FAQ – Why Local Lender?
June 4, 2018 By Neelam Singh
Why Realtor is advising me to go with a certain ‘Local’ Lender even when I feel that rates are NOT as competitive as I am being offered from national and online banks? All other terms seem to be equal and it looks like no brainer to go ahead with the national/online bank.
Yet I am being advised by lender/realtors that in this competitive market if I want my ‘offer’ to be accepted or taken seriously by sellers/listing agents I should be Pre-Approved by Local Lender of repute. Otherwise they claim that my offer will remain at the bottom of stack even if financially I might offer higher price!
They mention things like sellers’ trust of local banks/lenders, faster closing, and or full-appraisal. Is all this really true?
When shopping for your house loan, you must consider two different factors in a mortgage lender –
If you are getting best rates and/or terms of a given loan
Making your offer competitive (in current market)
Rate and/or Terms –
National banks/Online companies (like rocket, quicken, etc.) use lower interest rates as teaser to get maximum clicks and obviously engage potential clients. However, they don’t have full information on the local market or the subject property.
On other hand local lenders/banks (Academy Mortgage, Evergreen, Calbre, etc.) start with higher generic rate but they have the ability to drop the rates (within a certain limit) to make the offer bit competitive. Some of these Lenders do offer interesting new programs that might be attractive to you (ask your lender or a well-informed realtor will be able to update too.
Its good idea to interview with couple available options and get yourself pre-qualified by 2-3 companies (as a starting point). This will not have any effect on your credit as there’s certain period within which you can get this done and your credit will not take a new hit.
Your Realtor/Agent as professional ends up having rapport with these lenders and they have seen them operate in various scenarios. They don’t get any sort of benefit in these recommendations.
Factors like consistency in promised time-to-close, familiarity with listing agents, personal touch do matter when sellers and listing agents are going through a pile of offers on a given house!
Remember, as sellers, they want least risky offer that is supported by a lender/institution pair with a reputation of closing consistently on time. These are local names and sellers and listing agents have had first-hand experience with them, it does make difference, That’s final touch of familiarity. Let’s face it, property transaction is one of the biggest transaction and familiarity and trust does matter.
Their appraisers appraise given property at full price thereby minimizing the risk of delays. Some independent lenders can close a transaction start to finish in as many as 16 days! This sure makes your offer stand out.
Bottom-line, local lenders/banks tend to be more accountable than some national/online institution.
P.S. These are my personal opinion, after experiencing several scenarios with various clients and speaking with several lenders.