great deal of money on deposit, the local bank may be the first place to begin when shopping for a mortgage loan. For the rest of us, the best bet is to go online and find an online mortgage lender you are comfortable with and let them do the meet your needs.
To discover which one is best for you, let us check out the advantages and disadvantages of each.
Online Mortgage Lender
Shopping for a lender online might seem like a scary prospect, but understanding a few basic facts will make you feel convenient. When exploring the website in your search, be sure to look for a physical address and telephone number where one can contact a live human. Do not fill out an online application which requests your Social Security number. Although you will eventually be providing this information for your online lender, you will want to make sure you are comfortable using the person on the other end of the internet connection or phone line before you decide to do. Websites that advertise that they will let the lenders compete to obtain your business are actually lead providers that sell your contact information in order to multiple brokers. The idea that several lenders will be bidding for your loan is just true in the advertisements, it is not reality.
Online mortgage lenders do however get access to hundreds of bank mortgage loan products to choose from. This is an enormous advantage to you, the borrower, because you benefit from shopping at countless banks while only working with one point of contact. It is like driving to every bank in the united kingdom and asking the bank officer to show you the bank's best mortgage products. The rates available to you online will usually be the identical to the local bank, and many times they are even better online. An online mortgage company or broker will generally charge the same origination fee as the nearby bank, so the cost for you should be the same online as at the bank. You should never feel like another number in the system, but should be treated with respect and have all your questions answered to your satisfaction. Do not feel obligated to continue to utilize any loan officer who makes you uncomfortable in any way.
Local Financial institution
Do not confuse the big box national banks with smaller locally possessed banks. The big box banks are the ones with branches throughout their state, or even throughout the country. Locally owned banks as a rule only have branches around the city, usually do not have branches in other cities, and particularly not in other states. The national banks originate a huge number of mortgage loans because of their size and number of locations. In addition to offering their loans for their regular banking customers, big banks market their loan products in the at wholesale prices market. This means that they market their loans to the consumer via brokers, many of whom are online.
In either case, they sell a great majority of their loan portfolio to the secondary market and don't hold onto the mortgage for the entire term of the loan. The bottom line is, this means that they bundle a large group of mortgages together into many huge amount of money worth of mortgages and sell them to Wall Street investors at a discount and keep your difference as a profit. Once the group of mortgages has been offered, the bank takes the money from the sale and loans it away again, starting the cycle all over again. Because they will be promoting the loans, the big banks must keep the group of loans as clean and conservative as you possibly can to make them marketable to Wall Street investors, which tends to restrict their flexibility in underwriting.
Locally owned banks certainly can and do sell a number of their loans also, but in many cases they will keep the loans throughout to maturity. Because they do not have to be as concerned regarding making their loans sellable to Wall Street, they have the ability to become a bit more flexible when underwriting their loans. The bank may have chose to market to certain niche markets which the big banks are not comfortable dealing with. Some of the common niche markets are first time home buyers, small businesses, or individuals looking to purchase investment property.
For borrowers who play golf using the bank president, have longstanding banking relationships with a local bank, or who have a great deal of money on deposit, the local bank may be the first place to begin when shopping for a mortgage loan. For the rest of us, the best bet is to go online and find an online mortgage lender you are comfortable with and let them do the meet your needs.
