Are local banks still worth talking to?

Question

I know a lot of investors have moved toward DSCR and private lending over the last few years, that said, I still meet investors who swear by local community banks. Anyone still getting good terms from local banks?

Colt James Hazell · Answer

I used to swear by my local credit unions and lenders. Lately, it has been difficult to get reasonable funding for multi-family deals. Single-family, straightforward deals, even duplexes, have been fine. However, for anything 3+ units, I have been finding better results with a few national lender partners I have worked with. I have a few lenders who are national, that I have developed a strong relationship with, and have ben great.

Mike Grudzien · Answer

I like local relationships.  My credit union is awesome and has 3 of my mortgages.

Stacy Raskin · Answer

Local banks and credit unions can be great for conventional loans that are owner occupy properties. They can be competitive on rates and terms. What I hear from clients, is that they are not competitive on investment property lending such as DSCR loans for 1-4 or 5-8 unit programs or for commercial property loans for more than 8 unit properties.

On DSCR loans specifically, local banks and credit unions will generally have shorter loan terms sometimes with a balloon payment, higher required DSCR ratio so a minimum DSCR 1.2 ratio versus a DSCR 1 ratio for a mortgage broker or lender that specializes in DSCR loans. There are also specialized DSCR loan programs that will go below a DSCR 1 ratio.

Mortgage brokers and lenders who specialize in DSCR loans can often offer better rates, higher LTVs, longer loan terms (30 year fixed) and specialized products such as for properties that are short term rentals (STR)s.

Brook Janis · Answer

Traditional banks definitely have an advantage when it comes to interest rates, which is why many investors start there. What I commonly see is investors using conventional financing as long as they can because it typically offers the lowest cost of capital. However, as they continue to grow their portfolios, they often run into limitations such as debt-to-income ratios, loan count restrictions, seasoning requirements, or stricter underwriting guidelines.

At that point, many investors begin transitioning to DSCR financing because it allows them to qualify based primarily on the property's cash flow rather than their personal income. While the rates may be slightly higher than traditional financing, the flexibility, scalability, and ability to continue acquiring properties often outweigh the rate difference. As a broker, I've worked with investors who use both strategies simultaneously—keeping conventional loans where possible while leveraging DSCR loans to continue expanding their portfolios without being constrained by traditional lending requirements.