What's your go to process for getting funding?

Question

I own one rental condo that I've had for over a decade.  Looking to branch out to multi-families.  To the people that regularly buy property, do you have a go to process to get your financing? At this point my thinking is:

1. Start at bankrate.com to get an idea of what lenders are offering.

2. Pick 2 of the best offers and apply to get some preapprovals in pocket

3. At this point, shop other lenders to see if you can beat your best offer and maybe try to get lenders to compete with each other.  (ideas on how/where to track down the best loan terms??)

Basically for doing my first multi family where is a good source to shop lenders?  Does it ever make sense to user a mortgage broker or does that just add to cost.  I'm looking at house hacking so I think I will get a better rate financing as owner occupied.  Thank all.

Rob

John Warren · Answer

@Robert P. I have never loved the idea of shopping around to get the best rate because 99% of residential lenders are terrible at multifamily. They will promise you the world, but as soon as you get a deal you will find out that they don't know what the underwriting department will want to see. There is nothing worse than losing a good deal because of a bad lender.

I found my lender years ago when I purchased my first four unit in Lyons. I have stuck with the same lender for all eight residential purchases and refinances, and my rate has always been competitive. Have I lost $20 per month a few times.... maybe. I wouldn't trade that lending relationship for the world.

Robin Simon · Answer

Bankrate.com is probably better more for conventional owner-occ mortgage loans.

You should check out BP Mortgage Lender tools here:

https://www.biggerpockets.com/...

Eliott Elias · Answer

Call a mortgage broker, explain your situation and goals and they will be able to find a loan product based on what you're looking to do.

Tom S. · Answer

@Robert P.  As others mentioned above, I work a lot with local banks that know the area and often the property.  You can also get referrals from the RE agent on their "go to" lender.

Keep in mind as you expand to multi-family, up to 4 units is residential financing and 5+ is commercial. So be sure to speak to the commercial lending department if you're pursuing the bigger units.

Good luck!

Javier Mercado · Answer

It never hurts to shop. I would find a local mortgage broker in the market you’re shopping in. Brokers will have access to dozens of banks to pick the right program for you. Obviously Owner Occ is your cheapest out of pocket with an FHA loan.

Brokers don’t necessarily need to charge you a broker fee. Most of the time their commissions are paid by the bank. Always get an estimate of closing costs to determine how much you’re spending on fees. If you get someone that knows what they’re doing they will be fully transparent and break down the deal for you if you have any questions.

Once you have a property in mind and you have a loan estimate, you can generally take that document and shop with other lenders while you’re in escrow.

Good Luck!

Dylan M. Davis · Answer

I don't recommend to lender shop yourself into a hole. Talk to someone who knows what they're doing  that perhaps is connected to the guys actually writing the check and stick with them. Private lenders give you better rates and leverage the more you bring business. A lot of shops have closed their doors or are not entertaining creative multifamily projects. You should find a lender that's comfortable in 1-30 units.

Ned Carey · Answer

@Robert P. network with local investors and lenders. Always keep your eye out for lenders and try to learn the different types of lenders and their various programs. As @Robin Simon said Bankrate is basically for homeowner type loans. Its estimated rates are probably useless for investors.

The lending climate changes from time to time. Not just interest rates but the programs and what it takes to qualify for them change too. Given the rising interest rate environment expect changes in the lender programs. In 2008- 2010 for example the availability of investor financing dropped dramatically and investors struggled to find new lenders to get deals done.

Erik Estrada · Answer

Would recommend working with a broker instead. Especially one that focuses on investment properties.

Likely those rates on bank rate are inflated. If the goal is to get the best pricing on conventional loans, you might want to check out a credit union and have a good banking relationship instead. Be aware that many of those banks have overlays on their programs, so if you have trouble proving income/assets, brokers come in handy.

Relationships are what it's all about.

Robert P. · Answer

Cool thank you.

What's your go to process for getting funding?

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