The Importance of Using a “Local” Lender

Avoid potential pitfalls of buying in a coastal market by using a local lender

I think that the common misconception to most consumers when they are looking at borrowing money to purchase a home is that “a lender is a lender”.  I admit that in a lot of markets and in many instances, this can be the case.  However, if you are looking to purchase in a coastal market, you likely need to think again.  If you are purchasing a primary residence or a second home, or investment property, the obvious reason to choose a local lender is because you want to support the local economy in which you live or plan to live.  By supporting the employees who live and work in this market, you are supporting the local economy as a whole.  The more business that a local work force generates, the more money that they usually make and the more money that they spend as well. Its cyclical, we all need to support our local markets.

However, in addition to making the choice to support the local market, there are several other reasons that you need to consider using a lender in the coastal market in which you are purchasing.  I promise you that making the choice to use local financing sources will make your transaction easier and as smooth as it can possibly be.  Please consider the following:

• First, a successful local lender is going to generally be familiar or have a good working relationship with your real estate agent as well as your closing agent.  This familiarity between the parties involved in your transaction will make things run as they should because everyone knows what to expect from each other in most cases and there is much less of a chance that things will fall through the cracks.  There is also a level of confidence between parties to execute as needed because of this familiarity. 
• Local lenders are more likely to use local appraisers… this can be a biggie.  National organizations that don’t have local roots can often use third party appraisal management companies to provide their appraisal reports.  This may or may not be a problem but in a lot of cases, these appraisal management companies end up assigning the appraisal to an appraiser who lives 3-4 counties away from the subject property and may not be familiar with the market or the area.  This can lead to a poor appraisal report and ultimately problems with your financing.
• Coastal markets have potential pitfalls that other markets don’t have (i.e. flood insurance, wind/hail insurance, unique property types and a few others).  The types of insurance that are often required in a coastal market are different (and typically more expensive) than in other markets.  The changes being made to flood zones currently in process and to flood insurance, is substantial alone, without factoring in other potential issues that may arise.  Your local real estate agent is going to be aware of many of these things but may not always know how they affect the loan process.  A lender that is familiar with a local coastal market is going to know the right questions to ask regarding insurance, flood zones, condo investment property concentration, sufficient insurance coverage, etc in an effort to avoid potential problems that may arise over the course of your loan transaction.  To put it bluntly… A mortgage transaction in a coastal market can be unique and you need someone on your team who knows what to watch out for and how to protect your best interests.
• Local lenders have a good working knowledge of other local service providers that will be useful to you throughout the process and even after you take possession of the property.  This can include local insurance providers, surveyors, inspectors, property managers, electricians, HVAC companies among others.  Your local lender, along with your agent, can be a useful tool in helping you to obtain good information on excellent service providers in the area.  They also know the schools, the pediatricians, the dentists, doctors, etc.

In short, your local lender should not only exist to help navigate you through what could be a fairly unique home buying process, but they are also a great source of information to you in what may now be “your” local market as well!  For all of the reasons mentioned above, along with several more, don’t make what could turn out to be a major mistake… be sure to use a local lender.