It appears that loan officers are the gatekeepers to many would-be investors who don’t have a huge savings or access to private loans. My question is, is it important to impress a loan officer and if it is how do we go about it?
@Julian Starks What are looking to accomplish with access to these folk?
Hey @Travis Sperr I'm actually looking to invest in my first rental property this fall after spending the last year building my credit up and working on my savings.
Actually, loan officers aren't trying to keep people from getting financing (they typically only get paid when loans are funded), it's just that they have to comply with guidelines that are set far higher than their bank's underwriting department. Most traditional mortgage financing today ultimately comes from Fannie Mae and Freddie Mac, so lenders underwrite to those guidelines. If the loan doesn't fit in that box, it doesn't get approved and funded.
The exceptions are portfolio lenders who keep their loans on their books instead of selling to Fannie or Freddie. Often these banks have more guideline flexibility, but this is a less common source of financing.
So it's not so much about "impressing" a loan officer as it is just meeting the lending guidelines. Good credit (740 and above), stable income from job or business for at least the last two years, low debt, and a down payment of at least 25% for an investment property are the typical base requirements to get approved and get a good deal.
Hey @Travis Sperr I'm actually looking to invest in my first rental property this fall after spending this year building my credit, however back in March I was told that my FICO still was not high enough to be approved.
Oh I see, thanks @Mark F. I understand a bit better now, so it's not like the loan officer has a bunch of power to make something happen in the first place
Loan officers are just people who do their jobs. They aren't more favorable to people who "impress them". They have certain criteria that the borrower has to meet. If the borrower meets them, they get the loan, if not, they don't.
You can certainly make your loan officer's job easier by having your tax returns, W-2s, and other income verification documents ready to go before they even ask for them. Make it so that you are a pleasure to do business with.
But you cannot "impress" a loan officer into approving a loan they would not otherwise approve.
There are a couple ways to go about this.
If you want to impress a loan officer it has everything to do with being prepared and organized -if you want your file to stay on top then answer questions quickly and give complete information. All of the same things you would expect from a lender.
Also find a direct lender -so often investors meet brokers that have a lot of over lays - that may prevent you from qualifying. A direct fannie/freddie lender has no overlays and can lend based on the actual guidelines.
While I agree with the comments already made to a large degree, I am going to quibble a bit.
Assuming the loans officer is not an automaton or just a forms checker, they have some level of discretion and influence. Discretion mostly comes into play when things are in the gray zone (e.g. everything qualifies but one thing that is just below the criteria).
So if you are well qualified or poorly qualified, their discretion matters less and less. They can advocate as much as they want but a sub - 500 credit score and 100% financing request for $1MM with no experience will not get the loan. But when you are on that gray zone, having them on your side can be the difference between getting and not getting the loan.
As to how to get them on your side; well part of that is just make their job easier;
- If you take the time to do the research, you should know what they need from you almost as well as they do
- Come prepared with the documents in hand
- When you make a commitment do deliver something to them, deliver it on time
- Don't make them chase you as they have dozens or hundreds of files they are dealing with
- When you introduce yourself, show that you understand the project inside and out
- Know your numbers; as a loans officer, they are numbers people and appreciate others that know theirs
They do not 'owe' you their support and you have to 'earn' it. Be nice, be polite as you would be with any other person you were meeting for the first time. 'Build' the relationship so that even if you don't get the loan this time, they look forward to the next time you need a loan.
Agree to all that was lined out earlier. I bought my first rental property beginning of this year and it was helping a lot to come prepared with all documents required to the appointment with the loan officer. I knew my credit score upfront, my bank offers the information as service with monthly updates, and was familiar with the home buying and financing process. It was not an easy ride but I was able to answer all questions my loan officer had right away and that was impressing her. Right after the deal was done I refinanced my house with the same bank and it was processed in light speed. Changed to a portfolio lender for my recent deals as I reached the magic number 4 house to finance but it still works the same.
three months of bank statements
two years of taxes
one month of pay stubs
20-30% down payment
nicely arranged on a flash drive