Buying my first property! How do I choose a lender for it?

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Buying my first property! How do I choose a lender for it?

Juan David Maldonado
Investor · San Antonio, TX · Member since 2018 · 188 posts · 53 votes

Hey! How do I go about choosing which lender to go with when it comes to real estate investing? Buy and hold BRRR is the strategy I am going with. I have $10k saved up at the moment and I have good credit.

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Tracy Tippett
Financial Advisor · Port St. Lucie · Member since 2020 · 44 posts · 15 votes
4y

Hello David Maldonado,

I may be biased, but I cannot think of a good reason not to use a independent loan broker.  They are professionals in the lending space and can provide an advantageous level of access to lenders.  Typically professional loan brokerage firms will have access to several hundred lenders and an intense level of understanding of the market for the type of financing you wish to arrange.  

Many firms employ or contract with highly experienced loan officers and/or experienced underwriters. The knowledge of the business that a firm brings to the table can often times offset the costs associated with working with a financing brokerage.  The advice and input you receive from such a firm is of great value in itself. 

Be wary of firms requesting upfront fees.  Good brokers will spend time to assess your position and your goals.  Be ready to provide your financial data and documentation so the broker can properly assess your likely credit request outcome.

Good Luck and invest well.

Regards,

Tracy Tippett

TNT Funding Associates LLC

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  • Michael Mahung
    Member since 2021 · 27 posts · 18 votes
    4y
    Quote from @Juan David Maldonado:

    Hey! How do I go about choosing which lender to go with when it comes to real estate investing? Buy and hold BRRR is the strategy I am going with. I have $10k saved up at the moment and I have good credit.


    I would work with multiple lenders/brokers and see which one can give you the best rates and have the best programs.


    Some lenders give grants for first time homebuyers to cover down payments and closings costs as well. Make each lender bid against each other until you have your winner

    4Reply
  • Tracy Tippett
    Financial Advisor · Port St. Lucie · Member since 2020 · 44 posts · 15 votes
    4y

    Hello David Maldonado,

    I may be biased, but I cannot think of a good reason not to use a independent loan broker.  They are professionals in the lending space and can provide an advantageous level of access to lenders.  Typically professional loan brokerage firms will have access to several hundred lenders and an intense level of understanding of the market for the type of financing you wish to arrange.  

    Many firms employ or contract with highly experienced loan officers and/or experienced underwriters. The knowledge of the business that a firm brings to the table can often times offset the costs associated with working with a financing brokerage.  The advice and input you receive from such a firm is of great value in itself. 

    Be wary of firms requesting upfront fees.  Good brokers will spend time to assess your position and your goals.  Be ready to provide your financial data and documentation so the broker can properly assess your likely credit request outcome.

    Good Luck and invest well.

    Regards,

    Tracy Tippett

    TNT Funding Associates LLC

    7Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    4y

    Choose a lender that is investing in real estate as well. They can offer more creative products and help you brainstorm throughout the process 

    2Reply
  • Drew Mandela
    Member since 2022 · 7 posts · 5 votes
    4y
    Quote from @Juan David Maldonado:

    Hey! How do I go about choosing which lender to go with when it comes to real estate investing? Buy and hold BRRR is the strategy I am going with. I have $10k saved up at the moment and I have good credit.


     Juan,

    What State are you looking to purchase in?

    0Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    4y
    Quote from @Tracy Tippett:

    Hello David Maldonado,

    I may be biased, but I cannot think of a good reason not to use a independent loan broker.  They are professionals in the lending space and can provide an advantageous level of access to lenders.  Typically professional loan brokerage firms will have access to several hundred lenders and an intense level of understanding of the market for the type of financing you wish to arrange.  

    Many firms employ or contract with highly experienced loan officers and/or experienced underwriters. The knowledge of the business that a firm brings to the table can often times offset the costs associated with working with a financing brokerage.  The advice and input you receive from such a firm is of great value in itself. 

    Be wary of firms requesting upfront fees.  Good brokers will spend time to assess your position and your goals.  Be ready to provide your financial data and documentation so the broker can properly assess your likely credit request outcome.

    Good Luck and invest well.

