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Key takeaways
- National mortgage lenders provide home loans nationwide and tend to offer a variety of options, but may lack personalized service and charge higher fees.
- Local mortgage lenders finance properties in a specific geographic location and often provide more personalized service, but may have limited loan offerings.
- When choosing a lender, consider factors such as customer service, the type of loan you need and interest rates.
Deciding which mortgage lender to choose can be a daunting task, especially with the many options available. One of the key decisions to make is whether to go with a national or local lender. Here, we’ll break down the differences between national and local mortgage lenders and provide insights into which might be the best fit for you.
National vs. local mortgage lenders
National lenders
- Available nationwide
- Often a big bank or online company
- Typically offer a variety of mortgage options
- Service might be less personalized
Local lenders
- Finance mortgages within a specific region
- Often a community or local bank or credit union
- Known for more personalized experience
- Might not offer many home loan products
Is the application process different?
Differences in mortgage applications relate more to the type of loan, rather than the lender. If it is a qualified loan, as most residential mortgages are, the lender has to abide by specific guidelines set by the Consumer Finance Protection Bureau. And if it wants to be able to sell the loan easily on the secondary market, the lender must conform to criteria set by the Federal Housing Finance Agency (FHFA). Both establish standards for applicants to meet and checks the lenders must do to ensure the borrower’s ability to repay.
That said, when it comes to the underwriting process, there can be differences between how national lenders and local lenders evaluate you. Many lenders – both national and local – use automated software that quickly assesses your financial information and credit history to determine your eligibility for a mortgage. But local lenders may be more likely to also engage in manual underwriting (done by a human), especially for borrowers with unique financial situations or properties that don’t fit typical guidelines. This can lead to a more personalized experience, albeit a longer process. In contrast, national lenders might be more efficient and streamlined in handling your application, but more rigid in their criteria.
National lenders
A national mortgage lender works with qualified borrowers throughout the country. It might be an independent entity or a large bank providing a wide variety of home loan services. Examples of national lenders include Rocket Mortgage, Bank of America and U.S. Bank.
Pros
- Extensive range of loan options
- Offer mortgages to qualified individuals nationwide
- More likely to have extended customer service hours and more online features
Cons
- Might not get the personal touch that local lenders offer, as you are likely to be part of an assembly line
- Potential for more fees than local lenders, resulting in higher interest rates or closing costs
- Emphasis on handling large volumes of loans might make them less flexible when providing tailored solutions to clients
Local lenders
Local mortgage lenders only finance home purchases within a specific geographic region. Known for their personalized service, the loan officers at these lenders have a deep understanding of the local housing market, which enables them to offer tailored loan programs for first-time homebuyers or those with complex financial circ*mstances. Working with a local lender means you can enjoy direct, face-to-face communication with loan officers who are part of the same community. Examples of local lenders include a credit union or community bank.
Pros
- More personalized service allows you to interact directly with industry professionals and potentially get a deal more tailored to your financial situation
- Loan officers know the local housing market
- Often offer lower interest rates than national lenders
Cons
- Only operate within certain geographic areas, which won’t work if you are moving out of state
- Might not have as diverse a range of loan options as their national counterparts
- Might not have the same extended customer service hours as a national lender
You can read about one Bankrate editor’s experience in choosing a lender, and why she opted to go with a local institution–specifically a credit union–to get her mortgage.
National vs. local lenders: Which is right for me?
Choosing between a national and local mortgage lender depends on several factors. If you prefer a more personal touch and insight into the local market, a local lender could be the right choice for you. However, if you value a wide range of loan options and broad accessibility, a national lender might be more suitable.
To make the decision, evaluate your need for personal interaction, compare mortgage rates and reviews and consider the type of loan you need. Have you a specialized need: for a VA loan, for a jumbo loan, for downpayment assistance? Then, reach out to potential lenders to gauge their responsiveness and level of service, as well as their expertise in the particular type of mortgage you want.
Next steps on finding the best mortgage lender
When searching for the best lender — either a national lender or local lender — cost is important, but so are your needs and preferences. Some ways to narrow down your options include:
- Consider your credit. If your credit score could use improving, look into lenders who have options for low-credit score borrowers or those who don’t fit the standard financial profile.
- Compare quotes from multiple lenders. Studies show that shopping around for a mortgage could save you thousands.
- Pay attention to how lenders communicate with you. The right lender shouldn’t be difficult to work with. The best lenders are able to answer your questions promptly, be easy to reach and keep you updated throughout the process. The right lender won’t hit you with a hard pitch, either.
- Weigh the extra costs. Many lenders charge an origination fee and an application fee, to name just a few. Or they bump these charges up, to compensate for “discounts” elsewhere. Take this into account when shopping around and comparing offers.
