Learn How To Start Investing In Real Estate
Learn How To Start Investing In Real Estate

7 Tips For Navigating Today’s Mortgage Maze

Written by Paul Esajian

How can real estate investors secure the funding they need faster and more efficiently?

The U.S. mortgage market seems to have become even more complex in the last year or two. There are far more borrowing choices, and not just from old school main street banks. So how can homebuyers and real estate investors better navigate this maze?

1. Define Your Needs: In order to streamline the mortgage lending process, it’s smart for those buying real estate today to be very clear about their needs upfront. What is it that you really want out of this loan? What elements are the most important? Is it how fast you close? Closing on time? The most you can borrow? Not exceeding a certain payment amount? A loan servicer that won’t try to scam you after the loan is made? What are the absolute musts? Know where you can negotiate, and where you can’t.

2. Compare Capital Sources: Before making actual loan applications or providing your details to half the lending world, it’s smart to evaluate the different options available. There are so many different choices today. There are traditional banks, credit unions, mortgage brokers, private money lenders, new commercial real estate loan companies, and online crowdfunding portals, as well as peer-to-peer lending websites, business lenders, and other hybrids. It is important to recognize how they differ. How much will borrowing the money cost? How reliable is the source? How easy will it be to get the money?

3. Find Lenders That Love Your Type of Deal: Out of those sources of capital on your short list, which really love your type of deal? Trying to force a square peg in a round hole in the mortgage business is just going to lead to a lot of frustration. Just because they take your application and toss it into underwriting doesn’t mean it will go anywhere. If you are buying a condo, go to a lender that actually likes making loans on condos. The same applies to your credit profile, location, loan amount, and so on.

4. Explore Their Parameters: Dig deep into the lenders parameters and loan program guidelines before going all in. This might seem like a pain, but there is going to be a lot more pain if your loan application is strung out, and you lose your deposit because you don’t close. Constantly having to hop from lender to lender can be a credit score killer. Most buyers and borrowers never get into this. They often pay a high price for neglecting to ask a few extra questions. In particular, borrowers need to know what factors might derail a loan application or cause the terms to change between the time of pre-approval and final loan approval. In particular, this might apply to property condition, property type, loan amount, etc.

5. Find a Contact You Can Trust: Browse the web for five minutes, and you’ll find plenty of tantalizing loan offers. It’s no secret that things can change quite dramatically by the time the money makes it to the table. Expect the money to cost more than anticipated, closings to take longer, and to have to come up with more cash at closing than hoped. However, don’t stand for bait and switch tactics. Find a contact you can trust and that will work hard for you. Work on building a great relationship from there.

6. Be Over-Prepared: New regulations have limited the amount of paperwork lenders can demand from consumers in advance. Of course, this is also going to make it harder to lenders to make solid pre-approvals. While loan programs are expanding for buyers, underwriting can still be picky. It pays to be over-prepared. Consider everything the underwriter might ask for and get it together. Be prepared to squash any doubts or new conditions to that you can fast track your loan to funding.

7. Be Wary of Fraud: As mortgage lending picks up, mortgage fraud can too. Be wary of fraud, especially at the real estate closing table. Do not sign anything that isn’t accurate. It doesn’t matter whether it is the closer, your bank, or Realtor: don’t put your freedom on the line for someone else’s commission.