Will talking to a lender hurt me if I’m not ready?

Question

Hello BP community!

I am a newbie & have recently started self educating myself about the world of REI. What should I be doing first: Talking to lenders to see what I can afford? Or learning how to analyze deals?

If I talk with a lender and find that I can’t yet afford the type of home or duplex I want, will it hurt my credit when I don’t take action? If I learn to analyze properties and find great deals, but I don’t know what I can afford, then I am probably wasting my time right? I want to start taking action while also avoiding any setbacks from not knowing what I don’t know. There is SO MUCH information, it’s overwhelming. Where do I start?

I currently rent in Las Vegas, will be applying alone and hope to buy a single family home or duplex. I am open to finding a partner but haven’t gotten that far yet.

Thanks!!

Paul Higbie · Answer

@Rachel Guzman, no, most lenders are harmless.

Andrew Kiel · Answer

Do both.  Talking to a helpful lender or two should be a high priority.  The only thing that could hurt you there is if they pull your credit it may have a little bit of impact on credit score. You can also get a credit report yourself with a free site (www.annualcreditreport.com).  As you start to analyze deals, you may find something that is great and it will usually be important to act quickly - that means having financing / lender pre-qualification ready to go quickly.  If you need to fix any credit issues or have any other items to work on (like paying down some debt to qualify) the lender can help you there too.  Best to be in the know with your credit and income situation so you can know what you can qualify for before it becomes a fire drill.

Lance Trezona · Answer

@Rachel Guzman I hear you, I am not a fan of Househacking Single Family unless there is an ADU. I have done the roommate thing, but definitely like having my own place too.

Allyson Edwards · Answer

Great advice, I would do both and step one talk to a lender so you know where you can start analyzing those deals, and I think they can pull soft credit bc its your right to shop lenders which means dinging credit isn't fair to the smart shopper.

Harjeet Bhatti · Answer

@Rachel Guzman You can reach out to your own bank and meet with assignee MLO for that branch. Most of the time they have FTHB seminar which you can attend to get more information. MLO can guide you throughout the process.

Lance Trezona · Answer

Like @Andrew Kiel said do both. Talking to a lender will definitely let you know where you stand when it comes to what you can purchase. It will also help you with anything you may need to work on to improve. Sometimes the lender can pull a soft credit report which means it doesn't ding your credit. Analyzing deals is a good idea, it will help you get faster and more focused on what kind of property fits your investment strategy. Also, if you find a sweet deal while analyzing it might bring in another investor that can partner up with you. You are definitely on the right track! With the SFR are you planning on househacking?

Brian Walters · Answer

If you don't talk to a lender, end up finding a place you think is great, you may miss out by not being pre-qualified.  If you find a good lender they will give you some good advice and also let you know how much you can borrow.  Going to be hard to analyze places if you're unsure of exactly what you can borrow and also at what rate.  That rate impacts all of your numbers as well.

Michael Robbins · Answer

@Rachel Guzman I think it is a good idea to have a conversation with a lender and possibly complete a mortgage application.  This way you know what you need to do to be in a position to buy.  The rates, home prices, and rental rates will fluctuate but the best thing is to put yourself in a strong position to buy when ready.  You might consider focusing on buying your primary residence first with the intention of turning into in a rental after at least the one year mark.  You will likely get a better rate as a primary residence and most lenders (double check with your lender) allow you to rent it out after the first year.

Rachel Guzman · Answer

@Andrew Kiel , @Lance Trezona , and @Harjeet Bhatti ,

Thank you all for your helpful and encouraging replies! I am going to call and set some appointments with lenders this week. And I'm going to start looking at the MLS and practicing the numbers.

Lance, if I can't afford a duplex then I'm open to the idea of House Hacking in a single family. I'd like to avoid living with roommates if possible, mostly because of my dog and boyfriend, but I also want to get started soon, so we will see...

Will talking to a lender hurt me if I’m not ready?

Most Popular Reply