You have two big sources of money when you buy a home loan – a Washington mortgage company or a bank (also known as a “direct lender” in the mortgage industry).
Depending on your circumstances, one may be better than the other for you.
For example, someone with a high credit score may make a different choice than an applicant with a low score.
We’ll break down all the gaps, advantages, and disadvantages between a banker and one mortgage company.
Mortgage Company vs bank
Specific Mortgage companies who make only home loans – such as Rocket Mortgages or Better Mortgages – typically fall into the category of the bank.
They are direct lenders just like the big banks. However, they do not offer other financial services such as credit cards or checking and savings accounts.
These types of Mortgage companies usually only make a home purchase and refinance loans. They can also offer home equity loans or home equity lines of credit.
Hypothecary Mortgage companies are mostly less conservative than banks, but not always. So they may be more flexible about outside applicants, such as a lower credit score or larger loan amount.
For example, New American Funding – a Mortgage company – allows credit scores as low as 580 for FHA loans, while Wells Fargo – a large bank – requires at least 600.
Another specialized mortgage company, Caliber Home Loans, can offer a jumbo loan with a 5% down payment. You have to work hard to find a big bank that will go so low.
When it comes to rates, there is no hard and fast rule about Mortgage company vs. banks.
The rate you are given is more than your qualification – credit score, down payment, loan amount – than your specific Mortgage company. So make sure you shop with a few different companies and see which offer can give you the best deal.
Pros of Mortgage Banks
Here are the advantages of working with a bank or direct lender.
- You can choose the banks and lenders with your own interest rate and origination charge by hand and negotiate with them.
- They work on your loan from beginning to end. Your loan officer deals in-house with fellow employees and may have greater control and communication during the underwriting process
- You can make your local bank the best possible experience by partnering with a brick and mortar institution and a banking company you know is relevant to you
Cons of mortgage banks
Working with a bank is inconvenient, instead of a Mortgage company.
- Unlike Mortgage companies, banks do not have to explain what they make on your loan. If you do not shop aggressively, you may have to pay more than needed.
- Mortgage banks offer fewer products. If they don’t sell the loan that’s best for you, they can’t tell you about it (or even know about it)
- A conservative bank may not approve of you, even if you are a good candidate for financing.
Pros of the mortgage company
Mortgage companies operate differently than mortgage bankers. Upside here.
- Mortgage companies have access to a range of best mortgage rates and interest rates. They can provide better and more specialized products to those who need it
- The mortgage company can set their profit margins and it can be easy to negotiate
- In your closing statement, the fee of the Mortgage company is clearly revealed.
Cons of mortgage Company
The mortgage company also has their drawbacks.
- Mortgage companies monitor the contract process less because they don’t work for the lender. If the bulk underwriter puts your file on the back-burner, your Mortgage company may not be able to do anything about it.
- Mortgage companies are more expensive. But that may be because they get more complex loans, and HUD says the complexity increases lender costs
- Brocade loans may take longer to close. This can be a concern if you have a tight deadline to buy or refinance a home