    Regards,

    Tracy Tippett

    TNT Funding Associates LLC

    I think using a mortgage broker is generally a good idea, but definitely more for the refinance portion, not necessarily the acquisition financing if you are getting a hard money loan. Typically, a hard money or rehab lender will charge at least 2 points, and having to pay a broker on top of that usually gets expensive quick. Brokers can be good however if you are refinancing into 30-year debt with a DSCR loan for example, since those are not nearly as fee-dependent

    [email protected]
    Harpoon Capital514 Reviews
    WebsiteView Page
    2Reply
  • Dave Skow
    Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
    4y

    @Juan David Maldonado- 1) ask  friends / Collegaues for soeveral referals  2) contact the  referals and  ask  them  your  basic  questions   3)  choose one to  work with on a  formal loan pre approval  using a  certian hypotehtical -  easy as that 

    1Reply
  • Abby Weinstock
    Lender · Baltimore, MD · Member since 2020 · 115 posts · 70 votes
    4y

    There are many considerations when selecting a lender. For example:

    Are they a lender or a broker?

    Sometimes business will market themselves as lenders when they are just brokering the loan. Why is this problematic? Because any commitments they are making with respect to timing and funding are not fully within their control. They are not the final decision makers and therefore cannot guarantee that a loan will be funded. A borrower who wants to confirm that they are dealing with a lender versus a broker can check the local land records and see if the lender’s name appears in the land records as having originated loans previously.
    Do they have references they can provide?
    A lender’s website will no doubt have glowing testimonials from customers. But the lender should allow a prospective borrower to speak to references (preferably current ones) so that he can obtain a first-hand account of the experience with that lender. Reputable lenders should never resist providing this information. The borrower should also search the public domain for any reviews of the prospective lender.

    If the lender holds himself out to be BBB accredited, then the borrower should also check the lender’s BBB rating.

    How long has the lender been in business?
    If the prospective lender just got into the private hard money lending business, he has no proven track record. This is not a risk a borrower should take, particularly when the need for funding is immediate.

    How quickly can they close?

    0Reply
  • Juan David Maldonado
    OP
    Investor · San Antonio, TX · Member since 2018 · 188 posts · 53 votes
    4y

    @Drew Mandela Just Texas. I live in Texas. 

    0Reply
  • Mike Klarman
    Specialist · NJ · Member since 2022 · 1k+ posts · 649 votes
    4y

    If this is your first BRRRR odds are you will need more than 10k. You will only get 80% toward purchase price and maybe 100% of rehab, you said your credit is good so it's possible.

    But for every 100k in property value you will need 20k in down payment.

    0Reply
  • Bob ReinhardBusiness Member
    Lender · Patterson, NY · Member since 2017 · 488 posts · 186 votes
    4y

    Creating a personal relationship is what my clients prefer, whether I lend or broker. I know this by asking them. When speaking with different lenders, see what your comfort level is. We ask all of out clients to be responsive when we ask; you should expect no less in return. Pick through the posts above; there are many good points made. Also, each borrower's needs are different ... as yours may be over time.


    BTW, changing Fed rates affect all lenders so today's' numbers may not be tomorrow's.

    Much success! Bob

    [email protected]914-861-5501
    0Reply
  • Chris Clasby
    Lender · San Diego · Member since 2019 · 10 posts · 13 votes
    4y
    Quote from @Abby Weinstock:

    There are many considerations when selecting a lender. For example:

    Are they a lender or a broker?

    Sometimes business will market themselves as lenders when they are just brokering the loan. Why is this problematic? Because any commitments they are making with respect to timing and funding are not fully within their control. They are not the final decision makers and therefore cannot guarantee that a loan will be funded. A borrower who wants to confirm that they are dealing with a lender versus a broker can check the local land records and see if the lender’s name appears in the land records as having originated loans previously.
    Do they have references they can provide?
    A lender’s website will no doubt have glowing testimonials from customers. But the lender should allow a prospective borrower to speak to references (preferably current ones) so that he can obtain a first-hand account of the experience with that lender. Reputable lenders should never resist providing this information. The borrower should also search the public domain for any reviews of the prospective lender.

    If the lender holds himself out to be BBB accredited, then the borrower should also check the lender’s BBB rating.

    How long has the lender been in business?
    If the prospective lender just got into the private hard money lending business, he has no proven track record. This is not a risk a borrower should take, particularly when the need for funding is immediate.

    How quickly can they close?

