Are you considering a non-bank mortgage lender for your next project, but not sure about how to select one? If so, you are not alone. Here’s a sampling of questions we commonly field at Meridian about mortgage lenders:
- Are all mortgage lenders pretty much the same?
- Should I select the one with the most money at the cheapest interest rate?
- Do they all have basically the same lending criteria?
- Are they any better than banks?
- How’s the paperwork and time turnaround on these guys?
Although it may not look like it at first blush, there are big differences between the lenders. You need to ask good questions to protect your company before you enter into a commitment with a mortgage lender. In essence, they get their funds from different sources, have different underwriting processes, collection methods and default procedures, in addition to the obvious differences in lending amounts, rates and terms. Here are some questions to ask:
1. Where do you get your money? What could cause that source of funds to be unavailable to you?
2. What is your underwriting process? Who will look at my application?
3. What information do you need from me to make a loan decision?
4. When can I expect a firm answer?
5. Are there any non-refundable fees required with my application?
6. What percentage of applications have you approved in the last 12 months?
7. What determines the exact amount of money I can receive on a project? Is there a formula you use?
8. Have there been any instances where you sent a written commitment to a borrower but did not fund the loan?
9. How are your rates and fees determined? What can I do to receive a lower rate and less fees?
10. What costs can I expect to pay other than application fee, loan fee and interest?
11. May I have references? I’d like to talk to the last three companies you closed loans on.
12. Have you ever foreclosed on a loan?
13. What happens if I want to sell my mortgaged property?
14. What happens if I decide to lease my mortgaged property?
15. What is your prepayment penalty formula?
Ideally, get the answers in writing. Be aware that your contact is likely a commissioned salesperson. Therefore, always go by the fine print documentation, especially when that fine print is in conflict with any verbals. As with any loan transaction, be sure you are clear about your legal rights and responsibilities. Finally, remember that typically these lenders don’t have the funds they lend you, they borrow them. Later they sell your loan in a portfolio bundled up with other loans. With this process, there’s not much room for negotiation, however, these lenders do a great job of providing needed capital to our industry. Shop them wisely.
