Questions on Finding a Lender and Agent

Real Estate Agent · Providence, RI · Member since 2022 · 5 posts · 5 votes

Hi, I would recommend speaking with a couple of lenders who have been recommended to you. I would probably prioritize lenders with local ties as opposed to National companies. Generally speaking, a local lender will have a better idea of what loan program would best suit your particular circumstances. I always advice my clients to have a very clear idea about what their financing will look like before we start a property search. Most sellers have gotten used to dealing with pre-approved buyers, and it will alleviate a ton of stress for you if your agent and lender have a good working relationship. Everyone needs to be on the same page that the goal is to get you the correct property.

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Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

3y

reach out to @Brie Schmidt. She is an agent in Chicago and moderator here on the forums.

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Justin Hammerle

Realtor · Providence, RI · Member since 2022 · 404 posts · 262 votes

3y

Hi @Jacob Crow

1. Interest rates are subject to market conditions, and can change daily even. There will not be a wide range on what each bank is offering, it is going to be more based on what the current market dictates. You can go look up what the current rate is for a 30-year fixed now online.

2. If you get a loan pre-approval from a bank, they will need to do a hard inquiry against your credit which will impact your credit score. But as you said if you get multiple pre-approvals within a 45 day window credit bureaus will understand what your are doing and only count it as one inquiry.

3. If you have not signed an exclusive with an agent, selecting an agent is completely optional and whether or not you want to work with one is your choice. Agents create value by assisting and guiding buyers/sellers through the transaction and if your comfortable doing this yourself you don't need to use one. If you do decide to use one it is best to get them involved sooner than later so yes at minimum they should be submitting an offer on your behalf.

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Jonathan Taylor

Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes

3y

@Jacob Crow look for lenders who specialize in FHA and low down payment programs. These programs have a lot of little loopholes so having an expert in your pocket would be your strongest bet.

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John Warren

Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes

3y

@Jacob Crow as an agent, I would always tell you to decide who to work with once you decide to start formally looking at properties. There is no great time waster than going out for multiple weekends and then having someone ghost you!

When working with your agents and lenders, ask them if they own real estate. Ask them how long they have been investing for. Ask them questions about managing your real estate. Ask them questions about construction. You are not looking to be transactional in the same way a first-time home buyer would be, because investing comes with a whole host of business questions AFTER the closing.

In the defense of all the lenders, the last three months have been absolute insanity with rates. I don't think lenders even know what rates will be tomorrow at this point! At the end of the day, its not about shaving off the last 10 basis points, but instead it is about actually closing the deal.

My lender that I personally use is @Joshua Jones. He saved my first deal, and he has done eight loans for my wife and I.

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Joshua JonesPro Member

Member since 2020 · 70 posts · 32 votes

3y

Thank you @John Warren. @Jacob Crow I can tell you as an investor myself of 9 rentals and a lender for the past 19 years, the business is relationship driven. Having a team you can trust to run ideas by and the fact that they are doing what you want to accomplish, is huge. Rates are arbitrary with investing. You want to date the rate and marry the property. Rates change all the time and although rates are a driving force, they are not the only item when you are growing a portfolio. In my own portfolio I have rates from 3.5% to 8.5% and they all made sense based on the deal. @John Warren has grown an amazing proven portfolio of over a 125 units and having a team in your corner from property acquisition, lending, and being there before, during and after the deal closes is the most important thing. Feel free to message me with any questions or if you wanted to discuss further. We are always here.

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Jacob CrowPro Member

OP

Member since 2021 · 6 posts · 2 votes

3y

Quote from @Justin Hammerle:

Hi @Jacob Crow

1. Interest rates are subject to market conditions, and can change daily even. There will not be a wide range on what each bank is offering, it is going to be more based on what the current market dictates. You can go look up what the current rate is for a 30-year fixed now online.

2. If you get a loan pre-approval from a bank, they will need to do a hard inquiry against your credit which will impact your credit score. But as you said if you get multiple pre-approvals within a 45 day window credit bureaus will understand what your are doing and only count it as one inquiry.

3. If you have not signed an exclusive with an agent, selecting an agent is completely optional and whether or not you want to work with one is your choice. Agents create value by assisting and guiding buyers/sellers through the transaction and if your comfortable doing this yourself you don't need to use one. If you do decide to use one it is best to get them involved sooner than later so yes at minimum they should be submitting an offer on your behalf.

Justin,

Thanks for the great answer, especially for clarifying the pre-approval window!

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Jacob CrowPro Member

OP

Member since 2021 · 6 posts · 2 votes

3y

Quote from @John Warren:

@Jacob Crow as an agent, I would always tell you to decide who to work with once you decide to start formally looking at properties. There is no great time waster than going out for multiple weekends and then having someone ghost you!

When working with your agents and lenders, ask them if they own real estate. Ask them how long they have been investing for. Ask them questions about managing your real estate. Ask them questions about construction. You are not looking to be transactional in the same way a first-time home buyer would be, because investing comes with a whole host of business questions AFTER the closing.

