Hi Guys,

I just got under contract for my first duplex and am exploring my loan options. I've decided to go with a 15% down conventional loan. I'm shopping for rates and one lender has offered me a 4.5% interest loan. I was planning to go with this since it's a very low rate but i wanted to shop around to make sure that this is the best that i can find.

My questions is, should I disclose to other lenders that I already found a 4.5% loan? Would this make the lenders more likely to compete and offer lower interest rates or does this come across as offensive to other lenders?

Any advice is appreciated!

@Alex Nelson

That is an AMAZING rate. Would definitely take it if you can. 

In fact, would you mind sharing who that is? 

Also, I would try sharing the rate. Lenders make money by how much they mark up prime, quantities, amounts, etc. Just depends on how their company incentivizes them. 

If most of your lenders are like the ones that I call, they talk for quite a while before even finding out what I want to do with the loan or rate that I'm looking to get, if they know your rate prior to going off on a tangent, it may let them know if they can offer you something or if your rate is so good that they can't compete, leading to a more efficient conversation.

Worst case scenario: You tick someone off. 

Best case: You get a better rate. 

However, just be careful with your current, small bank, local lenders. Of course, they know that we shop. However, it is just tactful to not bate them, if you plan on doing business with them in the future. 

Good luck and let me know how it goes! 

-Scott 

A quoted rate is not binding or doesn't really mean anything until you have an LE or Loan Estimate in hand. Once you have that, you then have a commitment from the lender that barring a program or eligibility change, this will be their fees and rates. Once you have an LE, you can then get competing LE's from other lenders. 

Remember, verbal quoted rates and fees mean nothing, put it in writing, then you got something you can hang a hat on!!!

PS, basing your choice of lenders purely off the quoted rate doesn't tell you anything about their performance. Be careful about just going with the least expensive deal? This is a relationship business, can they perform and will you want to use them going forward? You need to understand who can get you from point A to point B with regard to your investing plans. That's who I would be working with, not just the lowest quoted rates?

Couldn't agree more with @Kevin Romines . In multifamily real estate, lenders know when a borrower is shopping around. Depending on the strength of the borrower, this tactic either results in a lower rate, or a bad reputation. Need to be very careful, 10 bps is not worth ruining your reputation.

@Scott D Burrows

I actually got this rate through Redfin Mortgage. I tried to shop around with the smaller/local lenders but no one has been able to come close to the Redfin rate. I've heard people say not to go with the big companies for mortgages but with a rate like this and no extra points or fee's, I don't know why I'd go elsewhere. Most of the other lenders I've talked to offer in the low 5's.

@Kevin Romines

Absolutely, I have this rate in writing and have actually locked in the rate with my lender already. I'm currently stuck in limbo with a tax lien on the property and the IRS being shut down, so I'm shopping around to see if any one else could match the rate I've already locked in.

I'm curious by what you mean when you say "can they perform" and "can they get you from point A to point B". obviously I want them to get to close with me, but any mortgage company will do that. What is there other than the rate that would make you chose one lender over the other? Once I move onto the next property, I can always shop around again to see who has the best rates for the next place. It seems to me that the lowest rate would get me where i want to go the fastest considering they aren't charging any extra points or fees to get that rate.

I appreciate your input!

Originally posted by @Alex Nelson :

@Kevin Romines

Absolutely, I have this rate in writing and have actually locked in the rate with my lender already. I'm currently stuck in limbo with a tax lien on the property and the IRS being shut down, so I'm shopping around to see if any one else could match the rate I've already locked in.

I'm curious by what you mean when you say "can they perform" and "can they get you from point A to point B". obviously I want them to get to close with me, but any mortgage company will do that. What is there other than the rate that would make you chose one lender over the other? Once I move onto the next property, I can always shop around again to see who has the best rates for the next place. It seems to me that the lowest rate would get me where i want to go the fastest considering they aren't charging any extra points or fees to get that rate.

I appreciate your input!

I always look at APR.. there is more to a loan than just the rate.. how much are you paying to get that rate.

Anyone have a good spreadsheet for this? Working on a personal residence and wanted to compare a few loans...

Performance would be, how quickly can they close? Do you get to closing without any surprises. Some lenders have overlays to the Fannie Mae / Freddie Mac / FHA / VA / USDA guidelines, does your lender, if so, what differences do these overlays make to your loan closing? As @Jay Hinrichs mentioned, APR, its the best way to determine what your overall costs are for that loan.

Is it a big box kind of lender that most real estate agents will not accept the pre-approval letter from? There are many lenders that may be alright for a refinance, but most agents wont allow certain lenders to get an accepted offer on one of their listings. There are reasons why this happens. If you want to know, ask some of the agents in your area that list a lot of homes?

