Local vs National
I see a lot of people say they want to go local, and while I understand the sentiment, one of the biggest myths I see perpetuated in lending, or insurance, or appraisers, etc. is that local is better. There are definitely pros and cons to each so I figured I would just lay out a few benefits and personal thoughts:
Small banks/brokerages:
Pros:
- Some regional knowledge of the market
- Possibility of more creative lending guidelines with bank specific programs
- Sometimes they have competitive rates for their area
Cons:
- weak balance sheet (more strict on some guidelines, no wiggle room, inability to be flexible or grant exceptions because they cannot afford to hold less than perfect loans)
- Can't scale with clients to different markets
- Usually limits exposure to individual investors (they don't want one investor to be too big of a portion of their balance sheet)
- Lack of experience with multiple solutions (tend to have 2 or 3 loan products they sell and are too niche to provide tailored solutions)
Large banks/brokerages:
Pros:
- Large compliance departments that understand individual market guidelines (typically each state has specific lending guidelines that augment the national baseline)
- Ability to scale into multiple markets with same lender (licensed in many states)
- Impossible for individual investors to "outgrow" a large bank's balance sheet (not concerned with one investor's concentration)
- More lending solutions available for different scenarios
- Often comparable or better rates given the game is volume based
Cons:
- Can be more difficult to get fast responses if the bank/brokerage does not have good follow up systems in place (or if the underwriting/processing staff gets overwhelmed)
- Bad large banks can feel less like a relationship and more like a cog in a factory (less personal)
Overall, I have worked from both and worked with both as a loan officer, branch manager, and as an investor/client myself. I have found myself defaulting toward larger, national banks/brokerages because of their resources, product offerings, and potential.
Feel free to share your experiences!