Who would u recommend as a lender? Bank, Broker, Direct Lender

Question

Hi everyone,

Newbie here, so I've been speaking to a few lenders. I live in Austin, TX. I want to buy a duplex, live on one side and rent the rest. I am aware that as soon as I provide all my info to a lender, they will pull credit and get the ball rolling and I cannot do this multiple times because it will affect my credit. The thing that is holding me back is that I am not sure who I should provide my info to: Bank, Broker, Direct Lender?  They all have pros and cons, and sound great when talking to them. So, I figured the best way to proceed was to ask experienced investors who they would choose or recommend. So here I am, any experience investors in the Austin area that would like to guide me towards what they think is best or send me towards their recommended Lender? Please feel free to reach out and shine a light for this newbie, I would really appreciate any assistance I get!  :)

Happy Investing to all!!

Melvin List · Answer

@Ivet Medrano the more you buy the more I believe a broker makes sense.

Dalton Osmanski · Answer

I would personally reach out to several local lenders who specialize in multiple unit dwellings because I've made the mistake of getting pre-approved from a lender who required 25% down on a fourplex because they considered it commercial property and other lenders who helped me get more money with a lower down payment. Keep shopping and good luck!

Ivet Medrano · Answer

Duly noted! Thank you ALL for the amazing advise and resources! I will definitely keep looking and carefully analyze all the options available.

Joe Kim · Answer

First off, there's some misinformation or information that can be misinterpreted in this post.  The governing body for mortgage and mortgage credit is the CFPB and the act protecting your credit is the Fair Credit Reporting Act.  My FICO although it explains it, its not explicit.  Mortgage, Auto, and Student Credit Inquires are all separate industries.  What they are saying is if you are shopping for a car you can take multiple inquires for AUTO and ONLY auto for it to count as one.   If you take a mortgage pull, auto loan pull, and student loan pull and or personal loan pull, and then a credit card pull, these ALL count as separate pulls.  They are NOT considered as one.  Now getting back to mortgage, you are allowed multiple pulls for mortgage in a 45 day period.  "You can shop around and get multiple preapprovals and official Loan Estimates. The impact on your credit is the same no matter how many lenders you consult, as long as the last credit check is within 45 days of the first credit check" - straight from the CFPB.  You can go to the website and research it yourself if you like.  And yes there are pros and cons to each one, but this is what I can tell you from my experience.  There are MANY aspects of a loan and if you are an A+ borrower who's got 800 fico median, 500K in w-2 income and no real liabilities on your credit history?  You can use anyone and your rates will be comparable and this is what I think isn't stressed enough in the mortgage loan industry.  Its like any other industry, you find an auto mechanic that you trust and is knowledgeable, and honest?  You stick to that guy.  He may be a few bucks more, but piece of mind and his ability to deliver and fix your car is worth the few bucks.  Why do stores like Macy's, Nordstroms, Bloomingdales, Neiman Marcus, exist?  Their mark up on clothing is insane? and to take that even further little boutique shops that SHOP at these very same stores and mark up their products even higher.  How do they exist?  Taste, service, the intangibles that make people pay 1000% more than what they might find at a high end outlet store.  If you find value in a 1500 dollar dress, why would you just RATE shop a mortgage which is far more complex than purchasing a dress, and the price of it is 100-10000 times more of a 1500 dollar dress?  But in a nut shell.  Brokerages can have the lowest rate but can be risky because they do not have their own underwriters.  They work with multiple wholesale banks that specialize in certain areas and because of this, funding times can be spotty.  They chase their own conditions for their processors who then when it goes to the bank are at the mercy of the underwriters who are not from the brokerage.  Furthermore each bank has their own overlays which most loan officers do not know.  Its very difficult to memorize 20 different bank's overlays for so many different scenarios.  Direct lenders have the ability to price match and usually have processors and underwriters in the same company.  Their communication tends to be better and if the Sh** hits the fan?  They are sometimes able to rush things through faster.  (and many times they are able to match broker rates if you have loan estimates) but their rates can be slightly higher.  Banks run into the same problems as brokerages but on a larger scale.  They do many more loans and might have processing on the east coast and underwriters on the west coast and things get delayed and buried.  So really? You want to find someone you really feel comfortable working with, still shop them.  This is America.  But bring them loan estimates (not quotes) and most direct lenders and brokerages will compete.  Depending on what bank they'll tell you thank you have a nice day.  Then at the end of the day work with someone who's knowledgeable and whom you can trust and will work hard to meet your expectations for your loan experience and make it as painless as possible.  This is most people's single largest purchase in their lifetime, why treat it like you're buying a certain name brand TV and check amazon and walmart and then your local best buy etc and take the lowest price, but then factor out warranty etc and you might pay 30 more for geek squad or something.  You need someone to guide you through the process more than just here's the rate + origination fees.

Aaron Gordy · Answer

@Ivet Medrano I talk to mortgage brokers exclusively. Be aware that brokers tend to specialize though in products/clients. Mortgage brokers tend to be aware of the best deals that banks offer. Some banks like Wells Fargo won't touch a construction loan, for example unless one has a ton of experience. Some banks keep their loans on their portfolio and some will sell in the secondary markets. I like to talk to mortgage brokers because they tend to know the best deals for my strategy and have a vested interest (big bucks) to make it happen.

Mitch Stanley · Answer

I want to clarify re, your statement - "within a short period of time are treated as a single inquiry."

One has 30 days to make inquiries re. Loan product(s) from as many  entities (  Mortgage Broker, Credit Union, Bank, ect)  as one chooses.

Personally, I would talk to as many companies as possible, My wife & I did this in the 1990's  & it was an EYE Opener in how we we treated!

Best Wishes for Success.

Kerry Boyle · Answer

Check out this website: http://www.myfico.com/credit-education/credit-chec...

TLDR: Multiple inquiries from auto, mortgage, or student loan lenders within a short period of time are treated as a single inquiry.

My best recommendation is to call many lenders and talk with them on the phone, figure out if they answer the phone, what their process is, if you have a good vibe, and how they handle tough questions regarding duplex/using one side as a rental to supplement income.

Narrow down to 2-4 lenders that work well and get a prelim quote from all of them in "a short period of time" and choose your favorite. Notify the others that you were prelim-quoted something less and chose to move forward with the other lender.

If you don't want to do any of that, call a broker. They have done it for you already and you pay a small fee to work with them. Some of the time, their rate may be better with the same bank than you would have had going direct to that bank.

Who would u recommend as a lender? Bank, Broker, Direct Lender

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