Things You Should Know About Lenders

Finding the RIGHT lender sure can save some headaches and time when purchasing an investment property.

Rule Number 1 – Don’t allow a lender to pull your credit before getting information on the programs they have available and explaining to the lender exactly what you are trying to accomplish with a particular property.  Let them know whether it is a rental property, a property that needs work, or a multi-unit property.  Also, make sure you tell them where the property is located.  Never give a lender your social security number until you think that is the exact person who can help you get financing.

A step you may want to take prior to contacting a lender is figure out exactly what your credit score is.  This way when you are asking them about lending programs, you can tell them exactly what your credit score is and they can tell you exactly what they can do for you.  You may get a copy of your credit report by visiting www.equifax.com

Each time you have your credit score pulled your credit score goes down just a small amount – this small amount could hurt you in the future.  So only allow a lender to pull your credit once you know that lender can be beneficial to you.

Some lenders will not lend on multi-units, some lenders will not lend on properties below $60,000, some will not lend in Baltimore City, some lenders will not lend to people who are self-employed.  So make sure you give them all the information you can and be very upfront with them as it will save you many headaches in the future. 

We have seen this type of situation happen more than once - A lender says they are going to lend someone money for a particular property from the information the buyer gave to them.  Then a few days before the scheduled settlement, the lender backs out for one reason or another.  This causes many headaches on both the buyer’s and the seller’s side.  The best way to avoid this is to be as clear as possible about your current situation and what your plans are for a property.

Information we recommend you tell the lender upfront:

-          What city/area the property is located
-          What condition the property is in/ what your intentions are by buying this property (rental, rehab)
-          Your credit score and credit history information (good credit history, previous bankruptcy, etc…)
-          Your employment status (full time, self-employed, retired)
-          How much cash you have to invest in this property
-          An estimate of how much money you can show in a bank account, IRA, stock market, etc…

Another thing to look for when dealing with lenders is that if it seems too good to be true – it probably is!  Lenders are a great asset if you have the right one on your team.  But they sure can put a sour taste in your mouth if you have the wrong one. 

Also, if a lender ever asks you for a significant fee upfront – walk away!  We have only ever had a lender ask for money to cover a credit check or an appraisal fee.  But, every now and then you will hear about a lender who promises great things if you will give them cash - from a few hundred to a few thousand dollars.  If they need money – Don’t trust them!

We have our own fair share of lender situations and stories:  We have had lenders promise us that settlement was going to be “this week.”  We heard this week after week.  As it turns out this gentleman just couldn’t get the job done but didn’t want to admit it to us or himself.  We have also had lenders tell us that closing was scheduled for tomorrow and then they cancelled the deal for one reason or another – the reason for their cancellation could have been addressed long before it was and could have been corrected.  Also, we have been the victim of a lender telling us, as well as the buyer of the property, that everything was perfect and ready to go to settlement only to find out that this lender had absolutely zero intentions of ever completing the transaction.

With all this said, once you do find that great lender, hold on to them - they sure can make your life a lot easier.  We recommend that you use lenders that are referred to you by someone you trust and someone who has personally used that lender’s service.

When you purchase a property from us we can refer you to lenders that have been beneficial in a similar type of situation.  This is just one more service we offer in order to make real estate investing a little easier.