What are some of the qualities that I should use to compare conventional lenders? A friend of mine, said to get these to compare.
- Good Faith Estimate
- Interest Rate APR
- Bank Fees
Right now my wife and I are on the stage of getting pre-approval so that we can take a closer look at some properties.
- If pre - approved from one lender/bank do you have to use them?
Thanks in advance for your help!
Any other info about this subject would be greatly appreciated!
Hi @Konrad Lightner definitely compare the APR as disclosed on the TIL, and the adjusted origination charge as disclosed on the GFE. You do NOT have to use the lender that prequalified you. Good luck!
Thanks @Michael Smith ,
What is the TIL, adjusted origination charge, GFE?
Thanks for the help! Links are good for me :) if you don't want to explain in detail.
Great thanks for help! Let me know if it sounds good.
This is the email Ill be sending out.
Thanks for emailing me. We found a couple of properties that look interesting but still need to get pre-approved for a loan before we can take a good look at it inside. Right now I am looking to compare lenders to see which one will fit best for us.
Some of the things that we will be comparing each lender will be-
- APR as disclosed on the TIL
- Adjusted Origination Charge
- GFE (Good Faith Estimate)
Thank you for your time!
Konrad and Jennifer Lightner
TIL is truth in lending, typically this is what you will get from a loan officer before you go forward with a contract. It is not a GFE, good faith estimate, and is subject to change. However, the TIL will have all the fees, origination charges, appriasal cost, survey fee, etc... that you would expect to see from them. These fees can change frequently before you lock something up.
I am in your same situation now, but I have narrowed my list down to 3-4 lenders and now have a signed contract to move forward. I have another day or two before I have to pick one, currently hoping the market will drop a little in the next day or so.
What I sent out to the lenders when I was shopping around was a request for a TIL statement at 3 different rates (for me it was 4.375, 4.5 and 4.625 on an investment property loan). I gave them my estimated credit score, property location (not exact address since I didn't have it yet), amount of the loan, how much money I was putting down and LTV (loan to value) of the house which was assuming it would appraise at the amount I was going to offer, and the time it would take them to close. I then narrowed it down to 3-4 and called them to see how they sounded on the phone and get a feel for them. Everyday since, I have been asking for updated rates to be ready to move forward.
If you like one company over another but they don't have the best rate, feel free to go to them with the best rate you have and ask them if they can match it. They may be able to do it and then you will go with the company you think will fit your situation the best at the best rate.
These are just a few things that I have seen over the past month and previous deals I have done. I am not a loan officer and don't know all the inner workings of the buisness, just another investor like you. Good luck.
Wow great post!
Thanks @William Allen
When comparing, make sure you are taking into account which fees are lender-specific and which fees are for third-party items that you will have to be regardless of which lender you choose. Make sure you look at other aspects as well, including the lender's estimates for taxes and insurance. I can't tell you how many times I see a quote from a competing lender that shows a lower figure for cash due at closing, but their estimate for hazard insurance is unrealistically low.
That's why the adjusted origination charge is so important, because it looks at the lender-specific fees and any discount/credit associated with the quoted rate.
@Michael Smith how can you tell if hazard insurance is too low?
@Konrad Lightner Your best bet is to find another experienced local investor and find out who they are using for financing...A few reasons why...
If shopping by rates - rates are usually not locked in for longer the 30-days, and the shorter the length of the lock the better the interest rate...15-Days are most common...you actually pay more to have a 30-day lock. Having a local lender that has a track record with other investors is great because they can guide you through the process...
I look for the lender who has reasonable rates and fees, and usually don't shop too hard for the cheapest lender...In my experience by working with someone that is trusted by the investor community, they may not be the absolute cheapest, but they will make you money in the long wrong because they understand what your goals and objectives are.
Sometimes the Lenders that are the cheapest are not the fastest in getting a loan closed, which can jeopardize your deal and reputation.
Most fees and pricing are fairly standard at banks and lenders because of new mortgage guidelines and regulations. Most fees will not change much between the time you are pre-qualified and the time you find a property. So you can have theem give your a GFE - Good Faith Estimate, and TIL(Truth In Lending) which disclose all of their standard fees.
The best bet is to find someone that you can build a relationship with and that has a pre-existing relationship with other investors you know because they will have a lot more reasons to make sure you're satisfied with their service because they know you will go back and report to the other investors how their service has been.
One last thing is consider Angie's List. I have never used them before but Angie's List is much like BP in that it is a community, and have a review system.
Hope that helps...
@Matthew Lee Thanks for the post! Good points about having a lender that is familiar and works with real estate investors.
@Konrad Lightner the absolute best way to know how accurate your lender's estimate for hazard insurance is would be to call a few insurance agents for quotes. A lot of times lenders will just use a certain percentage of the purchase price to estimate for the hazard insurance premium, but there are many factors that could cause your premium to be higher or lower than their estimate (age of the home, type of construction, etc).
comments. Especially in an industry that seems as commoditized as lending. Service matters. The ability to get a deal closed matters. How do they communicate, especially if something goes wrong? What systems do they have in place for underwriting etc. One of the biggest complaints in that industry is communication and slow response times.
I would gladly pay a little more to know that I'm being taken care of and the deal will close. If all your deals are very vanilla that might not matter as much, but for me it does.
this is a very helpful post!
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