When an inexperienced buyer considers a mortgage, most immediately turn to their bank. Having pre-existing relationships with your bank is a natural place to go. However, although the good relationship can be comforting, asking your bank for a loan before shopping around for better loan sources is a poor way to get the best mortgage with rate that works in your favor.
There’s no shortage in the amount of sources for a mortgage. Banks and direct lenders (like loanDepot) are an option, but for the best service and most competitive rates you should also be looking at credit unions, and mortgage brokers.
Common belief is that getting a loan with your bank is easier as they already have the information that they need to provide you with the loan, and therefore obtaining a loan shouldn’t be too hard a process. This belief is often false; having pre-existing accounts with a bank doesn’t mean that your personal information can just be auto-populated into your mortgage application.
Having an account with a bank doesn’t always give you a good deal. On the contrary, working with large banks usually involves higher fees and interest rates. After all, there’s a reason most realtors don’t refer their customers to big-name banks. According to Allison Barnett of the Barnett Realty Group, “I can’t tell you how many times I’ve worked with big-name banks and credit unions that have turned out to be dreadful experiences.”
This doesn’t mean that all big-name banks are bad though. If your realtor refers you to a bank instead of a credit union or the like, it’s most likely because of the bank’s superior quality. Sometimes the strong existing banking relationship can provide a level of comfort that is more important to some than saving money.
I recommend my clients always check in with me for an analysis before choosing a lender. I have years of experience and can always explain why a loan offer may or may not be great for you
