Our Top Tips for Finding and Vetting a Good Lender

In this episode Emil, Tom and Michael discuss the most important factors to consider when looking for financing. --- Emil: Hey, everyone. Welcome back for another episode of The Remote Real Estate Investor. My name is Emil shour, and today I'm joined by my cohost,   Michael: Michael Albaum,   Tom: Tom Schneider.   Emil: And we're going to be talking about how to find and vet lenders, a big part of your real estate investment team. We're going to be tackling each one of the key players in its own unique episode. And in this episode, we're going to be tackling the lender. So let's hop in.   Tom: Hey just want to let everybody know we're running a special deal with Roofstock Academy. If you want to talk to Michael and myself or any of the Roofstock Academy coaches, we are running this program right now where it's $101 off with the coupon code SEPTEMBER. This is Roofstock Academy. It is risk-free, includes coaching, over 50 hours of lectures, the Roofstock playbook. So we have our templates for interviewing vendors, all kinds of information, plus a lifetime satisfaction, full refund guarantee. And on top of that, Roofstock will pay you to invest If you invest on the Roofstock marketplace for every transaction on Roofstock, Roofstock Academy, we'll pay you $500 for the next five transactions, individual properties. So that's $2,500 worth of cash back. The coupon code that we're running is September. The coupon code is September, and that's going to be $101 off your purchase of Roofstock Academy to make the purchase go to Roofstock academy.com.   Emil: All right guys, before we get into the topic, some we always love to do what's going on in your world as it relates to real estate investing or not just what's going on, Tom, kick us off.   Tom: Oh boy. Having some issues with mail stuff. So I'm refinancing my primary and I took the advice of opening a HELOC then. Awesome, awesome. To have that line of credit, but I closed it out just because my lender wanted to close out the HELOC, uh, to do the refinance. And I'm waiting on the mail for the letter saying that the HELOC has been closed out and I'm like kinda concerned. It's been like two weeks. And I said, they sent the letter. So that has really put me on hold. Cause I plan to use that HELOC to go, uh, do some more rental property fishing. Cause I have to close the HELOC, open the new refinance and open the HELOC again. So just going through that rigmarole. So right now it's waiting on the snail mail.   Michael: They can't email you or fax you that letter.   Tom: I'm going to try it. You know, and another thing lenders will sometimes do is they have these third party, intermediary calls, I guess, is related to real estate investing. Also primary owning is they will have a third party company they'll call you. And then they'll loop in like a conference, call your bank and then they'll say, Hey, please confirm whatever your social, whatnot to confirm your you. And then they can get whatever answers they're looking for just over the phone. Cause they have you kind of authenticating for that third party confirm. So I'm trying to have them do that. And I'm trying to explain them that, Hey, can we do this? And might've kind of butchered my requests for them to do it. Hopefully can, but we'll see. I mean, that's a good question, Michael. I'm gonna knock down some doors trying to make it happen.   Michael: Yeah. When they ask you to confirm your social, how do you answer?   Tom: I, Oh boy. Get, get outta here, get outta here. I'm not getting my social.   Emil: Almost got him.   Michael: So close. So close. I could see you thinking about it? Like yeah, my social is.   Tom: Yeah.   Emil: That's never fun. All the like back and forth and forms and like   Michael: Just jumping through hoops, it seems like it's not a streamlined process.   Emil: Yeah. It never is. That's part of it. It's part of the game. So what about you Michael?   Michael: Yep. So do to close on that six unit I'm selling in Cincinnati on October 7th. So hopefully that'll go smooth, knock on wood and then I'm actually listing a property for sale on Roofstock in Southern California. It's a rental condo that I own. There's some been appreciation down there in that market. And so I think I can redeploy that capital and go somewhere else. So I'm going through the certification process as we speak and also in the process of refinancing my primary as well. So I am not looking forward to that rigmarole as Tom mentioned, hopefully it's a bit of a smoother process   Emil: I just refinanced like a month ago. And I'm in that process where the bank is having, it's like transferring the servicing of the loan to somebody else and nobody can give me a straight answer about how I do I just set up auto pay. Cause I don't want to send checks in the mail and stuff. And it's just Ugh. The joys of new lending.   Michael: The fumbled handoff always.   Emil: It's never smooth. It's never smooth. Yeah. But anyway, all part of it, all part of it.   Tom: Anything else going on Emil?   