Getting a loan today usually requires a little more time and effort. If you have refinanced or purchased property elsewhere over the last few years then you are familiar with this process. You may want to use your home town lender because they already have your paperwork or they are a friend. The unique aspects of getting a loan on OBX property may be worth reconsidering your decision. Here are some reasons why you should use an Outer Banks lender.
Outer Banks lenders are familiar with issues like flood zones. Just about the entire Outer Banks is in some type of flood zone. When some out of town lenders discover the property you are considering is in a flood zone they make a decision not to lend. They may do that without fully understanding the minimal risk and/or ways to insure against the risk.
Investment Versus Second Home Loans
Frequently an out of town lender treats vacation rental homes as investment property. Loans for investment property (like a year round rental home or an apartment building), have higher interest rates and higher down payments. Local lenders realize that the vacation rental homeowner has control over the property. Therefore, it is eligible for the more favorable second home loan programs. When buying a vacation rental home, a Vacation Rental Addendum must be attached to the contract. This often causes out of town lenders to designate your loan as an investment loan even though you control when the house is rented. Use an Outer Banks lender and eliminate this issue.
When appraisers are busy they can pick and choose which lenders to help. That happens in a busy market. Appraisers usually give local lenders priority since they know they’ll get more business later from that local lender. It’s surprising how often an appraisal won’t be pick up from an out of town lender until they are offered a heavily inflated fee. Your lender has a third party who hires the appraiser. A local lender can’t choose a specific appraiser but if he knows one won’t work for a specific property then he can ask for another. An out of town lender will have no idea if the appraiser is good for that property or not.
Here is a mortgage calculator on-line to help you determine monthly payments. You’ll also need someone who can estimate taxes and insurance. These expenses are almost always included in today’s mortgage payments and must be known to qualify for a loan. Lenders from out of the area will not be familiar with these costs here. Taxes here are typically lower than most metropolitan areas but insurance is a little more expensive. Being able to quickly ball park these expenses will help you make a much better buying decision down the road.
Perception of Offer
Of course your offer is going to look better if a pre-qualification or pre-approval letter is submitted with the offer. Experienced listing agents are usually wary of out of town lenders for the reasons listed above. Most of them had transactions fail because an out of town lender fell into one of those pitfalls. A seller may be less negotiable or require some non-refundable money up front if you use an out of town lender. Have your offer presented in the best light possible by providing a pre-approval letter from a local lender.
Almost every loan requires more than just a little good communication between the lender and the Realtor. There’s less of a incentive for an out of town lender to communicate with a local Realtor. They will likely not receive any more business from your Outer Banks Realtor. Local lenders know if they don’t communicate they may get a bad reputation with local agents who they rely on for future business. As a result, Outer Banks Realtors have found local lenders to be generally more responsive.
If you use an Outer Banks lender, then chances are good they’ll save you time, effort and possibly some money.