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

Choosing where to get a mortgage can affect everything from your interest rate and closing costs to how quickly you reach the closing table. Banks and mortgage companies can both finance a home purchase, but they differ in their services, lending focus and customer experience. Understanding those differences can help you compare offers more effectively and choose the lender that best fits your financial situation.

A financial advisor can also help you adjust your financial plan to meet your home loan needs.

Definition of Banks and Mortgage Companies

A bank is a financial institution that can offer a wide range of services, including checking and savings accounts, credit cards, personal loans and mortgages. If you apply for a mortgage through a bank, the lender may also consider your existing relationship with the institution, which can sometimes make account management more convenient.

A mortgage company specializes primarily in home loans rather than broader banking services. These lenders may offer conventional mortgages, government-backed loans, refinancing and other home financing products, and some operate entirely online without physical branches.

The biggest difference is the scope of services each provides. Banks typically combine mortgage lending with everyday financial products, while mortgage companies focus more narrowly on originating and servicing home loans. Both can offer competitive mortgage rates and terms, so the better choice often depends on the specific loan offer rather than the type of institution alone.

When choosing between a bank and a mortgage company, compare interest rates, annual percentage rates, closing costs, loan options and customer service. Getting quotes from multiple lenders can help you identify the mortgage that best fits your budget and borrowing needs.

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

Banks can be appealing mortgage lenders because they often combine home financing with checking, savings and other financial services. However, convenience does not always mean the lowest rate or fastest approval, so borrowers should compare a bank’s offer with those from mortgage companies and other lenders.

Pro: Existing customer benefits. Some banks may offer relationship discounts, reduced fees or other benefits to customers who already keep deposits or investments with the institution.
Pro: One-stop financial services. Getting a mortgage from the same bank you use for everyday finances can make payments and account management more convenient.
Pro: In-person support. Banks with local branches may be a good fit for borrowers who prefer face-to-face assistance during the mortgage process.

Con: Potentially less competitive pricing. A bank may not always offer the lowest mortgage rate or closing costs available, making it important to shop around.
Con: Lending requirements can be stricter. Some banks may have more rigid underwriting standards, which could make approval more difficult for borrowers with nontraditional income or credit profiles.
Con: The process may move more slowly. Larger banks can have multiple layers of underwriting and processing, which may result in longer turnaround times than some specialized or online mortgage lenders.

Pros and Cons of Getting a Mortgage With a Mortgage Company

Mortgage companies focus primarily on home lending, which can give borrowers access to specialized expertise and a streamlined application process. Still, they may not offer the broader financial services of a bank, and rates, fees and service levels can vary widely between lenders.

Pro: Specialized mortgage expertise. Because mortgage companies concentrate on home loans, their loan officers may have more experience working with different mortgage programs and borrower situations.
Pro: Potentially faster processing. Some mortgage companies use digital applications and specialized underwriting systems that can help move borrowers from application to closing more quickly.
Pro: Broader range of loan options. Depending on the lender, a mortgage company may offer conventional, FHA, VA, USDA and other specialized mortgage products.
Pro: Competitive rates and fees. Mortgage companies compete heavily for home loan business, which may lead to attractive interest rates, closing costs or lender credits.
Con: Fewer banking services. Unlike a traditional bank, a mortgage company generally will not provide checking, savings or other everyday financial accounts.
Con: Your loan may be sold. Mortgage companies commonly sell loans or transfer servicing after closing, meaning you could eventually make payments to a different company.
Con: Customer service can vary. Some mortgage companies operate primarily online or by phone, which may be less appealing to borrowers who prefer in-person assistance at a local branch.

Bottom Line

Choosing between a bank and a mortgage company comes down to the loan terms, service and borrowing experience that best fit your needs. Banks may offer relationship discounts, in-person support and the convenience of keeping multiple financial products under one roof, while mortgage companies may provide greater specialization, faster processing and a wider selection of home loan programs. Comparing interest rates, APRs, fees, closing costs and loan options from several lenders can help you find the most affordable mortgage rather than choosing based on the type of lender alone.

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.