Do I need a Mortage Broker ?

Question

Hi everyone! This question is in regards to getting pre-qualified for a loan to buy my first investment. As a real estate investor, do I need a mortgage broker? And if so, what are the pros and cons?

Katherine Blazer · Answer

I would work with one, but I might be a little biased... My only suggestion would be to make sure they work with investors. A traditional mortgage broker only knows FHA, VA, and Conventional loans. While conventional loans have an investment option with 20% down, it does not always work because of DTI. Conventional loans also have to be closed in your personal name. There are a lot of non-qm options with DSCR loans and funds that offer asset-based loans.

Stephanie P. · Answer

Full disclosure, I'm a mortgage broker.

The real answer is that it depends on your situation.  If you're buying your first home and you're looking for a multi family to begin to scale doors, then bank financing is just fine and they may have access to first time home buyer products that aren't readily available to a lot of lenders.  If you're looking for your 2nd or 3rd or 10th investment property, then a mortgage broker can be invaluable; particularly one that understands conventional guidelines.  Conventional money is still the cheapest out there when it comes to investment properties, but many people don't qualify because their DTI is too high. That's when a mortgage broker really earns his/her money because they can tailor a DSCR product to your specific requirements.  They have access to a wide variety of lenders that can make the loan fit for you.

So, not a straightforward answer, but not much is these days.  It all depends on you and where you are.

Stephanie

Timothy Hero · Answer

Brokers can provide value, but don't always.

I recommend brokers for people who don't understand the financing side, or simply don't have time to find the best lender. As a broker myself, I'd say 70% of my clients don't have a huge understanding of the financing side, so to pay someone 1 - 1.5% to handle the headaches is worth it to them. The other 30% of my clients run rental empires or work long hours in a busy industry like medical, so they don't have the time to ask 20 different lenders for qualifications and quotes.

Kaveh Nouraee · Answer

If you go with a conventional lender, you are going to have to qualify and have the file "fit in the box". If you use a broker that works with Non-QM or DSCR lenders, there is a lot more flexibility. ANd in the case of a DSCR, less paperwork.

Tony Ngo · Answer

As this is your first investment, you will likely still qualify for the conventional lending.  I would suggest you explore this option first as this will provide you the better rate.  Call around for the mortgage broker within your state and find someone that you are comfortable to work with.  He or she should able to provide you some idea on qualifying without you provide any personal information to them (as your case would be straight forward.  If you have other rental property, then they may require to see your tax return on rental filing deduction.)

Remember you are looking to build a good team.  Having a good mortgage broker who can look over your shoulder would help you on your purchase. The timing on meeting the appraisal and loan contingency period is critical on purchase transaction so that you won't put your initial deposit at risk.

Good luck.

Mike Klarman · Answer

A broker is supposed to do the calling and research and present you with term sheets.  If they are good they will leverage term sheets against one another.  His/Her job is to get you the best deal possible.

Now, can you search, call, vet lenders yourself.  The Short answer is yes.  I do it all the time but it is part of my job.  We always look for partners on the types of loans we do not do.  Our sweet spot is residential with an as-is from 100k to 2 M.  We do go up to 5 M but don't see residential deals that high too often.  But I get requests all the time for Apartment Buildings, Laundromats, Warehouses, etc.  It's my jib to build a good list of reliable lenders that do that.

Vetting lenders can be tiring, which makes Brokers useful.  Lenders do not pick up.  Sometimes do not even call back.  They are interested in selling you, not educating you.  So, sometimes you do not get out of them what you were looking for.

BP has a nice directory of lenders.

Dave Skow · Answer

@Stephanie Lacy 1) no you can use a mortgage banker or  mortgage   broker 2)  get pre approved ( not just  pre  qualified ) -  this means  you provide all your  data to a lender and they  verfify  everything

Erik Estrada · Answer

It depends on what you are looking for. I suggest calling a few mortgage brokers, bankers, direct lenders, private money lenders, hard money lenders and more. If you have any questions, I would love to chat.

Dwayne Poster · Answer

You want to explore your options. Know what the constraints of the different channels are and when they are most suited to your specific needs. Be proactive and speak with players from the various channels. Its far better to be pre qualified by the bank, a mortgage broker, and a private lender, than it is to be running around trying to find someone to cover your commitments at deal time. Personally, I have a number of lenders I send my deals for them to bid on, and yes, that includes brokers.

Eric Veronica · Answer

You need a lender who is experienced with financing investment properties in the area you are investing.  That lender may very well be a mortgage broker.  Good luck!

Do I need a Mortage Broker ?

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