Mortgage lenders vs. banks: which one should you choose?

Unsure of who to turn to when getting a mortgage? Check out this article for a breakdown of the differences between mortgage lenders and banks! Keep reading to learn more!


Compare mortgage lenders and banks before getting your loan

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Mortgage lender vs. banks! Find out which one is best for you! Source: Adobe Stock

Mortgage lenders vs. banks. These are both institutions that offer mortgage loans. So which one should you choose? Well, it depends on what you’re looking for.

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This post will help you determine which option is best for you! We’ll compare and contrast the two types of lenders and show you the pros and cons of each! Keep reading to learn more!

What is a mortgage lender and how is it different from a bank?

Are you confused about the differences between a mortgage lender vs. bank? We’ve got you, and we are here to help you understand the details involving both.

A mortgage lender is a financial institution with the main goal of lending money to anyone interested in buying or refinancing a home.

The are two types of mortgage companies: mortgage brokers and direct lenders. Mortgage brokers usually help potential borrowers find the right lender for their needs.

While direct lenders, as the name suggests, are responsible for directly funding and originating mortgages.

Both banks and mortgage lenders can help you get the funds you need to buy a property. But some factors differ between the two.

Mortgage lenders usually offer a variety of loan options and are more tolerant when it comes to the minimum credit requirements.

On the other hand, banks will offer only a few loan options for potential borrowers and have more strict credit requirements.

These are not the only differences between banks and mortgage lenders. Further, let’s dive deep into the pros and cons to help you choose which is right.

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Pros and cons of working with a mortgage lender

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Find out the pros and cons of a mortgage lender and a bank! Source: Adobe Stock

As previously said, mortgage lenders are known for being more flexible. As a result, they can offer borrowers personalized rates to fit the customer’s financial needs.

Additionally, most mortgage lenders offer a full-digital service, making it easier for borrowers to manage their mortgage accounts and offering great customer service.

Borrowers can even sign the closing documents online.

Lenders usually offer various loan options, such as conventional loans, jumbo loans, fixed- and adjustable-rate, VA, FHA, and USDA, for example.

Mortgage lenders also offer a specialized service, which can make the loan process faster. Below, let’s compare the perks and drawbacks of a mortgage lender.


  • Offer a variety of home loan programs to help customers find the best option for their needs;
  • Mortgage lenders have more flexible eligibility requirements;
  • Delivers more chances for customers to get customized terms and rates;
  • Since they offer a more specialized service, they have better guidance and advice for customers;
  • Mortgage lenders usually provide a faster loan closing process.


  • Most mortgage lenders offer fully digital services. Therefore they might not have physical locations;
  • After closing, your loan may be sold to another service;
  • Mortgage lenders might charge higher interest rates and closing costs.

Pros and cons of working with a bank

Banks usually offer more benefits to existing banking customers. As a result, customers can get lower or no account fees or better mortgage terms for having a checking or savings account.

They might also offer loan options for specific home buyers, such as investors and self-employed customers.

Nevertheless, banks usually have more strict requirements for applicants. Therefore, it is harder to qualify for a bank mortgage.

Also, since mortgages are not a primary focus of banks, they can take longer to process mortgage loans throughout closing.

Let’s compare below bank mortgages’ advantages and disadvantages.


  • Banks might offer lower interest rates;
  • Bank mortgages usually come with special rates and benefits for existing customers;
  • They might offer proprietary loan programs;
  • Usually, the bank will continue servicing you after the loan closing.


  • Banks deliver fewer loan options than mortgage lenders;
  • They have stricter qualifying requirements;
  • It usually takes longer to close the mortgage;
  • Banks don’t have much expertise in mortgages.

Bottom line: is it better to finance a home with a bank or mortgage lender?

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Find out the difference between a mortgage lender and a bank. Source: Adobe Stock

There’s no one-size-fits-all answer to that question! As we previously saw, banks and mortgage lenders have their benefits and drawbacks.

First, you need to consider your financial situation and homebuying goals. Additionally, shop around and understand better how banks and mortgage lenders work.

Therefore, compare the rate, terms, down payments, closing costs, and any potential benefits you can get.

And ask yourself some basic questions! Do you want specialized service and quick closing? Or do you like better borrower perks and better deals?

The only thing that matters is that the mortgage conditions make sense to your needs!

Lastly, we have another useful article to help you better understand mortgages. In the next post, you’ll find out how mortgages work.

Keep reading to learn more! At the end of your reading, I’m sure you will be ready to start your homebuying process.

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How do mortgages really work?

Having doubts about how mortgages work? Keep reading and find out all you need to know before financing a home purchase! Let’s get started!

About the author  /  Beatriz Vieira

Beatriz Vieira is a producer and copywriter who is part of the finance writer team in this portal. She has a degree in Journalism and aims to improve her bilingual writing skills. Her subjects of most significant interest are culture, finances, and self-development.

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