Developer · San Mateo, CA · Member since 2010 · 21 posts · 2 votes
Inspired by a post I read by Jason the apprentice on TheBuyAndHoldGuys last night, I decided to submit my information on LendingTree in hopes of beginning the pre-approval process. All morning, I've been getting calls from potential lenders all over the country and I'm feeling in over my head a little. Is it normal to work with a lender from, say, North Carolina, when I'm located in California? Or is that going to be a total PITA?
Should I be working with a local mortgage broker instead? Or working directly with the lenders through a site like LendingTree?
Any words of experience would be greatly appreciated!
Background: I'm located in the Bay Area and looking to buy a SFH somewhere in the East Bay (Antioch/Brentwood) or Sacramento (lots of competition from hedge funds for 3/2's). I have about $30k saved up and a credit score of 760. This would be my first time buying a house ever (I rent my current townhome for way below market, so there's no motivation to go out and pay $600-800k for a house in my area).
Chris DeHaan, I'm not much of an expert on conventional residential lending, but I will share my perspective:
1. Networking and relationships (such as those you build on Bigger Pockets, and even more importantly, those you build in the area local to you) can make the difference between stumbling around trying to build your real estate portfolio on your own, and having doors open and connections available to help you as you progress. Not having to reinvent the wheel can save big bucks and loads of time.
2. Sometimes paying a few bucks can save lots of money, headaches and time over free stuff you get on the internet. An example would be a free lease you get from a forms company. Later you find out that it is not compliant with laws in your state, and when you go to evict, you lose in court because of your lease.
Here's my recent experience with conventional financing.
I was seeking a refinance on my personal residence and a 4-unit held still in my personal name. I shopped around my network, and found a referral to someone who promised no closing costs and no origination fees, and his rates were marginally better than others. I spoke to another loan originator I had successfully used before and asked how that could be, considering that Fannie and Freddie loans are essentially commodities these days. His answer was they couldn't. They don't make enough off the loan to eat all of my costs and still pay their originators. So to my mind, I'd find out just before closing that somehow I didn't qualify for that program, or whatever, and either have to close with the higher rate, or have to start all over.
So I chose to close with the person who had taken good care of me through several previous loans. Every one talks about the horror stories of getting conventional financing these days especially when you are self employed. My process was effortless. I sent in a few documents, sent in some more backup documents, met the two appraisers, and closed with the rate I was promised and a minimum of fuss and effort. Totally worth the few dollars I spent on origination fees. I attribute the ease of closing to two factors:
a. I have my act together and give them everything they need, including an excellent credit score
b. They have their act together, know what they are doing, and take care of their customers
Believe me, I am cheap and normally shop my purchases to death. But tripping over a dollar to get to a dime is a lesson I've learned the hard way, many times.
I wouldn't use a company like Lending Tree, simply because it won't further my relationships with people who can help me. And you can't have a beer at a networking meeting with Lending Tree and hope to further a profitable relationship.
Well let's get some of our lenders in on this conversation. Ann Bellamy Bill Gulley Don Konipol and Will Barnard might be able to add something to the conversation too, as I think he uses various investors not necessarily in his city, etc.
If you're just buying your home, you can get a conventional mortgage in the secodary mortgage market from a large lender out of state. Just guessing and knowing the games they play, the deal they offer may not be the deal you close on or be any better than what you get locally. I'd run away from Quicken and probably walk away from Lending Tree.
If you are going to invest in RE, a banking relationship is most important as well as knowing a good mortgage broker. Banks can be like insurance companies, gut you a better deal if they have your home loan while trying to get a car loan.
While it's not a big deal sending a payment to Knoxville Tn. being able to run prrof of insurance by the bank can be easier, but really, who or where your loan is serviced isn't a big deal. A bank or large brokerage may retain servicing locally but the note is usually sold anyway, so there is no reality of your money staying local really.
