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Deciding which mortgage lender to choose can be a daunting task, especially when there are so many options to choose from. One of the key decisions is whether to choose a national or local lender. Here, we break down the differences between national and local mortgage lenders and provide insight into which one may be best for you.
National vs. local mortgage lenders
State-owned financial institutions
- Available nationwide
- Often large banks and online companies
- Typically offer a variety of mortgage options
- Services may not be personalized
Local Lenders
- Lending mortgages within a specific geographic area
- Often a community bank or credit union
- Known for a more personalized experience
- May not offer many mortgage products
Is the application process different?
The difference in mortgage applications has more to do with the type of loan than the lender. For a conforming loan, like most mortgages, the lender must follow certain guidelines set by the Consumer Financial Protection Bureau. And to make the loan easy to sell on the secondary market, the lender must follow standards set by the Federal Housing Finance Agency (FHFA). Both set out criteria that applicants must meet and checks that lenders must do to verify a borrower’s ability to repay.
That said, when it comes to the screening process, there may be differences in how national and local lenders evaluate you. Many lenders, both national and local, use automated software to quickly evaluate your financial information and credit history to determine your eligibility for a mortgage. But local lenders are also more likely to do manual screening (by humans), especially for borrowers with unusual financial situations or properties that don’t fall into the general guidelines. This makes for a longer process but a more personalized experience. In contrast, national lenders may be more efficient and streamlined when processing your application, but their standards are stricter.
State-owned financial institutions
National mortgage lenders work with qualified borrowers across the country. They may be independent entities or large banks that offer a variety of mortgage services. Examples of national lenders include Rocket Mortgage, Bank of America, and US Bank.
Strong Points
- Wide range of loan options
- Providing home loans to qualified individuals across the country
- Expect extended customer service hours and improved online features
Cons
- You may not get the personal attention that a local lender offers because you’ll likely be part of an assembly line.
- They may charge higher fees than local lenders, resulting in higher interest rates and closing costs.
- A focus on handling large volumes of loans can reduce flexibility in providing tailored solutions to customers.
Local Lenders
Local mortgage lenders only lend on home purchases within a specific geographic area. Known for their personalized service, loan officers at these lenders have a deep understanding of the local housing market, allowing them to offer customized loan programs for first-time homebuyers and those with complex financial situations. Working with a local lender means you’ll have direct, face-to-face communication with a loan officer who is in your community. Examples of local lenders include credit unions and community banks.
Strong Points
- With more personalized service, you could potentially work directly with industry experts to get a deal tailored to your financial situation.
- Loan officers are familiar with the local housing market
- They often offer lower interest rates than domestic financial institutions
Cons
- It only operates within a certain region, so it won’t work if you’re traveling outside the state.
- May not have as many different lending options as domestic banks
- May not offer as many extended customer service hours as national financial institutions
You can read about one of Bankrate’s editors’ experience choosing a lender and why they chose a local financial institution, specifically a credit union, to get a mortgage.
National vs. Local Lenders: Which is Right for Me?
Choosing between a national or local mortgage lender will depend on a few factors: If you prefer a more personal touch and insight into the local market, a local lender may be the best choice, but if you value a wider range of loan options and broader accessibility, a national lender may be the better choice.
To make a decision, evaluate your need for personal interaction, compare mortgage rates and reviews, and consider the type of loan you need. Do you have any special needs, such as a VA loan, jumbo loan, down payment assistance, etc.? Then contact potential lenders to evaluate their responsiveness and service level, as well as their expertise in the specific type of mortgage you need.
Next steps to finding the best mortgage lender
When searching for the best lender, whether national or local, cost is important, but so are your needs and preferences. Here are some ways to narrow down your choices:
- Consider your credit. If you need to improve your credit score, look into lenders that offer options for borrowers with low credit scores or who don’t fit the standard financial profile.
- Compare quotes from multiple lenders. Research shows that comparing mortgage rates could save you thousands of dollars.
- Pay attention to how the lender communicates with you. The right lender shouldn’t be difficult to deal with. The best lenders will answer your questions promptly, be easy to contact, and keep you updated throughout the process. The right lender won’t push you to make a hard sell, either.
- Consider the additional costs. Many lenders charge some fees, such as origination and application fees, or they may inflate these fees to make up for “discounts” offered elsewhere. Take this into consideration when comparing different lenders.
