What to look for in a Lender

Question

I'm very new to real estate investing and am hoping to do my first deal (ideally a tri-plex or quad-plex house-hack) in around 6-9 months.  I'm still firmly in the education phase, but this seems like a good starting point for me.  I have a small chunk of liquid cash, and pending the outcome of this deal, have an offer of private money for a second deal, which I'd like to put around 6 months after the first.

I recently mentioned my interest to a friend who has moved into conventional lending (primarily ag-related).  He is interested in moving into real-estate lending and has offered to set a meeting between him, me, and a more seasoned real-estate lender he associates with.  My question for the forum is what sort of questions should I be asking?  As I said, I'm new to this and still learning, but what are the valuable topics I might learn from this lender?  Also, what sort of questions will help me to make a firm connection with the lender so that I'll have that connection available in the future?

Alecia Loveless · Answer

@Tyler Hardin Also don’t be afraid to reach out to the bank you do business with if it’s a small local bank. I’ve had very good luck with my local one where I’ve banked for about 25 years and have at times had more or less money with.

They have been helpful and considerate and have worked hard to make my deals go through as well as having both the senior lender and an associate lender working on my loans. I couldn’t be happier with them.

This probably won’t work well if you use a large national bank, but you can always reach out to a credit union or other bank and establish a relationship too.

Daniel Hennek · Answer

You shouldn't have to worry about being the leader in the conversation.  What you're looking for is someone who will walk you through their process to build a profile for you and understand your situation.  Then they take that understanding, use their knowledge gained from experience, and put it all together into a plan that works for you.  If you have to bring that much leadership to the table when working with a loan officer you've found the wrong person.

So, long story short you're looking at this the wrong way. You're thinking of how you can "connect" with a lender and instead you should be testing them to see how well they connect with you. You are the customer, you have the power not them. Act like it, and don't work with someone just because your buddy, who's new at this, says it's a good idea. Your buddy might not know anything about what a good idea is for you when it comes to financial moves.

Also, don't be afraid to shop around and talk to multiple loan officers.  Those different conversations will lead to different perspectives and the loan officers will not all have access to the same products.  Find a good local mortgage broker to speak with who has access to many products and they will usually get you a better deal with less closing costs.

Tyler Hardin · Answer

@Tim Lucas awesome advice- thanks for taking the time to weigh in!  I hadn't really considered them separately, as they're sort of packaged together, but they really are different animals and can't easily be evaluated as a single entity.  I'll be keeping my ears open for referrals along these lines at future networking events and in my own search.

Tim Lucas · Answer

You should consider the lender (the company) and loan officer (individual) as two separate parts to vet.

Lender: Ask local real estate agents which companies close on time every time. Back in the day, I had a terrible time as a loan broker trying to close a loan with the likes of Wells and B of A -- they are just too big to care sometimes. I'm sure there are exceptions but big national bank lenders can be bad and can mess up your deal. Probably better to go with a small local lender or at least a local branch of a larger lender. Non-bank lenders tend to do better sometimes as well since loan origination is all they do. They don't do checking accounts :).

Loan officer: Pay for experience. The best ones don't budge on rate or fees because they don't have to. Someone who knows the ins and outs of the dozens or even hundreds of programs available in the market today is worth their weight in closing papers :). Basically you want to go with a walking mortgage encyclopedia who can work around any obstacle you throw at them.

Tyler Hardin · Answer

@Alecia Loveless Thanks for the advice!  Unfortunately, my checking is currently with Wells Fargo (all of my real money is transferred out of there as soon as possible, but it passes through that account), but I'm looking at making a change.  I'll be sure to consider lending options in my search criteria!

Tyler Hardin · Answer

@Daniel Hennek Thanks for the advice!  I suppose I'll have to blame my naivety on my lack of experience- I had been thinking of this meeting more as a networking opportunity (as the person I'm meeting is said to work with investors in my market, and invests himself in the area), but I hadn't taken the time to consider his motivation.  I certaintly agree that I wouldn't want to work with someone based on one recommendation, especially from someone new to the industry and with an obvious personal interest.  I'll certainly be shopping around (and seeking recommendations from fellow investors) when I get to that point, but I wasn't actively searching for a lender at this point and hadn't put enough thought into it.

Do you have any advice regarding what to look for in a lender?  Obviously rates and closing costs are important, I've read some mentions of lenders failing to come through at closing, and I've heard a lot of emphasis put on the speed with which a lender can come through for you.  Are there any other important ideas I should be focusing on?

What to look for in a Lender

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