Loan Officer Questions?

Question

Hey guys! Newbie here so don't (or try not to) cringe at this question lol!

I'm getting started in investing and was planning on talking to all of the banks and credit unions in my area about financing deals (I'm looking to BRRRR btw).

I'm just wondering what questions I should be asking of them and if I need to prepare anything before going to interview them (credit report, income statements, etc)?

Any tips or advice would be super helpful! Thanks in advance and happy investing!

Daniel Hennek · Answer

A good mortgage broker can help you sort through options and lenders.  They can help you formulate your plan and find the best lenders that have what you want.  You don't have to interview 10 different banks, a broker can help you by having a discussion about all the nuts and bolts of the scenario.  A good broker already knows who's got what and they probably work with national lenders as well as some local.  They probably have traditional mortgages as well as non-traditional.  I'm a broker and I've got all the traditional mortgages, and many non traditional.  I've got a few products that specifically cater to investors by using cash flow calculations, asset depletion, and cross-collateralization.  So, if you're shopping around you should at least find a couple brokers to talk to.  I moved to the broker channel for a lot of reasons, but its mostly about more product options, and better rates to offer customers while at the same time increasing profitability.  Yeah I said I've got lower rates and make more money as a broker, it's why many really high producing originators are moving to the broker channel.

I also agree with Will about finding someone with the mental aptitude to handle your scenarios.  The average loan officer doesn't do well with more complicated situations.  Heck, the average loan officer can't even calculate income from a tax return on a conventional loan when they are given a worksheet to do it!  Investors need better loan officers and you should be evaluating the knowledge of the loan officer diligently.  If you are guiding the conversation they probably aren't right for you.  You want someone who can take control and put you on a path.

Andrew Postell · Answer

@Kyle Trotman you are most welcome.  And you are 100% correct.  When refinancing, I need that After Repair Value as soon as possible!  The sooner I get it, the sooner I can complete the BRRRR method.  Must, MUST have ARV ASAP!

Elise Marquette · Answer

@Kyle Trotman make sure to get a preapproval (I.e. they’ve run it through the automated underwriting system) and have 2 years of W2s, tax returns if self employed, and most recent two paystubs. Also helps to have two months of bank statements

Andrew Postell · Answer

@Kyle Trotman sorry I did not catch this post earlier.  I actually have a list of questions I would recommend to ask any lender that you interview.  Here's the list:

Questions for Lenders

• When do you start using rental income to help me qualify? (the      answer needs to be immediately)
• When do you start using “After Repair Value” on my property?
• How long do you need me to be on title to refinance? (this is      important if you do need a short term loan to purchase then refinance out      - and the answer should be 1 day...very important that it is 1 day on      title is all that is needed to refinance)
• What is my minimum down payment required? (if they only require 15%      down on a single family home that is usually a good sign that you are      working with a flexible lender)
• How many loans can I have with you?
• Can I change title to my LLC?
• Do you sell your mortgages?
• What is your loan minimum?
• Can you explain to me what your reserve requirements are?

Will Fraser · Answer

I would recommend sharing your plan with them (so that they can match you with the most relevant loan products), learning about their experience in investing, and asking them what they are fueled by the most in their work.

There are many technical questions you can ask, but I find that mortgage lenders are highly regulated in our new housing market (post 2008), so when I'm dealing with the reputable firms in my area I want to focus on getting to know the Loan Officer and understanding if they have the mental skills to help me accomplish my goals.  If so, I definitely want to work with them.

Will Fraser · Answer

@Kyle Trotman never a problem, my man.  I love these conversations near and from afar.

If the lender is local I'd recommend having a very light version of this packet ready and sitting down for a cup of something with them and talking through the project.  I've found this to be my best friend when doing deals locally because the lenders are my allies and they root for me AND advise me.  The informal nature of this helps me build rapport quicker than a more formal pitch because . . . it's less pitchy?

That being said .  . . know your stuff!  I think I have built good rapport because I know the numbers and the paradigms of the projects well enough to discuss them conversationally in a personal setting.

When it comes to meetings with your other team-members, especially hard money lenders, top wholesalers, and asset managers this will be a little more strategic.

Those are my two cents, for what they're worth, haha

Kyle Trotman · Answer

Thanks @Andrew Postell! You've been a great help, I appreciate the responses.

If you had any questions about residential or commercial hvac systems feel free to shoot me a message and I'll do my best to answer them or give any advice. Thanks again.

Andrew Postell · Answer

@Jorge Uribe I also wanted to comment separately on another post from above.  An "agency" loan, meaning Fannie/Freddie, won't automatically call a note due.  That is usually what you hear from a non-flexible lender that doesn't want to lose business to flexible lenders.  I know because I used to work for them early in my career.  Don't hold it against anyone that states this....this is how we are trained.  It takes years to find out the truth for most loan officers so just stay patient.

Portfolio loan are NOT limited. They are actually readily available...but because most of those banks don't have sexy commercials on TV we may not have heard of many of the regular portfolio lenders.  Likewise, since "portfolio" lending is the bank's own money....each bank will lend it differently.  And the big banks do have these types of loans....they just aren't accessable to you and I.  Chase, for example, requires you to have $250,000 in a bank account with them to gain access to their portfolio lending.....hey, it's their own money, they can lend it how they see fit.  So really what we talk about on the portfolio lending side is finding the right fit and that usually comes from your fellow investors.  And that can even go for the Fannie/Freddie lenders too.  Some will be more flexible than others in that world as well.  Here's how to FIND good lenders (along with the questions I posed above):

• Post in the Bigger      Pockets STATE forum that you are looking in. There are usually some good,      local investors that monitor those forums. Maybe they already have a      suggestion or recommendation for you? Certainly try there.
• Visit your      local REI groups. There are many groups that meet across the      country. Some post here on Bigger Pockets. Many post on meetup.com.      Networking is always a great practice and you never know who you might      meet there and what good information they have to share. Would certainly      recommend visiting if one is close to you.

Hope this helps.  Thanks!

Andrew Postell · Answer

@Jorge Uribe I'll answer this in two ways:

• Fannie Mae and Freddie Mac - these are the entities that require you to close in your personal name.  Since their loans have better terms, investors still want their loans...so they close in their personal name and change title to their LLC after they close.
• Portfolio Loans - these are loans that come from a lenders OWN portfolio of money (thus the name).  Most of these loan types can close in an LLC name no problem.

There is no "right" or "wrong" way to do this but you certainly have options on keeping a property in an LLC if you would like.  Hope all of this makes sense.  Thanks!

Daniel Hennek · Answer

There never were "many" and agency products do not allow it.

If you look at agency(fannie/freddie) guidelines they tell you that you can't close in an LLC and if transferred to an LLC they can call the whole note due.There are still lenders out there that will allow it but since agency products don't allow it the products are very limited and investor specific.

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