Shop lenders or stick with one and build a relationship?

Question

I'm looking to purchase a property and I've trying to figure out what's the best course of action in regards to lending. I've heard advice from both sides - Some people I've talked to say that you should always shop around to get the best rates. Every lender is different and therefore by looking around you can find best product for your situation. Others I've talked to say that instead of shopping around it's best to stay with one lender and build a relationship. Over time the relationship and trust will grow, borrowing will become easier and eventually they'll be asking you if they can lend you more money!

I don't know who's right and I'm hoping to glean some wisdom from the biggerpockets community on this one. Thank you!

I don't know who's right and I'm hoping to glean some wisdom from the biggerpockets community on this one. Thank you!

Mike Wood · Answer

@Grant Berthold I am in the camp of building a relationship with your local bank.  I am working on my third construction loan with the same bank, and they are getting to know me.  It makes things easy, and they in turn help me out and look out for my best interests.  Most banks offer the same rates on conventional financing, so it really only the fees and points that could be different.

Carol D. · Answer

Grant,

I've used 30 year mortgages to finance my investment properties.  You can use a mortgage broker and build a relationship with him/her.  But he/she will sell each mortgage to a different bank.  I think dealing with one bank could be risky - that is the Dave Ramsey story.  His primary lending bank was sold... when the new bank reviewed their loans they felt Dave's business was too risky and called his loans.  When other banks Dave worked with her about it, they too called their loans.  If you are looking for a business loan then building a relationship is probably going to be the best way to go and as you are faithful they will increase their credit with you.

CT

Dave Weis · Answer

I've used West Bank for about 10 years; they are fairly conservative but have been willing to work with me. A friend of mine uses Lincoln Savings Bank and has been happy with them.

I agree with the earlier comments to try and stick with one or two lenders so you can build a relationship with them. Being able to count on funding is more important than getting the "best deal".

Nada Mohamed · Answer

I would say shop around until you find one you feel is honest, looks out for your interest, and you have a generally good experience with - then build a relationship with him/her - even if their fees may be a little higher (hopefully not). The loan process can be so stressful, you want someone who will communicate with you, answer your calls and questions, is not impatient with you, and which you feel is looking out for you. Once you find that person - don't let go!

Nada

Daria B. · Answer

@Grant Berthold

Why not do both? Shopping around allows you to decide whether you would do business with that lender and in turn they can become a long term resource.

This is what I'm doing. I keep in touch with a lender that was recommended by my agent and who I used for my last purchase and we have become great communicators with one another. When I call she takes the time to listen and will get my requests like approval letters out to the agent when I am submitting a contract. But it's more than that, we actually talk about other things like rates, family, upcoming holiday time off, etc.

I'm still shopping around because that lender is not a broker or portfolio lender and I'd like to establish a relationship with both of those entities. In my quest for knowledge I did find a local broker and found out just what she offers and let her know that in the future I may call upon her to which she was more than grateful to reciprocate.

They are the people that I want to learn from so that I know what my options are.

My recent HELOC that I acquired at yet another local lender has a contact that she used when her parents were buying and this person was very good at thinking "outside the box". All this came about just by me talking to them and we hit it off so well that they are willing to give me contacts and leads for me to check out.

I'm actually finding that I love to talk to people that love to talk about their business and help me learn. This is a fear that I am quickly overcoming since I'm more of an introvert. Apparently not with RE as I find it very rewarding to get help and pass that help on to others.

Good luck.

Grant Berthold · Answer

Thanks for all the replies! So the similarities I'm seeing in these posts is that it's advantageous to have a relationship with a lender for business/commercial/construction loans, but for conventional financing it's best to shop around. Situations can change but that's the general idea. Does that seem like a correct assessment?

Bryan O. · Answer

It seems like if you are doing traditional residential loans that there isn't much point in building those relationships. Get a good deal and continue. If you plan to use the commercial side of the house then relationship becomes quite an important aspect because they have much more flexibility to "believe in you." And I would agree with @Norm Bessette that there is less risk if you can have relationships with more than one lender.

Norm Bessette · Answer

To give you a slightly different perspective Grant, I'm in Southeast Mass. and have been buying and hold in multis of commercial size 5+ units.  I started with one local commercial lender for my first 4 deals and built a good relationship and proven ability.  Yes they will look to lend you money easily as time goes on but I also felt my business might be starting to get taken for granted.  At that time I did not shop so I could not confirm it.  Since then I have shopped and found another commercial lender with slightly less down and longer amortization all helping cash flow and growth.

Now I play both of them since I have done business with both and each has a few particulars that work better or worse on any given deal.  Don't forget that at least at the local commercial level most of these guys and banks know each other so if you get a good relationship (demonstrated by multiple notes with one guy) they see it and it is a confidence level for the second guy as well.

I guess my long winded bottom line is develop a relationship somewhere for the first few then expand out.  Competition for your business will become greater if you prove you are good.

Jeff B. · Answer

This is the mantra of hard money, but frequently lenders what to see the ownership/1td to get some seasoning and the hold over can kill the profits of the deal.

IMO,  Caveat Emptor

Anthony Stephenson · Answer

Buy for cash using somebody else money. Do the rental rehab. Put a renter in there. Shop for a refi. Pay your private lender back a pre-negotiated fee for the use of their money. Repeat process:)

Shop lenders or stick with one and build a relationship?

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