Portfolio Lender Questions

[Jonathan Ghrist]

I'm new to investing and am looking to make my first deal here within the next few months. I'm meeting with a portfolio lender this Friday and am looking for advice on what types of questions I should consider asking as well as what I should expect to be asked.. As I mentioned, I'm yet to make my first deal and don't want to come off as under or uneducated, preparing myself as much as possible prior to the meeting.

[George Despotopoulos]

Hey Jonathan, first, best of luck on this new endeavor! Investing is exciting, and challenging; great to see that you're here to learn more. 

I do not have much experience with portfolio lenders specifically, hopefully someone could chime in. I can give general advice here. 

You did not mention the type of deal, but I'm assuming it's going to be buy & hold. There are a few basics to know and factors that will affect your rate. Loan to value (LTV) is the maximum loan amount a lender will lend against the property value. Many lenders go anywhere between 75%-85% LTV. This means the rest of the purchase price comes from you. Usually the lower the LTV, the lower your rate.

Portfolio lender's may differ, not sure if they'd look at your income, debt to income or the debt service coverage ratio, which is usually measured as net income from the rental property divided by the loan payment. Some have a minimum of 1.1x, others as high as 2.0x DSCR.

You should know their minimum FICO and how they arrive at your score (average of 3 scores, lowest of 3, etc.). 

Other than that you would want to know if there are any pre-payment penalties, what their fees are (application fee, origination fee, is there an appraisal requirement, etc). You should have an understanding of all the fees that get passed to you at closing that come from the lender and also factor in title costs.

That's pretty much what I can think of at the moment. If anything else comes to mind I'll follow-up. Feel free to ask any questions.