Emil: Yeah, I got two calls yesterday from some mailers I've been sending out the last couple of weeks, both people who reached back out to me, they didn't want to sell the property that I was mailing them about. One guy actually had a property that's on market and he's just like, Hey, I have this property. It's on market. If you're interested, I'm good. It's a little bit too big for me. And your price is a little high. And then the other woman, same thing. She, I was contacting her about a four unit, but she's like, I have this 18 unit and I want 1.2 million. I was like, that is way out of my range. And she wasn't top dollar, like I'm fishing for deals. That is a little bit out of what I'm looking for, but I was at least happy to have some people contact me back. And hopefully I think they both mentioned they'd be looking to sell those properties within a year or two, just not right now. So hopefully when the time comes they have my information, you know, we had a good call and try to be friendly and hopefully they call me in a year or two, but it was cool to at least start getting some response from those mailers. So happy about that.   Tom: Seeds planted.   Emil: Yeah.   Michael: Did you feel like you were going to the car dealership, like a Toyota dealership, like getting, going to get a Corolla and they were like, yeah, we don't have this car, any Carola's for sale, but we have this pretty cool Ferrari. If you'd be interested, it's like, that's not what that's not at all. But I was asking about or interested in   Emil: I kind of had the expectation that it wouldn't be like people just calling me like, yes, here's my property. And it'd be like just this perfect thing. Right. I knew it would be like people calling and, you know, want to talk and like kind of spinning the wheels. But I guess my expectation was kind of, yeah, just sell me the property I was calling about. But anyway, at least just planting some seeds.   Tom: On that shooting, the breeze is it's pretty funny, culturally like different areas, like depending on who you're on the phone with, you know, like talking to some people from probably like California, New York, pretty choppy, like average call duration for this type of work. Oh, I don't know, like five minutes or something, then start moving down into the Southeast, like expanding it out. I like the changing gears of both types of conversations.   Emil: Totally. Yeah. Someone from California called me. It'd be a real fast conversation, but uh, this is in the Midwest where people are super nice and like, it was nice. It was cool to just talk to investors who are local and I don't know, just get on their radar and chat with them a little bit. So it's cool. At least getting some response.   Michael: When I was first buying properties out in the Midwest, I went and met with a property manager and I wanted to start asking her about questions and stuff about business related. And she's like, well, Michael, we haven't hardly had a chance to visit yet. And I was like, visit,   Tom: You got to break bread, Michael.   Michael: Yes, that's right. That's right. And I was like, this is cool. It's a little bit different. So it's funny when I talk to people, investors who get frustrated with like timeliness of working with other professionals and there are parts of the country, I'm like some folks just operate at different speeds. And so I think it's important to ask the question of like, Hey, if I email you, how long should I wait until I hear back? Because it standard might be three, four days, right? Where I think we're on the West coast and East coast, I think are used to a much timelier response time. And it's not someone being rude. Isn't not someone forgetting about you. It's just that they operate maybe at a different speed and there's nothing wrong with that. We just have to understand what it is, right?   Emil: Yeah. Total different pace of life. For sure. It was nice. Like you always say people from the Midwest are super nice. It is very true. They're super nice. It's very true. All right. Let's get into our episode. So the three things I have outlined here for us to talk about in terms of funding and bedding lenders is the first thing we're gonna be talking about is timing. So when in the sequence of your investment, should you go out and start looking for lending? How do you source lenders? How do you find them? And then last part of this episode is going to be vetting and certain questions you can ask to find the right lending partner. So start with that first one timing. When in the sequence, should you even start looking for a lender? Is it before you even start looking for properties? And once you have a property under contract, so who wants to take first stab at time?   Michael: Go ahead, Tom.   Tom: I could take an early, early stab at this. So what's cool about a lender is you can plug them in either. If you're buying all cash, you can do this after the fact and it doesn't need to be done. But if you are going to be purchasing with financing, this is something that you want to do super early for a couple of reasons. So one of them would be, I would do this before you even start evaluating properties. Just kind of work in parallel on these two tracks. The reason that you want to do this, it's a couple. You're going to one, know what your purchasing power is. So this is going to inform sort of your buy box on how expensive a property you can afford, or you can buy multiple properties. I'm going through that exercise of getting preapproved and all that is going to inform you on that information.   