Tips for choosing a mortgage company in Houston, TX?
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Andrew PostellPro Member
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes@Roi C. Excellent question here and I wish more people would ask it. It's a little challenging in the beginning since it's hard to know...what you don't know. So I'll give you some hints in what to ask about and look for in a lender with investment properties.
First, focus on smaller to mid-sized banks. it sounds weird but each investment property you own increases your foreclosure rate (there are tons of studies and numbers that support this). So if I'm a large bank who is publicly traded on the stock market I want low risk loans. And if that large bank is looking at an investment property loan for you the bank might make it harder to get qualified. But a smaller or mid-sized bank won't make it harder. They are just happy to have you! That's why investors say to go with smaller banks. They will have more flexible lending.
Second, interview the bank on their investment property tolerance. Being a smaller doesn't guarantee anything. Here's what to ask:
- When can I use rental income to qualify? (the answer should be immediate)
- What down payment would I need (15% should be the minimum....if they say 20%...that might be ok, but 15% is better)
- What if the property has no tenant right now? (that shouldn't matter)
- What are your terms? (30 year fixed rate is what you want to have on your first 10 properties)
Notice I didn't say anything about rate. If the rate is good but you can't use rental income right away, and you need 25% down, and there has to be a renter....then what's the point of the good rate? Rate is important but the other items are just as important if not more important.
Third, ask for a "Fee Worksheet". This will show you what the lender charges. Then you can see rates, payments, etc. The lender should be able to walk you through what it means. And if you want to compare with another lender, then you can get another "fee worksheet" from the other lender and compare.
Remember, you are the customer. Banks should want to work with YOU. If you have to wait a long time, don't get reponses, things aren't clear...those aren't good signs. There's 15,000 lenders out there. Some are good and some aren't so much. I hope this helps in some way. Tag me if you have more questions and I will respond. Thanks!
6 Replies
- Lender · Irving, TX · Member since 2016 · 9 posts · 3 votes8y
Hello Roi C,
What are you plans for the investment properties, are you looking to flip them or hold them?
- 8yRoi C.Investor · Houston, TX · Member since 2017 · 27 posts · 19 votesOP
Hi @Magin Mason, thanks for the quick response!
I'm not looking to do quick flips at the moment. My strategy for these properties is to purchase, rehab, rent and hold for 5-7 years.
- 8yAndrew PostellPro MemberLender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
@Roi C. Excellent question here and I wish more people would ask it. It's a little challenging in the beginning since it's hard to know...what you don't know. So I'll give you some hints in what to ask about and look for in a lender with investment properties.
First, focus on smaller to mid-sized banks. it sounds weird but each investment property you own increases your foreclosure rate (there are tons of studies and numbers that support this). So if I'm a large bank who is publicly traded on the stock market I want low risk loans. And if that large bank is looking at an investment property loan for you the bank might make it harder to get qualified. But a smaller or mid-sized bank won't make it harder. They are just happy to have you! That's why investors say to go with smaller banks. They will have more flexible lending.
Second, interview the bank on their investment property tolerance. Being a smaller doesn't guarantee anything. Here's what to ask:
- When can I use rental income to qualify? (the answer should be immediate)
- What down payment would I need (15% should be the minimum....if they say 20%...that might be ok, but 15% is better)
- What if the property has no tenant right now? (that shouldn't matter)
- What are your terms? (30 year fixed rate is what you want to have on your first 10 properties)
Notice I didn't say anything about rate. If the rate is good but you can't use rental income right away, and you need 25% down, and there has to be a renter....then what's the point of the good rate? Rate is important but the other items are just as important if not more important.
Third, ask for a "Fee Worksheet". This will show you what the lender charges. Then you can see rates, payments, etc. The lender should be able to walk you through what it means. And if you want to compare with another lender, then you can get another "fee worksheet" from the other lender and compare.
Remember, you are the customer. Banks should want to work with YOU. If you have to wait a long time, don't get reponses, things aren't clear...those aren't good signs. There's 15,000 lenders out there. Some are good and some aren't so much. I hope this helps in some way. Tag me if you have more questions and I will respond. Thanks!
- 8yRoi C.Investor · Houston, TX · Member since 2017 · 27 posts · 19 votesOP
Thank you for the detailed reply. That's great advice!
Can you please explain this "When can I use rental income to qualify?"
Do you mean that by adding the potential rent income my total income will increase and the loan terms should reflect that? So basically my income should be calculated based on my current income + projected rent?
I just want to point out that I'm looking to get a loan for properties that I want to purchase, not properties that I currently own and want to cash-out/refinance.
- 8yAndrew PostellPro MemberLender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
@Roi C. yes, your rental income should be used immediately to help you qualify. Rental Income + Regular Job Income = Qualifying Income. In theory, you should always be able to "afford" a rental property since the property will cash flow. As long as you have the down payment that is....and as long as the bank counts that rental income. The Fannie/Freddie guideline to this is that rental income can be used on a purchase right away, even if the property is vacant. That may not be important on your first property but it certainly will be important as you own more and more properties.
Oh, and if you are looking to do a cash out loan later make sure and ask the lender about this. SUPER CRITICAL that this is discussed beforehand. Thanks!
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