Finding a Lender

[Chris DeHaan]

Inspired by a post I read by Jason the apprentice on TheBuyAndHoldGuys last night, I decided to submit my information on LendingTree in hopes of beginning the pre-approval process. All morning, I've been getting calls from potential lenders all over the country and I'm feeling in over my head a little. Is it normal to work with a lender from, say, North Carolina, when I'm located in California? Or is that going to be a total PITA?

Should I be working with a local mortgage broker instead? Or working directly with the lenders through a site like LendingTree?

Any words of experience would be greatly appreciated!

Background: I'm located in the Bay Area and looking to buy a SFH somewhere in the East Bay (Antioch/Brentwood) or Sacramento (lots of competition from hedge funds for 3/2's). I have about $30k saved up and a credit score of 760. This would be my first time buying a house ever (I rent my current townhome for way below market, so there's no motivation to go out and pay $600-800k for a house in my area).

[Ann Bellamy]

Chris DeHaan, I'm not much of an expert on conventional residential lending, but I will share my perspective:

1. Networking and relationships (such as those you build on Bigger Pockets, and even more importantly, those you build in the area local to you) can make the difference between stumbling around trying to build your real estate portfolio on your own, and having doors open and connections available to help you as you progress. Not having to reinvent the wheel can save big bucks and loads of time.

2. Sometimes paying a few bucks can save lots of money, headaches and time over free stuff you get on the internet. An example would be a free lease you get from a forms company. Later you find out that it is not compliant with laws in your state, and when you go to evict, you lose in court because of your lease.

Here's my recent experience with conventional financing.

I was seeking a refinance on my personal residence and a 4-unit held still in my personal name. I shopped around my network, and found a referral to someone who promised no closing costs and no origination fees, and his rates were marginally better than others. I spoke to another loan originator I had successfully used before and asked how that could be, considering that Fannie and Freddie loans are essentially commodities these days. His answer was they couldn't. They don't make enough off the loan to eat all of my costs and still pay their originators. So to my mind, I'd find out just before closing that somehow I didn't qualify for that program, or whatever, and either have to close with the higher rate, or have to start all over.

So I chose to close with the person who had taken good care of me through several previous loans. Every one talks about the horror stories of getting conventional financing these days especially when you are self employed. My process was effortless. I sent in a few documents, sent in some more backup documents, met the two appraisers, and closed with the rate I was promised and a minimum of fuss and effort. Totally worth the few dollars I spent on origination fees. I attribute the ease of closing to two factors:
a. I have my act together and give them everything they need, including an excellent credit score
b. They have their act together, know what they are doing, and take care of their customers

Believe me, I am cheap and normally shop my purchases to death. But tripping over a dollar to get to a dime is a lesson I've learned the hard way, many times.

I wouldn't use a company like Lending Tree, simply because it won't further my relationships with people who can help me. And you can't have a beer at a networking meeting with Lending Tree and hope to further a profitable relationship.