Should I Get a Loan Through a Mortgage Company or Bank?

Before buying a home, you will need to choose who you’re going to work with through the home buying process. This starts with your real estate agent, though your mortgage loan officer can be almost as important. They can advise you on refinancing or home equity loans if you already own a home. A financial advisor can also help you adjust your financial plan to meet your home loan needs. In either case, once you have a loan expert you can trust, you will likely rely on that person for years, regardless of the company they work for.

Definition of Banks and Mortgage Companies

Full service banks are known as federally chartered financial institutions. They offer mortgage loans along with other banking products like checking and savings accounts and business and commercial loans. Many also offer investment and insurance products. Mortgage loans are simply one aspect of their business. The Federal Deposit Insurance Company (FDIC) regulates and audits full service banks.

On the other hand, individual states regulate mortgage companies. These regulations are considerably more stringent as well. In addition, using a mortgage company means you won’t be able to consolidate all of your financial accounts at one institution. However, this might not be a deal breaker for some people.

What Are Mortgage Loan Originators?

Should I Get a Loan Through a Mortgage Company or Bank?

Mortgage loan originators go through very different processes between federally chartered banks and mortgage companies. To be a loan originator at a bank, one needs to register with the Nationwide Mortgage Licensing System (NMLS). They also must be fingerprinted and checked for any criminal background. Anyone with a history of financial crime such as fraud cannot practice mortgage origination. However, the FDIC does not require the loan originator to demonstrate any specific knowledge of mortgage practices or programs.

To work at a mortgage company, however, a loan originator needs extensive training. They must pass two examinations: A national exam and an exam for each state in which they want to practice. These tests stress an understanding of the business and consumer protection laws. Once a loan originator obtains a state license, they must renew each one annually.

Pros and Cons of Getting a Mortgage With a Bank

Working with a traditional bank can offer a sense of security and familiarity. Banks often have long-standing reputations, established customer service systems and a wide range of financial products beyond mortgages such as checking accounts, credit cards and investment options. If you already bank with the institution, you may qualify for relationship discounts or special loan programs. Many borrowers also appreciate the convenience of managing all their finances under one roof.

Banks can sometimes offer competitive interest rates, especially for customers with strong credit profiles or large deposits. Because they’re heavily regulated, banks tend to be more conservative with their lending practices, which can appeal to borrowers who prioritize stability and reliability. They also have the financial backing to support fixed-rate and long-term loan products, providing peace of mind during uncertain market conditions.

However, getting a mortgage through a bank can come with limitations. Banks often have stricter qualification standards, making it harder for borrowers with lower credit scores, smaller down payments, or nontraditional income to qualify. The approval process can also take longer, as banks typically follow more rigid underwriting procedures. Additionally, banks may offer fewer specialized loan products than independent mortgage lenders, which can reduce flexibility for certain buyers.

Pros and Cons of Getting a Mortgage With a Mortgage Company

There are some specific advantages to using a mortgage company for your loan. First, they probably have access to a wider range of loan products than a full service bank. Banks structure their own loan programs within guidelines set by Fannie Mae, Freddie Mac, FHA and VA. But if your situation does not fit within their criteria, they will decline your loan.

Mortgage companies sell the servicing. This way, they have access to loan programs that are structured and offered by a variety of loan servicers, usually big national banks. Unlike a mortgage “broker,” the mortgage company still closes and funds the loan directly. Because these companies only service mortgage loans, they can streamline their process much better than a bank. This is a great advantage, meaning your loan can close quicker.

In a competitive real estate environment, the ability to close a loan on time is vital. The other advantage to fast closings is that rates and fees are cheaper for shorter rate lock terms.

You should note that your mortgage lender may sell your loan to another institution after closing. If this happens to you, don’t worry. The loan documents you signed with your original lender are legally binding for the life of the loan. A loan servicer cannot change the interest rate, fees or any other aspect of the loan.

Bottom Line

When choosing between a bank and a mortgage company, the right decision depends on your financial situation, priorities, and comfort level. Banks tend to offer stability, trusted service, and potential discounts for existing customers, while mortgage companies often provide more flexible options, faster approvals, and competitive rates. The best approach is to compare offers from both, review all fees and terms carefully, and consider how each lender’s strengths align with your needs. Taking the time to shop around can help you secure a loan that fits your budget and supports your long-term homeownership goals.

Home Loans and Your Financial Plan

While financial advisors can’t directly help you get a mortgage, they can ensure that your financial plan isn’t overly impacted by the introduction of monthly loan payments. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
If you eventually want to retire, it’s imperative that you don’t overspend when you buy a home. Doing so could cripple your finances for years, making it very hard to accrue any significant amount of retirement savings. To ensure you stay within your financial bounds, use SmartAsset’s home affordability calculator.