Lender me your ear….

It’s not really a secret that there are an insane amount of lenders in the race right now. In the good ol’ days there was no choice but to visit your local brick and mortar bank and talk with someone who was most likely your neighbor. Today, you don’t even have to see the white’s of another human’s eyes to apply for a loan. It’s madness I tell you. Maybe I am just from the era where local feels better…like feels more secure. Oddly enough, I am also the person with an affinity to the motto “to each his own”, so whichever approach floats your boat, that’s cool. What we are going to look at here are highlights of the lender options.

We’re gonna talk about Community Banks, National Banks and Online Lenders. All of these entities offer mortgage loans, it just comes down to a bit of personal preference as well as which one may have the best horse in the race at the time you are looking.

If you read my other post “The Importance of Pre-approval”, you saw that interviewing different lenders is highly encouraged, so this post is kind of an extension and vice versa.

Because I like to make sure that everyone is on the same page, I visited Wikipedia again and found that it describes a Community Bank as a depository institution that is typically locally operated and owned that tend to focus on the needs of businesses and families where the bank holds branches and offices and lending decisions are made by people who understand the needs of families, business and farmers.

Here are a few highlights:

Greater Responsiveness to Customers. Not only might they recognize your beautiful face when you walk in the door, they tend to have more time to talk with you in order to find out what your circumstances and needs are. When you need help, you are almost guaranteed to speak with the same person every time.
Local Focus. Because community banks channel their loans to the neighborhoods where their depositers work and live, it helps the communities thrive. When you make your mortgage payment to your local bank, there is a good chance that they will take that money and loan it to another local individuals.
Timely Decision Making. Community banks can typically make quicker decisions on loan requests because those decisions are made locally, within the bank itself. They may also have less red tape and tend to be more flexible in their loan guidelines.
Lower Rates. Your community bank may actually have lower rates and lower fees than a commercial bank or online lender.
Online Access. I’m quite sure that all community banks have an online app these days that gives you 24/7 access to your accounts. This may even include the ability to make your mortgage payment electronically, saving you time.

Fewer Financial Products. Some community banks may not have as many loan options as some of the commercial banks or online lenders. This does not mean they won’t be able to help you at all. It just may mean putting you into a different loan than you had initially considered.
Bankers Hours. Obviously you won’t have 24/7 access to the local bank branch. After certain hours during the week and on weekends, there is most likely an 800# hotline that you can speak to someone for some issues.
Reliability. Once you’ve been thru the approval process with your community bank, you won’t have to worry about them pulling the rug out from under you when it is time to cut the check for that property purchase. This is a huge deal. As real estate agents, we have seen it happen, and not only the heartbreak of our buyer clients, but the domino effect it can have by toppling a line up of contracts that are relying on the one before them.

The bottom line. Using a community bank has many personalized perks. You can speak to your loan officer face to face and being able to personally explain your circumstances surrounding the need for a mortgage loan and/or your financial status can be beneficial. You may even find that they have lower rates and lesser or fewer fees than commercial banks or online lenders, and you won’t have to worry about them ghosting you. Access to a human voice or face may be a little more limited due to the average hours of a community bank and there may be a possibility of limited loan options.

This knowledge bomb is directly copied and pasted from Wikipedia. I just found it too interesting not to include every word.

“In the United States, the term national bank originally referred to the Revolutionary War–era Bank of North America, its successor, the First Bank of the United States, or that institution's successor, the Second Bank of the United States. The first survives as an acquisition of Wells Fargo, while the others are defunct.

In the modern United States, the term national bank has a precise meaning: a banking institution chartered and supervised by the Office of the Comptroller of the Currency ("OCC"), an agency in the U.S. Treasury Department, pursuant to the National Bank Act. Inclusion in the bank's name of the word National,[6][7] the designation National Association, or its abbreviation N.A. is a required part of the distinguishing legal title of a national bank, as in "Farmers National Bank" or "Citibank, N.A." Many state banks, by contrast, are chartered by the applicable state government agencies (usually the state's department of banking). The Federal Deposit Insurance Corporation (FDIC) insures deposits at both national and state banks.

The advantage of holding a National Bank Act charter is that a national bank is not subject to state usury laws intended to prevent predatory lending.[8] (However, see also Cuomo v. Clearing House Association, L. L. C., stating that federal banking regulations do not preempt the ability of states to enforce their own fair-lending laws.)[9] There is currently no federal cap on rates. The federal government only requires that whatever rates, fees, or terms are set by issuers be disclosed to the consumer in accordance with the Truth in Lending Act.

Notwithstanding the name, not all national banks have nationwide operations. Some national banks have operations in only one city, county, or state. National banks should also be distinguished from federal savings associations, including federal savings and loans and federal savings banks, which are financial institutions chartered by the Office of Thrift Supervision, an agency of the U.S. Treasury Department that was merged with the Office of the Comptroller of the Currency on 21 July 2012.”

