I am getting closer to purchasing my first property in the Utah market and would like some advice on what qualities I should seek in a lender?
Also, I would like to clearly understand the difference between a private lender and a conventional lender. Is someone considered a private lender if they are not affiliated with a bank, but work for a mortage LLC company, or can they still be a conventional lender? How do I spot the diffrence?
I appreciate any advice!
@Kenan Karalic Congrats on working on your first deal! The term "private lenders" is used to describe a number of different type of lenders. I will give you my definition of each one.
Convention lender - banks. You will need to have an appraisal and most likely an inspection and go through their underwriting process. Most common type of loans are FHA, VA and Conventional. Each is a little different but all are through a bank
Private lender - An individual who loans money. Sometimes this is also referred to as "hard money." I personally like to use this terminology when talking about an individual who is not necessarily in the real estate business. It might be a friend, family member or an acquaintance that is willing to lend money on real estate for a better and safer rate of return then they are getting on their money right now. I consider private money rates at anywhere from 4%-8% typically without any points. Many times in this scenario everything is negotiable and the individual will depend on you to take care of setting up the closing and docs.
Hard money lender- Typically run as a business. May be an individual or a group. They will have rules and guidelines you must follow. Will lend at low loan to value and will charge higher rates of interest. I see a lot of 2 points and 10-12% interest in Utah right now. Most hard money lenders will only lend 60-70% or less of the LTV of the after repaired value and may want you to have some skin in the game. They usually don't lend the repair costs, at least not at first.
Hope that helps! If you have any other questions feel free to PM me.
Jeff's reply was spot on about what the different lenders are and what they do. But you also asked about qualities to look for. It is best to interview at least 3 and here are some things to look for:
1. Do they understand your goals as an investor and have suggestions on how they can help you reach those goals?
2. Do they have time for you and can you reach them on weekends if there is an urgent question?
3. Do they tell you what you want to hear or do they tell you the truth? You won't know this before the first deal, but you will definitely know by the end.
4. Do they have access to the loan programs you need?
5. Do you like and trust them?
Thanks Jeff! Would you happen to have recommendations for local banks/portfolio lenders/hard $ lenders/brokers in Utah that you like working with? I'm also looking to get in the game in the next year here in UT and I'm just trying to do my due diligence. Maybe you can PM me if that isn't allowed on the forum?? Thanks!
Hello @Ira Ashton
Banks are a dime a dozen all do about the same thing just might have slightly different lending criteria. Best banks are either small local banks or credit unions. I would try Mountain America Credit Union or America First Credit Union they are who I work with for refinance (HELOC). Also just google banks and start calling them and visiting them and seeing who would work best to your goals. I work with Holladay Bank as well.
Hard Money lenders they are a dime a dozen as well if you go to any REIA (SLREIA UREIA, UVREIA, NUREIA) (google those) you will find them... But the one I use is Matt Strong with Strength RE his number is 8 0 1 - 2 4 4 - 3 8 8 8 he lends like Jeff mentioned 2 points 12%.
Anyways PM me if you have any questions.
MACU offers investors a 10% down no PMI for up to $410k with a minimum credit score of 750. This is for residential only, not commercial. I was also told they'll finance up to 2 properties on these terms.
The most important factor to consider with a lender, particularly if it is a sellers market, is the ability to close the transaction and close it on schedule. what good is saving a few hundred bucks in fees if the transaction doesn't close and you lose the deal.
Hi @Kenan Karalic , congratulations! Is this your first investment property?
Like many described above, a private lender can be anyone from a friend or family member or otherwise a company not affiliated with a conventional lender aka a bank.
The qualities you seek in a lender are subjective to the investor, but overall they should be able to close your loan in the time-frame promised from the start, communication is of paramount importance as well. Not only should you be able to get someone on the phone but whoever you speak to should have the requisite knowledge and expertise in their field of lending.
We value trust, honesty, and open dialogue the most. We feel the most important aspect of financing is creating a channel of communication that removes any complications, concerns, and unknowns. From the start the process should be clear and it should be understood what is expected of you and us the Lender, in order to close the loan by the date we project.
Feel free to message with any questions.
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