If we are investing in an out of state property is it possible to use a small bank in that particular town for a loan, or do we have to use a bank in the town we currently reside?
Yes you can use the out of state lender. Where are you looking?
@Darius Inge Yes, try the banks that are in the town of the property you're investing in and not where you reside.
I would ask first what kind of property, is it a SFR? Because that will make all the difference, where you go looking for a loan.