Big Bank vs. Small Lender: 5 Reasons You Should Shop Small
When it comes to home financing, bigger isn’t always better. In fact, when it comes to a home mortgage, the big guys can leave you and your wallet feeling much smaller. Whether you’re thinking about getting a mortgage through a community bank, a credit union or a small mortgage company, here are five reasons to choose a small lender for your next home loan.
1. Better Interest Rates & Lower Fees
While local mortgage lenders offer many of the same loan programs as the larger banks, their overhead is not the same. Their operating costs are significantly lower and those savings are often passed on to the clients. Mortgage rates and closing costs vary from lender to lender with small lenders offering highly competitive rates on different types of home financing options. “As recently as May 2015, big banks like Citigroup and JP Morgan Chase admitted committing felonies after the 2008 crisis, albeit with no real sanctions, other than financial penalties that they pass on to customers and shareholders–a mere cost of doing business.” (Forbes, 2015)
2. Faster Response Time
Big banks have large financing departments that assign a number to their clients and they’ll hand you a 1-800 hotline for your home mortgage questions. Small lenders understand that your financial story is unique and they know that you’ll have questions that need answers outside of the normal 9am-4:30pm bankers hours so they make themselves available to customers on nights and weekends with direct lines.
Large financial institutions also receive dozens, if not hundreds of home loan applications a week. That creates a lot of paperwork to sift through, and it can take loan officers and underwriters several days to review documents and get in touch with applicants. It is logistically impossible large banks to provide the one on one attention needed, and frankly deserved, with such a big decision.
3. Specialized Financing
While Large Banks certainly offer FHA, VA, and of course Conventional financing options, those loans are commonplace across most all lenders. In addition to those “box-loans”, a small independently operated lender can research hundreds of loan programs that offer customized financing terms to fit your lifestyle. “At American Liberty Mortgage, we go the extra mile to take our client’s long term financial goals into consideration. By looking at the bigger picture and taking into consideration your entire financial portfolio, we ensure each borrower’s mortgage is secure, responsibly made, and a financial tool that works for their family.” Leslie A. Heimer, Sr. Lending Partner
4. Creative and Flexible Lending
The guidelines for getting approved for a mortgage with a big bank are pretty much written in stone and there’s very little you can do to change the rules.
Small lenders, however, can often approve mortgages that have been rejected by larger banks. This is because their guidelines and criteria differ. Some small lenders keep mortgages on their books instead of selling these to Fannie Mae and Freddie Mac. With these agencies out the picture, the lender doesn’t have to follow their strict lending guidelines. This gives small lenders the ability to be more creative with how a loan is structured, and adjust their guidelines to approve borrowers who may not qualify at one of the megabanks. This could be due to a self-employment scenario, irregular income, unusual perhaps property type or a myriad of other reasons.
5. Corporate Greed
If you haven’t yet read the book The Big Short by Michael Lewis or 13 Bankers by Simon Johnson and James Kwak, it may be worth your while if you’re looking for a deeper dive. At American Liberty Mortgage, they pride themselves on lending to their neighbors, giving back to our community and treating thier clients like more than just a number. “We want your business today and in the future and we will work hard to earn it.” Leslie A. Heimer, Sr. Lending Partner
If you’re considering purchasing a home, then getting pre-approved is one of the fist steps on the journey to homeownership. Contact us today to learn more about the home buying process or begin the pre-approval process right now. Whether you’re looking to buy, sell, or invest in real estate, we look forward to the opportunity to serve you.