Selecting the right bank for taking out a mortgage loan is not an easy task. While choosing your bank, you have to take into consideration all your options and gather as much information as possible. Here we are talking about the problems in selecting either a big bank with global presence or a community-based local for taking out a mortgage loan. Both these two groups of lenders have certain advantages as well as disadvantages. Sometimes with the flexibility and services offered, small banks can be a better option than the giant banks. Again, sometimes the borrowers feel more secured by obtaining the loan from a federally guaranteed large bank. Here we discuss about the comparative advantages as well as disadvantages of these two sets of banks -
1. One big plus point of the big bank is the sheer coverage. Usually, there are several branches of a large bank not only across the city or the town but also throughout the country. Because of the size-related advantage, big banks are in a position to tap more deposits and in the same way, these banks are in a position to issue more loans also. Here, it is to be noted that the main business of the banks is to attract deposits and to give loan out of the accumulated deposits. The lending rate charged by the bank is higher than the interest rate that the banks pay to the depositors. The difference between these two rates is the main source of profit for the banks.
2. Smaller community banks are more flexible than their bigger counterparts. In order to grab a larger share in the banking business pie, smaller banks try to distinguish themselves from the large banks by offering more personalised services and sometimes by offering mortgages outside the standard norms. Smaller banks put more emphasis on the relationships with the customers. Because of the more personalized services offered, many borrowers prefer the smaller banks over their larger counterpart.
3. Many of the borrowers are discontent with the fee rises of the big banks. A survey conducted by the J.D. Power and Associates, because of this increase in big banks' fees, an increasing number of customers are now shifting towards the small community banks. Many customers are now leaning towards the small banks for more personalized services and for individualized treatment of their personal mortgage problems. A number of mortgage loans queue up in front of a big bank. If a particular application doesn't meet the required criteria, the bank then immediately move on to the next loan application. This is however not the case with the smaller banks. Moreover, with a big bank, for any kind of transaction-related queries, you have to talk with the customer care executives. For following up with your case, you may not find the same executive. This is however not the case with community based smaller banks.
Mainly becuase of the flexibility, more personalized services offered and comparatively smaller fees, many borrowers prefer smaller community banks over the big banks.