Local Lenders vs Big Banks

Are you a first time home buyer? No matter how far along you are in the process of buying your first home, whether it is initially browsing on Zillow or working with a real estate broker to find the perfect place, you are probably well-aware of the importance of securing financing on good terms. However, in the course of shopping around it can be difficult to decide on a lender who will meet your individual needs. If you are torn between getting a home loan at a local institution or one of the larger chains, today we are taking a closer look at some of the pros and cons of big banks vs local lenders for first-time homebuyers.

What Are The Most Important Considerations for First Time Homebuyers?

Before comparing big banks to their local counterparts, we first have to consider what is crucial to a first time homebuyer and what they need for a successful banking relationship. The first thing that you probably thought of is the cost, as first-time homebuyers may not have the capital or collateral to have an advantage in negotiating interest rates. Location is also important, as being able to work with a lender in-person has several advantages. A first-time buyer also needs access to certain indispensable products and services such as home-buying seminars or loan prequalification. Convenience is also a consideration, and multiple branches or walk-in appointments may help facilitate your financing experience considerably.

The Advantages of Dealing With A Big Bank

Now that we know what is important to the first-time homebuyer, we can take a more detailed look at why a big bank may be right for them. In short, the larger the bank the larger the reach. Access to large amounts of capital can make qualifying for a loan easier for the average customer. If prime lending options are not an option, a big bank may have access to sub-prime lending opportunities. These institutions also have been known to value those who combine multiple services and thus can have great package deals for those who want to apply for other forms of credit or accounts at the same time they secure their home loan. The convenience of one-stop shopping for multiple financial services can be an advantage when you are going through the stressful process of buying a home. However, large institutions are not without their drawbacks. They can be rigid where more flexibility is called for and some customers have criticized the impersonal nature of a banking relationship with a big bank.

Working With A Small Lender or Local Bank

Local banks or small lenders may be a viable alternative for most first time home buyers who have average or better credit. While local institutions can be more selective in determining who they lend to, there are many great reasons to try them first. If you want personal service and a close relationship with your banking institution, this is probably the way to go. Their fees may be competitive or even superior to what the big banks are offering, as they are often not as heavily leveraged and have fewer overhead expenses. They may also have more contacts in or knowledge of the local real estate market that can make them a valuable resource. The community involvement of local banks may also give you more options and flexibility when it comes to financing or refinancing your endeavors in the future.

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