Should you use a mortgage broker or lender that's out of state?

Question

Hi, I'm new to real estate investing and I'm really interested in out-of-state real estate investing since I live in New York.  My question is, should I find a mortgage broker or lender in my area to get preapproval or should I find one out of state in the area that I want to start investing?

Robin Simon · Answer

Having a local lender is just not that important anymore - there are lots of great lenders and brokers that have national platforms and can originate a loan perfectly fine w/o meeting at a brick and mortar location.  In fact, you will likely get better terms (fees/rates) than at an old-fashioned local bank since forward-thinking national lenders are likely not to have bloated/outdated costs.  The world is changing with technology and real estate is notoriously slow to adapt

Eliott Elias · Answer

You absolutely can. Some brokers may have products your local lender has never heard about before. All it is, is the outreach is larger and your options are greater

Susan Maneck · Answer

I bought my last property in Mississippi through a Mutual of Omaha agent working out of California. Costco used to have a real nice program through their Executive Membership that saved a lot in closing costs (which alas, they have canceled.) They were kind of a pain to work with but the interest rate was right, so I went with them. If you are buying a really cheap property owner occupied then you probably need to use a local bank because the big ones don't want to deal with anything under 80K and by law local banks have to if you otherwise qualify. Don't be afraid to shop around, but I would avoid brokers if you can because they just add to your closing costs.

Mind you, though, I had been buying real estate in Mississippi for 18 years. I didn't need a banker to show me the ropes.

Mohammed Milord · Answer

Thank you for the amazing insight. I'm really new at this. It can be overwhelming.

William Anderson · Answer

Mohammed,

Good for you.  You understand that investing is all about making money not buying the house next door.  New York is an expensive state compared to some other states for a beginner.  Start with laying out goals.  You have funds to buy a property and they are where?  What is your current return on that investment?  Start your goal setting by selecting a reasonable ROI that is higher than the return on your funds now.  If you are invested in equities, your average long-term return is 7% or less.  Setting a goal to earn 9% for example or greater is a good start.

The actual act of buying is down the road for a new investor, learning the business and it is a business that should come first.  How will you hold the title?  Did you create a business e.g. LLC?  What about accounting and taxes?  Start by learning all of these aspects before you try to buy a property.

Skipping well along and leaving lots of stuff out, you need to work with a real estate agent who has actual investment experience.  An agent that owns multiple properties with years in the business.  It takes a while to make all of the mistakes that turn you into an expert investor.  Your real estate agent can be your partner, not financially (it does happen) but in the sense that your success is their success.

When you get to the point when you believe you are ready to take the leap, let me know.  I work with clients from outside my area, Mississippi Gulf Coast on a regular basis.  I am originally from CA and relocated here in part due to the great investment opportunities.

Mohammed Rahman · Answer

Hey @Mohammed Milord - lenders local to the area you're investing in will be a much better experience than others (even large branded banks).

Local lenders have a closer ear to their market and can sometimes approach a deal with a friendlier perspective since they have more knowledge of the area.

Chris Winslow · Answer

@Mohammed Milord

I would recommend selecting a lender that is local to the area that you will be investing in and here's why:

- Mainly they know the market there

- They can help guide you in determining if something is a deal

- They know specific rules in the area

- They know what works there and what others are doing

- -They can connect you with other investors and other contacts in the area