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Warning Signs of A Bad Lender I have decided to put this section in my web site so that I can achieve one of my goals. my objective is to make sure you don't get overcharged and/or lose money because you happen to pick a bad lender to do your loan with. I know that I will not always be the person you choose to do your loan with, but, I want to do everything I can to help you pick the right lender for your needs, even if it's someone else. If I was in your shoes and had to pick a lender to do my real estate investor mortgage loan I would do the following 1. During my interview with the lender I would ask the following questions a. What is the minimum amount I need to put down on a property I am wanting to rent out? The lender answer should indicate that they do have loan programs for investors that do not require a down payment subject to your ability to qualify. If they say that they require a minimum of 10% down or more they are not aware of the investor market and I would stay away from them (even if your plan was to put 10% down anyway) I feel that you are risking a lot when you don't work with a lender that has the experience needed to close investor loans. b. What kind of license do you personally hold? Most states require licensing for people in the mortgage business. The exception to this rule are loan originators who work for lenders. Loan originators do not need licenses to originate loans but they also do not need to pass the thorough background checks and testing requirements required by the states. Typically licensed professionals in the mortgage business get paid a higher percentage and I feel that if the mortgage license is not acquired by the loan originator they either cannot get a mortgage license from the state or do not want to get better pay. I personally would not close a loan with someone that did not have their own personal license and I would ask to see it. c. Are you licensed to do FHA loans? Although there are not really any investor friendly loans that are FHA compatible a lender that is able to do FHA tells me that the lender has been in business for a while and plans to stay in business. FHA approval is difficult for a lender to get and is a good sign that you are working with a lender that will be around for awhile If the answers to these questions are favorable I would then ask them for a quote. they should ask you a multitude of questions and be able to tell you if they have a program that fits your needs and tell you when they can get you a rate. I would ask them to send me the rate in writing using a Good Faith Estimate. many lenders don't want to take the time to put a quote into writing because they are just too lazy or worse yet they don't want you to know what your fees are. The GFE should be completely filled out with a company name and a date. Each section should have some fees associated with it. If any sections are missing fees this is a good sign that the lender is trying to mislead you. they are hoping you will pick them since they quoted the lowest total fees. On the GFE I would also look for a fee called the YSP or Yield Spread Premium. This is a fee that the lender will be paying the broker upon close of the loan. If it is a range (e.g. 0% - 5%) The broker is hiding from you what they plan to make from the lender. The higher this amount the higher your rate will be. I would ask the broker to put in an exact amount they expect to make from the lender. This amount should not be more than 2% in most cases If they do not send you a GFE or their GFE is much lower than other GFE's you have received it probably is not accurate. If you ever need help reviewing a GFE to check it's validity we will be more than happy to assist you. Our goal is to make sure you don't get overcharged even if we don't get the loan. If you would like to work with a lender that puts you ahead of profits please fill out the form below
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