What's the best way to look for a mortgage lender today?

Question

I'm a brand new investor. Have never bought a house and am completely new to everything including financing.

1) What's the best way to look for a mortgage? I've heard banks, credit unions, mortgage brokers, mortgage banks? Are brokers more expensive?

2) Has anyone used Zillow's mortgage preapproval thing? What was your experience like?

3) Do pre-approvals expire if you take too long to find a property? What's the time limit? I'm scared of not being able to find a property fast enough after getting a pre-approval.

Jeff L. · Answer

I'm planning on doing out of state buy and hold, SFRs and possibly 2-4plexes. Thank you for the advice! I don't really have any relationships with local small banks or credit unions. Do you have to be a member before asking a credit union to get a quote?

Sheryl Gurvey · Answer

@Joshua Feit I am an investor in Atlanta as well.  I am going to look for a portfolio lender as well as I would like to buy a small multi-family.  Would you mind sharing any banks that you find to be workable and I will do the same?  Thanks!

Joshua Feit · Answer

Hi! Josh from Atlanta here -- I'm about to complete my first year of buy/hold investing in May. I have financed a triplex and a single family this year through conventional banks, and if I can help it, I will try my best to NEVER do that again! I am self-employed, and even though I have a sparkly credit rating and plenty of savings to make the cut, meeting the underwriters' requests turned into an extra part-time job for several weeks. Not fun.

(The following is based on education I have received right here on BP, not experience. I am in the process of following my own advice right now...)

Search for 'portfolio lenders' in your local area. These are banks or private lenders that lend their own money instead of writing the loans and selling them off to bigger banks. I am told these in-house lenders will often be able to simply the process, as they only have to satisfy their own requirements, and not the requirements of the bigger banks that may eventually be buying the note.

The issue with finding 'portfolio lenders' is that just because a bank meets the definition, they may not even know the term. That makes it much more difficult to find these institutions. To locate portfolio lenders in my area, I am networking with other RE investors and making a lot of phone calls.

I wish you all the best with your new venture. Cheers!

Bryan N. · Answer

For me it's been a smaller bank in my local area.  Better customer service and the process is made easy because they know you.  The lender even advises me on what not to do with money transfers and when to do taxes, so I get the best investor loans available.

Anne Chiramberro · Answer

Hi, @Jeff L.

I'm a newbie too so but I just got pre-approved for a loan on a small multifamily. I went through several banks and credit unions before finding a bank with a decent interest rate and matching their pre-approval qualifications. My pre-approval letter states it expires in six months if I don't close on a property before then. Maybe other banks have different timelines, but it definitely comes with an expiration date. I don't think re-applying would be too hard though if you don't find a property in time. It just means re-submitting the paperwork.

Rob Beland · Answer

This really depends on what type of real estate you are purchasing. If you are looking to invest an a rental property such as a duplex, triplex, or four-family, you should start with local banks and credit unions and see about getting pre-qualified. They will determine based on your credit score and income whether or not you qualify for a mortgage. You can then go out and research properties. Once you find a property and finalize the deal, they will likely verify your income, credit, etc... to be sure nothing changed drastically. If you are looking to invest in 5 units or up, it's a more involved process but the first step is still getting pre-qualified. You can get pre-qualified by more than one bank at the same time and it will not negatively affect your credit (it shouldn't anyways). If you are looking at getting into flipping houses, the banks are going to be less likely to finance you since you have no experience so you will likely need to look for private financing or take money out of a 401-K or go to a hard money lender (they will either charge you crazy interest or not lend to you but I'm not really sure since I'm not too familiar with hard money lenders).

As far as banks/credit unions vs. mortgage brokers, the rates should be comparable but you likely have a relationship with a local lender which should help your case. The mortgage brokers will likely have access to more funding sources and can probably get more creative with the financing than a local bank or credit union.

Can you provide more details on your situation?