Advantages of Local Lenders
If you intend to purchase property anywhere – whether it’s in your local state or if you’re looking for a second vacation spot in good ol’ Hawaii – it’s important to use a local lender for your mortgage. Most places around the USA have a number of licensed local lenders and so you won’t fail to find one near the area you’re looking to settle in.
Here are three reasons you should use a local lender for your mortgage:
You bank may not conduct business in the specific area you want to settle
While you think that this is not necessary, having a lender that conducts business in the locality you want to settle in is crucial. Not only will they be familiar with the state of the property and area from an intimate point of view, they will also be able to advise you on the best places to settle in for maximum benefit to both you and them.
As an external lender, all your bank has to go with are the reports on the real estate market, which may not really reflect the exact state of the area you want to live in. This may result in you paying higher interest rates to cover the lending risks. However, local lenders will be able to assess the property from a more intimate point of view and hence are likely to give you a better deal on your chosen property.
External lenders cost more for out of pocket
This is a no-brainer really. While you lender may have license to practice in the area you want to buy, not having a local branch brings a number of other factors to light. For one, your offer may not get approval, mostly because some real estate agents have had bad experiences with external lenders. In case of a bidding war, you will easily miss out just because you have an external lender.
Another possibility is that the seller may decide to charge you out of contract because your lender hasn’t met the deadline or instead charge you penalties. You are also on the way to incur more expenses in taxes and maintenance fees in the event that things don’t go smoothly, which occurs very often with external lenders.
Buyer loyalty is not rewarded
Many times, buyers want to be loyal to their bank, even if they’re buying property in another place, such as a vacation home. However, typical bankers have little regard for such loyalty; they are only known to act according to their best interests. Local lenders are much more trustworthy, primarily because they depend on the loyalty and trust cultivated with current clients for future business in form of referrals.
However, if you’re buying property elsewhere, the bank will consider that you’re intending to move there. Hence regardless of what the bank does, you won’t have a chance to spoil its name in the states it actually has branches in. It has no incentive to offer you breaks such as lower interest rates.
The fact is simple: local lenders know the local area better, are easier to work with, offer better rates and in the end will lead to a faster conclusion of your purchase than an external lender.
The author is a qualified financial services provider, including offering local lender and merchant cash advance services for individuals and small businesses in the US.