How to Choose a Lender to Finance Your Home

The type of lender you choose can make or break the sale of your next home. Find out what you should be looking for in a home lender!

When it comes time to buy a home, buyers often don’t know where to begin. Any knowledgeable REALTOR® will tell you that the first place to start is connecting with a great lender. They’ll also tell you that like REALTORS®, lenders are not all equally competent or skilled. In fact, we’ve seen sellers reject offers and escrows fall apart solely because the buyer chose the wrong lender. That’s why it’s really important that you choose your lender carefully.

Choose wisely…

If you plan to purchase a home with a loan, your lender will play one of the most vital roles in your home buying process. There are 3 main types of lenders to choose from:

Big Banks
Online Lenders
Direct Lenders

Each type comes with their own pros and cons. Read through to decide which one fits your circumstances best.

Big Banks

Big banks are those that you see on every street corner, in your grocery stores and accessible ATM’s. They are the banks where you deposit your money, pay your bills, and cash your checks.

The benefit of using a big bank is that they often have the best rates. So if your interest rate is your biggest concern, a big bank might be the way to go. However, these interest rates usually come at a cost. Since mortgages are a secondary product that banks offer as a courtesy to their customers, they have some of the stiffest guidelines and are known to kill a deal within days of closing if the end result doesn’t fit within those strict parameters.

Big banks also have a lot of work to do when it comes to customer service, response time, organization, and speed. They typically work banking hours, making getting touch with someone after hours challenging. This is tough when a lot of real estate deals are written and submitted in the evening or over the weekend. Offer deadlines are set without regard to banking hours, which can make getting a pre-approval tough on the spot.

They also have multiple people touching your account, which means there might not be a point of contact when things go array. These factors not only create slow response times, they also have the potential to create confusion during the transaction when buyers need clear answers and need to adhere to hard deadlines.

Online Lenders

Online lenders are the ones you see advertising at the top of google when you start searching for a home loan, or when you like anything referencing ‘home buying’ on Facebook.

The benefit of using an online lender is that they usually have decent rates and they’re lightening fast when it comes to delivering pre-approvals. Speed is their appeal.

Yet, there is a reason why they’re so fast… Online lenders are like factories. They deal with cookie cutter loans like a champ, but if you need extra counseling or if you don’t fit neatly into their wheelhouse, then they aren’t the best option for you.

Additionally, they are typically located out of state, so if you have a problem, it can be hard to get answers you need quick. There is no office for you to walk into for help, and you’ll often be working around business hours in time zones other than the one you live in.

Direct Lenders

These are the ones that are a little harder to find, but they are usually local, familiar with the market, and work with a lot of local REALTORS®. As a result, they have a very informative and balanced view of the best loan products for buyers and what it takes to get an offer accepted in your local market.

The benefit of working with a direct lender is that they take a consultative approach. They will sit down and go over all the loan options available to you. Ultimately, they’ll help you choose the right program that is going to be the most beneficial to you and your unique situation. And since they have a vested interest in closing your loan, they will typically make themselves available on nights and weekends – when you need them the most.

The only disadvantage of working with a direct lender is that they aren’t always the ones with the lowest rates. Sometimes, they are, but not always.