What should real estate investors do when mortgage lenders start getting tough to work with?
There is no question about it: some lenders can be very hard to work with at times. There are even circumstances that can cause difficult lenders to delay a deal. Lenders can start to demand all types of things, and – before you know it – you are off schedule. Many can seem unbelievably ridiculous. So what do you do when that starts happening?
How Many Ways Can Mortgage Lenders Be Difficult?
If you do enough real estate deals, with enough lenders, you’ll run into issues such as:
- Last minute underwriting conditions
- Unreasonable inspection and property condition demands
- Lost paperwork
- New indemnity waivers and affidavits
- Deed restrictions
Why Do They Do It?
Borrowers can only act intelligently and effectively if they get to the bottom of why lenders are making them jump through crazy hoops. More often than not, some lenders will exhibit a few of the following:
- Sheer incompetence
- Extreme due diligence
- Greed and lack of competitiveness
- Not the right fit
- Scared of doing the loan
- Simply don’t want to do this deal
Why don’t they just deny the loan in the first place? There can be many reasons, none of which we are expected to understand. Everyone has their own numbers to make. Some need to turn in mortgage loan applications. Others need to get loans into underwriting. Some need to actually make loans. Sometimes issues don’t come up until all the conditions come in. Other times, things change internally during the process. Lenders might have to stall loans or cut back on a certain program that aren’t performing, or they may have black listed certain areas.
What to Do
Borrowers have to get to the bottom of the issue before they can take the right actions. There is no point in sending in the same ‘lost’ paperwork for the third time if the loan isn’t going anywhere. On the other hand, if this is a loan you need, and it needs to get done fast, it may be prudent to deal with it.
Start by talking to your loan officer contact. They will normally have the most to lose or gain, meaning they will be the most willing to work with you. Quiz them on whether this is worth pursuing or not. Talk to other lender contacts to see if they think the request is reasonable or not. Check out underwriting guidelines as much as you can yourself. Sometimes you can force the underwriter’s hand to get an approval if you know your stuff better than they do. Sometimes it is just an overly tough underwriter having a bad week. Can you get someone else to handle the file?
Tips for Avoiding Loan Challenges in the Future
- Know your lender and loan program parameters intimately
- Have this information organized, visible, and easy to interpret
- Develop relationships all the way up the chain, from loan officers to executives
- Consider using pre-established lines of credit instead of waiting on mortgages when closing dates are sensitive
- Try using private money which doesn’t have all the intricate underwriting hoops
- Recognize when you need to switch lenders fast to get the deal done
- Work with the best vendors that can help alert you to lender specific issues in advance
Unfortunately, these issues can be more common than borrowers would like. Not all loans run into issues, but don’t be shocked when they do. Perhaps even more importantly, don’t underestimate the power of good lender contacts and relationships.
Whether borrowers can afford to wait or not will depend on how tough the seller and Realtors are. Yet, it also demands that repeat buyers do the math on their time. Is this loan or lender delivering a reasonable ROI on your time?
Also take these cases as a reminder to be patient with buyers of your properties when they run into challenges on their mortgage loans. Don’t count the money until you’ve got it in hand.