Mortgage Lenders Versus Banks: The Pros & Cons Of Borrowing Money
Buying a home is known as the American Dream. In the past, you’d go to your local bank and borrow money to finance your purchase. These days though, there are more options and untraditional paths to homeownership. However the most common routes to a mortgage are the non-bank mortgage lenders such as Quicken Loans, Loan Depot, and New American Funding as well as bank lenders such as Wells Fargo and JP Morgan Chase. Both options have pros and cons of course, and depending on your situation one option may be better for you than the other.
Traditional banks are known to be stricter with their requirements, but it’s important to note that even non-bank lenders have their own list of qualifications. For example, the Miami bookkeepers found out Quicken Loans needs potential homebuyers to have a minimum down payment of 3%. New American Funding needs them to have a minimum credit score of 620. Reali Loans, another non-bank mortgage lender, requires a minimum down payment of 5%.
If you already have a long-term relationship with a specific bank, it may be easier for you to leverage that relationship. A traditional bank knows of your past financial situation, has easy access to all of your accounts perhaps even credit card limits. Banks are subject to federal compliance and reporting laws, so they have stricter rules about lending money. They typically need mortgage borrowers to have a higher credit score than a non-bank lender would. The Miami bookkeepers also know that if you’ve filed for bankruptcy or foreclosed on a home in the past, you’ll probably have a harder time borrowing from a bank.
The pros of lending money from a bank are that you’ll probably have lower interest rates. You may also get a special rate or extra benefits since you’re an existing customer. On the other hand, you’ll have more fees because of all the compliance requirements and may be pressured to buy additional products due to the cross-selling opportunities. Traditional banks also tend to take longer to close on a deal.
With non-bank mortgage lenders, you tend to have more flexibility and shorter amount of time to close.
However the Miami bookkeepers know most of these companies are online based, so you’ll get less assistance for the entire home buying experience. Unlike banks who service the loans themselves, mortgage lenders often sell the loans to servicing companies after closing. This means you won’t have control on who pays or who you’ll work with, once the deal goes through. But it’s important to know that your mortgage rate and terms won’t change.
If negotiating your terms and faster closing is high on your priorities list, the Miami bookkeepers suggest going the non-bank route. These guys also tend to have ore expertise since they have to go through several mortgage-related courses and exams so they have a deeper understanding of the industry.
For more information contact our offices YBKD bookkeeping in Miami 305.868.7620