Portland, OR · Member since 2019 · 24 posts · 3 votes
I’m looking to purchase my first investment property in the next few months, 2 to 4 units and will live in one for 1 to 2 years. I’ve spoken with a few lenders at this point and have gotten one preapproval and another was just submitted. I had a few questions I’m hoping I can get some advice on. I’m a newbie but super excited about investing in RE.
1. Is it bad to go with a lender that is out of state? I live in Oregon and a lender from California recently reached out to me.
2. What aspects of a loan should one shop around for? I understand that the interest rate and fees are crucial but is there anything else? Also, what specific fees can be negotiable? I’ve read some lenders may give a little to cover closing costs? I’ll be doing a 30 yr fixed.
3. I don’t want to disappoint lenders who I might not proceed with. Any tips on that?
Hi @Wa Chan, and congrats on taking the next steps toward a house hack! It is definitely best to go with a local lender who understands the local market and can tailor a loan solution to best meet your needs. Please feel free to shoot me a message if you have further questions about lending details, I am happy to help!
Congratulations on getting started! It's very exciting. First let's clarify a couple terms for you. From a lender's perspective, multifamily is anything 5 units and over. You need one type of loan for 1-4 units, and a completely different type of loan for 5 units and up. Once you make the shift to commercial, ie 5 units and up, the income of the property becomes the main thing the lender looks at, rather than your personal income.
For now, getting started, if you are going to live in the property and it has 4 units or fewer, then you can use any home mortgage broker. Now be aware that if you are going to live in the property, you need one type of loan, and will be working with a home mortgage broker. If you are going to purchase a property and hold it for investment purposes (ie NOT going to live there), then you need another type of loan. And when you get into the larger properties, 5 units or more, then you will need a different sort of lender entirely.
Home mortgage brokers (what you need right now) tend to be licensed in only one particular geographic area. I would recommend staying with a local home mortgage person for the property you have described.
Now, I am a commercial loan broker and I work with investment lenders who can operate in all 50 states, so those lenders do exist as well. Once you are buying property and not living there, you will probably start to work with lenders who have a larger geographic footprint.
Be VERY careful when you are "shopping". Each lender that you talk to is going to run your credit, and if you "shop" with multiple lenders, you may end up getting worse terms, because you've damaged your credit a bit by the time you get to actually funding a loan. It is better to work with a mortgage broker, because a broker can shop the loan for you, without it damaging your credit. Look for home mortgage brokers in your area that have good reviews, or come highly recommended, and let them do the shopping.
And for the answer to your third point, the above paragraph applies as well. Let a broker do the shopping for you. It protects your credit, and brokers have relationships with more lenders than you can find on your own. Look for a good broker in your area and go from there.
Hi @Wa Chan, and congrats on taking the next steps toward a house hack! It is definitely best to go with a local lender who understands the local market and can tailor a loan solution to best meet your needs. Please feel free to shoot me a message if you have further questions about lending details, I am happy to help!
I don't believe its bad to work with a lender from out of state, as I have worked with many clients all over the country, the key is quick and open communication, you should get the feeling they are out for your best interet,keeping you up to date throughout the process. Trust but verify, verify. Would be great to talk with someone that has already worked with that lender.
Also research how much time you will spend with the paperwork, are they going to ask you to verify your blood type, its a joke but some lenders will bombard with never ending paperwork requests. It can be stressful and time consuming, and in my opinion time is priceless. We try to get all the docs needed within 72 hrs so we can help close within 21 days. Staying ahead of the system so you can move on to the next deal.