When searching for a loan for 4 or more units, would I reach out to a mortgage broker, or go straight to a bank?
Hi @Ben Kahle
Are you going to be living in one of the units or buying it as an investor? As you may already know, investor rates are going to be higher and will require a larger down payment (usually >= 20%). If you'll be living in the property, that potentially opens up FHA as an option which would mean you'd want to find a lender who knows and can submit FHA loan applications. The type of loan that works for you really depends on your strategy.
I'd actually try and reach out to a few local credit unions and banks and ask them what kind of multi-family loans they're looking for. You can often get a great deal if the bank plans to underwrite and maintain the loan in-house as a portfolio loan.
Of course, reaching out to a mortgage broker or two and getting pre-qualified isn't a bad idea. They'll be able to give you a good sense of the type of terms you'll be able to get based on your credit and finances.
Whatever you do, make sure you get pre-approved before making an offer. The market is insane in LA right now and in most cases, you're offer won't even be looked at if you don't include a pre-approval letter - something you don't want to risk when going up against the large influx of all-cash buyers.
@Joshua McGinnis -- This would be non-owner occupied and I'd be putting around 25% down. Most of the lenders I know only deal with 4 units or less, so I'm wondering who to reach out to exactly for more than 4 units.
Thanks for your insight!
What size property and transaction amount are you talking about? Under 2-3MM reach out to local and regional banks. Above 3MM you start to get into the capital markets, CMBS, Life Insurance, Fannie/Freddie multi-family loans. You are not going to be able to get a pre-approval letter from the bank for a 5+ unit building. You might be able to get some type of documentation from the bank however 5+ units are different than 1-4 units. Compile a one page resume/cover letter when submitting offers on these properties and include a proof of funds letter with a sufficient amount of capital. For local and regional banks speak directly to the bankers. Do not use brokers especially if you are financially stable. Talk to local multi-family brokers and see who is funding transactions in your area. I would imagine there is a lot of appetite from local banks in LA right now (and most other large cities).
If you go above 3MM or to the capital markets (CMBS, Life, Fannie/Freddie) you would speak to a highly reputable broker that deals with these types of loans.
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