How do you shop around for a lender?

Question

When people shop for lenders, what does it look like in practice? Is it something that's typically done after entering escrow?

Will it require a hard credit pull for each lender I talk to to get an accurate estimate? If so, how will that affect my credit and loan estimate?

While in escrow, should I be calling around different brokers and/or direct lenders? And how many?

Doug Smith · Answer

We don't typically pull credit right out of the gate. I like to gather as much info as possible on the borrower and deal before we do that and make sure everything else is spot on before chatting with the borrower about pulling credit. After 32 years, I much prefer building a strong rapport and relationship with borrowers. I want them to think of me as a valuable advisor and member of their team. The easiest way to get me to say "I wish you well" while I move on is to have someone say to me "thank you...I'm going to shop around to 30 other lenders while I only base my decision on the lowest rate". Honestly, there are only 24-hours in a day and I have other deep relationships to assist. We strive to give the client the best deal we can, but commercial lending is complex. There are a lot of residential brokers out there that have never flipped a house or don't even own a home themselves and want to get into the business because the retail lender they work for came up with a new, groovy product called a "DSCR". Spend time chatting with the lender. Get a real feel for their experience...not age...but do they do deals like yours regularly. Get a warm fuzzy that they really, really know what they are doing and actually close deals. There are people like me that have spent decades honing their craft. It's frustrating when the field starts to get flooded with rookies that fancy themselves as loan experts because their brokerage now has a DSCR product. Don't get me wrong...it's a great product and I do use it a lot...but its like commercial lending with training wheels. Really talk to a lender to understand their background and "close-a-bility". Deepen that relationship. You'll be glad you did.

Caroline Gerardo · Answer

Talk with three until you find one that says they have a product that fits exactly with your income, credit, assets, desires... Each should be able to quote a price for rate and fees at that moment in time and assuming what you said was exact. This needs to be completed BEFORE you make an offer to be sure you can close with your set of facts.

Only one lender needs to pull the mortgage credit and they should provide you a total copy not just the scores. The lender is not credit issuer but the report you can use to shop. A mortgage credit pull today and again with another company tomorrow won't change your scores.

A good realtor requires you to have a preapproval letter from an Underwriter that states the amount of sale price, down payment, loan type and days it will take to close. You might also want to show your FICO and assets. With a strong and detailed preapproval letter the seller can see you are ready to close fast. Sellers pass on a weaker offer to find a buyer who is ready to go.

Mario I Fernandez · Answer

Hey Woojin,

You can find lenders investor friendly under BUILD YOUR TEAM top menu. You can call them and talk to them to see what they can offer and what suits you.

Also, you should get pre-qualification before you sent any offer since, the seller will ask for a pre-qualification letter or proof of funds(POF) in case you are buying cash to be sure you can purchase the property.

Regarding pulling your credit, it will depend on the lender. Some of them do it one time and others a few times during the transaction that's why you need to shop around to the what they offer.

Minh Duong · Answer

When people shop for lenders, they always ask for a loan estimate. This document summarizes the whole entire loan and makes it very easy for the borrower to compare different lenders.

You can check out this link for a better understanding of how to read a loan estimate https://www.consumerfinance.go...

The best practice is to always shop with different lenders first by comparing the loan estimates before entering escrow. This way, the escrow process is smooth, and there is no delay in closing. Plus, you also know what you're getting yourself into with the financing.

In terms of hard credit pulls, you can have it pulled several times by different lenders, and it still counts as one inquiry. You just have to make sure to call your credit bureaus and explain to them that you're shopping for mortgages.

While in escrow, you can still call for different brokers and/or direct lenders, and you can reach out to as many as you want. The problem with this is if you switch to different brokers/lenders during escrow, you will have to resubmit the whole entire loan again and restart the loan process. This will delay escrow and closing. You can still switch lenders during escrow, but make sure you keep in mind that there will be delays.

John Morgan · Answer

@Woojin Joo

I get 2 or 3 free loan estimates from different lenders to compare everything. You can get pre-approved early or wait til you’ve already made an offer. I usually wait til I’ve made an offer, but either way is fine. Ask them to do a soft pull on your credit with an example for all their expenses on a loan size you’re looking for.

Jamie Parker · Answer

Are you currently under contract or needing funding. Some lenders in Private Institutional Lending that may not require credit checks or income docs. In some cases the interest rates and points for origination are more reasonable.