Loan Information Needed on Out of State Investing

[Anne Christensen]

Hello,

I am most likely going to be investing out of state but I have selected which state just yet.  I'm considering several states.  Is it best to obtain a loan from a local lender or a lender in my own state, where I will NOT be investing?  I am assuming I should only apply for one loan approval since pulling my credit score/history will lower my credit number.  Any advice appreciated. 

[Patrick Roberts]

If the lender is licensed in the state you're buying in, then they can do the loan. If it's a commercial/DSCR loan, then licensing may not be required. The biggest advantage of using someone local to where you're buying is that they will understand taxes, insurance, and similar items very well when it comes to DTI/DSCR calculations and payment quotes, and they will likely have a local network of service providers for ancillary services (survey, inspections, etc). If you have a lender you trust and work with regularly, it wouldnt hurt to have a conversation about it with them. Lending is all about relationships, especially when it comes to exceptions and tricky deals.

It generally doesnt hurt to interview lenders and apply with 2-3 of them at the same time. Your credit will only be hit once if the apps are all within a couple weeks, and this will give you the opportunity to make an apples to apples comparison. Just keep in mind that it's not all about rate and fees - there is a considerable knowledge and expertise component that should be considered as well. Sometimes the cheapest option isnt the best option, and most over-the-phone rate quotes (saying "I have 800 credit and 20% down, what's your best rate?") are completely worthless. 

[Anne Christensen]

great advice! thank you so much! 

[Erik Estrada]

Quote from @Anne Christensen:

Hello,

I am most likely going to be investing out of state but I have selected which state just yet.  I'm considering several states.  Is it best to obtain a loan from a local lender or a lender in my own state, where I will NOT be investing?  I am assuming I should only apply for one loan approval since pulling my credit score/history will lower my credit number.  Any advice appreciated. 

 I think you should look at it as, which lender will provide me with a good service  and can close at a reasonable cost? Talk to both and compare.  

[Devin Peterson]

Quote from @Anne Christensen:

Hello,

I am most likely going to be investing out of state but I have selected which state just yet.  I'm considering several states.  Is it best to obtain a loan from a local lender or a lender in my own state, where I will NOT be investing?  I am assuming I should only apply for one loan approval since pulling my credit score/history will lower my credit number.  Any advice appreciated. 

If what you need is an investment-focused lender or broker then it does not necessarily matter in-state vs. out-of-state. You will find that even some of the most helpful are nationally licensed or may not be local. I recommend just getting to work with someone who has a strong knowledge of the investment space and can connect you with multiple options.

[Robin Simon]

Quote from @Anne Christensen:

Hello,

I am most likely going to be investing out of state but I have selected which state just yet.  I'm considering several states.  Is it best to obtain a loan from a local lender or a lender in my own state, where I will NOT be investing?  I am assuming I should only apply for one loan approval since pulling my credit score/history will lower my credit number.  Any advice appreciated. 

 Best bet is likely (not absolute - everyone's situation is different) is to look at a national lender or broker that has options in lots of states - its a great development versus 20 odd years ago, with technology, internet, places like this - can have access to many more options than before (local broker or lender thats it)

[Derek Brickley]

Hey Anne!  Yep for one especially in the early stages a hard credit pull would not be useful, just have them do soft checks for the time being and opt out of credit solicitation: www.optoutprescreen.com 

I could be biased... that said typically working with one lender than can help regardless of where you're looking and having a relationship with that will provide the easiest and most cost effective route long term.  Just as you will be out of state, as long as the lender has knowledge of at minimum the state level where you're looking that will be perfect.  Generally a "local" lender may just have more restrictions and even though they know the area, that's really what a great realtor and PM should be able to inform you on.

[Anne Christensen]

Thank you for the advice!

[Deborah Wodell]

Great question! When investing out of state, it’s not always necessary to go with a local lender. Many nationwide lenders can fund deals regardless of location and often have competitive terms. Local lenders might have specific insights into the market, but it really depends on the type of loan and property you’re pursuing.

As for your credit, applying to multiple lenders can result in hard inquiries, which could temporarily impact your score. To avoid this, it’s best to work with a broker who can shop around and present you with options from multiple lenders without multiple credit pulls.