Profile picture for neufda

Is it better to use a local lender?

I would really like to use a lender that will give me the best rate, no matter where that lender is based.  I've heard that sometimes appraisals are off if you use a lender that is not local since the appraisers used by the lender may not be experienced in the area you are moving to.  What are your thoughts on local vs. non-local lenders?
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May 13 2011 - Sandy
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Profile picture for sunnyview
I think that you need to choose the lender that has a good reputation, a good rate and has good service. Appraisals are now ordered through an outside service under HVCC so your chances of getting a bum appraisal from an out of area appraiser is about as high with a national internet lender and a local one.
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September 19 2011
Hi Nefuda,

I would recommend that you work with a local lender who understands your local market.  It may not be necessary to meet with them face to face, but it's always nice having someone local you can turn to for answers. 

Check out a very similar answer I posted earlier this year [hotlink removed by Zillow moderator]

Check out other great questions at [hotlink removed by Zillow moderator]

Thanks, Matthias
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September 19 2011
I don't think anyone really responded to your follow up question of borrower paid vs. lender paid compensation. The originator of your loan can only be paid by you or by the bank. This change occurred on 4/5/11 and the feeling in the industry is that it should not harm you as a borrower, but in no way does it help you either. The loan process today is much different than it was just two years ago. I can't stress enough the need to look for a local lender to guide you through this process.
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May 17 2011
You should explore local options. They have a lot more to lose and a lot more to gain based upon your ability to use word of mouth. If they do a good job, your referrals will be a reward that they will have earned.
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May 17 2011
It's a broker making things more difficult than they need to be! 

Regardless of who youe work with you can choose a higher rate and pay lower fees.  Or you can choose to pay higher closing costs and obtain a lower rate.  Rates and fees are a see saw...It doesn't matter who you deal with both can provide you the same options.
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May 13 2011
Profile picture for neufda
What are "borrower paid origination charge loans" and "lender paid origination charge loans"?
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May 13 2011
Interesting response Andy Matejka - there is a whole new can of worms.
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May 13 2011

A local lender should work hard to keep you satisfied so that you can be a good long term referral source for him.

Being a Broker, I'd advise you to seek a broker that can provide you with Borrower Paid Origination Charge loan quotes as well as Lender Paid Origination Charges so that you can make the best decision for yourself regarding the rate and fees for the transaction.

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May 13 2011
If a non local lender offers you a rate/fee combination that cannot be matched by a local lender...Odds are you won't get what you expect.  No magic lenders, No magic loans & No magic pricing. 
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May 13 2011
These days appraisals are ordered independently, and most of those use an appraisal management company.  The appraisal management company has an approved roster of appraisers that they choose from on a round-robin basis.  Each appraiser informs the company which areas they are able to appraise, and that is one way how the the pool of available appraisers for your home's appraisal is narrowed down.  There are some mortgage lenders who have their own appraisers who they use, and it is still randomly selected from those appraisers, rather than utilizing the 3rd party services of an appraisal management company to do that form them.  You can ask the lender how they will be selecting the appraiser, and ask how many appraisers do they have who would be eligible to appraise a home where you are looking to buy (keep in mind that information needs to be researched/requested, may take a little while to confirm, since it's not something a loan officer is permitted to have access to).

Now as far as using local vs. non-local, that is something always to be debated.  Obviously real estate agents are concerned about the transaction going as smoothly as possible, and the chances of that happening increase when a lender who they know has a good track record will be taking care of the financing, who is familiar with the closing customs, and underwriters are familiar with the market.  Those lenders typically tend to be local ("If you can't drive to the loan officers office with a crowbar in hand then they are too far!" is what one real estate agent told a client of mine).  The other advantage is that certain down payment assistance & first time homebuyer programs are only offered through lenders who are located within the state, county, etc. and so using an out-of-state lender may limit those options.

