@Mark A. McElhannon, you've gotten some good advice. I'll underscore a couple of points. Regardless of the type of lender you work with, building a trusting relationship is crucial. All lenders have strengths and weaknesses, staying close to them is the only way to learn what each of those are. I started my career as a commercial banker a long time ago, but have been an independent mortgage broker for nearly a decade. I feel this gives me the flexibility to find the right solution for my client and not just sell what my bank offers.
I'll also throw in my 2 cents on common differences I've seen in my career:
CDFIs - Because of their subsidized financing structure, they have the ability to be a low cost lender (and sometimes provide grants). However, you have to invest in specific communities where they are encouraging development. Often times, their approval processes are slow.
Credit Unions - Their member structure also subsidizes their financial structure so they can also be a source of low-cost financing. Many times they just do plain vanilla lending. Those willing to go beyond that could be good partners for real estate investors.
Traditional banks/Local Banks and non-bank lenders - If they are a portfolio lender, meaning they actually hold on to the loan and don't just collect your payment, then they have the ability to be flexible. Many banks securitize their loans (bundle them together) and sell the loans to Fannie Mae or Freddie Mac, while continuing to service the loans, that is collect your payment. This allows them to get more capital so they can make more loans without having to grow their asset base, while also maintaining their relationship with the customer through monthly payments. If a bank does this, they have no flexibility in their lending and must meet Fannie Mae's and Freddie Mac's requirements in each loan. In my experience, most have limited product offerings. Those that are portfolio lenders will often develop a niche, where they are really good. Your best bet would be to find a portfolio lender whose niche aligns with your investment strategy. I've seen banks be very competitive with blanket loans that cover multiple properties and/or multi-family properties, e.g. 5+ units.
Mortgage Brokers (obviously I'm biased) - Brokers have the ability to work with all of the above and can get you to the best lender for your scenario right away instead of having you waste your time with the wrong type of lender. I can quote from over 100 lenders instantly, but usually only work with fewer than 30 in a given year. As a broker in a wholesale market, I "buy" a loan from a lender at a discount and mark it up for my profit. I can do that through charging points, but since I'm getting it at a lower rate than you could as a consumer, I prefer to mark up the rate while still being lower than most others in the market. My markup is always lower than the original lender's because I don't spend money advertising during the Super Bowl, my president doesn't have a corporate jet, and we don't have layers of management we need to pay. So I'm always able to offer a lower rate and make a decent living without charging points. In my humble opinion, if you want low, competitive rates, fast closings and great service, work with a broker.
I'm also an investor and have been on the other side of the table. I'm happy to share my experience as both a lender and investor. Just DM me.
