Question: I am trying to decide which lender to use to refinance my home mortgage. The small, neighborhood bank is offering the lowest rate with mortgages backed by Fannie Mae/Freddie Mac. Their closing costs are slightly less than the big name mortgage lenders in my home city. Is there anything else I should consider in this decision regarding which lender to choose? I like the personal service and convenience of the neighborhood lender, but are there any risks that I'm overlooking with using a smaller lender? How is the smaller lender able to offer lower rates? Thanks. Elsa, St. Louis Park, MN

Answer: There is no reason why you shouldn't go with your community lender so long as you've shopped around (which you have) and it's a bank insured by the FDIC. The risks are the same. There could be a number of reasons why they're offering lower closing costs, from a business strategy to compete against the big banks to having a healthier balance sheet. When the numbers line up, it's good to support neighborhood institutions.

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