The key to having an easy-as-possible loan transaction is communication IMO.  If you can't get the correct information in a timely manner then it doesn't matter if that lender is on Main St. or in Timbuktu.  If everyone knows what all parties expectations are from the beginning then actions will be performed with them in mind, and then there will be minimal stress if issues arise.  If you have a real estate agent who is able to portray a buyers needs in the contract correctly, a loan officer who keeps the buyer & their real estate agent informed, a processor who puts together full files for underwriting, an appraisal done by a local appraiser, an underwriter who has common sense, and a closing department that runs on schedule... you are going to have a very high chance of having a smooth transaction.

Once you have figured out which lenders can provide that type of service, then check out their rates and compare. 
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May 13 2011

I personally would work with a local lender especially for a purchase.  Most of the time a refinance is a pretty straight forward transaction.   

The "perception" that rates vary so much from lender to lender is misguided (IMO). If you see a big difference in rates you will see a big difference in closing costs.  You pick your rate (30 year) at 4%, 4.5%, or 5% and then I will let you know your costs anywhwere from thousands down to zero.

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May 13 2011
Everybody is very competitive in terms of pricing/interest rates.  This is because they all buy and sell on Wall Street in the conduit of MBS (Mortgage Backed Securities).  There is No one size fits all in pricing, so when you see pricing/interest rates quoted on the internet they are basing it on the lowest rate to draw interest.  They don't factor any price adjustments, nor the changes in the Market.  I'd recommend using somebody with whom you feel comfortable and will provide you the best service.  Service is very important in these types of transactions because you generally will find the old adage, "you get what you pay for".
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May 13 2011
I do recommend a local lender as they know the area, are familiar with the local issues, are convenient so you can do business face-to-face, and they work hard to build a great relationship with buyers & agents.  I also recommend buyers check with 2 or 3 lenders so they can compare the various financing options.  It is not all about the lowest rate so be a wise consumer and shop the entire package.
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May 13 2011
The lender vs appraiser thing is myth as one has zero to do with the other. As a lender we are not allowed to pick and choose appraisers nor are we able to steer the value.

If you want best rate,...check local and online. Just research who you use regardless. Local does not always mean trusted or better. Vice verse.
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May 13 2011

As a consumer, you should go with the lender that can offer you the best rate and lowest fees.  You should also ask them about their experience and their turn times to close a loan. Although the previous Realtor comment suggests that you would experience headaches by using a online lender, that is based on her experience only. There are plenty of experienced loan officers who advertise online who can close your loan quickly and at competitive rates.

All lenders are required to order appraisals form an Appraisal management company who will assign the inspection to a local appraiser. It is best if your Realtor meets the appraiser and provides sales comps that justify the sales price of the property.

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May 13 2011
There are many benefits to using a " local " lender ....as previous emails indicate

that being said , if you work with a local loan officer that is not responsive  and engaged ..it is not much benefit to you ...but at least you can physically visit  his/ her staff and office to get any issues dealt with , if needed  ( versus dealing with an 800 #).
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May 13 2011
It all depends on the Lender and not their location. I have closed loans in many states, but what you truly want to ask yourself is if you are working with a true mortgage professional that has your best interests in mind. This is the largest debt you will most likely create in your lifetime, choose wisely.

As for the appraisal issue, since the HVCC rule, Lenders are no longer able to choose which appraiser is used. You need a Lender that has the knowledge to underwrite an appraisal to see if it is worth the paper it is printed on.

Last week I received an appraisal that was 100,000 below value, it was terrible. I wish I could have his license suspended but instead I blacklisted him. I did not accept that appraisal as I knew it was a very bad appraisal. I ordered another and and received an appraisal 120,000 higher than the previous.

Don't always look at rates. Since the Loan Officer Compensation rule passed in early April, we are all playing on an even field.
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May 13 2011
Local lenders are most reliable and when there are concerns, it seems that
the local banks can usually work things out.
Over the last year our local banks have saved several deals because they were more flexible  and still rely on local appraisers..
 
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May 13 2011
I recommend you go to a local lender. Every experience that I've had with an online or out-of-state lender has caused delays with closing, and added a tremendous amount of unnecessary stress, during the course of the transaction. Sometimes their rates may seem attractive, but it's better to shop rates locally, and not have the added stress or delays. Ask your real estate professional to recommend 2-3 lenders that you can interview to get your pre-approval process started. Best wishes!
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May 13 2011
 
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