We are recently retired and sold our home of nearly 30 years. The people who bought our home were from out of state and did not use a local bank to get their loan and our closing was delayed 3 times while we waited for thing to get straightened out. We have not bought or sold in a long time, but according to our agent they got a great rate from this national lender and delays are just part of it. It seemed to us that because the lender was not local, all of the paperwork and decisions had to happen on the other side of the country and nobody here really had any good answers for why it kept occurring, however when it was said and done they did get a very good deal and saved some money.
We are now in the process of buying a new home. We want to make the best decision possible in obtaining our loan, but could you provide some advice on local banks vs. national companies that may have better rates?
Julie and Paul, Fruita
Julie and Paul,
Ahhh the fresh scent of a lenders delay…The lending side of the world is the most frustrating part of the business for me. First, always remember that the information Realtors relay to our clients is only as good as the information relayed to us by the loan originator and their information is only as good as what all the mouths upstream are relaying to him or her. Let me say that finding a good and competent local lender is always the best idea and the vast majority of our local loan originators will work diligently to get your loan processed and completed through underwriting on or before the closing date.
One of the big delay offenders is when an underwriter needs clarification on a piece of information that was provided in the buyer's loan file or with the property appraisal. When this happens the processing can be delayed until the information is re-submitted or clarified and that can take days. It all depends on the volume of loans that a lender is processing and the location of their underwriter, but it can be like a one car breakdown on the 405 in L.A. It really does not take much to throw everything into a waiting game. Because underwriter delays happen at or near the end of the loan approval process the delays can have a significant impact. The underwriter is the St. Peter at the pearly gates of lending. They are the ones, to my way of understanding, that ultimately have the final say on if the loan meets all the required conditions or not and if the appraisal is satisfactory and meets their internal appraisal metrics.
If it does, that is fantastic, we are moving to close and if it does not…well that’s not good. Not always fatal, but typically not good. It is best if you use a lender whose underwriter is local or in-state. Having a local or in-state underwriter is key, as they are more accessible and understand our local and state markets for interpreting appraisals and having a local underwriter review the file is far better than one in Boston, as they just have a better handle on our local market dynamics.
In my opinion, it also boils down to accountability. When you are deciding on whether to choose a local lender or a national lender accountability is key. Accountability is a rare commodity in any business, but you can bet there won’t be much if your lender is out of town or out of state. You are most likely going to get a very similar interest rate from a local lender as you will from a national lender and where you might see the difference is in the fees the two charge, but I assure you a national lender and especially lenders from out of state are not as accountable and if something goes wrong, the small monetary savings will quickly become less important and at that point you will gladly be willing to pay a bit more for a lender who cares and gets the job done on time.
My motto is always, use local and keep your money working in our local economy and at the same time, build a relationship that you will have and can value for years to come. Not to mention they will likely work hard for you and be accountable so you spread the word to your friends and family. My experience has been much smoother when working with local lenders vs. the national ones. Hope this helps.
The Kimbrough Team