Talked to my first portfolio lender - bullet points and questions

[Matt Powell]

Hi all,

Had my first conversation with a portfolio lender, and thought I'd share how the conversation went and what their products look like. I'll hit the high notes of the conversation, then afterward I have a few questions. I welcome any additional thoughts folks have...

2 products, their conventional loan and what he called a "mod/rehab investor loan":

• Conventional: 80% LTV, 4.75%, 30 year fixed
  • Non-portfolio; sold to Fannie/Freddie
    
  • Recommended this to me for my first 3 deals because I haven't met my max of 4 Fannie/Freddie loans (I have 1 for my primary residence)
  • When I pointed out that conventional doesn't include rehab costs, he said I should be buying properties with "minimal rehab" when starting out. He said stay away from hard money if I can.
  • Rehab costs that I provide out-of-pocket are put into escrow, held by the bank, and paid to the contractors only when certain milestones are hit and the work is completed to the bank's satisfaction
• Mod/rehab investor loan: 60% LTV, 1 year ARM, 4.75%, 2 points, 700 credit score
  • Portfolio: held in-house and not sold to Fannie/Freddie
  • He did NOT need to see deal analysis to make a lending decision; only wanted the address so he could personally do a drive-by and look it up on his own
  • Said he would be using tax assessment valuation to determine market value, which struck me as incorrect
  • Rehab costs are loaned by them, are put into escrow, and paid to the contractors only when certain milestones are hit and the work is completed to the bank's satisfaction

So, now a few questions, if I may:

• His advice to use conventional mortgages for my first 3 deals makes sense because the terms are better. Is there any reason I should not do this?
• I have a private lender lined up for down payment support on my first deal. If I use a conventional loan on a house that's livable, but could use some updating (paint and carpet), will a hard money lender loan me just the money for the rehab? Or is, say, $15k not enough for it to be worth their while?
• Are the bank's escrow policies, for both conventional and portfolio loans, normal? Particularly the conventional, because I would expect the bank to not care about rehab with conventional loans. Maybe it's just a courtesy? It's not unwelcomed (I could use the oversight), but it struck me as strange...
• How are those terms on the mod/rehab loan?
• Shouldn't he want to see the deal analysis for the mod/rehab loan?

Again, first call with a portfolio lender, so I'd love a sanity check on how it went before I call the next one. I promise not to post one of these for every phone call. =)

Thanks!

[Russell Brazil]

@Matt Powell The underwriting does become more strict for properties 5-10.  An invaluable resource I have found is the Fannie Mae Eligibility Matrix (Link Below).  It will take a bit of time to understand it, but when you do, it explains what you need for loans 1-5, then 5-10...what credit score, reserve requirements etc. Also if you do have questions for lender specific things...touch base with @Upen Patel. He is a mortgage broker who is very knowledgeable.  He does the normal Fannie/Freddie loans...but then many other types of lending on top of that too. 

https://www.fanniemae.com/content/eligibility_information/eligibility-matrix.pdf