The difference between banks and independent mortgage lenders

While you might be focused on the age old question, "How much mortgage can I afford?" there's another factor to consider.

You’ve compared locations, neighbourhoods, and homes, now it's time to time for one more: should you get your mortgage with a bank or with a private mortgage lender? Yes, there’s a difference. And while the difference may not be something that first comes to mind when deciding on a house, it certainly becomes important when it comes time to crunch numbers.  

When it comes to choosing between a bank or a private lender, it's all about the details. While each provides you with the loan required to purchase your new home, each has their own set of benefits.

Bank Mortgage Lenders

A bank is traditionally less expensive; however, they can be more difficult to work with, especially when it comes down to actually receiving your loan. 

For instance, a key focus for a bank is your credit score—which indicates if your credit is in good or bad standing. Where you can typically get away with a lower credit score through a private lender, bank’s prefer good to excellent credit rates. This is something that’s moderately easy to achieve, but can be made more difficult depending on your debt levels, including student loans, credit cards, car payments, or any pre-existing line of credit.

When purchasing from the bank, they also look for proof of employment from a long-term perspective. Where it’s easy to show how much money you make and where it comes from, through a bank they have the ability to pull up years of records. If there's a reason they feel you may not be able to keep up with payments, there may be more resistance in give you a mortgage. 

Independent Mortgage Lenders

Private lenders tend to be a bit different. Though working with them can cost you a few dollars, they are known for getting to know their clients, are significantly more flexible, and have a much simpler response rate. 

A private lender can seem like a scary proposition from the get-go, but the benefits can be great, depending on your needs. A private lender caters your loan options specifically to your needs and credit. This can be beneficial if you already have other expenses or are looking at making your first large investment. 

With increasingly easier approval processes, private lenders make it as easy as possible for you to get the loan you’re looking for. Diligent and efficient are typically how they can be described which is an excellent asset when you’re looking towards a smooth transition into purchasing a house.  

At the end of the day, choosing between a mortgage at a bank or a private office is completely your decision. Where both have their successes and failures, each holds its own merit depending on your current financial situation. 

Ready to kickstart your homebuyer journey? You can try Pine's free online mortgage application today.