Now that we’ve all been enlightened on that, let’s talk specifically about National Banks as they relate and/or impact mortgage loans. Think Chase or Bank of America.

Brick and Mortar Locations. There are actually National Banks with brick and mortar locations, such as the aforementioned. You won’t see them in our immediate area tho.
Size and Financial Resources. They have size to their advantage because of having so many more locations, which means more consumers, which means more financial resources for loaning. This also means they may be able to offer low rates than other lenders.
Tougher Qualification Guidelines. They may require higher credit scores and lower debt-to-income ratios. Additionally they don’t bend their guidelines to meet individual need; you either meet their guidelines or you do not.
Your Mortgage is Not Important. Your mortgage loan will not affect their bottom line because they are multi-billion dollar financial institutions and most loan officers at big banks earn a salary so commission from getting your loan approved does not necessarily motivate them.
Limited Mortgage Programs. They tend to focus more on standard mortgage programs, so if you are hoping for a low down payment loan or even another type of loan such as home renovation, you’ll have to look elsewhere.

The bottom line. So while you may find lower rates with a big bank, you may end up finding a lot hoops to jump through in order to qualify for a mortgage with them. You may find it harder to meet their guidelines and they will not bend to help you with special circumstances.

So, Wikipedia didn’t have much to say about this particular type of lender….nothing at all actually. It sent my search to “online banking” which, is not the same thing.

When you think of online lenders, what comes to mind first? If you’re like me you may say “Rocket Mortgage” and “Quicken Loans” is another most commonly known. Probably because of their presence on TV during prime time viewing. I have to say, Rocket Mortgage’s commercial during the Super Bowl was genius and made me LOL.

According to Fannie Mae, using on line mortgage lenders increased 5% between 2018 and 2021.

You can do a google search of online mortgage lenders and get quite the list…some I’ve never heard of. A lot of sites will even give side by side comparisons of the different lenders features like rates (which you should know aren’t guaranteed until you’ve been thru the approval process), how quickly you can get pre-approved, what type of loans they offer and many other things. However, as you know, the purpose of this post is not to tell who is the best online lender. Nope, I’m not about to sit in judgement on that. What I do want to do is give you some insight on what you can expect if you feel an online lender is the way to go for your mortgage needs. Let’s dive in!

Convenience. I mean just look at the picture above. Who doesn’t want to do business from the comfort of your own home, in your fuzzy socks, with your prized four legged friend snuggled up next to you! Most online lenders offer digital end to end process, meaning your experience is completely online. You don’t have to make or wait for a phone call and you surely don’t have to make a trip to their location. You can literally do it any time of day or night.
Speed. Many of them boast about how you can get an answer within minutes. We’re all busy, right? We want instant gratification, right? We need to know how much house we can afford and we need to know now! Although, sometimes speed isn’t always good. Remember the old saying “haste makes waste”? Because they want to quickly get you verified, they don’t always ask for all of the pertinent info to 100% pre-approve you. This can lead to issues at a later time, possibly once you’ve made an accepted offer and are ready to move forward.
Selection. Not all online lenders will offer FHA or VA loans but some do and some offer fixed as well as adjustable rate mortgages. Suffice it to say that if you are looking for a specific loan type or your circumstances are unique, you’re going to want to make sure you choose an online lender who offers the type of loan to fit your needs.
Issues Getting Approved. If you have a low credit score or are self-employed, you may find yourself having to provide additional information and/or paperwork. This will slow down that high speed approval that you were hoping for.
May Cost More. Digital or online lenders aren’t always necessarily cheaper. You may pay more for that convenience with fees. Always be sure to look at that fine print!
Buyer Beware. This is, I feel, by far the most important thing to note regarding online lenders. I’ve heard horror stories of buyers losing out on the property they wanted because of using an online lender. Some lenders will get you thru the approval process, tell you to go ahead and put that offer in, only to pull the rug out from under you at crunch time by unexpectedly declining you after all, or suddenly imposing new stipulations that they never laid out up front. This could be devastating!! In a market like we have right now where multiple offers are a thing, sellers have been known to skip over those offers whose financing are with an online lender.

The bottom line. So while the convenience and speed of online mortgage lenders is appealing to those in the digital age, you may find yourself in a pickle if that online lender doesn’t come through for you. We see all the time where convenience can cost us more. We pay fees for using a debit/credit card when paying at a store on paying a bill online. Online lenders are no different. You may pay additional fees for the convenience of applying online.

I sincerely hope all of this information has been beneficial for you. If you have any questions, please reach out to me on the Contact Us page. The above information is just the tip of the iceberg in huge sea of details. It is important to me that you understand all of your options and what comes with each of them. Above all, please always remember that regardless of what type of lender you prefer; local, big bank or online, you deserve to find the lender who will offer you the best rates and fees, the best customer service, and the best overall experience, from initial contact to last mortgage payment.

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