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: 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 against 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.
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--and you should expect to find wide variances in price and availability of credit.
A 25-year expert observer of the mortgage and consumer debt markets, Keith Gumbinger has been cited in thousands of articles covering a wide range of consumer finance and economic topics in outlets ranging from the Wall Street Journal to the Bottom Line newsletters. He has been a featured guest on national broadcasts for CNN, CNBC, ABC, CBS and NBC television networks and has been heard on NPR and other national and local radio programs. Keith is the primary researcher and writer for HSH.com's MarketTrends newsletter and has authored or co-authored a number of consumer guides on mortgages, home equity, refinancing and more.