Are the Hard Money Lenders You Use Local or National?

Question

I live in Hamblen County TN with a population of 65k. I haven't found any local hard money lenders yet so I'm considering my only option may be to extend my search radius to Knoxville or Nashville (~100 miles away). Preferably, I would like to work with a hard money lender whom I can meet in person whenever I want, who actually have knowledge in my local market I could use. What is the market like for hard money lenders? Do the majority lend nation wide or state wide? Is it normal to apply for a hard money loan whose base is quite far from your local market?

Who are your hard money lenders, and how close are they to your local market? If they are within your local market, how valuable would you say there knowledge of the local market is in closing the deals or even helping you find future deals by linking you with other investors or cash buyers?

Van Blackman · Answer

@Tim Ivory

Good evening, sir!

Great question.

In all honesty, I think it would be best to develop a relationship with a lender that is local, if you can. There are plenty of great nationwide HML's out there, but no one is going to KNOW your market like someone who is FROM your market, or at the very least from a NEIGHBORING market.

My concern with out-of-state-lenders arises during the underwriting process. What happens if the lender is not familiar with the area you're trying to purchase in? I buy and sell investment properties in Chicago. Some of my clients have used lenders from California. Not a red flag by any means, but certainly not IDEAL. This is why: if your appraiser is having a bad day, and he or she comes up a little light on a property's resale value, the out-of-state lender is going to take that appraisal as gospel. The lender, then, could even tell the borrower that they're not going to do the deal. However, a local lender will be able to tell you IN A SECOND what they think of that particular property because they most likely have lended (or at least have been asked to lend) in exactly the same neighborhood you're trying to purchase in. Your local lender will have much more flexibility in their underwriting abilities on your deals due to their market knowledge and experience. Which, in turn, can only be positive for the borrower.

Another reason to work with someone local if you can: familiarity & relationship. Do you really think the guy in California who's seen your name on his computer screen a few times and had a couple telephone conversations with you is really going to be there for you if you need something on a Sunday night? Probably not. What about the guy who's from your market, who's driven to meet you face-to-face (several times), had lunch with you, and golfs with your dad every month? If something happened and you NEEDED to reach THAT guy, you'd get some answers ASAP, right? At least it's more likely.

You should talk to several lenders. In-state. Out-of-state. All of the above. But try to spend most of time with people in, or just immediately outside of, your county. Having a local contact will be invaluable, with any facet of real estate. No matter if it's a lender, an attorney, a broker, etc. No one knows your market like the people within your market.

Hope this helps!

Jay Hinrichs · Answer

Keep in mind that in TN you need a specific state license to lend money there.. ... there is a big player in Memphis there name escapes me.. but most of the big national lenders like lendinghome or Lima will be compliant.. with state laws.

little guys probably not.. and be on the look out for out and out scammers..

Kerry Boyle · Answer

This is a great post, particularly the last paragraph.

I work for a national lender and the appraisal is a big factor - I rely on you to know your values will hit and vet them with the appraisal. I think every lender has seen his/her share of bad appraisals - when we just don't agree, but they still end up being limiting factors.

Ultimately, having a local and a national lender at the ready is best practice. National lenders may provide better rates/LTVs, but local will have the flexibility that you will definitely need if you plan on doing multiple deals a year.

**Edit: I just had to come back and say that not all national lenders are slamming numbers behind a desk. A lot of our LOs have personally met their repeat clients, flying out to their area. Nearly every LO in my company would work a Sunday if it meant getting another closed loan.

Dan Beaulieu · Answer

Big National guys pull credit, and local ones will not. Just depends. One of the big ones, and I wont name names, will actually pull your credit first before even talking to you on the phone. Then they might tell you that your deal doesn't qualify for xx reason, and you're left with nothing but a hard inquiry on your credit and a sad face emoji.

Tae C. · Answer

@Tim Ivory

I used a national company for my flip (gone nightmarishly bad - due to the contractor and other people involved, not the fault of the HML) in Indianapolis and a local Cincinnati company for my Cincinnati flip (who I would never use again due to extremely high rates and other potential concerns).  Assuming I do more projects here locally in Knoxville in the future, I have a couple local bank options I know of that I would utilize that have much better rates than typical hard money lenders, so you may want to see if there is a local bank with a commercial department that would might be able to provide for your funding needs.

Dan Beaulieu · Answer

Yes, 100% of the time if you are bankable and have the time to close and want to put that much down, that is the way to go! Valid point indeed.

Tim Ivory · Answer

@Tae C.

Sure. I'd appreciate that very much.

Tae C. · Answer

@Tim Ivory

The loans are originated and underwritten by the commercial department, however they can be used for residential and commercial properties/projects alike. I can direct message you a couple banks. Not sure if they’ll finance out in Morristown.

George Despotopoulos · Answer

@Tim Ivory

Some HML do pull your credit at the outset. Others wait until you're pre-qualified and they're pretty sure that they can close  your loan (barring any significant unforeseen circumstances that pop up during underwriting). The inquiries will show on your report.

Are the Hard Money Lenders You Use Local or National?

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