Do not confuse the big box national banks with smaller locally owned banks. The big box banks are the ones with branches throughout the state, or even throughout the country. Locally owned banks as a rule only have branches in and around the city, usually do not have branches in other cities, and especially not in other states. The national banks originate a huge number of mortgage loans due to their size and number of locations. In addition to offering their loans to their regular banking customers, big banks market their loan products in the wholesale market. This means that they market their loans to the consumer through brokers, many of whom are online.

In either case, they sell a great majority of their loan portfolio to the secondary market and do not hold onto the mortgage for the entire term of the loan. In a nutshell, this means that they bundle a large group of mortgages together into many millions of dollars worth of mortgages and sell them to Wall Street investors at a discount and keep the difference as a profit. Once the group of mortgages has been sold, the bank takes the money from the sale and loans it out again, starting the cycle all over again. Because they will be selling the loans, the big banks must keep the group of loans as clean and conservative as possible to make them marketable to Wall Street investors, which tends to limit their flexibility in underwriting.

Locally owned banks certainly can and do sell some of their loans also, but in many cases they will keep the loans all the way through to maturity. Because they do not have to be as concerned about making their loans sellable to Wall Street, they have the ability to be a bit more flexible when underwriting their loans. The bank may have decided to market to certain niche markets which the big banks are not comfortable working with. Some of the common niche markets are first time home buyers, small business owners, or individuals looking to purchase investment property.

For borrowers who play golf with the bank president, have longstanding banking relationships with a local bank, or who have a considerable amount of money on deposit, the local bank may be the first place to start when shopping for a mortgage loan. For the rest of us, the best bet is to go online and find an online mortgage lender you are comfortable with and let them do the work for you.