Selecting a lender can be a difficult process if you don’t know the right questions to ask. This article features 5 questions to ask when looking for the lender in TX who is right for you!
While the process might seem arduous, you must remember that you have the upper hand. There are a variety of lending options available, and in theory, these lenders are competing to have you as a customer.
As an investor looking for a lender, your process might be different than someone looking for a traditional mortgage of a home they plan to reside in. Here are a few great questions to help you in your search.
What are Your Terms, and Are There Additional Fees?
You will obviously want to know the interest rate, the LTV (Loan to Value) and the number of points you will be paying. In addition, you should always ask if there will be additional fees. These can be points, legal fees, underwriting fees, administrative fees, etc.
These fees can greatly impact your profits if they are not accounted for from the beginning. Make sure you are of any prepayment penalties you might be charged as well.
Will This be an Asset Based Loan?
Unlike a more traditional loan or mortgage through a bank, an assest based loan is secured on the value of the property. If the loan is not repaid the assset (. the collateral) goes to the lender. Generally, when you don’t qualify for the traditional loan the asset based loan is a solid alternative. These lenders are considered ‘hard money’ lenders and you will pay a bit more in interest rates and points. But, what many investors don’t realize is these lenaders are a great set of second eyes on your deal. If they won’t lend then I’d reconsider your deal.
Do You Have Property Criteria That Must Be Met?
Geographic boundaries, as well as limitations on the type of property you are able to purchase, might be put in place by the lender. Make sure you fully understand what types of properties the lender will allow you to buy.
If you are looking for a two bedroom, fix and flip, but the lender requires 3 bedrooms and a price point of 250k+, you might be out of luck.
Do You Provide Funds For Rehab?
In many cases, a real estate investor will need to make some repairs. Will you have to pay for this out of pocket? Or will your lender provide funds for rehab and upgrades? And don’t forget to ask how the rehab funds will be distributed? Will there be inspections of work to release additional funds?
This is important to know when you are looking at potential properties for investment. While the ability to borrow more money to fix up the home might seem appealing, make sure the value is there as you will be paying additional interest on these funds.
Does Your Company Flip The Loans After They Are Originated?
Many companies will sell the loan to a 3rd party after the loan has been originated. This means that there is a possibility that you will be working with a yet to be determined 3rd party. If they flip the loans, you will be making payments and working with a different company once your loan has been processed.
What is Your Experience With Loans Like This?
Someone who is familiar with what you are doing and who see’s what a good deal you are making, is more likely to provide you with better terms. They will see the loan as low risk, and be able to help you maximize your profits.
As with any decision in real estate, it important to know all of your options and shop around. Remember to ask questions about ANYTHING you are uncertain about.
Our team can help guide you through the process of choosing a lender who is right for you! To get started, simply fill out this form, or give our office a call to get started! 361-695-1943