In the defense of all the lenders, the last three months have been absolute insanity with rates. I don't think lenders even know what rates will be tomorrow at this point! At the end of the day, its not about shaving off the last 10 basis points, but instead it is about actually closing the deal.

My lender that I personally use is @Joshua Jones. He saved my first deal, and he has done eight loans for my wife and I.

Thanks for the recommendation as well as the advice. It is much appreciated.

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Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

3y

RATES: don't fret about anything under 0.25% difference. Yes, lenders now require you to apply so they can run your credit to give a rate quote.

POINTS & FEES: are tied inversely to rates and also depend on the lender.

FHA vs Conforming: FHA has lifetime MIP, Conforming only has PMI until you achieve 20-25% equity. FNMA Homepath also allows repairs to be financed in the purchase loan.

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Paul De Luca

Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes

3y

Quote from @Jacob Crow:

Hi all! I have been a big fan and follower of BP for some time now. My fiancée and I are finally starting to invest in Real Estate through a house hack in the Chicago area. We are currently in the process of looking for an agent as well as a lender. We have a few leads for agents through BiggerPockets and personal recommendations. From the agents we have been given several recommendations for lenders. We do not have a lot of money saved compared to Chicago prices, so we are looking to use either an FHA, 203k, or a Conventional 97. A few questions we have are:

It is hard to tell from the lenders what exactly what mortgage rate we can get as well as fees, is the only way to figure this out to get pre-approval from several? If so, does this actually hurt your credit score or is there some sort of grace period where it won't hurt you if you apply around the same time?

One lender mentioned that I would only be charged points to buy down my rate and their fee goes away using FHA. Are fees and points charged reduced when using an FHA loan?

If I have no outstanding debt and a high credit score, why might I not want to use the Conventional 97 over an FHA?

Lastly, at what point in the process do I need to select an agent? I currently have a couple agents sending me deals on the MLS (all know that I am still talking to other agents) but at what point is it expected that I commit to one? When a deal comes along that I want to put an offer on? When they have sent me X amount of properties?

Sorry for so many questions wrapped into one post and thank you ahead of time for any answers!

What type of property are you looking to buy? If you're looking to house hack a 2-4 unit property, then FHA or some other 5-10% down ARM product is probably your best bet. Someone correct me if I'm wrong, but I believe the 97/3 Conventional product is only for single family homes. I have not seen or heard of that available for 2-4 unit properties. FHA is great for the low down payment of 3.5% however there are drawbacks such as the loan limits, minimum condition (FHA appraisal), the self sufficiency test, and the relatively high PMI. If you go the 203k route you'll need to work with your lender & contractor/consultant to make sure everything is done properly.

Getting the "best" mortgage rate is also a matter of tradeoffs. Are you willing to pay points to buy down the rate or put down more money? What about using an ARM product? A few questions to consider.

@Drew Sygit - are you sure that's true regarding the FHA PMI? It's my understanding that you you can eliminate the PMI once you hit 20-25% equity.

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Olivia Grabka

Property Manager · Leominster, MA · Member since 2022 · 103 posts · 50 votes

3y

@Jacob Crow.

My advice:

1. Use Guaranteed Rate or Rocket Mortgage

1a. Fees are fairly standard & in my experience Rocket has the best service and pretty close to the lowest fees (I own my house, and I have a total of 7 mortgages for rentals we own).

2. Get pre approved

2a. Interest rates are the only piece of the mortgage that shift, the other fees/feautures will be pretty much the same

3. Hire an Agent after you are pre approved; ask Agents how many houses they've sold in the last 2 years, hire an Agent that has at least 20 sales per year.

Agents are typically uncomfortable providing their actual numbers, so forcing them to provide you a track record will create trust. Once you settle on the Agent, sign an exclusive agreement & follow their lead. The biggest mistake I see Buyers make is second guessing and attempting to logic out the process. Your job as a Buyer is to qualify for the mortgage and make decisions as to what compromises you are willing to make to buy a house (you will have to compromise), do your job & let your loan officer and Agent do theirs.

The above is based on my experience as a Buyer, an Agent and an investor. I hope this helps.

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Joshua JonesPro Member

Member since 2020 · 70 posts · 32 votes

3y

@Drew Sygit and @Paul De Luca FHA pmi is on for the life of the loan if the initial down payment is less than 10%. If they put down 10% or greater then the PMI falls off after 11 years. FHA is different than other products and that is why having a team who understands the product and what the goals are is important.

In terms of what company people should use, lending, like real estate is not company based. It’s experience based. You want people who mirror whatever your goals. You can find lenders who undercut each other to win deals. All that means is those lenders lead only with price. Maybe they are good and maybe not. Same thing with realtors who lead with commission rebate to the buyers. Same concept.

You want a team. A team who can help you with before, during and after. Someone who has done what you want to do. Someone who will be there to always bounce ideas off of. It has to be a two way street.

The professional is what makes them good, the name on their door is secondary. I would never generalize an entire company. If I said a Toyota car is the best, some will agree, most will not. Depends what my needs are for that car. Real estate is no different. It’s based on the individuals needs.

