Local bank versus online lender?

[Peter Beckwith]

I keep hearing real estate investors recommend going to a local bank to get a loan. Has anyone had success using any online lenders?

[Jason Wray]

Peter,

Local banks are good if your doing an easy cookie cutter loan or what they call "A" paper.  The problem is most local banks are limited to funding certain deals and have strict "Overlays" and guide lines.  When you go online you can look at what the bank/lender offers and an idea of rates.  For example when a borrower wants to buy an investment property the rules/guide lines change.  They carry tougher credit risk requirements such as higher credit score thresholds and reserve requirements.  They also look more carefully at landlord experience depending on the number of units and loan size.

Typically you want to look for a "Fully Delegated" bank/lender who underwrites their own loans and is a "Direct Endorser" or Full eagle.  Just illustrates that the bank/lender approves their own loan files and does not need another investor to clear or approve the file.  This is where the "Online" bank/lender can be a good fit with less hassle.