Ever been on a good food tour in a foreign country?
Stay with me.
We recently talked about how the most important person on your real estate team is your spouse. Make sure you each understand the financial, time, and emotional commitments involved before you buy your first rental property.
Once you and your spouse are on the same page, it’s time to start building out the rest of your real estate team.
Start by finding a great real estate broker. Your real estate broker is like a five-star hotel concierge who can make your entire vacation so much better.
With a real estate broker on your team, it’s now time to find a great mortgage broker.
To continue our analogy, if your real estate broker is the hotel concierge, your mortgage broker is a trusted tour guide.
Have you ever visited a foreign country for the first time and been excited, but a little bit nervous, about what’s in store for you? There’s so much to see and do, but you don’t speak the language and are a bit anxious to venture out on your own.
Fortunately, you have an expert tour guide lined up to meet you at the hotel and lead you on an memorable adventure.
Think about how the concierge and tour guide each help you in different ways.
The concierge does not actually join you for each experience on your vacation. He helps you plan an itinerary and makes the arrangements before setting you on your way.
He knows his role and leaves it to the specialists, like tour guides, to lead isolated parts of your trip.
For instance, the concierge may help you book a food tour around London with an experienced tour guide. My wife and I did this years ago and had a wonderful time.
The tour guide is the local expert who knows the ins-and-outs of the neighborhood. She has an intimate knowledge of the local food scene based on years of experience.
She’ll show you the hidden gems and recommend what to order at each restaurant based on your personal preferences. She can educate you as to what’s in certain dishes and why you may like to try them.
She’ll also steer you away from the tourist traps and prevent you from going to the wrong places to ensure you have the best experience possible.
Recommendations? Education? Preventing mistakes?
Love all those things.
And, this is exactly what a good mortgage broker will do for you.
Why it’s important to have a good mortgage broker on your team.
Mortgage lending is big business. Just about every person out there needs a mortgage to buy a home or an investment property. As a result, there are a lot of banks and companies out there who want your business.
To be sure, not all mortgages are created equal.
And, not all brokers, banks, and lending companies are created equal.
Your job as an investor is to find a mortgage broker who truly has your best interests in mind.
That means working with someone who wants what’s best for you and your family, not what’s best for him and his family.
Plus, because rental property investing is a long-term game, you want someone on your team who’s also in it for the long run.
What should you look for in a good mortgage broker?
During your loan process, you will be talking to your mortgage broker a lot.
Refer back to the tour guide analogy. During the tour, you are essentially dependent on your tour guide. If you’re going to depend on someone, you probably want to like that person.
The same goes for your broker during the mortgage process. You will be dependent on your broker to make sure your loan gets approved.
Make sure you find someone that you mesh with.
Here are some of the qualities you should look for in a good mortgage broker.
A good mortgage broker will:
Recommend the best loan for your goals.
There are numerous mortgage options out there. Selecting a mortgage is not a “one-size-fits all” kind of thing. Your broker should be well-versed in all the options and make recommendations based on your priorities.
Stop you from borrowing more than you really can afford.
There’s a difference between what you might get approved for and what you can reasonably afford. A good mortgage broker will help you understand the difference.
If you’re tempted to take out more than you should, your mortgage broker should help reign you back in.
Help get your loan approved.
Your mortgage broker’s primary job is to match you with a lender and loan product to meet your needs. The underwriters will have the final say in whether your loan gets approved.
If you haven’t had the pleasure, you’ll need to provide the underwriters with documentation about your income, savings, investments, and so much more.
While it’s ultimately not up to your broker to approve the loan, he can serve as an advocate on your behalf. He can help get the underwriters the information they need to approve your loan. Don’t underestimate the importance of this part of the job.
Explain the numbers.
This is especially important for rental property investors. After all, you’re buying a rental property to make money. All mortgage brokers can show you how much that property will cost every month.
The best brokers will take it a step further and show you how much you can expect to cash flow from that property each month. Then, you can decide if it makes sense to buy a property based on the numbers.
Not let you refinance until the time is right.
It’s tempting to refinance at the first moment rates drop. There are costs involved with refinancing that can oftentimes eat away at any savings from refinancing. A good mortgage broker will stop you from doing so until the moment is right.
Be patient as you look for a great mortgage broker to work with.
Take your time finding a good mortgage broker. It’s important to work with someone who does more than just promise the best rates and terms.
Plus, if you shop around enough, you’ll learn that there’s not much variation in the rates from one provider to the next. Rates are mostly dependent on economic conditions outside the control of mortgage brokers and lenders.
That’s why your mission is to stay patient and find a mortgage broker that you are comfortable with.
When my wife and I were first getting started, we were told by a few different people that we had to work with this one particular mortgage broker. He was the best, apparently. His website was full of accolades and awards.
We decided to give him a shot. We called his office and set up an introductory phone call for later in the week.
At the scheduled time, he didn’t call. When we emailed him, he apologized and explained something came up with his kids.
OK, no problem. That’s understandable. We rescheduled.
At the rescheduled time, he again didn’t call. That was enough of that. We moved on. Maybe he really was great at his job, but he didn’t seem to care too much about us.
We found a good broker years ago and have never looked back.
In the end, it all worked out for the best. My wife and I met with a number of brokers before connecting with the guy we still use today. We’ve used him for all our Chicago purchases and multiple refinances.
As a side note, I firmly believe that when you find someone good for your team, you commit to that person. Commitment leads to trust. And, trust leads to the best outcomes. This is true for anyone you work with, not just mortgage brokers.
On top of being a mortgage broker, our guy is an experienced rental property investor. If you want to buy a rental property, I recommend you work with someone who also owns rental properties.
At a minimum, find someone who has ample experience working with investors.
For instance, with our first purchase in 2018, our broker recommended a conventional loan (at the time called “Home Possible”) that I had never heard of before.
The loan allowed us to put 5% down, instead of the normal 20%, which meant we could more quickly buy our second property. This one recommendation allowed us to buy two cash-flowing rental properties within 6 months.
This is just one example of how a good mortgage broker can help accelerate your real estate goals.
Find a broker for your real estate team who understands your goals.
Our broker understands exactly what we’re trying to accomplish with each purchase. I can be straight with him and he can be straight with me. It’s refreshing.
We’ve had in-depth conversations about the numbers on every property we’ve considered. Importantly, he’s prevented us from borrowing more than we can afford.
And, whenever the underwriters ask for so many documents that I am about to lose my mind, he steps in to make it all better.
Same as us, this is exactly what a good mortgage broker will do for you.
What has your experience with mortgage brokers been like?
What else do you look for that I didn’t mention above?
Leave a Reply