If you’re looking for money for REI, you may be surprised to know that you often have a better chance of approval at a community bank. Borrowers often try the “mega banks” first thinking that since they (theoretically) have more money to lend they will grant approval more easily. But that’s not always the case.
Instead, many community banks will lend money to locals, in particular, much more readily than will the larger banks. In fact, in December 2011, big banks approved a mere 9.7 percent of loan applications while small banks, those with less (often considerably less) than $10 billion in assets, approved over 47 percent of the applications received, their highest percentage of approvals ever. [1] And that trend continues.
The reasons for quicker approval at community banks has a lot to do with their desire to offer more personalized service. Typically smaller banks pride themselves on their ability to make their own lending decisions. And in so doing, they work much harder to keep their money within the community itself. Locating such an institution when you’re looking for a REI loan can dramatically improve your chance of approval from the outset.
Not only do smaller banks strive for higher approval ratings for local residents, they also work to provide additional services. Many small banks are focused on building long-lasting relationships with their customers. That being the case, they’re more apt to offer non-traditional mortgages that you won’t get from the big boys.
A few months back, customers who were outraged at the increasing fees charged by large banks, left in droves and took much of their business to smaller community banks. Sadly, the change helped shift only a minimum of the financial or lending power to local communities since the majority of funds still rests within the vaults of huge corporations. (In 2011, Bank of America’s deposits alone came to approximately $417 billion.) It did, however, make customers more aware of the benefits of doing business with a smaller bank, one with a staff who truly cared about them as individuals.
While community banks may not be able to compete with mega banks in the volume of loans they approve, it might still be your best option for quicker approval on a REI loan to try a smaller bank first. A loan officer in a smaller bank is much more likely to work with borrowers to help them gain approval, which isn’t always the case in a bank that handles a much higher number of loan applications every week. And community banks may charge lower rates and smaller fees with less frequent increases. This is all to your advantage if you’re a RE investor in need of funding.
[1] from biz2credit.com
