4 Compelling Reasons to Choose a Small to Mod-Size Mortgage Company Over the Big Banks When Refinancing Your Mortgage

It is common for smaller things in life to be overlooked. This is also the case in the area of mortgage loans. Many Americans naturally gravitate towards big mortgage companies that they see advertised on TV. But in reality, a small or medium sized mortgage company might be a better fit for you.

A smaller mortgage lender can provide greater flexibility in loan guidelines and more responsiveness to customers. Big mortgage lenders tend to be more focused on mass marketing of their services, while smaller mortgage lenders look for niches that the big lenders do not service as well.

Some of the smaller mortgage lenders that do not get all the attention include credit unions, community and regional banks, and a variety of nonbank lenders. These smaller lenders may operate in a few states or even in one state.

Many home buyers turn to smaller lenders after they had trouble getting a mortgage approval from a large bank. Others may simply have gone with the small lender after they did a lot of mortgage shopping and found the best deal for their specific situation. Other house buyers may choose a medium sized or small lender because they like the amount of personal attention they receive.

Here are some of the compelling reasons to choose a small to mod-size mortgage lender:

#1 Flexibility

Smaller lenders can often green light mortgages that the bigger lenders cannot. This is because their lending guidelines may be different.

Big lenders have to be able to quickly process large numbers of loan applications. To do so, they need to have fairly strict guidelines that allow them to find qualified borrowers with as little hassle as possible. They are going for the largest numbers of qualified buyers they can get with as little trouble as possible. Anything that is outside these guidelines may result in a mortgage decline.

Smaller lenders need to focus on a niche market to survive. Part of this niche can be to give mortgages to some of the borrowers that the big lenders turned down.

Sometimes the person who was turned down is still a good candidate for a mortgage. It just may take more time and effort to qualify the borrower. They could be self employed and do not have pay stubs and W-2s. They may have seasonal income or have past credit problems due to a job loss. It also could be an extended family where there are several earners making the mortgage payment. Or, they could be getting an unusual property where it is hard to find comps to assess the value.

Big lenders may pass by these more unusual cases because it takes too much of their time to qualify them. But a small lender may be perfectly suited to serve this type of niche market.

Many small mortgage lenders have what are referred to as portfolio or nonagency mortgages. These are mortgages that the bank actually keeps on its books or sells straight to investors, instead of sending them to Fannie Mae or Freddie Mac; this is what happens with most mortgages approved in the US. Because they are not selling them to these US government entities, they do not have to stick to typical lending guidelines, which allows more flexibility in things including credit scores and the level of income documentation.

#2 Local Market Knowledge

A small lender in city or region may have better knowledge of local market conditions. They are a key part of the local economy and they know what is happening in the economy. They can use that knowledge when they are approving a mortgage.

For instance, a big bank may not want to approve a mortgage for an unusual property. But the local lender may have a better knowledge of the history of that property and may be more comfortable doing a loan for it.

#3 More Responsive

With a smaller lender, you are closer to the people who make the decisions to approve the mortgage. Instead of dealing with a huge bureaucracy, you may be dealing with a small team of people who are dedicated to your mortgage. A small lender also is more likely to be personally involved in approving you. They are more likely to do the hard work that it may take to get the loan approved in more unusual circumstances.

Decisions with small lenders are often made locally, so you might get your loan approved faster, too.

#4 Specialized Loans

Some small lenders may offer specialized loan products that big lenders do not have. Perhaps you want an ARM with a 15 year lock? Many big lenders do not have such products but a smaller lender might.