Borrowing closer to home has its advantages
The local lender that has served borrowers in your community for decades is often overlooked by new borrowers entering the homebuying market, but the benefits of these lenders should not be underestimated. Borrowing closer to home offers many significant advantages that larger national lenders are unable to match.
Smaller local lenders offer many of the same products as larger banks, and often at a much lower cost. While mortgage rates and closing costs vary from lender to lender, local lenders are often able to offer more competitive rates on different types of home mortgage loans than their larger counterparts. Over the life of a 30-year mortgage, those lower rates can save you thousands.
Local lenders are also typically better about disclosing the true cost of closing, with fewer hidden closing costs appearing at the last minutes. The closing costs of local lenders tend to be lower than their national counterparts, since they work with local appraisers, title agencies, and other vendors. These lower upfront fees combined with the lower interest rates mean big savings for your pocket.
Local Market Familiarity
Local lenders have inside knowledge about the ins and outs of the housing market that you’re buying in better than their national competitors. They understand and respect local real estate contracts, local real estate needs, and local title requirements.
In markets where bidding wars are common, working with a respected local lender can mean the difference between your offer getting accepted and continuing the housing search. Local lenders who know the local market and have a strong track record of closing smoothly and quickly can help reassure listing agents and sellers that a sale will close without hassle.
A huge benefit and draw for local lenders is the personal interaction. Having a brick and mortar location that you can visit and speak with your loan officer means that you are working with someone that knows the local market and who understands your needs.
Local lenders make many of their decisions in-house, unlike their larger national counterparts who may pass your application from department to department for review – costing you time and, potentially, your new home. Sometimes, the person who receives your application at a local lender is also the final decision maker on your loan. Talking to a lender face-to-face can mean valuable advice that can help you overcome mortgage rejection or negotiate a better mortgage rate.
Flexible Lending Requirements
Unlike their national brethren, local lenders are often able to apply different guidelines and criteria to loan applications that allow them to approve mortgage applications that would have been rejected by larger banks. Whether your self-employed or have less than perfect credit, the flexible lending requirements that many local lenders offer can be a perfect option for you.
Since many local lenders keep their mortgages on their books rather than selling to Fannie Mae or Freddie Mac, they are not subject to following the strict lending guidelines set forth by those agencies. This gives local lenders the purview to approve borrowers with low FICO scores, but who may have enough assets or income to support mortgage payments. Your local lender might also be willing to consider alternative credit, such as utility payment history, rental payment history, and other forms of payment verification.
While big banks and national lenders might be the first place that many borrowers might think of when beginning the homebuying process, local lenders have a lot to offer many homebuyers. Since local lenders need to retain customers for repeat business, it’s likely you’ll find their service, product options, and rates to be fair and competitive.
Did you use a local lender to buy your home? Leave us a comment below and tell us about your experience.
Annette Masterson is a licensed broker with EXIT Realty Bob Lamb & Associates in Murfreesboro, TN. She has developed one of the most successful real estate teams in Rutherford County, known as Masterson Network, that specializes in new home construction and residential listings and sales throughout Middle Tennessee. You can email Annette at firstname.lastname@example.org or call her at 615-896-5656 (Office) or 615-533-1660 (Cell) for more information.