PItfalls of the Non-Local Mortgage Lender

The Importance of Using a Local Mortgage Lender 

When purchasing a home it can be a bit overwhelming on where to go to get a pre-approval for a mortgage, especially if this is your first home purchase.  It is so easy these days to go online to look for almost anything and there are plenty of internet mortgage lenders ready to sell you a mortgage.   Or, if you are relocating to Tennessee, and have owned a house before, its easy to feel comfortable with the lender you worked with in the state you are moving from. That lender was most likely referred to you from your real estate agent and at that point in time, you were referred to a "local lender". That same lender however, is not always the best choice for a mortgage out-of-state.  

Mortgage lenders work on commission so when you speak with a Loan Officer,, whether it is an internet lender, or national bank, they are eager to convince you that they can do a great job providing a loan in another state.  What most people don't realize is, that as soon as the purchase agreement for the home is sent to the loan officer, it is immediately turned over to their loan processing department and the loan officer you had been dealing with is many times no longer involved.  The loan processing department are the ones who will have the contact with the buyer, the buyer's real estate agent and the buyer's title company. This means that there is no point of contact and you will become the "little fish in the big sea",  so to speak.  The loan officer(the first point of contact) that you assumed would handle your loan has now turned you over to someone else.  This is not to say that there are loan officers who won't stay in touch, but they do not 'process' the loan for you after you have finalized a contract on a home.  One of the biggest advantages of using a local lender is the quality communication between all parties.  

Here are some things to consider when selecting a mortgage company.
  • There is no substitute for looking at a mortgage professional, face-to-face and discussing the entire process.
  • Internet, national banks and out of State Lenders often allow for a greater chance of misunderstanding or lost communication between the real estate agent and the title company who will be servicing your purchase and closing.  
  • Non-local lenders are often not familiar with the real estate laws of Tennessee.
  • Tennessee is a non escrow state and for lenders that work in a state where they deal with escrow,  it can be challenging to learn the rules and regulations in Tennessee.
  • In a survey conducted for Tennessee home purchases, communication was the top complaint of both real estate agents and title companies regarding the buyer's chosen lender, who was not a local lender.  Complaints usually were regarding un-returned phone calls and length of time to get required answers. The second most frustrating complaint was different time zones where messages and phone calls were not returned on the same business day.
  • Local lenders communicate with local title companies and they are very familiar with each other  so communication is typically never an issue.
  • National banks, internet and out of state lenders are not always familiar with the actual closing requirements for Tennessee including costs required by the state or local municipality you are applying in. This can result in a Good Faith Estimate(GFE) that can be significantly under disclosed from the actual cost the borrower will pay at closing and can case major issues days before closing.
  • National banks and internet lenders are not familiar with the values of Tennessee properties.
  • Local lenders live and work in the areas you are interested in and understand the complexities of property taxes, HOA fees, transfer fees and local closing costs.
  • Local lenders are better able to counsel you on your finances and what is the best solution for down payments, local closing cost assistance programs and more.
  • Internet lenders shop for rates with many institutions. Be wary of too many inquires on your credit.   It is possible to lower your credit score.
  • Financial markets are very fluid and changing every moment of the day.
  • Local lenders are typically able to give you the best rates.

Your REALTOR can give you recommendations for local lenders.

The information provided on this site should not be used as a substitute for professional counseling and advice from certified legal or financial professionals.

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