Hello BP Family!
I have a meeting with and old friend that has become a lender and am scheduling a meeting with them. Any ideas on what questions I should be asking him? I have a house that is paid off and was thinking of taking a cash out loan to buy another property!
@Mathew Collins I would suggest several questions to ask. Here's my recommendations:
- When can your bank start using rental income from future properties to help me qualify for the loan? (the answer should be immediately)
- Can I change title to my LLC after closing?
- What is the minimum downpayment I need?
- What is your closing time?
- How long does it take to be prequalified?
- What is the difference between being prequalified and preapproved with your bank?
- (if you are seeking to purchase your next property with something like hard money and then needing to refinance out) How long do you need me to be on title before you can refinance me? (the answer to this should also be 1 day).
- Do you sell your mortgages?
- What are your lender fees? What will my total fees be?
The first question is the critical question but so is question #7 depending on your strategy. If your friend cannot use rental income right away, but you still want to use him for the cash out loan on your home then that might be ok. I can't tell if the home you own free and clear is a rental home or your own, so that might make a difference as well. Also, if your friend is new to the business he may not be able to answer these questions. That would also be a red flag to me. Loans can get complicated in a hurry. Simple loans are good for someone early in their career but if you own multiple properties or something like that your loan might cause him some trouble. Keep that in mind. We don't want this transaction to ruin your friendship.
Let me know if there is anything else I can help with. Thanks!
Thank you @Andrew Postell. This will be my first purchase of a rental property. I own the house I live in now that is worth about 500k and work full time at around 70k annually. I also have about 40k in cash in a brokerage account and no credit card debt. I was thinking about paying in full with a cash out loan because I figured I could get a better interest rate if I were to do that. This being my first investment property I wanted to keep it small and simple to minimize the risk and get some experience under my feet. Thank you for your time and knowledge. Everyone has been so helpful on here and can't wait for the day I can give back.