The other one reason is it's going to make the transaction and everything much smoother. We've talked about before. One of the beauties of coming in with all cash is it can often lead to a much smoother transaction. If you are financing, you can make that transaction experience for everybody. A lot easier. If you have your ducks in a row, your lender identified, pre-qualified all, you know, you have all that in a row. So if you are buying with lending, doing that way up front, you know, way before you've submitted your offer already having that preapproval letter. But if you're planning to buy all cash, there's no reason why you can't go through the acquisition by it without cash, and then go through that lending exercise. So I'll, I'll uh, put, uh, in, in my response there, Michael,   Michael: No, man, peanut gallery is on strike. You ain't get nothing out of us. I agree with everything you said. I think that's the ideal scenario, right? Where you can set things up to be executed on a very calculated and set timeline. I know personally I've done deals and have not got the lender set up in advance. I'll just start looking at deals and learning the market. And you know, I'll be two, three months out before purchasing wham get hit with a really great deal. And I was like, Oh, I got to jump on it. And so having done both the lender prep ahead of time and also lender prep kind of after the fact, it's, it's so much easier doing it ahead of time. And I don't think it's ever too early to start just having those very cursory conversations, high level conversations. I'm an investor I live in this state. This is where I'm interested in investing. And depending on who the lender is like geographically, where they are, that'll shift the conversation a little bit as well.   So if you're chatting with a national lender, it's going to be probably a different conversation then with a local lender of, Hey, I'm committed to growing in XYZ market. And this is, I know where you live. It's the local vendor versus, Hey, I'm looking at purchasing. And one of these five States, can you help me without, throughout that entire process or through any of those States? So just understanding the limitations and capabilities of the lenders is really great as well. And what kind of get in that later in the episode, when we talked about some of the questions you want to be asking, but I would say the more specific you are on your market, the more committed you are to a specific market, the more specific, and the earlier you can start having those conversations with local lenders versus you can go more high level with the, uh, with the more national folks.   Emil: Do you guys go get preapproved each time? Like I think you guys mentioned this really smart to go get preapproved, to get everything lined up. I'd say before property one, subsequent properties, I haven't gone through the preapproval process. Again. I don't know if this is the right way of doing it, but I just knew that I got lending from that lender. Everything was smooth. All good. So I didn't do it ahead of time on subsequent properties, just the first property. Do you guys do it for each property? Curious before each property.   Tom: If you're working, like what happens if you buy one rental property, you start adding, you start establishing a relationship with that mortgage broker and it could be not a, a full, you know, it could be just reaching out to them cause you've done several deals with them and you like them. They have a great operations team. They have great rates. You could just ask them the email, like, Hey, I'm looking at buying this and they already have, you're assuming your information hasn't changed too much. You can get just an initial check on your, your buying power. So maybe not the full thing, but as you start doing it again and again, and again, I'd say less intensive, especially if you have a relationship with a mortgage broker who knows what you're up to and you're background.   Michael: Yep. I would totally agree. And just so everybody knows who, who, maybe isn't familiar with a mortgage broker, but a mortgage broker is just someone who goes and shops around at different lenders to find you the best product. Kind of like an insurance broker is going to go shop the insurance market and come back and present you with a few different products versus going to a specific lender, like a bank of America. If you're going to go to bank America, you're going to talk, you're going to get bank of America products. If you go to a mortgage broker, they might have, you know, seven or 10, whatever different products available to you. So just wanted to shed some light on that. And I totally agree, Tom, I think with the more repetitive you are with the same lenders, the easier it becomes. And so I'm with you and you'll, I only did it a handful of times to go get prequalified or preapproved. So I think it's also important to ask the question of your lender of like, Hey, you know, you understand my profile now going forward, what does this look like?   What do I need to be cognizant of? Because I think it can get pretty basic. It can get pretty easy to understand of what you will and won't qualify for depending on what your debt to income looks like. And depending on what the bone of value that you're trying to utilize on a purchase looks like. And so it always surprised me when people would like make offers on properties and they couldn't go get financing. It's like, wait, how did you not know that you're not going to qualify? Like you have a credit score of 400, like no, duh. So just be aware of what the lender is looking for. And then it makes it so much easier. It's you're not going to be surprised.   Emil: And then you know your buying power, right?   Michael: Yeah. You know, you're buying for that. Shouldn't be a surprise to you either. Like when you get that preapproval letter, I don't know. You should never be like, Holy crap. Like I either qualify for a lot or a little, like you should know.   