    These are good tips especially regarding references and experience, but I have to take issue with the first one: saying that a Lender can control those things better than a Broker is rarely the case. I've worked as a lender and a broker, and speed has much more to do with the capacity of Underwriting and the quality of the LO who builds the file than it does with Lender control. In fact, a lot of direct lender shops will have a worse ratio of underwriters and closers to deals, and while a direct lender can't go elsewhere or do anything about that (except hire and train Underwriters...), a good Broker will know the turn times for a particular lender and go where things will get done more quickly. 

    Funny story: I had a client come to me as a Broker to save a purchase deal that (WELL KNOWN DIRECT LENDER) had been working on for over a month without so much as a Conditional Approval. While the file was complex (Borrower owned several properties, 1031 was in play, and controlled several entities etc) I got it done and was able to save the escrow (with some help from the Agent!). About a week after the close of escrow my client called me and asked me to guess who had just called them. I had no idea but they, laughing, said "it was the LO from WELL KNOWN DIRECT LENDER with the initial approval!"  

    2Reply
  • Patrick DruryBusiness Member
    Real Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
    4y

    @Juan David Maldonado
    You should mention where you are looking and people can also chime in with recommendations

    [email protected]614-412-4565
    Reafco-556 Reviews
    View Page
    0Reply
  • Carolyn Bernicky
    Member since 2022 · 21 posts · 10 votes
    4y

    What about no money and the OPM you say they will need 20% is that always the case? I don't think so...

    1Reply
  • Carolyn Bernicky
    Member since 2022 · 21 posts · 10 votes
    4y

    Newbie Investor .... Seeking advice about financing options (biggerpockets.com)

    0Reply
  • Lori Goldsmith
    Realtor · Beverly Hills, CA · Member since 2022 · 31 posts · 24 votes
    4y

    Hi Juan, 


    I’ve been a REALTOR® for over Twenty years and I have worked with a bunch of Lenders. Good, fair and not so great (that’s me being polite, if you could hear my thoughts you’d laugh) That being said, I have had a few very tricky almost non lendable buyers do to income verification and other big issues. One of my buyers found a guy here on Bigger Pockets that has been a sheer miracle worker. He has not only secured these loans but he facilitated to close the loans early, shortening escrow periods. Feel free to direct message me if you would like his info. Not sure protocol on posting his name here…..

    0Reply
  • Rudy Sant
    Rental Property Investor · Plantation, FL · Member since 2015 · 25 posts · 6 votes
    4y

    @Tracy Tippett can you mention a hand on broker In North Midwest? .

    Please 🙏

    0Reply
  • Jacob Amaro
    Lender · Los Angeles · Member since 2022 · 7 posts · 7 votes
    4y
    Quote from @Juan David Maldonado:

    Hey! How do I go about choosing which lender to go with when it comes to real estate investing? Buy and hold BRRR is the strategy I am going with. I have $10k saved up at the moment and I have good credit.


    Hey Juan,

    I️ think one of the most important aspects of choosing a Lender is finding someone who will be honest with you. Far too many Lenders have been giving false promises to borrowers and ruining deals in contract. Our company has had a fair share of people coming to us 10 days into contract saying that their lender was unable to fulfill the promises they made. 
     

    2Reply
  • Tracy Tippett
    Financial Advisor · Port St. Lucie · Member since 2020 · 44 posts · 15 votes
    4y
    Quote from @Rudy Sant:

    @Tracy Tippett can you mention a hand on broker In North Midwest? .

    Please 🙏Hell @Rudy Sant

    My first reaction is that a firm like my own can work on projects in about 46 states.  I would love to take a look at the project.  I am requesting a referral from my network of brokers.  I am thinking that North Mid West is the MN or WI area, is that the case here?

    Tracy Tippett

    0Reply
  • Joe Miller
    Real Estate Broker · Columbus, OH · Member since 2021 · 203 posts · 247 votes
    4y

    Shop around. Don't take the first Loan Estimate you get. 

    I got my first estimate with my rate at 6.6%, after calling many lenders I got it to 6.125% with potential to buy down a little. 

    0Reply
  • Chris Clasby
    Lender · San Diego · Member since 2019 · 10 posts · 13 votes
    4y
    Quote from @Carolyn Bernicky:

    What about no money and the OPM you say they will need 20% is that always the case? I don't think so...


    There are a few programs that will allow for a 15% down payment for an investment property. The trade off will be in the rate as you go to the higher loan-to-value, and of course that will affect cash flow of the property. Definitely can make sense especially when you're considering keeping money is reserve for maintenance or improvements, but the higher the LTV the higher the rate.

    1Reply
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