If you are like the vast majority of Americans, you are probably thinking about getting a house at some point in your life. Most people who get a house do not buy it outright but instead, get a mortgage. If you are currently looking for a home loan, then your options are a large bank, mortgage broker, or a local, community bank.
There are several advantages to getting a home loan through a local or community bank rather than a large megabank. Here are just a few.
Access to other Financial Services
If you get a home loan through a local or community bank, you can also have a single source for all of your banking products. For example, you can have your checking accounts, savings accounts, and mortgage loan all through the same community bank. This makes it much easier to deal with your finances all in one place. Also, it is usually easier to get services at local and community banks because you are already likely to have a relationship with them. Going with a local community bank that you might already have a relationship with is much faster and efficient than starting from scratch with a third-party lender.
Less Likely to Sell Your Loan
You probably already know this, but lending institutions will often sell loans to other institutions, and over a 30-year mortgage, this can happen a lot of times. Generally, this will not threaten the status of your loan, but you will have to start making payments to a different location and company. Most of the time, this will happen without any problems but problems are more likely to arise the more your loan changes hands. Community banks are much less likely to sell your loan because they rely on those in-house loans to generate interest income. Large banks can often afford to sell off loans for a single-time fee but community banks cannot.
Personalized Service
Large banks have a ton of products and are practically wallowing in money, but they often are very impersonal and “cold.” Community banks, on the other hand, are intensely aware of and in tune with the needs and preferences of the local community. As such, you are much more likely to get services and products that are responsive to your unique circumstances when you go through a local bank. Additionally, since community banks are actually owned by the customers that use them, there is much less of a conflict of interest between you and those who own the bank. Large banks are mostly responsive to the interests of their shareholders, not the community that they serve.
Home Equity Loan
If at any point during homeownership you decide that you need a home equity loan or a home equity line of credit then you will be much more likely to get one with a community bank rather than a large bank. If you already have a home loan with your bank, it will be much easier to get complimentary services from the same bank since you have a relationship with them.
Also, if you decide that you need secondary financing then it is much easier to get it from a community bank. Since they already have much of your financial information, it will be much easier to get a secondary source of financing.
Better Mortgage Rates
One other major reason to seek out a home loan from a community bank is better mortgage rates. Community banks are much more likely to offer lower mortgage rates and closing fees than traditional large lenders like Fannie Mae or Freddie Mac. Community banks have direct control over mortgage pricing. The advantage that community banks give here is small, but it is still an advantage nonetheless. Over 30 years, even a slightly smaller interest rate could save thousands.
Conclusions
Community banks are a good option to get a home loan because they offer fair rates and are more likely to work with you and give personalized services. Community banks also tend to offer lower home loan rates than traditional mortgage lenders. At the end of the day, community banks are working for you so your interests are aligned.
