Local Lenders May Be Your Best Bet for a Loan

Getting a conventional loan approved for all but the well-to-do with a 700+ credit score can be daunting. To say that Lenders today are risk averse is an understatement. What is a buyer to do if, after having gone to the expense and time of having an appraisal performed on the home they want to purchase, their lender disagrees with the appraisal? What if the property is a farm? What if the buyer, due to a nasty divorce, has poor credit, but has a dependable and good paying job? What if the subject property is a condo that has not been approved by Fannie Mae or FHA? Circumstances such as these are becoming more common place. In most of these cases, the buyer is not likely to get approval from a major out of state bank because decisions about the buyers’ qualifications or the property appraisals are being made hundreds or thousands of miles from the subject property and with no real knowledge of the buyer.

This is why local lenders may be your best option for getting a loan approved. A local lender, equipped with local knowledge, is more likely to apply “common sense underwriting” when making a judgment as to the buyer’s specific qualifications or the true value of a local property. Does this mean that large regional or national lenders are out of the question? Maybe not, but only if the lender’s local affiliate has some degree of autonomy in decision making on loans. Remember that the local lender has a vested interest in their community that a regional or national lender cannot possibly have. The local lender might be willing to consider extenuating circumstances when evaluating the buyer or the property. If necessary, they can even drive by the property and evaluate it, personally.

In my book, Homes Buyers and Mortgages, I discuss the fact that in today’s market, buyers should always have two lenders evaluate their loan application. Due to the fact that many loans are being denied for reasons like those stated above, having a local lender in the mix of potential lenders just makes sense.