As far as relationships, it will be those relationships that can save you when your up against a sticky problem that other lenders cant or wont deal with. Is your lender geared up to handle all the needs that a real estate investor has? Do they have all the programs to properly take care of all their needs? Besides all the conventional loans. Fannie Mae cuts you off at 10 financed properties, so does your lender have a full complement of Non-QM loans or Portfolio loans. Do they have fix and flip loans, do they have hard money, do they have commercial loans, what about HELOCS for both primary residences and a rarity, the HELOC on a rental?

These are just some of what you may need along the way, the big box guys typically don't have all that? So their good for maybe a one off purchase if the agents will accept them? But they are not your long term relationship.

Originally posted by @Kevin Romines :

Performance would be, how quickly can they close? Do you get to closing without any surprises. Some lenders have overlays to the Fannie Mae / Freddie Mac / FHA / VA / USDA guidelines, does your lender, if so, what differences do these overlays make to your loan closing? As @Jay Hinrichs mentioned, APR, its the best way to determine what your overall costs are for that loan.

Is it a big box kind of lender that most real estate agents will not accept the pre-approval letter from? There are many lenders that may be alright for a refinance, but most agents wont allow certain lenders to get an accepted offer on one of their listings. There are reasons why this happens. If you want to know, ask some of the agents in your area that list a lot of homes?

 for instance I wont sell one of my new constructions if the buyer is using Rocket.. they are beyond redicules and furious all in the same sentence.. and wells can be a challenge as well

@Jay Hinrichs

This loan that I got has an APR of 4.759%. I really haven't paid much attention to APR while shopping around. What would be a "competitive" APR rate?

I also never thought about those issues with lenders, however for this property, I used a redfin agent and redfin mortgage and everything has gone mostly smoothly so far. Only issue i had was that the lender didn't realize i was purchasing both halves of the duplex at first and offered me a 3% conventional.

The biggest problem with this whole thing right now is Donald Trump. The owner has a tax lien against him and I can't get the title released by the IRS because the government is shut down.

@Alex Nelson that seems really low. Is that for owner occupied? Also - 15% down is really good. All my 4plexes require 25% down.

@Alex Nelson is that an owner occupied purchase?  

@Alex Nelson does that rate include origination or discount? Is it FHA or conventional? If no discount or origination points than I assume is a 1st time homebuyer program. Anyway, most bankers lie, they often quote a 1 day lock which is not feasible, you need an at least 23 days lock. I never take buyers that show around because I can't compete with lying ... most of my business comes from realtors, sometimes a client will say what amazing rate they received from a retail bank and I say great, go there. But then I receive their quote and it has origination and Discount and they are not even aware. Always look at the going rates and figure out your rate will be about 0.125%-0.25% higher as those rates published online are truly a teaser, plus the unknown of working with someone no one can recommend. More importantly these online deals are leads given to bank employees, no successful or top producer banker will sit in a cubicle working on in-house leads

@Ariel K.

@Eric Veronica

This is a conventional 15% down owner occupied loan.

@Diana Muresan

This is a conventional loan, it most likely is a first time home buyers loan as this is my first purchase. I have locked in the rate until after closing already (although I'm currently discussing extending this date since my closing is being pushed back due to government shutdown). There are no origination charges or points, there are no discount points, and because I locked in my loan in December, they had a promotion to give $1,000 towards closing. I was told that these rates are because of my income, my situation, the location of the property, and maybe some other things. The lender didn't tell me all of what it took, she just told me that i checked all the required boxes to qualify.

@Alex Nelson then it sounds great. Stay where you are, only that I am confused what a confused what a conventional loan has to do with the government shut down? Perhaps it's an FHA loan and not conventional? Conventional loans are not affected by the govt been shut down

@Alex Nelson

I would just get the quotes without mentioning it and look at the full quote, compare everything, and then see which one is best/cheapest for you.

@Diana Muresan

Technically it's not a problem with the loan, it's a problem with the purchase. The seller of my property has an IRS lien against him so we have to get this property released from the lien so that I can purchase it. Unfortunately I can't do that until the IRS is opened back up, so until then we're stuck twiddling our thumbs hoping the government opens back up soon.

@Alex Nelson gotcha. I thought it had to do with the IRS transcripts 

Originally posted by @Alex Nelson :

@Kevin Romines

I'm curious by what you mean when you say "can they perform" and "can they get you from point A to point B". obviously I want them to get to close with me, but any mortgage company will do that. 

 The fallout rate for preapproved buyers is actually about 35% according to some academics studying Oakland CA. Any realtor will tell you it isn't evenly distributed; some lenders it's down in the single digits (we find ourselves invited to their birthday parties...), others it's over half. 

Not shown on there is "applied for preapproval" and "preapproved." "Application" is gov't speak for "in escrow," which generally means someone had a letter with the words "preapproved" or "prequalified" somewhere on it. "Originations" is gov't speak for "actually closed." 

812 / 1262 = 64%, meaning 36% failed to close.

Statewide numbers, the same 64% / 36% ratio. 

Based on HMDA data.

Lenders are currently not required to disclose their fallout rate, average time to close, etc.