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If you're borrowing money to buy a home, you'll want to get the best possible mortgage rate. Home loans are paid off over a long time, and you borrow a lot to buy a property, so small differences in rates could make a huge impact on both monthly payments and on total loan costs over the life of the loan.
To find the best rate available to you, it's helpful to get different quotes from several mortgage lenders. And there are different types of lenders you should try, including the following three options.
1. Banks
Both local and national banks typically offer mortgage loans. Many people default to working with banks, especially if they have a pre-existing relationship with one because they have a checking or savings account at that institution.
Banks can be a good option for borrowing, but be sure to look beyond just the bank where you have current accounts. You can consider big and small banks to see which offers the best rate and the types of loans you are interested in.
2. Credit unions
Credit unions are different from banks because they are member-owned and not-for-profit institutions. It's often possible to get a mortgage loan with a lower interest rate from a credit union than from a bank.
One downside of credit unions, however, is that you generally must be a member of the credit union in order to be eligible to get a loan from it. Different credit unions have different kinds of membership requirements. In some circumstances, becoming a member is as simple as paying a fee. But with other credit unions, you may need to meet more stringent requirements, such as being a current or former military member, living in a specific state, or being a member of a certain organization.
3. Online lenders
Finally, online lenders are another option to consider when you are looking for a mortgage loan. Unlike banks and credit unions, they do not generally have local branches. You will typically need to complete the entire loan application process either via phone or over the internet. While some people prefer the convenience of this, others miss the hands-on customer support as they make decisions about a major loan.
Online lenders sometimes offer lower rates and better terms than banks or credit unions because they don't have the costs of maintaining physical structures. It can also be quicker and easier to get mortgage quotes from online lenders since you can do so over the internet. However, a growing number of banks and credit unions provide online quotes, too, so this may not be an advantage specific to online-only mortgage lenders.
By getting quotes from all three of these different types of lenders, you can truly explore all of the options available to you. Since different kinds of financial institutions may be better suited to specific borrowers, it's worth taking the time to consider each different kind of mortgage loan provider before going through the pre-approval process and committing to borrow.
When you get the most affordable loan possible with the most favorable terms you can find, you'll be glad you made the effort.
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