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Paul De Luca

Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes

3y

Quote from @Joshua Jones:

@Drew Sygit and @Paul De Luca FHA pmi is on for the life of the loan if the initial down payment is less than 10%. If they put down 10% or greater then the PMI falls off after 11 years. FHA is different than other products and that is why having a team who understands the product and what the goals are is important.

In terms of what company people should use, lending, like real estate is not company based. It’s experience based. You want people who mirror whatever your goals. You can find lenders who undercut each other to win deals. All that means is those lenders lead only with price. Maybe they are good and maybe not. Same thing with realtors who lead with commission rebate to the buyers. Same concept.

You want a team. A team who can help you with before, during and after. Someone who has done what you want to do. Someone who will be there to always bounce ideas off of. It has to be a two way street.

The professional is what makes them good, the name on their door is secondary. I would never generalize an entire company. If I said a Toyota car is the best, some will agree, most will not. Depends what my needs are for that car. Real estate is no different. It’s based on the individuals needs.

Thanks, I should have specified I meant you can refinance from FHA to conventional to remove the PMI.

1 Reply

Jeffrey Frcka

Real Estate Agent · Chicago · Member since 2019 · 1 post · 0 votes

3y

Hi Jacob, Seems like you are on your way to making great moves in real estate! I'm a life long resident of Chicago. I'm also a real estate agent and real estate investor. My wife and I utilized the FHA 203K program several years ago to buy and rehab a bungalow here in Chicago. This really propelled us into real estate investing. I love working with first time buyers! House hacking coupled with the 203K is a fantastic way to get started!

I have an amazing lender that I have personally been working with for years who I'd be happy to refer to you.

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Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

3y

@Paul De Luca FHA has MIP, NOT PMI.

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Michael K.

Investor · Chicago, IL · Member since 2018 · 352 posts · 176 votes

3y

Hi Jacob,

I'll try to answer your questions as you asked them.

1. Credit inquiries won't cause a significant impact on your score (about 5 points). So if your score is very high, then getting 2 or 3 pre-approvals shouldn't hurt you. But to answer your question, yes the lender needs to pull your credit to give you the final rate quote. I'd refer to this Federal Reserves website on daily mortgage rates, they are generally close to what I see on my client's preapproval letters.

2. I'd refer this question to a lender, just remember that points are just a way of buying down the loan upfront, but if you are not planning to keep the house for a long time period they may not actually save you much money.

3. With FHA you pay the private mortgage insurance premium upfront, so will add to the closing costs. Expect roughly 1.75% of the loan price. With the conventional, you will pay on a monthly basis and the PMI will fall off after LTV crosses 80%.

4. As soon as you can find someone you like and trust, and who has experience with the type of property you are looking to buy, I'd say you can go ahead and formalize the relationship. You will at the very least need to do this before you start putting in offers.

Hope this helps!

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Brie SchmidtBusiness Member

Moderator

Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes

3y

Like others have mentioned, rates and points are all tied together. So if you want less upfront fees your rate will be higher and if you want a lower rate your fees will be higher.

I have been an agent on the north side for 10+ years specializing in 2-4 unit properties.

The 3% down conventional is not available for 2-4 units. 203k is an option but it is an extremely hard program to do because the renovation costs rarely fit into the loan limit and they are usually $200k or more. I have put about 15 203k deals under contract in the last 5 years and 1 closed.

FHA is a difficult product too because 3 and 4 units have to pass the self sufficiency test. I analyze every single property from Pilsen to Jefferson Park to Evanston every day and maybe find 1-2 properties a year that pass it. So your focus should be 2 unit properties under $650k if you want to go FHA.

You are not obligated to an agent till you sign something, but if the agent just has you set up on an automatic email that isn't doing much for you. They should be running numbers and providing analysis for you too.

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Jonathan KlemmBusiness Member

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Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes

3y

Hey @Jacob Crow - Awesome to hear you and your finance are jumping into the real estate space. If you surround yourself with some of the awesome Chicago investors above you have no choice but to be successful.

I'd suggest you jump on finding an agent right away. Talk to a handful of people and see who you have the best relationship with and make sure they are an investor themselves so they at least know the fundamentals of investing.

I know for me, the more offers I can make the more deals I get. Make sure you find an agent who isn't afraid to write offers and do the tough negotiations. Once you find a property and you are ready for your big rehab definitely reach out, happy to help any way I can.

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Dave Skow

Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes

3y

@Jacob Crow- pick one lender to work with ...get formally pre approved for whatever scenario you want to use .. many of the questions you ask will be answered during this process ....fyi - you can get rate quotes now but you will need to get updated rate quotes once you have a purchase contract and this is the point you will be able to lock the rate in ( so essentially rate quotes today without a property dont mean much )

Definitely use conv 97 over FHA as FHA has high mtg ins costs and the mtg ins is permanent

When you get an offer accepted - you can shop the lenders for quotes and make a change to another lender if you need to

Get an agent deceided on now ...

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Questions on Finding a Lender and Agent

Questions on Finding a Lender and Agent

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