First things, first - What type of investor are you? Are you strategizing to flip or to buy and hold? If you’re planning on flipping properties, you will have no problem finding lenders who provide programs to fit the needs of your next project. If you’re looking to buy and hold, lenders are often not alike and it is not comparing apples to apples.
Senior Account Executive Cody Smart provided questions that can help you determine which rental loans lender is the best fit for you.
Will my experience as an investor be taken into consideration?
In non-qm lending, qualification varies and sometimes first-time investors are turned down due to lack of experience. You will want to know off the bat if your experience will disqualify you and furthermore, if your experience could benefit you in their program.
Lenders often have loyalty-type programs for experienced investors. Find our what your lender may offer if you have a growing portfolio.
Does the lender offer a program that fits my investment strategy?
As we like to say at Visio Lending, the most popular flavor tends to be the refinance program, whether you’re looking to take cash-out or simply refinance an old loan, which is a common program across most direct lenders.
Now, if you’re looking to buy and sell after only a few years or so, you’ll want to find out what ARMs are available to you or if you are planning to buy and hold long-term, you will want to learn more about their fixed rate program.
In regards to 5/1 ARM and 7/1 ARM programs, these fit the buy and sell or buy and refinance strategy. If the lender you are working with offers adjustable rates, you will want to know if there is a 0 point option. If you are planning to buy and hold onto the property for a decade or more, doing a fixed rate makes more sense and with programs like Rental360, have a rate buy down option for you.
What are the lender’s rates and closing costs?
This may seem like a given, but in all actuality sometimes this isn’t as straightforward as investors would like. You should know before signing which factors could potentially change your rate and what closing costs or fees are required. The last thing you want is to end up at the closing table with an unexpected rate and more fees.
Lenders always require fees, whether they’re closing fees or legal fees, you should know what fees will be expected of you. In addition to knowing what factors could adjust your rate throughout the process, if any. Sparking up this conversation, should also lead you to understand if the programs offer a rate lock and the average time it takes to close.
Does property type effect eligibility?
Like we mentioned earlier, alternative direct lenders aren’t easy to compare, also meaning their programs are not exactly alike. You will want to know which types of properties they fund and if your property fits their niche.
You should note that different lenders allow for different property (for example: some non-qm lenders do not allow non-warrantable condos or boarding houses) and some will include rate add-on's depending on the property type (condo, SFR detached, 2-4 units) you are looking to fund.
What could go wrong?
In the mortgage business, it’s no secret that closings can be prolonged or loans do not get fully processed. It’s important that your lender is transparent with you on what is expected of you to get your loan processed and especially letting you know what could go wrong.