Should I refinance with a bank, direct lender or credit union?

Apr 22, 2013 Keith Gumbinger,HSH.com

Q: What is better for a refinance: credit unions, banks or direct lenders?

A: There's really no one answer. It's like asking, "What's the best store to buy pants?"

Credit unions, banks, direct lenders and others -- like online mortgage lenders and mortgage brokers -- should be collectively thought of as retailers of a product.

There are a number of factors in play here, and how you personally value and weight each of them will determine what is better for you. Collectively, they are:

Convenience
Service
Price

Convenience: If you value convenience and your existing lender offers a streamlined, no-hassle just-sign-here refinance, this may have the strongest appeal, even if it may not be offered at the best price.

Service: If you more strongly value a service-oriented, sit-across-a-desk-and-discuss-your-needs-in-person experience, you might not prefer online arrangements and e-mail communications, even if they might offer you a fantastic price.

Price: You might value a big, well-known national or regional brand over a smaller, lesser or even unknown entity, even in cases where a smaller entity might offer more personalized service or even a better price.

Of course, there can be some advantages and disadvantages of each kind of retailer.

If you're a hard-to-place applicant, a mortgage broker might have more choices and offers available for you compared to a bank or direct lender.

Most mortgages today are sold to Fannie Mae, Freddie Mac or backed by the FHA, so there is great similarity in pricing from place to place for many popular mortgages, especially fixed-rate mortgages.

For some kinds of loans, though, especially ARMs or jumbo mortgages, that's not the case, so you will probably want to seek out places which put those loans in portfolio, which would generally be depository institutions like banks and credit unions -- and you should expect to find wide variances in price and availability of credit.