When you shop around for your refinance, finding the
best mortgage rates
is only part of the process. Refinance customers also need to shop
around to decide which type of financial institution they want to
refinance with. Do you prefer the anonymity of an online-only bank
or the face-to-face meetings with a loan officer? Your refinance
experience will vary according to the type of lending institution
6 refinance lending options
No. 1: National banks.
Larger banks typically offer lower fees because they do so many
Sam Garcia, founder and publisher of MortgageDaily.com in
Garcia says the downside is the potential lack of personal
"You often need to talk to multiple employees at a large bank,
which can be frustrating," says Garcia. "They may lack flexibility,
too, because they're overwhelmed with business right now, so it's
best to stay away from a big bank if you have a credit issue or are
No. 2: Community banks.
"Community banks tend to be more flexible in their lending
standards than larger banks," says Garcia. "They often hold more of
their own loans rather than selling them on the secondary market,
which makes them more flexible."
Garcia says you're also likely to get more personal attention
from a local bank.
On the downside, a community bank might charge more since it
doesn't handle the volume of a larger bank.
"There's also a chance you would end up working with a less
experienced loan officer because of the lower volume of loans,"
No. 3: Credit unions.
offer a similar experience to a community bank, but you need to
belong to the credit union in order to borrow money.
"You'll likely get more personal attention as a member of a
credit union," he says. "Credit unions typically keep their loans
in their portfolio and service your loan themselves."
The flexibility of a credit union can make it easier to qualify
for a loan, especially if you have some credit issues or are
Garcia says the disadvantages potentially include higher fees
and fewer loan products.
No. 4: Online-only lenders.
"The fact that a lender handles all transactions online
shouldn't be a determining factor unless you prefer a face-to-face
meeting," says Garcia. "There's nothing inherently good or bad
about online-only lenders, although it's best if you can deal with
the same person throughout the loan process."
Garcia says some borrowers prefer the anonymity of applying
online if they have credit problems that they don't want to discuss
in person. Yet, that impersonal relationship is often why Realtors
online-only mortgage lenders
"Realtors are relationship-oriented, so they usually recommend
local lenders who they know," says Rich DiGiovanna, an associate
broker with Re/Max Allegiance in Burke, Va. "But if an online
lender gives you the same service as someone in your backyard and
the same fair, reasonable loan, then there's no reason not to use
No. 5: Direct lenders.
Many small mortgage lending companies refer to themselves as
"direct lenders," who deal directly with borrowers and originate
their own loans, unlike mortgage brokers. These companies only
offer mortgages and not other bank services.
"A direct lender offers you the advantage of working with one
person who can speak directly to the underwriters, but if you're
turned down by this lender, you're done," says Garcia. "They can't
shop around for other loan products with different underwriting
standards like a mortgage broker can."
No. 6: Mortgage brokers.
If you expect a challenge in qualifying for a refinance, a
mortgage broker may be a good option because they know the
guidelines different lenders have, says Garcia.
"The best thing a mortgage broker brings to the table is the
ability to work with 20 different lenders who have 20 different
loan programs," says Donald Frommeyer, senior vice president
Amtrust Mortgage Funding, Inc. in Indianapolis.
"Some loan companies specialize in working with people with a
high debt-to-income ratio, some specialize in FHA loans. If you
don't qualify with one lender we can try with another."
Garcia says the downside of mortgage brokers is that they are
dependent on a third party and can't approve your loan themselves.
"They're only as good as the lenders they work with," he says.
Before you start comparing mortgage rates and plugging them into
a mortgage payment calculator, decide which type of mortgage
experience you would prefer. That decision can drive your choice of
lending institution and can ultimately help you succeed in