When you have successfully understood and implemented the ideas and methods discussed in the previous pages, you will then be ready to go out and source the loan. Here are some strategies and tips on how to choose the Lender.
1. Contact different Lenders
You should contact a number of organisations across the spectrum of Lenders:
Major national banks; smaller state-based banks; credit unions; banking divisions of fund management and insurance companies; and local and national mortgage brokers or originators. You’ll soon learn that not all Lenders are the same.
Keep a record of the products that are unique to the individual Lenders such as 100% LVR, Lender pays the mortgage insurance premium, they accept higher of valuation or contract price, loan on the gross realisation value of the project rather then cost and so forth. As you become a more experienced investor you’ll often require non standard loans to make a property deal work.
To assist you in this process we have prepared the Finance Assessor Check List.
Never burn your bridges and always treat each Lender in a professional and courteous manner because products change regularly and the next best product may be offered by the Lender that you declined today. So be up front and tell them that you are shopping around but if they have the best product for you then they’ll have your business.
This time consuming process can often be handed over to an experienced mortgage broker who has already done the hard work for you as part of his every day job. It is in the mortgage brokers interest to have a wide knowledge base and skill set to ensure that they can recommend a Lender that will meet your needs without smoke and mirrors because he only really makes money when you do the deal and refer future work.
2. Tell them what you want
Rather than asking for information on their pre-existing loan packages and trying to see if or where you fit in, tell the Lender clearly what you want and ask the Lender what they can offer and how you will benefit by having them as a Lender. Provide the Lender with a professionally prepared summary document which details what your strategy is and what is required from the Lender. This places the onus on them to prove that they are worthy of your business and it will also place you in a better bargaining position.
Provide the same information to the mortgage broker and have them summaries a range of products from the best suited Lenders. Always have them justify there selection and good mortgage brokers will provide this advise in writing.
3. Obtain Pre-Approval
i) Select a minimum of 2 Lenders that best meet your needs then:
Obtain a firm verbal commitment: Confirming that you will be provided with a loan to suit your requirements, before you leave the Lenders office.
Get the approval in writing: Determine when the Lender will send a confirmation letter that is an irrevocable commitment that you will get the loan and under what time frame. The loan process shouldn’t take any longer than 6 weeks. Have the Lender agree in writing that if it does take longer than they have stated you will not be proceeding with them and they are to refund your costs.
The approval must be irrevocable: An irrevocable letter of offer means that, if you do nothing wrong, then the financier should extend you the loan.
The approval should only be conditional upon property valuation: This will eliminate any undue surprises when you find the property
ii) Chose the lender, which you feel most comfortable with, based most importantly on your relationship with the Lending manager.
iii) Even if a financier isn’t prepared to give you a loan they may be able to recommend a financier that will.
iv) Approach as many lenders as required to get THE DEAL YOU WANT.
v) Don't focus on the interest rate. The relationship is the most important facet because the interest rate and other loan issues can always be negotiated differently once you start finalising the deal with the Lender.
vi) If you use a mortgage broker then they will be responsible for performing these tasks on your behalf