Buying my first property! How do I choose a lender for it?

Question

Hey! How do I go about choosing which lender to go with when it comes to real estate investing? Buy and hold BRRR is the strategy I am going with. I have $10k saved up at the moment and I have good credit.

Tracy Tippett · Answer

Hello David Maldonado,

I may be biased, but I cannot think of a good reason not to use a independent loan broker.  They are professionals in the lending space and can provide an advantageous level of access to lenders.  Typically professional loan brokerage firms will have access to several hundred lenders and an intense level of understanding of the market for the type of financing you wish to arrange.

Many firms employ or contract with highly experienced loan officers and/or experienced underwriters. The knowledge of the business that a firm brings to the table can often times offset the costs associated with working with a financing brokerage.  The advice and input you receive from such a firm is of great value in itself.

Be wary of firms requesting upfront fees.  Good brokers will spend time to assess your position and your goals.  Be ready to provide your financial data and documentation so the broker can properly assess your likely credit request outcome.

Good Luck and invest well.

Regards,

Tracy Tippett

TNT Funding Associates LLC

Michael Mahung · Answer

I would work with multiple lenders/brokers and see which one can give you the best rates and have the best programs.

Some lenders give grants for first time homebuyers to cover down payments and closings costs as well. Make each lender bid against each other until you have your winner

Chris Clasby · Answer

These are good tips especially regarding references and experience, but I have to take issue with the first one: saying that a Lender can control those things better than a Broker is rarely the case. I've worked as a lender and a broker, and speed has much more to do with the capacity of Underwriting and the quality of the LO who builds the file than it does with Lender control. In fact, a lot of direct lender shops will have a worse ratio of underwriters and closers to deals, and while a direct lender can't go elsewhere or do anything about that (except hire and train Underwriters...), a good Broker will know the turn times for a particular lender and go where things will get done more quickly. Funny story: I had a client come to me as a Broker to save a purchase deal that (WELL KNOWN DIRECT LENDER) had been working on for over a month without so much as a Conditional Approval. While the file was complex (Borrower owned several properties, 1031 was in play, and controlled several entities etc) I got it done and was able to save the escrow (with some help from the Agent!). About a week after the close of escrow my client called me and asked me to guess who had just called them. I had no idea but they, laughing, said "it was the LO from WELL KNOWN DIRECT LENDER with the initial approval!"

Jacob Amaro · Answer

Hey Juan,

I️ think one of the most important aspects of choosing a Lender is finding someone who will be honest with you. Far too many Lenders have been giving false promises to borrowers and ruining deals in contract. Our company has had a fair share of people coming to us 10 days into contract saying that their lender was unable to fulfill the promises they made.

Eliott Elias · Answer

Choose a lender that is investing in real estate as well. They can offer more creative products and help you brainstorm throughout the process

Robin Simon · Answer

I think using a mortgage broker is generally a good idea, but definitely more for the refinance portion, not necessarily the acquisition financing if you are getting a hard money loan.  Typically, a hard money or rehab lender will charge at least 2 points, and having to pay a broker on top of that usually gets expensive quick.  Brokers can be good however if you are refinancing into 30-year debt with a DSCR loan for example, since those are not nearly as fee-dependent

Chris Clasby · Answer

There are a few programs that will allow for a 15% down payment for an investment property. The trade off will be in the rate as you go to the higher loan-to-value, and of course that will affect cash flow of the property. Definitely can make sense especially when you're considering keeping money is reserve for maintenance or improvements, but the higher the LTV the higher the rate.

Carolyn Bernicky · Answer

What about no money and the OPM you say they will need 20% is that always the case? I don't think so...

Dave Skow · Answer

@Juan David Maldonado- 1) ask  friends / Collegaues for soeveral referals  2) contact the  referals and  ask  them  your  basic  questions   3)  choose one to  work with on a  formal loan pre approval  using a  certian hypotehtical -  easy as that

Joe Miller · Answer

Shop around. Don't take the first Loan Estimate you get.

I got my first estimate with my rate at 6.6%, after calling many lenders I got it to 6.125% with potential to buy down a little.

Buying my first property! How do I choose a lender for it?

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