Should I shop for a lender or go off recomendation?

Question

What up everyone,

I’m ready to get pre approved and start looking for properties in philly and I’ve heard it’s best to shop for lenders. Was thinking of finding one credit union, one broker and on bank and reach out all within one day to get accurate comparisons. I also have a family member who’s a real estate agent out of state and recommended I go to a lender they know how does country wide lending (quicken). As a first time buyer, Is it smart to just go with the lender I was recommended or is it more beneficial to shop around? If I should shop around, how important is it to get quotes from all lenders in one day? Heard on a youtube video that it’s important to get accurate comparisons. Is that true?

Appreciate the insight!!

Corby Goade · Answer

Shopping for lenders is always a good thing, but where most rookies mess up is they only look at the rates and fees. Of course, that part is important, but the service you get from your lender is so much more important than the fees. Lenders will make or break deals for you. You don't want to be in a position where you have a great deal locked up and you lose it (and your earnest money) becuase your "low fee" lender can't perform.

My lender has saved so many deals for me that other lenders would have lost. He returns my calls on Sunday night. He calls sellers on my behalf to convince them that we, as a team, do lots of deals together and will close this deal too. See if you can get your 18 year or rep from Quicken to do that.

Lenders are your partners and should be an integral part of your team, not just a number on your spreadsheet.

Grant Schroeder · Answer

@Eric Samuels once you find a good lender stick with them and do not shop around. A good lender is worth their weight in gold. If you continually shop around on a great lender you will just annoy them and they will not want to work with you in the future. If you can find a great lender early on as you are building your portfolio, stick with them!

Noah Berson · Answer

@Eric Samuels Hi Eric, As a local Philly Realtor, I can tell you it’s super important to use a local lender who is familiar with the market. I can’t tell you how many times I’ve seen a buyer try and save an 1/8% and use a lender in another part of the country with a 1-800 number. I’d highly recommend a local lender, you’ll get their cell phone number and a 215/267 office number. In additon to that, non local lenders often don’t know that Philly transfer tax is 2.14% so their loan estimates are often incorrect. Just a few pieces of many reasons why it’s good to use local. Happy to help you in your searching and recommend good lenders. Not a bad idea to compare a few quotes from a few local lenders.

Marcus Auerbach · Answer

Yes in theory you should shop around, but that's a lot of work and often times you may end up with 3 equally mediocre results - or you could ask someone who has already done that.

Problem with lenders is that you can olny shop rates and maybe fees, you can't shop for performance.

We (my team, as an agent, not as an investor) interact with a lot of lenders every year on close to 100 transactions, so I can tell you which ones are great and which ones to run from (like Quicken)! My favorites are are local here in Milwaukee, I have basically all national lenders blacklisted, because they all suffer from the same systemic problem: unfamiliarity with local issues, call center mentality and being out of reach and touch. Of course they tell you otherwise.

Top agents usually know who performs well. You learn to pay attention when you loose a closing on a listing you have been working for half a year on because the lender is being stupid. We have a closed FB group and one of the most discussed topics is which lenders are great and which ones are not.

Side note, you can have a bad experience at a great bank, when you work with a different loan officer! So you need both: great bank + great LO!

Will Gaston · Answer

@Eric Samuels maybe the single most helpful thing to my investing career has been talking to various lenders. I have learned a ton from the 100+ loans I have gotten since I started.

The lender is the real decision maker for almost everyone investing. And they are not equal. Talk to as many as you can. You won't regret spending time on that.

Ryan Chatman · Answer

@Eric Samuels definitely shop around. It won't hurt anything to find the best lender for YOUR situation.

I'd get the quotes as close as possible but wouldn't make a huge deal of having them on the same day. Nothing is set in stone until they lock the rate for you anyway.

Shopping around helped in big ways in our situation. We talked to a few different banks before landing on a lender that beat them out by a good bit.

Ryan Chatman · Answer

@Eric Samuels @Eric Samuels Yes, the lender will want to know what you can bring cash wise which will lead you in the direction you want to go in (FHA vs Conventional). The loan officer can give you specifics on their different offerings and requirements on what you need to bring to the table based on loan amount.

You may want to have them put together a few scenarios based on the budget you are shooting for. I'd also suggest leaving room in your target budget for flexibility while negotiating. For example you want to buy a house listed at 150K; you may want to be approved for 175-200K. The market right now is competitive for buyers and you may need to come in over asking depending on the property. I learned the hard way and lost several offers due to being out bid (in nov 2020).

Secondly, I'd suggest doing the house hack method (and BRRR if possible) vs. a SFR. Just think- you can have tenant(s) covering your housing cost and possibly be saving whatever you currently pay monthly now.

I am currently doing a BRRR house hack and it is shaping up very well. It will bring in great cash flow shortly and even better cash flow after we move out. And since it had lots of value added I should do nicely on the refi. My thought is it is easier to BRRR when you are househacking.

This BP podcast had a guest who did something similar and has grown from it:

https://m.facebook.com/watch/?v=497203950870248&_rdr

Hope this info helps, and good luck!

Brock Mogensen · Answer

Definitely a good idea to shop around a few banks to compare quotes and create "competition" between the lenders.  If you are going to go with credit union style banks, I usually prefer to stay local, because they will often be easier to work with.  Using a mortgage broker, especially if you are newer, is a good option too.

Jason Hirko · Answer

@Eric Samuels  As others have said, you should definitely compare different lenders AND make sure to not just look at rates/fees. When you call them, do you go direct to your LO, or do you go to a phone room? Is the type of lending that you're wanting the lender's main focus or are you going to be climbing uphill every time you have a loan request? Do you feel like you can trust the person on the other side of the phone to not only do what they say they will do, but also work hard to push your file along? A lot of the lending 'competition' out there won't even return your phone calls, so just because they send you an automated quote from their website, doesn't mean they are going to be there for you.The other thing that I would mention that hasn't been said yet is that your list of the TYPES of lenders is pretty limited. Of course talk to a bank and credit union, and I guess a broker if you really want to, but you can throw a rock and hit a hard money lender, all who focus on different types of properties and different borrower situations. Finding a good broker is probably harder than finding a good lender. I would also say you should look at friends and family for your first deal(s). Nothing wrong with splitting the profits with an investor to get a little bit of a track record before you go pitching different lenders.

Eric Samuels · Answer

@Ryan Chatman

Thank you Ryan. Got another quick question: I’m still not fully set on if I want to house hack a larger multi family or get a single family on a conventional loan and rent out. My price range would probably keep me at a 5% conventional or below but could also swing the same price on an FHA for a multi family. Does this affect how I would get pre approved? Do I need to solidify that plan beforehand?

Should I shop for a lender or go off recomendation?

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