What should I be looking for when choosing a lendor?

Question

Carlos Valencia · Answer

Hello Candice,

Things you should be looking when choosing a lender will depend on what your RE investing goals are. If your looking to invest I would look for a Lender that is an investor as well. This way you know that they themselves have experience on both ends of the process and can help guide you more with better mortgage planning to navigate the market your trying to invest in. An experienced investor lender should be more familiar with Investor guidelines for financing. This will give you confidence that your working with the correct people as they will speak your language.

@Albert Bui @Matthew Kwan

David Truong · Answer

Here are some great things to keep in mind when choosing a lender, I got this directly from Craig Curelop's book "House Hacking Strategy."

• 1. What kind of property types do you lend on? Do you lend on small multifamily properties (two to four units)?You will want to find a lender that lends on multifamily property if you are house hacking a two- to four-unit property.
• You will want to find a lender that lends on multifamily property if you are house hacking a two- to four-unit property.
• 2. What town or area do you lend in?Find a lender that lends in your area.
• Find a lender that lends in your area.
• 3. Do you take into consideration the condition of the property? What are the maximum repair costs?This depends on what you are looking to do. If you have a massive rehab, or the property is borderline livable, you will want to know whether you can purchase it with your lender.
• This depends on what you are looking to do. If you have a massive rehab, or the property is borderline livable, you will want to know whether you can purchase it with your lender.
• 4. Do you have a maximum or minimum loan amount for a property?This will help you decide on what you can (or cannot) buy.
• This will help you decide on what you can (or cannot) buy.
• 5. What is the maximum/ typical debt-to-income ratio you wouldlend to? Do you focus on front-end or back-end DTIIf you have student loans, a car loan, or credit card debt, you will he more likely to receive the loan if they focus on front-end DTI because it only spotlights the property. However, I have found that it is most common for lenders to focus on back-end DTI, which takes into account all debt in your name. However, be sure to talk to your lender. Depending on the loan type you receive, some of your projected rent may counter the debt.
• If you have student loans, a car loan, or credit card debt, you will he more likely to receive the loan if they focus on front-end DTI because it only spotlights the property. However, I have found that it is most common for lenders to focus on back-end DTI, which takes into account all debt in your name. However, be sure to talk to your lender. Depending on the loan type you receive, some of your projected rent may counter the debt.
• 6. What is your loan-to-value (LTV) requirement? What is the maxi-mum/typical LTV you lend on? Is it the same for FHA loans?The higher LIV that is allowed, the more likely you will be able to qualify for a loan. At this time, most lenders require 75 to 80 percent for conventional investments and 90 to 96.5 percent for owner-occupied.
• The higher LIV that is allowed, the more likely you will be able to qualify for a loan. At this time, most lenders require 75 to 80 percent for conventional investments and 90 to 96.5 percent for owner-occupied.
• 7. What credit score do you use for your evaluation, and is it the same for conventional and FHA loans?You will want to know whether your credit score will satisfy your lender's requirements.
• You will want to know whether your credit score will satisfy your lender's requirements.
• 8, My intentions are to rent part of the property out and pay for the mortgage that way. Do you take that into consideration?If they count future rents toward your mortgage, this will help you qualify for a larger property. I would go with a lender who includes future rent toward the mortgage.
• If they count future rents toward your mortgage, this will help you qualify for a larger property. I would go with a lender who includes future rent toward the mortgage.
• 9. I'm relatively new to real estate investing. Does lack of experience count against me in any way?Most conventional lenders do not use lack of experience as a way to penalize you, but always double check.
• Most conventional lenders do not use lack of experience as a way to penalize you, but always double check.
• 10. Do I need any cash reserves to qualify for the mortgage?You should always have cash reserves because things go wrong and you do not want to lose your shirt. However, you do not need a lender to tell you what they should or should not be.
• You should always have cash reserves because things go wrong and you do not want to lose your shirt. However, you do not need a lender to tell you what they should or should not be.
• 11. Are there any compensating factors? For example, if I have a great credit score, but my debt to income is slightly above your mark, could we work something out?If you meet one criterion, but barely meet the other, you are going to want to see if the lender will be flexible.
• If you meet one criterion, but barely meet the other, you are going to want to see if the lender will be flexible.
• 12. I want to make the loan approval process as easy as possible for the both of us. What do you need from me so I can get it to you all at once?The easier you make it for the lender, the more likely it is that they will want to continue working with you, give you the best possible rate, and actually close the deal. Your lender is your friend. Make it easy for them.
• The easier you make it for the lender, the more likely it is that they will want to continue working with you, give you the best possible rate, and actually close the deal. Your lender is your friend. Make it easy for them.

