Learn More About Financing in Today's Environment

1Tips from the Pros

Steve Bighaus

Discusses What to Look for in a Lender

A

loan is a loan, right? Wrong. An investment property loan comes with a different set of guidelines and requirements than your typical owner­occupied or even second home transaction. So here are 10 key things to look for in a lender.

EXPERIENCE – It is important to interview your potential lender.

Whether you have found someone on your own or were referred to a mortgage professional by a friend, family or colleague, ask them questions. How long have they been in the mortgage business? Someone who has been in the industry 10 or more years has truly weathered the storm. What positions have they held?

This is more important than you may realize, even if someone has been in the industry for a long time what have they done in it? If they have always been a loan officer, what is their production like?

By Steve Bighaus

KNOWLEDGE – Going hand in hand with experience what does your loan officer know? Ask them detailed questions about your situation and see how they answer. Do they have an immediate answer for most of your questions or do they need to research and get back to you? Are you a first time investor or buying your seventh property? What do they know about the differences between financing one to four properties vs. five to ten?

Ask them questions about the “myths” you have heard in the mortgage industry. Do they tell you that you can only have up to

four financed properties? If they do, it is time to move on to a different lender.

SPECIALTY – Rental properties are different. Sure, any lender can offer you a loan on them and chances are most loan officers have done at least one in their career, but is that their focus? If you are looking to build your rental portfolio you want someone that can work with you on your time schedule. Are you looking to buy one property a year or buy 10 properties in the next couple of years?

A loan officer that can help you strategize is vital. They should be able to help position you and your finances at the pace that you can handle, not necessarily what you want to handle.The more properties you own the more complicated it gets, so working with someone that specializes in investment properties and can help you goal set for your individual situation is key.

Ask your lender what percentage of their business comes from investment property loans.

You want someone whose business is at least 50% investment properties helping you out. >

37

COMMUNICATION – This may seem basic, but you should be working with someone that will return your calls and your emails. Regardless of how you came across someone, they should be getting back to you within 24 hours. No matter how much experience, how long they have been in the mortgage field, how highly recommended they come, you are their potential client, and you should be treated like gold.

AVAILABILITY – Going along with communication, are they available to talk with you on the phone or do they only communicate via email? If your lender is on vacation or out of the office, do they have an assistant or partner that you can talk with? Ask them if

they work alone or if they have a partner or a team. Don’t discount them if they do work alone, but if you have an urgent question how would they be able to handle it if they are out of the office?

COMPANY AFFILIATED WITH ­ Find out who your mortgage officer works for or with. Do they broker their loans, or do they work for a direct lender? Ask them questions about their company, how long has the company been in business? What are their financial strengths? Will your loan be serviced by the same company or will it be sold off right away? If you don’t ask any other questions about the company, ask this: Does your company sell directly to Fannie Mae, Freddie Mac, or both?

Why ask this? Because Fannie Mae and Freddie Mac are the two largest purchasers of mortgages and they set the guidelines for the loans that you have to qualify for. If your lender’s company doesn’t sell directly to Fannie or Freddie that means they have to sell their loans to a correspondent lender who then sells loans to Fannie or Freddie.

If they sell their loans to a correspondent lender you not only have to qualify for Fannie or Freddie guidelines you also have to qualify for any additional guidelines or restrictions that the correspondent lender sets.

These extra guidelines are referred to as overlays. If you have ever heard that you can only have up to four financed properties it is because of an overlay.

LOCAL UNDERWRITING – Does your mortgage professional know their underwriters? How many do they work with? Ask them if your loan will be sent to a giant pool to stand in line or if your loan will be underwritten by someone they know. Why does this matter?

Aren’t guidelines, guidelines? Yes, but the underwriters that review your loan are human and just as your loan officer has experience, it is important that the underwriter also has experience in reviewing investment property loans.

Does your lender have a good relationship with their underwriter? Ask your lender what their underwriting turn times are like. Are loans underwritten in 1­2 days or 1­2 weeks? >

38

“Ask your lender what percentage of their business comes from investment property loans. You want someone whose business is at least 50% investment properties helping you out.”

RESOURCES – A mortgage professional is worth their weight if they have resources. Do you need a referral to a strong tax preparer, financial planner, or lawyer? Are you starting out on your own and need a referral on where or who to buy an investment property from? Your loan officer should be able to give you names or point you in the right direction. However, if you were referred to them by one of their partners, they aren’t going to bite the hand that fed them, so don’t expect referrals to another competitor. That is just sound business.

PRICING – Let’s face it, pricing, the interest rate and fees that you pay, are important, but it should not be the only reason you choose a lender. If the only strong point in your lender is that they can offer you a better rate or lower closing costs be aware that you may run into pitfalls with your loan along the way. Be sure to ask them some or all of the above points. Saving money is important, but if your loan doesn’t close on time or at all, how much money are you saving?

PERSONALITY – While this is not highly important, you should be able to get along well with the loan officer you work with. They should fit you and your personality and meet your overall expectations of a loan professional. Ultimately you need to be comfortable with who you are using. Make up your own questions to help determine if they fit this factor. ♦

To contact Steve Bighaus, please call 206.930.1801 or email him at: steve.bighaus@snmc.com

39