Tom: I've got a good point too, to make the difference between a prequalification and a preapproval. So I think this is there's some ambiguity in these two. So just as a quick disclaimer, between the two. So a prequalification is based on what you have submitted to the lender. It's a, a letter, to be honest, it doesn't really mean anything just because it's what you're telling the lender. A preapproval is a more involved process where the lender is running credit and getting verification. So those are the two different ones. I'm okay. Doing a prequalification where I'm spending information. Cause I'm going to be honest and straightforward. I mean, that's not something that you want to fluff around with because if you do embellish things at the point at which you actually needed the loan, the lender is going to find out the truth like doing there.   So it's, you're really just wasting everybody's time. So I'll do get a prequalification. I could do a preapproval, but I'm okay. So that's just a quick kind of disclaimer on the difference between a preapproval and a prequal. So pre-qualify, doesn't really mean a whole lot. It's what you tell the lender. And as long as you're being honest, that's great. It'll be the mustard, it'll work, pass mustard!   Michael: Pass muster.   Tom: It'll pass mustard.   Micheal: But I think it's, I think it's, I don't think, are you putting a D on the end of that word? It's muster, not mustard, like the condiment mustard.   Tom: I like, you know, effort, you know, cause you want to have a lot of effort, mustard. Okay.   Michael: Uh huh.   Tom: You can cut the mustard. It's really easy. It's a vinegar based condiment.   Michael: I thought you would be peanut butter spreading that mustard. If I was a betting man.   Tom: You can. It depends.   Emil: And this episode has completely gone off the rails.   Tom: The other reasons too early get your qualification or approval is you can get different rates. So you can go through this vetting process that we're going to talk about to make sure that you're getting the different rates. And it can be really easy to do this process once with one lender and say, Oh, I liked them and I'm not going to do it again. But honestly you can like save money by doing this upfront and doing it multiple times with multiple lenders. You wouldn't want to go through a pre approval multiple times, cause that is multiple credit checks. You know, that more kind of intensive process and doing multiple of them could be detrimental to your credit score. And that's something I would ask the lender like, Hey, is this going to touch my credit score in the process? So that was my one other point I wanted to roll back and doing it early is you can get rates from multiple lenders who are making the best decision.   Michael: Just to piggyback on that.Tom, the way that I describe it to folks is a prequel is an interest in a lender to lend to you. A preapproval is their commitment to lend. And so I've also heard…   Michael: Dating and engagement.   Michael: That's right. That's right. So I've also heard that some lenders are actually do require a credit pull to get your pre-qual letter, which is the less intense. So I always say, thanks. No thanks. I won't go through that credit pool until I'm ready to actually pull a trigger on a mortgage because a lot of these prequel letters are only good for 90 days. And so if you go through that process, prequel or preapproval and they pull your credit and you do nothing for 90 days where they're going to have to do that again, to reestablish that qualification or that approval. So that's why I always say, find a lender that doesn't require a credit pull to get a prequal letter. That way you have the letter that says, Hey, I could get lending from someone once needed and then go get the approval from whoever you're going to do the mortgage with.   Emil: Solid. Alright, let's move on to our next topic here. So it's how to source. And I'm curious if you guys go local versus national, do you have a preference and just in general, how do you guys source? Like where do you even start looking for a lender? That's a good place and resource for people.   Michael: It varies. So a lot of times I'll ask my agent who I'm working with. If they have a good lender recommendation, and usually they will. And so I've worked with national folks on numerous deals out in the Midwest. They've also used a lot of local folks also out in the Midwest. So I like entertaining both. When I talked to a lot of students in the Academy, I talked to them about take three and just, it's super easy to start pick one that you already have an existing relationship with because you could have a checking account or savings account somewhere. Start there, see if they'll lend where you're interested, find a, a big national lender, see if they’ll lend to you and then find a local lender to wherever the property is. Start there and then dig deeper on finding more of the same.   If those one of those three doesn't work out. And there are really great resources to find fun. I mean, bigger pockets has a super thorough forum with all kinds of contributors and active members about lending and where to go and who to use. Google is just great. Getting reviews of investor friendly lenders in X market, or, you know, based on where you are, where the property is. And often I just cold call people, Hey, this is what I'm looking for. Is this something that you offer and just starting having a conversation with them? A lot of folks are really just starting from scratch, especially if you don't have, if your local bank, you know, your bank of America that you have your savings account with doesn't lend in Tennessee.   