• You will want to find a lender that lends on multifamily property if you are house hacking a two- to four-unit property.

• Find a lender that lends in your area.

• This depends on what you are looking to do. If you have a massive rehab, or the property is borderline livable, you will want to know whether you can purchase it with your lender.

• This will help you decide on what you can (or cannot) buy.

• If you have student loans, a car loan, or credit card debt, you will he more likely to receive the loan if they focus on front-end DTI because it only spotlights the property. However, I have found that it is most common for lenders to focus on back-end DTI, which takes into account all debt in your name. However, be sure to talk to your lender. Depending on the loan type you receive, some of your projected rent may counter the debt.

• The higher LIV that is allowed, the more likely you will be able to qualify for a loan. At this time, most lenders require 75 to 80 percent for conventional investments and 90 to 96.5 percent for owner-occupied.

• You will want to know whether your credit score will satisfy your lender's requirements.

• If they count future rents toward your mortgage, this will help you qualify for a larger property. I would go with a lender who includes future rent toward the mortgage.

• Most conventional lenders do not use lack of experience as a way to penalize you, but always double check.

• You should always have cash reserves because things go wrong and you do not want to lose your shirt. However, you do not need a lender to tell you what they should or should not be.

• If you meet one criterion, but barely meet the other, you are going to want to see if the lender will be flexible.

• The easier you make it for the lender, the more likely it is that they will want to continue working with you, give you the best possible rate, and actually close the deal. Your lender is your friend. Make it easy for them.

I am also new to real estate and have been consuming material like crazy these past month so hopefully this helps. Feel free to give me a follow on here, I'd love to keep in contact with another investor!

Eliott Elias · Answer

Most lenders offer the same products. What differentiates them? Communication and transparency. Work with those who play the long game.

Randall Alan · Answer

@Candice Ravin WoodfinThere are definitely things that differentiate one lender from another… but fewer of those are on the financial side.  I’m speaking mostly about mortgage brokers who represent multiple lenders though.

One thing up front you want to avoid is any company that wants thousands of dollars up front to get you a loan.  I have found those types of companies to be somewhat scammy.  They get there money up front and then don’t necessarily care if you get your loan because they already have their payment,   But after that: Obviously rates will vary between lenders… but they are typically pretty tight with each other.  Brokers (as I understand it) make some money on the back side of loan rates as well.  But after the rate itself you want to look at the fees THEY actually control… which really aren’t too many… but many have a processing fee which is sort of just extra profit for them, but is meant to offset the cost of processing the loan.  After many loans with the same lender ours waives that fee for us.  They also frequently pick certain vendors which sone of those you are allowed to shop for (survey, etc).  What title company that is used can also be a factor as they have different rates as well. My experience has been that lawyers that do title work charge more than pure title companies… so pay attention to who is doing the closing.  But the majority of other fees are usually fixed… title insurance, doc stamps, etc.  What is more of an unknown until you have been through the process a few times is just how well, and how fast a particular company takes care of you.  Is the loan officer juggling 15 loans at once and is overloaded, and such.  I think of that as the personality of the firm… and it’s hard to shop for that but you can go by referrals from others you know in the business. hope it helps!Randy

What should I be looking for when choosing a lendor?

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