4 Reasons to Use a Local Lender When Purchasing a New Home
Buying a new home is an exciting time, but it can be stressful, too. You have to make sure that you are getting the right mortgage for your purchase price and credit score. It's also important to buy from someone who will work with you in good faith and help guide you through the process of finding the perfect home for your family. One way to ensure this is by using a local lender when purchasing a new home. Here are 4 reasons why it would be beneficial to use a local lender.
1. Local Lenders Know the Market and the Local Appraisers
One thing that a local lender has going for them is the fact that they know their market and can use this knowledge to help you find an appraiser who understands your area. This means that the appraisal value will be more accurate than if it were done by someone else because national appraisers sometimes don't know the difference between small towns within a larger metro area. A local appraiser may also know if there are any special requirements that need to be met to comply with HOA rules or if anything is needed on the home's exterior before it can get appraised.
2. Closing Costs are Usually Lower with a Local Lender
Although you may see lower interest rates initially with large, national lenders, the hidden fees usually mean that a national lender is going to be more expensive in the long run. When using a local lender, typically the closing costs on your loan will be much lower. Lots of people don't even realize that there's a difference in closing costs between national and local lenders. Closing fees vary depending on the lender, but the average is somewhere between 2% and 5% of the loan amount. So if you are taking out a $250,000 loan, you could be looking at a difference of anywhere from $5,000 to $12,500. That's a big difference in the amount of money that you are either paying cash for or rolling into a loan.
3. Local Lenders Offer Convenience and Security
Another advantage to using a local lender is that you may be able to get your loan processed more quickly and without the hassle of dealing with a national company. When you work with a local lender, you typically speak with the same person every time you call or have an appointment. You aren't just another line on a spreadsheet; you're a real customer, and you'll have the opportunity to build a relationship with your lender. This means they'll likely call you back themselves when you need something, or they'll meet with you in person to discuss questions or concerns.
As far as security goes, if you are concerned about having all your personal and sensitive financial information shared over a computer, you can drop your paperwork off right at the lender's office without needing to upload and email documents. Plus, you won't have to go through the hassle of finding access to a scanner (not everyone has one at home) and then scanning and emailing dozens of pages of documents.
4. Strong Relationships Between Lenders and Realtors Create Accountability.
The relationships that your realtor has with the local lenders in your area are invaluable. Lenders want realtors to continue referring customers to them, so they're going to work hard to make sure their customers are happy and have an easy experience. Your local lender will work to make sure that you get the best interest rates possible so you can minimize the amount of money you pay in monthly payments. When you're ready to move onto your next home, you'll want to work with that person again because you know they took care of you the first time around. Personal referrals are important, and realtors who have built relationships with local lenders are going to vet those people to make sure their customers are working with someone who has their best interest in mind.
The bottom line is, local lenders care about the community they're serving because it is THEIR community, too. No one knows your neighborhood better than a local lender, so you know that their advice will be tailored to what is best for those who live there.
This article was written with contributions from Scott Gruber, Senior Mortgage Lender for the Goshen Road First Mid banking center. Scott has been lending in the Metro East and St. Louis areas since 1998, and has been in the mortgage industry since 1991. His specialty is helping first time buyers secure financing for their new homes. He is an expert on all types of financing, including FHA, VA, USDA, Conventional and Home Equity loans.