Tom: Yeah. Under network is a great spot to start. I'll do a shout out to Roofstock Academy. That's our internal program that we have here at Roofstock that people can join if they want. One of the perks of your sec Academy is inside of this Slack channel, which is this forum amongst members and coaches. And I actually am doing my refinance off of a recommendation from one of the members in the Slack channel with Roofstock Academy. So worth checking out Roofstock Academy.   Emil: I did the same thing. Yeah. Network is just huge. And you'd take everybody with what they say with trust, but verify. So you get that lead and then you go to your homework.   Emil: Totally.   Michael: Where do you look Emil?   Emil: In the past, I have, since I've primarily bought my properties from Roofstock, I have looked through Roofstock’s networks, so Roofstock will recommend a couple of lenders and it's a good place to at least get started. Anytime you talk to one of our Roofstock experts, they can give you the contact information for a couple of different lenders who they know will lend out of state. So that's always a good place to start. I've found that there's a couple of these lenders who primarily work online, right? They're just like, they're like internet lenders and their rates seem to be better than national chains, like a US bank or Chase or whoever. So like, you guys mentioned, you find someone who's good. I've used them for a couple of loans now and that's been nice. The nice thing. Also, once you've done the homework and you've found a lender, you like is Tom, you mentioned it.   They have all your information. You don't need to do the two years of previous tax returns and for pay stubs and all this and that. They have all your information and it's a really smooth, easy process. So it's nice to do the homework upfront and then just piggyback that relationship for each subsequent deal. And that's been for residential now for, since I'm potentially looking at properties that require a commercial loan, which has five plus unit buildings. I'm talking to people who invest in those markets. Right. So just talking to other investors, Hey, who, what lender use investor-friendly agents. They have tons of lenders that they work with. So get their lists and start contacting each one. Yeah. Between those two, those have been the most helpful for me.   Michael: Right on.   Emil: Yeah. Anything else on sourcing guys? We can add here?   Michael: I would just say, kind of above and beyond what we already mentioned. Networking. Just talk to as many people as you can and let them know what it is that you're doing, because I think it's pretty shocking how many people know other people that can be helpful to what it is you're looking to accomplish. So whenever I'm looking for financing, I'll talk to everybody that I have a conversation with that we're talking about real estate, Hey, you know, I'm looking for finding lending in this area for this type of building. If you haven't known anybody, let me know. And that's just not casual dinner conversation, right? Like, Hey, the chicken's really good. Oh yeah. By the way, I'm like, don't be that guy at that get together or a zoom call. Cause it was doing social distance still. But I just say, talk to everybody. You can and let them know what it is you're looking to accomplish what it is you're looking for.   Tom: When you're talking to alumni on the phone, they're gonna try to close you and like lock it up and have you choose them and who knows, maybe they might get the best, but I would make sure that you speak to at least two or three lenders, like at a minimum. So, and you can be upfront with that in that initial conversation with them like, Hey, I'm evaluating you and a couple of other folks. So I'm not going to make a decision today. This is for, I'm just collecting some information to make the best decision. And I would let them know that because these guys are a lot of them are sales folks, right? They're trying to get you to originate your loan with them. So have that in your head upfront and you can be totally transparent and saying, Hey, this is a discovery call and not making any decisions today.   Michael: Be strong. Don't give in. Some of them are really good.     Tom: Yeah, they are.   Emil: Yeah. Yeah. They'll tell you, you know, we have the best rates and we charge the lowest points and least fees and all that   Michael: You lock in your rate today. It could go up tomorrow. So lock it in today.   Tom: Yeah. Fear man. Fear sells. Yep.   Emil: Yep. All those things. Alright. So our last thing we want to hit on on this episode is the meat. Vetting questions. What should you be asking lenders to find the best one? So…   Michael: Who does number two work for?   Emil: These episodes are becoming like South Park and funny movies. Dammit Michael.   Michael: Sorry.   Emil: It's good. It's good. We got to keep these fun. Alright.   Michael: A little Austin Powers in the morning.   Emil: So yeah. What are, what are some tried and true questions you guys go to when you're evaluating a new lender?   Tom: I’ll lead the way on this one, do a little Michael sandwich. Well, I'll leave that first one and leave this one. So I would think about it in high level categories and have questions for each of these high level categories. We're actually, by the time this is released, we will have just put out a webinar with Roofstock on, on this talking about property managers, lenders, all kinds of good stuff. We'll probably be on YouTube, go check it out. It's by Roofstock Academy. So anyways, high level question. So the first one level of questions, and I'll let Michael get into the specific questions. I'll just put the high level ones together. So is learning about the company. I think there can be a little bit of a sniff test and looking about how big are they are, how much business they do, how many employees they have, what kind of customer experience.   