Here’s the deal on bankers and lenders: regardless of whether you are buying or selling a property in SLO County, there are some important things you need to know about choosing and working with a lender.
First of all, it’s important to understand that the business of lending money is just that, it’s a business. And like most businesses, lenders can offer different products and services in order to entice customers to work with them and buy their services and products. In this case, the product happens to be money. There are several different sources of lenders who you can investigate in order to borrow money for the purchase of real property.
- Mortgage Brokers: Local loan brokers are usually who we work with the most as real estate agents and brokers. The local mortgage brokers I work with are licensed and knowledgeable about a variety of loan products and are an important part of the transaction process. Having a working relationship with local Mortgage Brokers also allows me access to them at a moment’s notice for pre-qualification letters and other client services.
- Banks: Most banks that you do business with offer home loan programs and refinance programs. There could be a benefit to working with a local banker and having a working relationship with a local lending institution. There are also a number of online banking institutions that offer loan products and they can be very competitive.
- Credit Unions: Many Credit Unions offer competitive rates and financing options for real estate.
- Private Lenders: Most private lenders are found through mortgage brokers as mentioned above. There are groups of investors who pool money and lend it out just like banks, credit unions or other lending institutions.
As a buyer of real property, the agent or lender you choose to work with can make or break the deal. I always recommend to my clients that they consider all their options, make comparisons, and always do the math. What’s important is that you feel comfortable with who you are working with and know that your agent is looking out for your best interest.
For sellers, who is the lender that your buyer is working with? Are they reputable and communicating with your Broker in a responsible manner? It’s important that the person you have an agreement with is able to execute the contract and have the ability to pay for the property.
Secondly, you have choices in loan products. One size does not fit all; it’s important to do some research and determine what you qualify for and your lending choices. Here in California, we work with several different types of loans, some are even part of the contract language. You should also know that the type of loan you are working with can make a difference in the strength of your offer. The most widely used loans in our area are:
- Conventional: 30 year or 15 year mortgages with down payments of 5% – 20%
- FHA: mortgages with 3.5% down payment
- USDA: mortgages with 0% down payment options
- FHA 203K: Rehab loans with 3.5% down payment
- Seller Financing: options and proposals, usually require 20% – 30% down payment
Lastly, you should know that in order to make your real estate dreams come true you are going to need money. There is good debt and there is bad debt. The point is to establish a relationship with a lender you trust and who you can work with. They want your business and they want to help you. A great lender and a great Real Estate Broker can guide you and assist you and help you accomplish your real estate goals. It’s up to you to decide how big you want to dream, hire the best people you can find to work with and let them do what they do to get you there.
Ken Bryant, Real Estate Broker 