This post first appeared in the September edition of Cirios Trends: Getting to the Bottom of the Housing Market

One question almost every first time homebuyer asks us is: “Who should I talk to about getting a mortgage?”

The easy answer is: “Whoever gives you the best rate and terms.” While this answer does have some viability, if you are buying a home in the Bay Area for less than $700,000, most lenders now offer similar rates and terms. This is because the government basically controls the mortgage market, and banks are hawking the same, government-stamped loans to the public.

But that doesn’t mean the choice of where to get your loan is any simpler. Interest rate and terms aside, your decision should come down to which lender you feel confident can close your loan and which provides you the best service.

Below are the three main resources available to first time homebuyers in today’s mortgage market and how they stack up in terms of confidence to close and service:

1) Banks and Credit Unions

Closing Confidence: If a major bank or credit union provides you with a pre-approval for a mortgage, you should feel comfortable that your loan will close with the same terms provided on the pre-approval … assuming your appraisal comes in OK, of course, which given the new appraisal rules, is anything but a slam dunk.

Service: Big banks have notoriously lousy customer service, so find out early how easy (or hard) it is to get your loan rep on the phone. If a problem arises during escrow, you want your advocate on the other line, immediately.

2) Private Mortgage Companies

Closing Confidence: Despite a much-needed house cleaning in the world of private mortgage companies, some still exist. Most are reputable firms that sell government-backed loans to big banks, but do your homework to make sure yours isn’t a fly-by-night operator.

Service: These lenders get paid when your loan closes. As a result, most are efficient firms that offer service that is frequently better than banks or credit unions. Few private mortgage companies offer “Jumbo” loans, so if you’re looking for that million dollar estate or penthouse condo, chances are they can’t help.

3) Mortgage Brokers

Closing Confidence: Mortgage brokers do not provide the money for your loan. They are basically sales people for financial institutions. The question then becomes, who is the mortgage broker selling your loan to? Many big banks have stopped buying loans from brokers, which has severely limited these brokers’ ability to conduct business.

Service: Like private mortgage companies, mortgage brokers don’t get paid until your loan closes. This means they will do their best to get your loan funded as quickly as possible. That being said, a broker is not the final decision-maker on your loan, so you may be strung along in a painful game of telephone if there are problems.

In the end, we advise our clients to reach out to each type of lender and get a feel for their level of service and loan choices. Your real estate agent should be a knowledgeable sounding board for everything you hear from your potential lender — if they are not, it’s time to find a new agent!