The days of simply going into town and chatting with your local lender are definitely long gone. If you had a good rapport with your local bank and sufficient funds in their bank, you were likely to be approved for a loan fairly easily.
Nowadays there are so many options that it can be difficult to determine what’s your best choice for your next loan. More important than what are your loan options is the question of why your best choice is the right one to choose? That’s what we’re going to compare today – nationwide lenders vs an online lender vs your local hard money lender, which one should YOU choose?
For some, a nationwide lender might seem like an obvious choice. After all, wherever you go for an investment, there they are as well. And that’s true, but so are some of the traditional lending requirements and slower processes that drag out loan to closing dates.
National lenders are going to have a set of criteria that you have to meet. There will be less flexibility in the loan requirements, even if they aren’t applicable in your state or city.
Loan processing time and approval time is likely to be longer than with some other options. Most nationwide lenders have set dates and locations for loan approvals. That means that all of your loan package must be submitted and sent to the location where loan meetings are held. Then, upon receipt and review, a decision can be made. If you need your money fast in order to get a certain property under contract, this could hurt your chances.
National firms are also quick to sell your loan in a servicing package to a 3rd party company. While John Smith might have originated your loan locally, as soon as it closes it’s packaged up with hundreds of other loans and sold off. When there are issues, rate changes, escrow problems or any of the other things that can potentially be an issue during a loan’s history, your only option is to dial the 800 number you are given and pray that you are able to get answers.
On the plus side, this type of lender might offer lower rates than some other options. Since they also include government loan programs like FHA or VA, some of their rates can be lower for traditional real estate financing.
A recent addition to residential real estate lending options are online lenders. These completely online options have made inroads into the marketplace. These are companies like early pioneers, Lending Tree and Quicken Loans as well as relative newcomers Patch of Land or Lending Home. There are dozens of others in this niche as well.
The critical issue with these companies is longevity. Some of them have only been around for a year or two. If you are “banking” (see how I got that in there? 😉) on your lender being there when you need them, it’s critical to explore their ability to stay in business.
And that leads to financial stability. It’s very important that you check the stability of your lender before you start working with them. Online entities may or may not have financial information that they share. Going this route means making sure that your lender is stable and will be in business awhile.
In addition, if they are strictly an online entity, it’s harder to take action against them if something goes wrong in their handling of your financing or financial information. If you’re in Texas and their business address is Michigan, are you going to go to Michigan to get things resolved?
Local Hard Money Lenders
Having a local hard money lender can be the difference between your getting a property or watching someone else end up with the home. That’s because your local lender has people on the ground and in the area today.
If you’ve got a property that you want to get under contract and close on quickly, they know the market, the areas as well as the costs of completing work in that area. All of those points make it easier and faster for them to decide what terms they are able to offer you for financing on the project.
Hard money loans are going to be more costly due to higher interest rates. But the benefits of a fast closing, lower loan documentation requirements and more creative financing terms could easily offset any uptick in interest rate.
Why Local Lenders Are Best
Speaking of financing terms – here’s where your local lender can really make a difference. Based on their insight into the market, they have a better handle on what options might be available and offer you the best possible terms while protecting themselves as a good lender needs to do.
When there are issues, and there’s always something that happens in a real estate transaction either before or after closing, there’s someone to talk with. Local hard money lenders in Texas, like Loan Ranger Capital, have offices and team members available in your local area. That makes it easier and faster to get solutions rather than sitting on hold after dialing an 800 number.
A factor when choosing a lender that often isn’t considered is what happens after closing or when you need to change the terms or payoff my loan? For many other options, that becomes complicated and time consuming. When you choose a local lender that keeps all their loans “in portfolio” and local, there isn’t any issue.
While there are more lender options than ever before, finding the right one for your next project doesn’t have to be difficult.
If we can help you get the financing you need, when you need it – give us a call TODAY! Contact us at 512-220-9916 or email us at [email protected]. We look forward to helping you reach your goals now!