When to put a loan application in

Question

Hello everyone!

I currently have 2 properties, but those were financed as a primary home many years ago. I'm beginning my investment property journey and I had a possibly simple question regarding "order of events".

Where I am at: Been talking to an agent from Strata Group Reality and others trying to lock down a good one in the central Florida area to proceed forward with. Also, I have spoken to my bank as well as some recommended lenders and just getting an idea of what kind of loan I can get and how much. Still searching for deals on buy-and-hold rental properties, but have not found anything to pursue as of yet.

Working with a lender at Home 1st Lending in Florida, I needed to fill out a bunch of information on my finances as expected to see what I can get. However, its at the point where I need to submit copies of driver's license, social security card, bank statements, etc. Navy Federal Credit Union also wants to charge for a loan application fee and start going through that process.

If I haven't even found a property worth pursuing yet, is this too early to be doing this? Are these lenders just trying to lock me in with them before its the appropriate time? Been a while since I financed property and it's the first time I've done a pure investment property. Advice here is appreciated.

Thank you,

Zachery

David M. · Answer

@Zachery Hitchcox

You should never be paying for an application up front. Normally, you don't "apply" for the loan until you are under contract.  Even then, you onlyi would pay for the appraisal and maybe rate lock then.  The lender gets paid at closing.

The docs you mentioned makes sense for them to do a proper pre-approval.  Not sure what Navy Federal Credit Union is up to, but its not normal to charge a fee.  A pre-approval might be only be good for 30days, but that can be "constantly" updated for free.  Lets face it, they can't have a doc that is good "forever."  And, anything in your financial situation can change.  So, it just forces you to contact your lender and confirm that nothing has changed.

In my opinion, its the lender's service that really matters.  Since you are going after conforming loans, their rates will ultimately be the about the same in the end since they are all selling to the same secondary market.  Remember, loan officers is still a sales profession.  Whatever rate they quote you upfront can change since it will almost always be "tomorrow" when you get around to doing a rate lock.  Its only if you have a stupid/lazy lender that puts you in the wrong loan product that mainly trouble occurs.

I'd be happy to give you a lender referral if you like, just send me a direct message.  Good luck.

Tyler Gibson · Answer

You should get a pre-approval if you think you will make an offer in the next 90 days. 1st home lending is not exactly an investor lender but I am sure they have access to some investor products. If you would like some other suggestions I would be happy to provide some.

Zach Wain · Answer

@Zachery Hitchcox - My company is licensed in FL, I would be happy to answer any lending questions you have.  But, my advice is to not pay any upfront app fees.  It is 100% a tool big companies use to lock you into using their services or lose the cash.  There are tons of amazing lenders that do not require this.  Do not pay an up front app fee, or lock fee, or give them your credit card!

Find a small/mid sized mortgage company rather than the big buys that for the most part are giant call centers.  Usually, the small/med sized lenders offer better service and better rates.  Smaller companies are not blowing billions on stadium naming rights, national commercials, etc etc - so we usually have lower costs and lower margins

Miranda Holland · Answer

It depends. Being that you're looking for a property through a realtor, chances are you will have time to find financing after you find a house.  However, it is good to already have your financing in place in case someone else is looking at the same property you're looking at.

With that being said, check to see how long the pre-qualification is good for with each lender. If it's only good for 30 days, you might want to wait. If it's good for 6 months and you expect to find something by then, getting prequalified is a good thing

Sergey A. Petrov · Answer

I had to look this one up! The poster says he is in Japan. He references Strata which is Canadian for condo/HOA and says he is looking to buy in FL! Looks like there is Strata Group in FL.

I don’t know if you are in Japan or in the US. If outside of the country get your financing arranged well in advance of making an offer. Having represented out of the country buyers, I can tell you that having a crystal clear “this is where my money is coming from to buy your property” attached to your offer is crucial. If the seller doesn’t understand your bank statements or doesn’t trust the source of financing they’ll move on to the next best offer even if yours is cleaner otherwise.

Miranda Holland · Answer

If I were you, I would work with a licensed mortgage broker when it comes traditional banks and a private money broker if you were looking for private money to help find the loan that is best for your situation.

Jay Voorhees · Answer

Hi Zachary - no lender should ever charge you an application fee or anything else.  And - in this market, most lenders will welcome the opportunity to pre-approve you for free in exchange for the opportunity to handle your financing when you do get into contract.  Getting pre-approved in this day and age should be pretty painless too if the lender is competent.

Sergey A. Petrov · Answer

I think it depends on what you are looking for as that’ll determine the type of financing you’ll be obtaining. Commercial or 4+ residential for the most part doesn’t care about your W2. Single family, duplex, triplex, four plex is different. A pre qualification / pre approval should take less than a day and cost your nothing. Once you have it in hand you are ready to make an offer when the deal gets on your radar (your lender will update with new date, etc if the deal comes 2 months later). I say get your ducks in a row now and keep hunting. Being preapproved now will make it a lot easier to move quickly once you find a deal

Edwin Epperson · Answer

@Zachery Hitchcox as a private lender here in FL, my focus is on short-term loans, typically 6 - 12 months IO, with balloon MTG's, though I do broker out 30yr fixed rate rental loans as well.  By lining up LTR financing, you are stepping into the more institutional world, but honestly, you should not bother going through the hassle of paying anything until you are ready to actually close on a deal.  There are DSCR loans available made specifically for RE Investors, like yourself, and they allow you to own the property in an LLC, from the day of purchase.  So none of this "sneaky-petey" (no offense to those named Pete) changing the title from personal to your entity after closing, because the bank would not allow you to buy in an entity.  Also, the DSCR loan products are what is most commonly referred to as "No Doc Loans".  We don't require proof of income, we don't require 2yrs of taxes, we don't consider personal DTI, we are strictly looking at the asset and the performance of that asset.  Happy to discuss more with you on this, but I would not suggest paying for anything right now until you have a deal under contract.  Also, DSCR lenders can close within 30 -45 days or even sooner.

When to put a loan application in

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