Local vs National

[Clayton Silva]

I see a lot of people say they want to go local, and while I understand the sentiment, one of the biggest myths I see perpetuated in lending, or insurance, or appraisers, etc. is that local is better.  There are definitely pros and cons to each so I figured I would just lay out a few benefits and personal thoughts: 

Small banks/brokerages:

Pros:

- Some regional knowledge of the market

- Possibility of more creative lending guidelines with bank specific programs

- Sometimes they have competitive rates for their area

Cons: 

- weak balance sheet (more strict on some guidelines, no wiggle room, inability to be flexible or grant exceptions because they cannot afford to hold less than perfect loans)

- Can't scale with clients to different markets

- Usually limits exposure to individual investors (they don't want one investor to be too big of a portion of their balance sheet)

- Lack of experience with multiple solutions (tend to have 2 or 3 loan products they sell and are too niche to provide tailored solutions)

Large banks/brokerages:

Pros:

- Large compliance departments that understand individual market guidelines (typically each state has specific lending guidelines that augment the national baseline)

- Ability to scale into multiple markets with same lender (licensed in many states)

- Impossible for individual investors to "outgrow" a large bank's balance sheet (not concerned with one investor's concentration)

- More lending solutions available for different scenarios

- Often comparable or better rates given the game is volume based

Cons:

- Can be more difficult to get fast responses if the bank/brokerage does not have good follow up systems in place (or if the underwriting/processing staff gets overwhelmed)

- Bad large banks can feel less like a relationship and more like a cog in a factory (less personal)

Overall, I have worked from both and worked with both as a loan officer, branch manager, and as an investor/client myself.  I have found myself defaulting toward larger, national banks/brokerages because of their resources, product offerings, and potential.  

Feel free to share your experiences!