So like about the businesses is a good one. The other important category of questions is how do they make money? The other ones is standard operating procedures and lastly cannot be overlooked his references. So can I talk to someone who isn't your grandmother about your business? Who's done work with you. So all I'll lead with that high level overview. Michael, if you want to just in some specific questions or however you want to take the second part of this.   Michael: Yeah I am going to do a sprinkling. You made a really good point. And actually I just had kind of this epiphany this morning and just now, because I was having a call with the lender earlier this morning. And so about the size of the operation, this is a smaller local bank out in the Midwest. And I was having, this is now I think my second or third call with the president of the bank. And so I think it's interesting to look and see who it is that you're speaking to or who it is that you can get ahold of because a lot of these banks are structured differently and so they have the front end salespeople and then it kind of funnels through to the ultimate decision makers.   And so if you're able to speak directly to a VP or a president or somebody who is a key decision maker at that bank, you can often get things done a lot sooner, a lot more effectively as well. So I'm now starting to put a little bit more weight on that when I don't think I was previously,   Emil: Would you say that's more important for a commercial loan versus a residential?   Michael: Yeah. These are all commercial loan products and some portfolio type stuff. So I think that does make for him a similar transaction process for the commercial type of stuff, because that's where things tend to be a bit more flexible or a little bit more custom. The residential space is pretty cut and dry. It either is, or it isn't since the vast majority of those are getting bought up on the secondary market by Fannie and Freddie.   Emil: Right. Yep. Good distinction.   Michael: So, okay. So some specific questions that I like asking lenders is who do you work with? Who are most of your clients? Are you work with investors? Do you work with owner occupants? Where are they in relation to their properties? Are you work with out of state investors? I like asking you about interest rates. That's always a big one because that's a big driver of who I'm going to ultimately decide to borrow from. And of course, with the understanding that interest rates change every day, but with commercial lenders, again, they're going to have more custom products. They're going to have often a wider range of products to choose from and with varying interest rates.   So again, for residential asked that question as well, but with the understanding that they're going to change, also, you can ask them about what their fees look like and what their credits look like. See if they can give you a, just a general breakdown of, Hey, to originate this loan, what's it going to cost me? What are all the different fees I'm going to be paying? Who are those going to and what are they for? Because you just want to get an understanding of, Hey, okay. If, if lender A has offered me a, an interest rate of four and a half then or B is also offered me four and a half, uh, there's really no difference. Well, there could be a vast difference in the fees that you're paying on the front end just to originate that loan. And so that can be sometimes to the tune of several thousand dollars difference.   So we want to make sure that we're actually choosing the best lender to work with also really important to ask about prepayment penalties. These are like really important. And basically what our prepayment penalty is, is if you pay back the loan early, either in the form of a sale or just a cash injection that you're paying back the entirety of the loan early, you can get penalized. That's more common for commercial loans. I don't know if I've ever seen one in residential. Tom, have either of you guys, have you seen pre-payment penalty on a residential loan, not something that I've ever seen, but ask the question of the lender. Also asking about their specific underwriting criteria. Kind of like we were chatting about earlier in the episode is if I'm a borrower, I should know what the lender is looking for.   As far as what my debt to income should look like as a strong borrower, what my loan to value should look like as a strong borrower. And so asking these questions on the front end is going to help build out this framework for you to decide, okay, well, lender A will give you no only cares. If my loan of value is maxed out at 35%, this other lender wants it lower at 25%. So maybe I'm a better candidate over here asking these questions is I think that'd be really helpful. Ask them how they treat rental income is a really big one. Some lenders will treat it as part of your, uh, income on the debt to income ratio, others won't. So if someone is not going to treat the income that you're planning on generating or that the property is currently generating as usable income, that might be a reason enough to walk away. I don't know. It's going to depend how…   Tom: Stop taking my points, Michael. I was going to, stop take it by points. I was like, it's crazy how the, the range that lenders have on making decisions on applicants, you think it'd be like a little bit more standardized, but anyways, excellent point, Michael, on confirming that rental income is yeah. If they treat it as income. Yeah.   