I have a credit score around 750, with a good debt/income ratio, and a high income. My goal is to spend less money out of pocket on new purchases and not pay for it over the next 15 years (all 15 year financing). I have done a few 80/20’s, and have gotten anything from mediocre rates w/ kind-of-high closing costs (National City Bank) to HORRIBLE rates w/ MONSTER closing costs (1st one I did, King Capital Mortgage Company) where I was taken advantage of for being naive. With my credit score, what is the best case scenario (closing costs and int.rate)I should be looking for when buying 1-4 unit properties? I finance on 30 year fixed rate loans but make 15 year payments. Also, when I try to compare closing costs, there does not seem to be a standard form for good faith estimates, so things are always labeled/worded differently, making it difficult to compare apples to apples.
a caveat to my former statement - National City, though they are not investor friendly as a lending institution, has the broker who has treated me better than any loan officer I’ve dealt with - just so Nat City fans don’t thing I’m ripping on them. King Crapital, on the other hand, I don’t care what anyone thinks.
[b]Go Bucks![/b] Time to kick some Wolverine rear this weekend :beer:
Sorry just had to say that.
In regards to your question. As with any situation is always best to shop around. Find someone that you can trust. Someone who is not out there to take it to you on every deal.
HORRIBLE rates w/ MONSTER closing costs
I have to say that everybody has to make a living. However, there is a right way and wrong way to do it. There are so many rookies in this business. They have heard the stories of great wealth to be made. They want to make it over night. It is not about long term relationships. It is always about this weeks paycheck. >:(
standard form for good faith estimates, so things are always labeled/worded differently, making it difficult to compare apples to apples.
Unfortunately you are right. The closest thing to matching is comparing line items. For example, section 800 is all Lender controlled fees. There should be no more than 5-6 fees there So look more at the total and you will be able to compare a little better. If you are dealing with a broker, these fees can vary depending on which lender they are taking you to.
I know that this is not the answer that you were looking for, but, it may help a little.
I must say that a relationship with a mortgage professional is one of the most critical contacts that an investor must have. Rates and costs are one factor, but having a knowledgeable consultant who knows the various products available by many lenders will out way the savings of an .125% here or $500 there. The financing you are looking for is only available by a handful of lenders and their guidelines can vary from place to place. Knowing what your portfolio currently looks like along with what you goals are is critical to placing loans. Some lenders have restrictions on the number of properties owned, the pace at which an investor is purchasing, and if the subject property will create a negative cash flow (which with 100% happens often). These key pieces will get some brokers caught up.
There were several points that you missed when asking for the advice of the professionals here. Such as, how many tradelines open on your credit report, purchase price, your income source - how much and how long, debt to income ratio, and how much in liquid assets that have been available the past 60 days.
As a rule of thumb your closing costs should be pretty consistent across the board. Interest rates will vary because some brokers or inexperienced with the programs available and will place you into a program which is not best suited for your great credit.
You should really understand how a mortgage broker gets paid. Once you know this, an arrangement can be worked out in advance on how much your consultant would require to make on each loan. This way you will always be able to structure the financing how it makes sense for the individual property.
As far as fees go the bottom line is how much do the fees total. It really doesn’t matter what they call them. As someone said earlier, the section with 800 level fees are the lender controlled fees look at the total of these fees and compare the total not each item. I personally feel that if anyone is trying to charge you more than a total of 1.5-2% of your loan amount in this section then they are ripping you off. it is hard to tell you what rates you should be able to get on a 1-4 unit because the rate you could get on a 1 unit inv prop is alot lower than what you could get on a 4 unit inv prop. I would say if you are truly doing an 80/20 as an investment property on a 30 year fixed then you are probably going to be looking at about 7.25-8.75% first mortgage depending on # of units and 10-13% on the second depending on the number of units. The hardest part about investment loans is that not many lenders offer 100% investment property financing and so there is not as many places to shop rates. I definitly agree that the best thing to do to avoid dangers in both rate and fee as well as unexpected surprises is to find a loan officer that you trust to do what’s fair to both of you and has done many 100% investment property transactions because 100% inv prop financing is a whole different animal than conventional conforming and an inexperienced loan officer can cost you the deal if they dont’ know what to be prepared for.
Thanks everyone for the replies. I always appreciate the help I get here.
InvestmentLoans Ben, I agree that relationship w/ a lender is of utmost importance - which is why I feel so burned by the first lender I used. I made the ignorant mistake of trusting the first mortgage broker I spoke with. She seemed honest, and when I was buying my first property, I was just ecstatic someone was loaning me money (which I later found out from other lenders that I am very easy to loan to). I mistakenly thought that since I made it very clear that my intent was to buy a lot of properties (and would buy them all using the same lender if I was treated well) that she would not put the screws to me too hard. Bad assumption. I did not shop her at all - also my mistake. She assured me she would get me the “best deal available” and told me that w/ my income and credit I would have no problems at all. On an 80/20 loan, I paid full closing costs and title expenses for 2 loans! Over 6K in closing costs for a 50K property! I could have put a 10% down payment down and spent 2K on closing and would have had 5 of 7K in equity, instead I put it all in her pocket. I paid almost 8% on the first and over 13 on the second. When I showed my closing statement to another lender - he actually started laughing. He has done every other loan I’ve gotten since then and I’ve paid one set of closing costs for 80/20 loans and been in the 6’s on the first and 8’s on the second. I got screwed out of thousands of dollars because I was dumb enough to trust a greedy lender.
I agree w/ you that a relationship w/ a good lender is one of the most important things an investor can have. But the important part is making sure they are actually a GOOD lender, not a crook.
Mdhaas - It was a close one today, but the mighty Bucks pulled it down. Too bad Penn State did too.
I agree w/ everything you said here. Unfortunately though, the lender I took the screwing from wasn’t a rookie. She was quite experienced - she just made the judgement call that I may buy one double and never buy another property, so she went for the sure thing instead of building a relationship. It’s my own fault for not researching, and I know that, but it still ticks me off. The flip side, though, is that I tell every person in the Columbus Ohio market that I talk to about my experience w/ King Capital. I’ve sent my good lender probably 20 solid loan leads on top of quite a few loans of my own, and I’ve steered many more than that away from King Capital. ;D ;D ;D