Securing debt on your multifamily or commercial property can be a daunting process. With all the different types of loans being offered, how can you determine which Lender is the right one for you? You may start out searching the Internet, and just as you found us, there are hundreds of other Companies wanting to earn your business. At this point, it may be confusing on who to proceed forward with to ensure they have your best interest in mind. Don’t fret, there are some key tips that every Borrower should know and keep in mind when finding that right Company to work with.
Understanding the Difference Between a Lender, a Consultant and an Origination House.
Many Companies found on the Internet, portray themselves as an actual Lender but are truly an Origination House or Consultant. Even though you can obtain the same financing from all sources, it’s important to understand the difference between the three of them and what each have to offer.
First off, let’s quickly define a “Lender”. A Lender originates and lends money to a Borrower at the closing table. In exchange, the Lender will receive a Mortgage Note executed at closing that puts a lien on the subject property and obligates the Borrower to repay the debt. The Lender is identified as the Mortgagee Party on all loan documents and most often, also Services the loan post-closing. A Lender typically only has a few different loan options that they offer and each Lender’s requirements will vary even if obtaining the same type of loan due to the specific borrower and/or property risk factor for that Lender. In multifamily financing, a common type of financing is known as Agency Financing through the Fannie Mae Delegated Underwriting and Servicing (DUS) Multifamily Loan Program. Only approved Lenders can originate, fund and service loans under the Fannie Mae DUS Loan Program. This also applies to FHA/HUD and Freddie Mac Agency Programs.
What is a Consultant?
A consultant is a non-licensed individual who consults on your financing needs. Basically, they place your loan request with a Lender or an Origination House, for your loan to be processed, underwritten and funded outside of their hands. Some Consultants might help with obtaining information initially but very few actually work in conjunction with the Underwriters, therefore, they lack the ability to identify potential underwriting hurdles that might arise during the course of the process. This can often cause your loan to not make it to the closing table.
Does an Origination House lend money to the Borrower?
An Origination House will act as an intermediary between the Borrower and the Lender. There are many advantages aligning yourself with an Origination House. Primarily, they have the capability of working with various Lenders to find that perfect loan in which a Borrower is looking for. Not every Lender has the same requirements and/or fee structure either. For example, if a Borrower is seeking financing through the Fannie Mae DUS Loan Program, there are only a handful of Lenders in which you can choose to obtain this type of financing through. While the same type of loan is being sought after, each Lender has their own risk factor, requirements and loan costs for such loan. A true Origination House will understand what each Lender has to offer and if your financing goals will fit into their specific requirements.
Additionally, an Origination House is a Company with multiple personnel who stay up-to-date on regulatory and lending news and changes; focuses on continuous relationship building with local community banks and existing funding sources, as well as, authorized Lenders for the Agency programs. Lastly, there is a whole staff available at your disposal, not just a one man shop such as a consultant.
Benefits of working with an Origination House compared to a Lender directly or a Consultant.
Aside from some Lenders not working directly with a Borrower, you will find that an Origination House can be extremely helpful when going through a commercial or multifamily loan process. Once dealing with an Origination House, they will be able to determine which loan platform and Lender best fits your scenario. You will also find that an Origination House can counsel a Borrower on any issues with their multifamily or commercial property and can help navigate the Borrower in the right direction to achieve the targeted financing.
Working with an Origination House allows you to turn to a firm specializing in the industry to do your research and find that perfect loan that fits your financing goals. Many times, a Lender will decline a loan request but since an Origination House has multiple funding sources, you will not need to start from scratch. If you were working with a Lender directly and a decline occurred, you would need to locate another Lender and submit all the documentation again. Aside from saving the Borrower time, an Origination House knows which Lenders offer better interest rates and loan costs because these all vary. There are also some Lenders that offer the same type of loan option, but take on more of a risk and an Origination House will know the perfect Lender to obtain the best financing terms on your investment property.
Working with a Consultant can be limited in so many levels. A Consultant is not licensed, therefore open for questionable individuals to partake in the industry. This is not a blanket statement and there are some very good Consultants out there, but you have to ask why would one not elect to become licensed in an industry which requires a license to protect the consumer. A Consultant is typically a one man shop which limits the financial resource and man power to stay on top of your loan request but also may affect the relationship building with existing and new funding sources. Most importantly, very few Consultants work directly with the Underwriter, Closer and Lender's Attorney throughout the process which could severely impact the closing and funding process.
Why a Mortgage License is Important.
It’s essential to make sure you are working with an Origination House that has a Mortgage License. In 2008, the SAFE ACT was enacted which mandates nationwide licensing and registration for mortgage loan originators. The registry that is used to regulate this is known as the Nationwide Mortgage Licensing System (NMLS). The main purpose behind the NMLS is to prevent Loan Originators and/or Origination Houses (Mortgage Brokers) with complaints or violations on their records, from moving to a different state and starting over.
Aside from the NMLS providing mortgage supervision and consumer protection, the reason why we feel it’s important to make sure you are working with an Origination House that has a Mortgage License is because the person behind the Company is essentially “screened”. With finding Companies online, you sometimes never get the opportunity to meet the individuals you deal with on a daily basis for the next 60+ days, so how can you know you are working with a reputable Company or individual?
The NMLS requires a criminal background check be performed via finger printing (on a Federal and State level) and a credit report check. The reason these are done on all applicants is to “demonstrate financial responsibility, character, and general fitness such as to command the confidence of the community and to warrant a determination that applicants will operate honestly, fairly, and effectively.” These “screening” requirements are done on an annual basis. When working with a Company that has a Mortgage License, you can rest assure that they have fulfilled the nationwide licensing requirements and are morally able to assist you with your financing needs.
Why you should work with an Origination House You Feel Comfortable With.
It often helps to work with an Origination House, like Global CommercialBanc, that has various Platforms and has the ability to work with you one-on-one to determine which of these Platforms best fits your short & long term financing needs. Global is licensed through the NMLS, Mortgage License Number 389427 and has licensed Loan Originators. We can guide you through the loan process from start to finish, but most importantly, we have the knowledge and expertise to know exactly what loan you will qualify for that will also obtain the best pricing for your investment. With over a decade of history, Global has built relationships with significant funding sources in the multifamily and commercial financing arena.
Don't rely on well written web pages. Be proactive and perform proper due diligence on the Company you are about to turn to and rely on. Whether you are just starting out in the commercial industry or are looking to build your real estate portfolio, these tips will help you find the right source to achieve your multifamily or commercial financing goals with ease.