Michael: I was chatting with my buddy in the Bay area and he was looking at house hacking. And so he found this duplex, it was really interested in, and he went and chatted with this lender and the lender said, Oh yeah, you know, this is, this is the max loan amount you're eligible for. And I said, ask him if they'll consider the rental income from the second half of the duplex, as, as income, as usable income. He's like, okay. So he did that. And he's like, Holy crap. He qualified for like an additional 120 K in loan amounts. So sometimes don't take the face value as the answer for most of these questions. If it's not an answer that you like, I'll ask the question why, you know, always follow up and either you're going to get somewhere or you won't, but at least then you'll know hopefully why that is the way that it is. And if it's flexible at all, some more questions to ask our typical club time, because you don't want to get stuck with a lender that has a really long close time, but your escrow timeline is much shorter than that. And so then you could be at risk of losing the deal because you can't perform or assume your lender can't perform in the time stipulated by the purchase and sale agreement. Another great question to ask is what's going to happen to my mortgage after it's originated. And Tom, you had a really good rant on this, on a previous episode about what happens to mortgages after you've originated them. And so often they get bought up by other companies and then you have to change where your loan payments go and then you have to change your password, but they only accept Firefox as the internet server. And so just getting an understanding of what's going to happen to it. Who's to keep that, are you going to stilll, are you going to continue dealing with the same lender time and time again for the same loan or are you going to have to, you know, move around? So asking about what happens to it is a really great question asking them if they'll match rates, I think is great. So a lot of lenders are really wanting to compete for business. And so if you say, Hey, you know, you're offering me a four and a half and able to get 4% over here and better closing costs, will you match it most often they'll say yes. But only if you ask the question, so which only goes to further your point, Tom, if you only talk to one lender, you only know what their interest rates and their closing costs look like versus you go talk to two, three, four, five, you have a plethora of closing costs, spreads rates spread. You can take the best one and go to your favorite lender because it was good relationship or you like working with them or what have you and just say, Hey, this is, this is a quote I got from a different lender. Can you beat it and see what they say? Most often they've got a lot of flexibility on moving stuff around. So that was my rant on the questions to ask. And of course there's more, but those at a high level are some pretty pertinent ones, at least at a minimum that I would, I like to start with whenever chatting with the new lender.   Emil: I wrote down a couple that I just wanted to highlight on. I think you mentioned it, Michael, but just making sure that when you talk to a lender, if they're national, make sure that they lend in the state, you're going to go buy a property. The other thing sometimes you'll talk to different lenders, ask them what their interest rates are and what you need to make sure you do is ask them how many points are associated with those interest rates. So one may tell you, Oh, we're doing, we'll do a 3%. Yeah. The one could say 2.75. And what they're not telling you upfront is that you also have to pay one point. And what a point means is let's say you get a loan for a hundred thousand dollars. One point is 1% of that loan added on as a closing cost fee. So in this case, it'd be a thousand dollar fee. You pay as part of your closing costs. So make sure you ask what points are associated with those interest rates that they're quoting you. I would also ask if they lend to an LLC. So if you're planning on setting everything up into an LLC and you want the loan taken out in LLC, you have to make sure you ask if the bank will lend to an LLC.   Michael: What do you do if they say no,   Emil: That's a good question. I don't have anything in an LLC right now. So I don't know the answer to you.   Michael Something you can do is ask if once the loans originated, if you can transfer the loan to an LLC and a lot of lenders won't care because they've got you on the hook for the loan. So, but some may say no. And so there's this thing called a due on sale clause, which basically says, if you sell or transfer the property, that mortgage can be called due in full. And so you just want to avoid that in its entirety. And so adding that conversation on the front end, I think is huge of, Hey, once I purchased this thing, I'm planning on purchasing, transferring it to an LLC. Are you cool with that? And if they say, yes, get it in writing. And if they say no, that might influence your decision on who you ultimately use for, for a lender.   