What do you look for in a good lender?

Question

Hey all,I'm beginning to get started here in Austin, Texas and have my plan as far as what I'd like to go after, short term and long term goals, and what to look for in an agent, but I had a question about lenders. The agent recommended me to a lender(broker) and I wanted your take on things. Thoughts?

Linda Osborn · Answer

I think house hacking is the best way to start, especially if you are young and mobile. It absolutely is difficult to find decently priced MF in an around the Austin area. Keep in mind as you do your numbers, however, that the closer a property is to Austin proper, the more it will most likely appreciate over time. If you plan to hold for awhile and take a short term loss, you may make up for it in appreciation over time. The reverse is also true, the farther away, from Austin you get, the better your initial pricing is, but you can expect less appreciation so you have to focus on cash flow in the here and now and less on appreciation recovery over time. The absolute best advantage of house hacking is being able to get a low cost (low down payment, low interest rate) loan that also pays for YOUR housing (no more rents!) which bringing in additional funds. Never underestimate the value of your own cost of living in addition to rents being paid to you!!

Brian Coleman · Answer

@Kris Wong Yeah, I'm seeing a lot of REALLY inflated MF-units out there. Luckily I'm extremely mobile and am looking out as far as Kileen, Hutto, PF. The advice I've received over and over here is to be patient, table my emotions, and make sure the numbers work. I'm nervous, excited, and all sorts of other emotions, but I'm going to put my head down and focus on finding a good deal. Like they said "You make your money on the buy".

Kris Wong · Answer

@Brian Coleman Austin is incredibly competitive. That just means you have to hustle harder, or learn to find value in properties that others don't see. House hacking is a great strategy. I wish I would have done it myself.It's nice to work with a realtor that owns investment property, but the greater majority don't. I am mostly concerned with working with someone that is willing to work hard (within reason), and has some idea of how to analyze a deal. Most of what I see hitting the market is crap as far as the numbers are concerned.

Brian Coleman · Answer

@Kris Wong Thanks for the info! I've heard finding properties here in Austin is becoming increasingly difficult. Has that been your experience? I am looking to house hack a multi-family as I have contractor connections and I'm pretty handy already. I have a realtor I've begun talks with but forgot to find out if she has any investment properties herself. Would you say that is something you look for in a realtor?

Kris Wong · Answer

@Brian Coleman hard money is treated as cash, the same as private money. Most "cash buyers" are using hard money or private money. It's much more expensive and is suitable when you need to close quickly or it would be difficult to find conventional money due to the condition of the property. You would never buy and hold a property with hard money. You would do your renovations and refinance into a conventional loan, allowing you (typically) to pull out the cash you had in the deal.

Brian Coleman · Answer

@George Taylor, thanks for the clarification. If I remember right, the hard money lenders usually have a much higher rate, correct? I think for the numbers to work I'll want to go traditional in my present situation. In what situation would you personally prefer to go hard money over traditional?

George Taylor · Answer

If you are looking at hard money I would suggest going direct to lenders. Brokers shop your loan around and add points for their services. Do not pay any upfront fees besides an appraisal or credit check where applicable. If you are looking traditional then go to a broker as they are state regulated to work with regulated banks. Hope this helps..

Brian Coleman · Answer

@Andrew Johnson, thanks for the quick advice. That's exactly what my agent told me to do!

Andrew Johnson · Answer

Brian Coleman Rates and terms are rates and terms. My advice: start the process with the recommended lender. Any subsequent lender is going to want all of the same "stuff" so it's then easier to deal with them. Dealing with a community bank can be different if they are going to hold the note. Exploring both options.