Should I Use a Mortgage Broker and How Do I Choose One?

[Charles Carillo]

The constant question with many real estate investors is should I use a mortgage broker? In this episode, Charles explains the pros and cons of using a mortgage broker and how to choose one that will best fit your needs.

Talking Points:

➡ When you are purchasing real estate, your lender will most likely be your largest partner; usually providing 65% - 80% of the sale price. The question I often hear is; “Should I go direct to a lender or work through a mortgage broker?” and the answer is it depends.

➡ Typically, I would utilize a mortgage broker but, in some instances, I will go straight to lenders or banks. This usually is the case with smaller properties where local banks are really the main source or only source of funding and where I might already have a personal relationship which makes a huge difference when getting financing from local banks and credit unions.

➡ In most cases however; working with a broker is usually the best route. Yes, you will be paying for the services of that broker but you are tapping into their experience, relationships and knowledge.

o Mortgage brokers are involved in more deals than you are and know the market inside and out. They are speaking to buyers and sellers all day long while pulling quotes and they will know the best lender fit for your deal. If you are not the perfect borrower or the property you are buying has some issues, they will know where to go to get it funded. They will make sure to present your deal to the right lender, in right way.

o Lastly, if you are purchasing a property from a large real estate brokerage, they usually will have their own in-house mortgage broker. If you are in a hot market, telling the real estate broker that you will use their in-house mortgage broker might help move your offer to the top since their firm is going to make more money on the sale with you versus another buyer.

o A good mortgage broker will pay for themselves many times over.

➡ How do you choose a good mortgage broker?

o Get mortgage broker referrals from your real estate broker

o As mentioned above, if the real estate broker has an in-house mortgage broker, make it known that you want to use them. Keeping the loan in-house will help incentive the real estate broker.

o When you are vetting mortgage brokers; make sure that they are active in that market, asset class, property size and property class. If you are buying; un-stabilized, 20-unit, value-add, B class apartment buildings; how many similar deals have they closed in the last 12 months? What type of rates and terms were they able to get the buyer?

o Explain your business, your team and your goals to them. We have 3 partners and currently own 50 class B apartments in this city and have a 3rd party property manager. You focus on purchasing 20–40-unit apartment buildings in these cities etc. You will be vetting them but they will also be vetting you.

o I suggest putting together a professional looking brochure about your firm (or maybe just you) that you can email out to mortgage brokers or anyone really that you might work with. We have one that we provide to potential people we might work with; real estate brokers and mortgage brokers or even potential passive investors. This will put you ahead of the other potential investors that they are vetting at the same time. This will also help with your first deal since the broker will know exactly how your business is structured, who are the partners, what is their bio, how many units you control etc.

o If you are new, a good broker will help prep you to purchase a property like creating a financial statement, schedule of real estate owned, resume – making you a strong buyer in the eyes of the lender.

Listen - https://podcasts.apple.com/us/...

Watch