Emil: Solid, good points, other things to ask, let's say, you're buying a property that you want to fix up and potentially refi later doing something like the BRRRR method you want to ask about seasoning period, which is how long the bank will require you to own the property before they'll do a reassessment of the value to do that refi. So another good thing to ask, and I think that was it. Those are the only other things I wanted to add.   Michael: I just want to pepper in one more thing. And it's kind of a, like a gut feel type of thing. Make sure you like your lender. Like I'm dealing with this lender right now that is such a pain in the butt to work with. And every time I see an email or phone call from him, I'm just like, Oh God, like I don't want to answer. And it's like pulling teeth every time I interact with them. And it sucks because they have a fat prepayment penalty on my mortgage and it's a big mortgage, so I can't even go refinance out anywhere else. And now I'm just kicking myself that it was the dumbest thing ever. But at the time he was so easy to work with and he was able to get the deal done. So I just, time is of the essence, but now I'm just like, God, like this is so awful. So just, if you can like, just like try to like who you're working with, make sure that they're easy to work with that, you know, you're not dreading their phone calls and emails.   Emil: That sounds like a tough situation in that they seemed good on the front end. Like you couldn't have vetted it out in the front. Cause it sounded like they were easy to work with. It just happened once you started really working with them once the loan was final.   Michael: Yeah. Yeah. It was a little, yeah. Once the, once the loan was finalized, the gloves came off, man. And it was like, let's go.   Tom: Oh you're, you're locked in. You're locked in. This is the real me.   Michael: And yeah, the whole prepayment penalty thing is really a pain in the butt too. So, um, it was at a time when I wasn't really even thinking about that kind of stuff, but now it's come full circle and I've realized how captive it makes you. So if you can find a lender that does not offer those, it doesn't require those. I think that's worth a lot.   Tom: My last thing I'll add on this general episode is sometimes you might be concerned and calling up a lender to talk to them. You might be concerned about like sounding dumb or like not knowing you're doing, don't worry about it. This is talking to lenders or talking to people in real estate in general is like a muscle. Every time you do it, it's going to be a little bit easier. Uh, something we talk a lot about with Academy members, it's getting your bats in another thing is generally speaking. These people are trying to sell you.   So they're like, they're nice. I wouldn't be concerned about, you know, they're, they're not gonna be like, Oh Tom, you dumb. I can't believe you asked this question. Like, like, no, they're going to be totally reasonable. So put those fear and ego aside and start on the fence. Just jump in man. Talking to lenders, identifying them, especially if you're planning to buy with financing, that's an important thing to do upfront.   Michael: And I think just to that, for that point, take it as an opportunity to learn to, I mean, ask the dumb questions. It looks silly because you're interviewing and speaking to a bunch of people, but you're only going to work with one of them. So ask the dumb questions and learn from it because you're probably not going to ever see those people again. Yeah. Just real quick guys. Pancakes or waffles.   Tom: How about this savory pancake?   You thought it was going to have something after saying that like, well, I don't.   Michael: There's no option C it's a simple a B. All right. Tom pancakes. Emil, pancakes?   Emil: I’m taking pancakes. We've been making a lot of pancakes at home lately. Waffles is just such a production with like a waffle maker. So pancakes, baby.   Michael: Pierre? And do not say I don't eat pancakes or waffles. I don't want to hear it.   Pierre: You can peanut butter spread onto both of those I’ll take either one.   Emil: Ooh, well done.   Michael: You make a pancake sandwich with two waffles on top and bottom,   Pierre: But I'll take a German pancake any day.   Tom: What about a giant fluffy Japanese pancake. Oh, sorry. Go ahead.   Michael: Ooh. And so what's different about a German pancake.   Pierre: Oh, it's the Dutch baby. It's like a, I'll give you the recipe right here. Three eggs, a third of a cup of cream, a third of a cup of milk, a quarter of a cup of butter and half a cup of flour and preheat your oven to 400 degrees, put a cast iron pan inside the oven, preheat it, melt some butter on it. Throw it in there for 15 minutes. And it's like a big old souffle.   Emil: Wow. Sounds incredible. Alright. I know what I'm doing this weekend.   Michael: That sounds amazing. I'm a, I'm a pancake guy too. If anyone's ever eaten at iHop, I'm a big fan of the, I think it's like a junior happy face, like a chocolate pancake with chocolate chips and whipped cream on it. Such a kid at heart.   Emil: So are you like 13 years old?   Michael: I'm like 9, I'm this many years old.   Emil: Thank you guys again for joining us on this episode as always, please leave us a review. Guys do we like reviews?   Michael: Big fans of reviews.   Tom: Love them, love them.   Emil: We need to, we need to bring back giving people shout outs when they leave us a review. So leave us a review and we'll give you a shout out on a future episode and we'll catch you on the next one. Happy investing.   Michael: Happy investing.  

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