Okay to ping two different lenders?

Question

Wanted to know what your opinion was on contacting more than one lender, to get approved for a loan for an investment property. I think it may be wise in case one of them gives the better interest rate or terms. Any ethical issues with this?

Elizabeth Colegrove · Answer

I highly recommend you shop around. as Bill Gulley says if you shop within the first 30 days it doesn't hurt you. We almost didn't shop with our first loan and almost got creamed. When we shopped we found a better mortgage company, rates and they were MUCH easier to work with. So definitely shop around.

Jerry W. · Answer

I normally just ask for their rates and fees and explain the property, price, and ask what their rates currently are and terms.  If the quote is good I may fill out an application, but I tell them I have not made an offer yet and want my loan options known before I do.  I have an advantage of having loans with them before so they know that I buy properties and have most of my info on file with them.  If you have never gotten a loan with them tell them you are shopping for the best deal and want to know their rates and loan options.  If they ask I even tell them what other banks I am looking at.  So far I have never had a banker act bad towards me for shopping for rates.

Andrey Y. · Answer

@Jerry W.

@Albert Bui

Thank you guys for your feedback. I am about to get all the information regarding financing in a couple of hours. Given I have been out of the RE game for a few years, would you go ahead and contact the 2nd lender and get their rate as well, and if so, would you disclose that you have already filled out an app with another lender, but are shopping for the best rates.

Jerry W. · Answer

I may be doing it wrong, but in the past I always got at least 2 quotes from banks before I applied for a loan.  If one was cheaper I simply told the other bank that bank A offered me the loan at a lower rate.  I would be glad to do business with both of them, but as a business I need the best deal I can get.  Only once was I turned down by any bank for any loan I had the down payment for.  I would estimate I saved tens of thousands of dollars by doing this.  When I went back to  a bank that did not give me a loan before they usually offered me a better rate the next time.  I had loans with all 3 banks in town until just recently.  After being lowest on rates several times in a row, and helping me buy out a partner in a REI company, I have made all of my loans for the last 2 years with the same bank.

If a bank is so snooty they do not the business of anyone who shops for good rates you do not want them for your banker.  They sale a product, if they are jerks buy it from someone else.  I pay all my bills and mortgages, I work hard and I am careful to buy right, and offer a good clean product to my customers, who will rent from someone else if they get a good product at a better rate.  What kind of a business does not understand that?  I currently have about 10 loans out between 2 banks.  The best product is the one I buy.

Andrey Y. · Answer

Thanks guys. I have submitted one application but have still not received an interest rate or anything. In the past, I have been given an approximate interest rate and loan amount BEFORE I even submitted bank statements, W2s, LESs, etc. What gives?

I think I will wait for their official quote before filling out another application, out of respect.

Albert Bui · Answer

My input on this depends on the borrower. Its one thing to have competitive pricing and a high degree of service, but I can definitely relate with what Bill mentioned above.

When I feel a borrower is highly "transactional," and non relationship oriented I will let my team know to not put too much emphasis on the file because at the end of the day the team and staff have salaries and costs that have been allocated from the bank.

As a loan officer for a bank we're rated on our profitability to the company. If we're committing human resources to files that have high chance to go else where then our execution rate drops which means we're increasing costs/resources that could have otherwise used to focus on creating a great experience on highly relational borrowers who are "committed."

Its a grey area ultimately and as a loan officer you have to feel out the borrower to see which play to take. I've been burned before where I commit resources to files and made the wrong play, having my team focus on files that I thought were Iffy on follow through. I definitely dont like letting the team down since they also get per file bonuses that feed their families as well.

Joel Owens · Answer

The time to SHOP the rate is before you commit to a lender.

Remember that a phone quote means nothing. They are just trying to tell you best case scenario and most of the time it doesn't happen.

They can't give a real estimate until they do a pre-screen of the property and look at the offering. Even then if the underwritten NOI etc. or what was given by the seller is not correct then it can change the loan terms offered.

Bill Gulley · Answer

No real credit dings, within 30 days as they know you're shopping.

The issue is that too many inquiries then begins to look like loan denials, then they and other lenders begin to wonder why, digging deeper to see if they missed something, can also just be this guy can't make up his mind, kind of flakey. Must be a reason he's not getting a loan......

Credit pie is on your face!  I've had to turn folks down simply because of too many inquiries over a 1,2,3 month period, no one wants to underwrite the guy, assuming there must be issues and it's a pain in the azz trying to build justifications as to why. You apply 3 or more times you really limit you chances, saying loan applications. Applications must be made before credit inquiries can be made, :)

Bill Gulley · Answer

As mentioned, great to shop, get terms, rates etc. But, making two applications is a bad idea, sounds like a good one, but it causes issues.

Credit inquiries are not the big issue, here's what can be;

Bank A sees you went someplace else, the delay working on your app until you explain what you're doing

Bank B can do the same thing

They will delay settlements to ensure, by verification you aren't getting another loan of any kind, that changes your ratios.

Dealing in good faith means a lot to a lender, if they feel like you're just jacking them around, they might reciprocate.

If both lenders reciprocate, you're in the cold, but

If you can energize them back into action, you still delayed things and you have pie on your face.

This is also an indication of your management techniques running your business, not cool they may decide they just don't think you're ready for their bank from a business point of view, remember this is commercial, not consumer, if they doubt you management/business skills and ethics, you're gone.

Biggest flag begins with an attempt of fraud, trying to get more than one loan, usually such attempts will never happen, too many checks in place, doesn't mean someone may not try, so your intent is questioned.

How to avoid all this, tell Bank A that you will go with them, but because time is of the essence and because they can't totally commit ask them, inform them, that you'd like to see if bank B could be used to back up the deal. Often, you can get a bank to work with you, if they can't make the loan they don't hate you and you could end up being a future customer. Some documents, like appraisal might be assigned to another lender, credit reports can not be assigned.

So, again, best thing to do is be up front! This is one area where a really good broker (like yours truly LOL) can be an asset, they shop and when the package is ready they can assign the package for that lender to begin underwriting. Banks aren't doing third party originations, they will originate.   :)

Andrey Y. · Answer

I asked a lender and he said that a credit inquiry for a mortgage loan has no affect on your credit score. So if has no effect, doesn't that mean that several inquires from different lenders shouls still have no effect.

Okay to ping two different lenders?

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