When you’re in the market for a new home, one of the first questions you may have is what sort of mortgage interest rate you can get. In today’s housing market, interest rates can differ from a bank vs. a mortgage lender, and they have a tendency to change all the time, so it’s important to find a lender that can help you nail down the right rate for your loan at the right time.
Fortunately, anyone buying a home, including first-time home buyers, has lender options so they can find the best rate possible and the best bank for their mortgage. However, there are some things you’ll want to consider before you choose to use a private lender vs. a bank for a mortgage, as well as the pros and cons of each.
Pros and Cons of Using a Bank for a Home Loan
Larger financial institutions, like banks, credit unions, and other mortgage companies, typically handle the entire mortgage loan process, including originating, processing, and funding. They can offer some benefits to certain lenders, including special deals for those who are investors, self-employed, or have a high credit score.
There are a few things to consider before taking out a mortgage from a bank, including whether you could get a lower interest rate elsewhere. If you are already an existing member of that bank, they may offer special discounts or benefits to you.
There are some disadvantages to getting a mortgage through a bank, however. First, banks tend to have fewer loan options with higher credit requirements. They can also be a lot stricter about lender standards due to the reporting laws and federal compliance policies they must follow. They may require additional fees you wouldn’t necessarily pay to a private lender because of these compliance requirements, and these fees can add up quickly in addition to what you’re already paying for your loan.
With less loan variety and longer closing times, many lenders may decide that working with a bank is not for them. In that case, they may decide to contact a private mortgage broker instead.
Pros and Cons of Using a Mortgage Broker for a Home Loan
Mortgage loan originators, or private brokers, can be a great option for homebuyers looking for a more personalized loan experience. Mortgage brokers offer one-on-one lending expertise, more loan options to choose from, and faster closing times. They may provide more guidance related to paying for your loan, and they may be more willing to negotiate a lower interest rate with you.
You may be able to find a lender who will give you a better deal than your bank, even if your credit score is lower. This is because private mortgage brokers search for loans from banks or other lenders that will best fit your needs. They will vet each bank and negotiate on your behalf to get the best interest rate possible.
Other benefits to using a private mortgage broker rather than a bank include:
- They save you time by doing the legwork of shopping around for a loan.
- They can help you get a lower interest rate by negotiating with lenders on your behalf, which larger financial and banking corporations won’t do.
- They can provide guidance and advise you on which type of loan is best for your situation.
Therefore, if you prefer to have someone else do the work of shopping for the right home loan, a private mortgage broker can be a great option. While they may not have access to every loan that’s available, they can work with you one-on-one to find the best interest rate for you.
Is It Better to Get a Mortgage from a Bank or a Lender?
There is no simple answer to the question of whether it’s better to use a bank vs. a mortgage lender to get the best interest rates on a home loan. Ultimately, the interest rate you get can depend on many factors, including your credit score, the amount of the loan, the lender you work with, and how much of a down payment you make.
With that being said, a private mortgage lender may be able to offer you a lower interest rate because they are more personal and willing to work with your situation. If you’re looking for a more specialized loan, such as an adjustable-rate mortgage or a jumbo loan, then a mortgage broker may be able to offer you better rates with these mortgage options.
Finally, you’ll want to consider how comfortable you are dealing with a larger financial institution. Some people may prefer to work with smaller banks or private lenders because they feel like they will get more personalized service. Others are comfortable dealing with a large bank because they feel like their money is more likely to be safe.
As you shop for a home loan, it’s important to compare rates from multiple lenders before deciding what’s right for you. Both banks and private mortgage lenders can help you get the money you need for your new home, but be sure to consider all the fees and charges associated with each loan before making your final decision.
If you’re shopping around for a mortgage, look no further than First Fidelis. We work one-on-one with every customer to ensure they are receiving the best interest rate possible. Contact us today at 913-205-9978 or get started with our pre-approval application.