One Thing Investors Overlook When Comparing Loan Options

[Kelly Schroeder]

Something I see often when talking with investors:
Most compare interest rates… but forget to compare speed.

A slightly lower rate doesn’t help much if it means you lose the deal to someone who can close in 10 days.

When evaluating lending options, speed can make just as big an impact on returns as the rate itself — especially with Fix & Flips, BRRRRs, and bridge scenarios.

Curious what others prioritize:
• Rate?
• LTV?
• Speed?
• Term length?
• Rehab structure?

What’s the deciding factor for you?

[Clayton Silva]

Biggest thing I see is consumers not understanding the difference between the interest rate and the cost of the interest rate.  Clients come to me all the time saying they got a 5.75% when I offered them a 6%.  I ask to see a copy of the locked loan estimate and they are getting a 5.75% for 3 points when I was offering a 6% for 1 point.  I could easily offer a 5.75% for a lot less than 3 points but they get laser focused on the rate they miss all the junk fees, and broker fees, and origination charges, and points.

To your point though, speed is important, but even more important than that, to me, is actual ability to close.  Too often clients go to the lowest rate or lowest fee, and a 4% rate on paper is only as good as the LO's ability to actually close the loan.  I see it all the time, because the call center lenders that offer that usually have a relatively poor pull through rate, they just try to get as many people through the door as they can, but a good LO should be finding the hurdles up front, understanding the client's goals and overall picture, and offering them rates and terms that they can actually deliver on.