Brokerage firm or bank for loans

[Sanjoy V.]

Is it best to go with a brokerage firm or shop around with any local smaller banks for better rates for a multifamily loan 4-5 million?

[Marty Johnston]

@Sanjoy V. I would echo what the other two have already said, but let me perhaps also elaborate a little on what we make known to our borrowers up front. First - how "bankable" are you as a borrower? 700+ FICO? Experience in this kind of MF acquisition? What kind of rates are you expecting? Typically we recognize that if a borrower is very bankable and they have the ability to walk into their local or regional bank, get a 3.75-4.25% interest rate, 75-80% LTV and 1 pt, than they may be best off simply going this route because as a broker, we know that we won't be able to 'beat' that per-say but perhaps simply match what they've already been quoted. The difference being, if you can be direct to your local entity and by-pass the fees associated with utilizing a broker's services (no one works for free!), than it's likely that the borrower will simply go to their bank instead.

Where I really see the benefit in utilizing a broker's service is for a few reasons:
1) They don't have the time or desire to shop their loan themselves going to different lending institutions. A broker already has these relationships in place, readily available, and can get you answers very quickly, sometimes same day from a lender they already know will offer certain rates, terms on this kind of asset and borrower.

2) The borrower is not as 'bank-able' as the bank might prefer. In this scenario, borrowers may have to leverage a broker's relationships to get their deal financed. Also, a lot of borrowers ONLY know of their local banks, but most often aren't sure how to tap into the secondary market lenders. This is where most brokers focus their niche since that is the majority of investors out there because their A) DTI is too high B) Credit is affected from too many Hard Credit pulls from lending on numerous properties C) Need Hard Money / Bridge loan for acquisition which some or most banks won't offer

3) A borrower simply wants to utilize a broker to simplify the financing side of their business, being more hands off on views a (good) broker as more of a "business partner" to have someone they trust getting them financing for their deals and trusting that they're getting the best rates available to them.

Just my $0.02! But hope this helps.
Best of Luck