Arrange Financing Tips

Try to leverage your money.
Cash is not necessarily king. If you can get a major lender to finance your investment, you will increase your return on cash by at least 5% annually.  The days of easy credit are WAY over. Many of our investors are shocked to discover that their perfect credit score doesn't hold water any longer. The biggest driver at the moment is employment status. If you are self employed, you are going to be stuck with a hard money loan.

Get lender approval before traveling.
It can take weeks for a major bank to issue a letter of credit. If you want to go scouting before getting a letter of credit you are wasting your time. Your lender will be driving the bus and you are wasting your time looking at properties before your financing is determined.

Start with a major lending institution and then work your way down.
We describe major lending instutions like Bank of America, Wells Fargo and Chase as "A" paper. "B" paper would be third party lenders usually represented by mortgage brokers. "C" paper is hard money at usually 10% and 3 points up front. We do not recommend getting multiple letters of credit. This approach can have a negative impact on your credit score. Start with "A" paper, if you can't get "A" paper, move down the ladder. Using a shotgun approach to picking a lender usually backfires. 

NOTE: There will be drama with "A" paper.
The chances that "A" paper will close on time is less than 5%. The good news is that all listing agents and properties owned by foreclosed banks know this. The bad news is that there will be a lot of last minute desk pounding, threats and drama. There is a possibility that you will have to pay fines for not closing on time. "A" paper bank mortgage brokers are generally young adults who are overwhelmed with loans, don't care about you, your loan or if you close on time. All you need to do is mentally brace yourself for idiotic last minute requests for some random piece of paper that needs to get faxed. Plan on camping out at your fax machine. 

Get a loan with your current bank.
You will get better rates and probably better service if you start with the bank you currently use. However, if you are out of state, confirm that your local bank can write paper in Nevada. Not all lenders are licensed in all states.

Stick to one lender once an offer is accepted.
Switching horses after your offer has been accepted will delay your closing on time. Delays in closing are expensive and can possible blow the deal up. It is possible to lose your earnest money and all the time you have spent appraising / inspecting this property if you can't close on time.

Avoid major purchases and do not change jobs while you are in escrow.
Your lending institution will do a verification of income, credit and background check just before you close. If you make a drastic change in your financial profile, the escrow train will come to a screeching halt. Suit cases and bodies will go flying everwhere. If you are dealing with "A" paper,  there is a distinct possibility the escrow train will go off the rails and you will lose your earnest money. IF you even smell of a financial profile change, you need to tell your agent immediately so everyone can brace for impact.

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