By Mel Dorman, December 24, 2020
Often I meet first time home buyers who reach out after they have been preapproved. At first, I am thrilled to see they have started by getting their financial picture in order. Then, often, to my dismay, they tell me they picked a big bank (like Chase, Wells Fargo, US Bank) or online budget lender (Amerisave, Quicken Loans, Rocket Mortgage) or their local credit union.
At this point, they have already been upsold on the idea of getting a super low-interest rate or money back for closing costs and believe the mythical dream that they get all this at no cost. Sadly, that’s not the truth and when you do or supervise 100 transactions a year (like me) you see what really happens to buyers with bad lenders. Here are 3 reasons you need a local lender.
1) Local Lenders are Financially Incentivized
Credit unions, big banks, and online budget lenders hire hourly employees to keep their rates low and their points low. Sounds great right? The ugly side of this is they could care less if you close. They will be paid either way!
I have seen countless transactions go awry with these types of lenders because paperwork is lost and all of a sudden, the lender will not pick up the phone. Why?
Here is the truth: They don’t get paid more or less if you close and they would rather not deal with the trouble. Meanwhile, a local broker is ONLY paid when you close and when they mess up (which is rare) they usually pay out of their pocket to make it right. They have a reputation to keep in this market.
2) Local Lenders are Available
Most of the real estate happens on the weekends and evenings. It’s a mad rush on Saturday or Sunday evening to get your offer accepted. This is when you need to know “Am I qualified?”. But big banks, credit unions, and budget lenders don’t work evenings and weekends. They won’t send over a last-minute pre-approval and they certainly won’t call the listing agent and tell them how great you are (a strategy we use to get our offers accepted in multiple offer situations).
Furthermore, local lenders have established relationships with the best appraisal companies and know which companies to avoid; those who do poor quality work and make baseless claims on value (low or high). When it comes to knowing the market and responding when you need it most, choose a local lender.
3) Local Lenders are Local
Seems obvious right? Well, the dirty little secret behind all those flashy incentives that budget lenders give you is that they are national companies who hire the cheapest appraisers and employees to get the job done. How does this affect your bottom line? Here is a story, my most recent client’s used Amerisave (a big-budget lender). There were 4 budget loan processers shuffling papers around and the person in charge of hiring the budget appraiser forgot to give the appraiser the counteroffer with the correct purchase price. Needless to say, the budget appraiser didn’t even notice an incomplete offer and appraised it “at value”… only it was $22,000 under the actual purchase price! Now my clients, who thought they would save $500 with Amerisave over my preferred local lender, are on the hook for putting $22,000 more down to make the deal close on time!
When it comes to your most important purchase, perhaps of a lifetime, take it from me: don’t step over dollars to save dimes. Don’t be wooed in by flashy incentives. Work with folks who are time tested, attentive, and incentivized to make sure you close on time!
Special thanks to our very own Cori Angel and Iban Soria at Bank of England who is our preferred local lender. Click here to connect with them.
Mel Dorman
Broker | OR & WA
She/They
Ten years ago, Melissa was living in a slum in Kolkata, India, helping over 200 women escape sex trafficking by providing alternative work at a social business...
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- melissa@livingroomre.com
