Lenders vs big banks

11 Replies

@Jennifer Aubry

Hey, so in my experience, larger banks, specifically chase and Wells Fargo were very competitive.

Small banks were great too and they offer portfolio loans!

Problem with all of these (in my experience): they don't loan to LLC's!

You have to transfer ownership to your LLC when attempting to refinance and/or after initial purchase. This was a big turn off for me.

I found lenders through BiggerPockets that much better suited my needs!

I do recommend contacting Camile case from Inclusive Properties. She was very competitive and offered exceptional customer service!

Good luck!

Here is what I see from personal experience as well as from banks that clients bring with them.

The worst: online lenders. Not being able to see a person when stuff hits the fan. Sometimes you can print your own pre-approval letter, no need to show any taxes or paystubs!

Often really bad: national brand retail banks. I have so many horror stories, you would not believe half of them, they seem made up. Its like stand up comendy, just not funny. Sometimes it works out, in particular the combo: perfect client + perfect house. Their process is streamlined for volume and they (succesfully) try to replace loan officers with apps. 

Hit or miss: mortgage brokers. An additional filter and delay in communication. My worst deal last year was with a mortgage broker, they stalled/forgot/delayed the closing 4 times - 11 weeks in total (VA loan). But sometimes they are good.

Best: small local banks or CU, regardless if you are getting a portfolio loand or a 30 year Freddy Mac. They understand the local market, will not insist on a termite letter for a Wisconsin property (we have snow and several feet of frost, but no termites), my client can see them in person, and if I have to, they will see me too

What Buyers usually do NOT consider when choosing a lender: how it makes your offer weaker or stronger in the eyes of the seller. If the seller has not been burnt by bad lenders, most listing agents have been. The lender you choose is a very important part of your team! And how your offer will be perceived!

When I am the listing agent and we have 3 offers, similar price and terms, one with Rocket Mortgage, one with Wells Fargo and one a local Milwaukee lender I know and I have worked with. And then my seller is not sure how to decide and is looking at me...

Now, have I had great smooth deals with all of these? Yes of course. What we measure is % of screw ups. Also, Realtors talk a lot, at least at Keller Williams - so I hear a lot what works and what doesn't!

Lastly: this is important: you have to speak to several lenders. (or ask a good agent who knows all the players) Banks are very different, loan officers are very different. The winning combo is a great loan officer and a great bank. One or the other does not get you across the finish line. 

Personal experience: last year I was shopping for a BLC and (a little to my surprise) have been turned down by several banks, some of them I have currently loans or accounts with, until one lender that I did not expect at all said: yes, of course and offered more than I was asking for. So you do have to put the work in!

Hi all,

My 2 cents based on personal experience only- I have heard the same thing about the negatives of using a big bank and have looked into local credit unions but I will say that I used US Bank for 2 recent deals and have been very happy with their process. The rates were competitive and the banker was very helpful and very transparent with me. The only downside is they are lacking E-sign docs (DocuSign, etc) abilities which was a little frustrating to me but overall, I would recommend them. I have no affiliation with them other than I have used them to finance two properties I've bought.

Dan

My suggestion would be to not short change yourself - check around with all the lenders in your area to see what programs they offer.  I will agree with the above comments that generally you get more stringent treatment with big banks - but you never know.  Each bank has their own "appetite" as far as what they like to lend on --- no rhyme or reason to it, its just their internal underwriting.  Lenders also often run "specials" as well regarding their programs.  I would suggest you make a few calls and get the lenders general overall programs - that will tell you alot as far as what they are aggressive in their lending practices, and what they tend to steer away from.  Once you get that info, you can better pick and choose who to pull an application with.

Good luck!

definitely ask around. There are some big banks that are good at mortgages, and others that aren’t.

A mortgage broker friend said to me “all banks have their sweet spots. Around her, TD is great at personal banking, lots of branches, always open, lots of ATMs, but bad at mortgages (which I experienced). Wells (at the time, maybe not anymore) is/was great at mortgages, etc.

Big or small, you need to find a bank that not only gives good rates, but doesn’t drag you through the wringer to get to closing... which some absolutely do.

@Jennifer Aubry , it all depends on what you need and/or want. Banks can be great, but they don't fit every situation.

For example... You find a property that needs rehab. Most banks won't touch this one. They like turn key. They want the property in good condition and fully rented. 

Sometimes you need a broker, hard money or private lender to acquire the property and get it fixed up. @Marcus Auerbach is definitely telling the truth about some of his bad experiences (I'm not just a lender; I buy as well). There are a lot of crappy lenders out there who only care about getting the loan and commissions. However, some of us really do care about your success. Unfortunately, we're harder to find.

As you try to figure out how to best acquire your next property, please don't discount any funding source. Learn them all and how each one applies to your situation and property. Sometimes one is better than another. Sometimes, you need to use a layered approach to get what you want. Every deal is different. There is no such thing as a one size fits all. If you approach every problem with a hammer, you'll only be effective occasionally. Flexibility and a good team are important.

Good luck.

Originally posted by @Jennifer Aubry :

I am interested in purchasing my 2nd property. Preferably a multi fam unit. What are the pros and cons of pulling an application with a larger bank versus an independent lender?

 I have often seen big banks messing up deals because they are not used to investment properties. I know this is not always the case, just my personal experience. One time we made it to the closing table and it had to all be redone because they had the paperwork set up for an owner-occupant.

Another time I had an appraiser do the inspections as if it were FHA, but it was supposed to be conventional. The lender told the appraiser it was FHA because they is what they often saw.

Just to follow up on what @Jeff Cichocki said, it can even come down to your specific loan officer at the lender. The best thing you can do is build a relationship with a good loan officer who will look out for your best interests rather than the specific transaction. It's very possible you encounter a good loan officer at a good branch of a big bank and have a better experience than at a smaller lender and vice versa.

@Jennifer Aubry more important than whether they are a large bank or a small local vendor is how much they work with investors and who you are working with. A Loan Officer or Mortgage Broker that doesn't work with investors is not going to be familiar with the underwriting guidelines for investor loans which can make the transaction more difficult.