Look to the APR of the loan, not the note interest rate when shopping for your loan. :)
Thanks for the input Bill Gulley. I'm looking to get a loan for a buy and hold investment, rather than my own personal home, so that limits my options, right? Even with 20% down, I've been told that many conventional lenders won't even entertain a loan for an investment property.
Chris DeHaan, I'm not much of an expert on conventional residential lending, but I will share my perspective:
1. Networking and relationships (such as those you build on Bigger Pockets, and even more importantly, those you build in the area local to you) can make the difference between stumbling around trying to build your real estate portfolio on your own, and having doors open and connections available to help you as you progress. Not having to reinvent the wheel can save big bucks and loads of time.
2. Sometimes paying a few bucks can save lots of money, headaches and time over free stuff you get on the internet. An example would be a free lease you get from a forms company. Later you find out that it is not compliant with laws in your state, and when you go to evict, you lose in court because of your lease.
Here's my recent experience with conventional financing.
I was seeking a refinance on my personal residence and a 4-unit held still in my personal name. I shopped around my network, and found a referral to someone who promised no closing costs and no origination fees, and his rates were marginally better than others. I spoke to another loan originator I had successfully used before and asked how that could be, considering that Fannie and Freddie loans are essentially commodities these days. His answer was they couldn't. They don't make enough off the loan to eat all of my costs and still pay their originators. So to my mind, I'd find out just before closing that somehow I didn't qualify for that program, or whatever, and either have to close with the higher rate, or have to start all over.
So I chose to close with the person who had taken good care of me through several previous loans. Every one talks about the horror stories of getting conventional financing these days especially when you are self employed. My process was effortless. I sent in a few documents, sent in some more backup documents, met the two appraisers, and closed with the rate I was promised and a minimum of fuss and effort. Totally worth the few dollars I spent on origination fees. I attribute the ease of closing to two factors:
a. I have my act together and give them everything they need, including an excellent credit score
b. They have their act together, know what they are doing, and take care of their customers
Believe me, I am cheap and normally shop my purchases to death. But tripping over a dollar to get to a dime is a lesson I've learned the hard way, many times.
I wouldn't use a company like Lending Tree, simply because it won't further my relationships with people who can help me. And you can't have a beer at a networking meeting with Lending Tree and hope to further a profitable relationship.
My wife and I recently closed our first property a few months ago, and I was in the same boat as you, looking for a lender.
I ended up fielding 2 lenders, both large banks. I selected them because they had experience with the building (condominium in NYC) that we were purchasing in. The takeaway for you could be finding a bank with experience in the neighborhood that you are looking in. This is public information. Every property has a public record that shows title owner, any financing, and the financier. So, if you find a house, you can (or find someone who will) look up the information and you can approach that lender.
Nothing is final until closing, so you can always leverage one offer against another lender, which we also did to get another fraction of a percent taken from the interest rate.
As far as the 20% goes, there are a few other options that immediately come to mind. If you can find a property that has some equity, but they still need to sell, you might be able to do a sub2, or if they own outright, owner carry (though there are some pitfalls there too.)
Another option that is pretty clean is a homepath loan. Homepath loans are awesome for investors, because they don't require an appraisal, and you can get in them for less than the 20% for conventional. (I'm sure it varies a little bit from situation to situation, but i've generally read 10% down)
You should totally be working with a local mortgage professional. A mortgage broker will have many options available for you and not just one rate or program. And unfortunately, "trigger leads" are sold by the credit bureaus when your credit is pulled. Those trigger leads go out to mortgage originators who pay for those leads. Just ignore the calls and work with who you've chosen to work with. :-)
I am a loan officer working in Bay Area. I work with multiple lenders so can give you better options based on your needs. Please feel free to call me to discuss in detail. I have done loans in bay area as well as in Sacramento area so aware of current market conditions and the options available.
speak with a local broker FOR sure your agent should have a go to lender and honestly you'll want to work with somebody with a proven LOCAl track record, if you need a referral ill DM you my go to lender for all my investor clients