Finally, the System Works in Your Favor!
Learn the one government regulation that can help you find the best mortgage deal.
We’ve talked a lot about choosing the right mortgage broker – and with good reason. As I’ve said before, your broker is the most important member of your power team. You can find hundreds of great deals, but without the financing to make them happen, you’re nowhere.
One of the reasons brokers are better than other mortgage lenders is that they work on 100% commission. They’re hungry. When brokers learn that you’re serious about getting into real estate investing, they’ll be all over you – because one investor can bring eight, 10, 12 deals to the table in a year. Just think about it – that makes you a much better prospect than the typical mortgage customer who buys a new primary residence once every 10 years or so.
That hunger can work in your favor when you’re first selecting a broker for your power team. Make sure each broker you talk with knows that you’re shopping around. They want to build a long-term relationship with you, so they’ll bring their best possible deal to the table.
But don’t stop doing that once you find a broker you’re comfortable with. You’ve got to keep them hungry, so they don’t start taking your deals for granted. Don’t just pick one broker and then send all your deals to him for the next 10 years – keep shopping around. You can have more than one broker on your power team – in fact, I recommend that you end up with at least three brokers that you trust and are comfortable working with. Then when you’ve got a deal brewing, you put it in front of all three of them and ask them to serve up their best.
You may be thinking that involving three brokers will just complicate the process and slow things down. But here’s the beauty of it – the government actually requires that they do this, and do it in a timely fashion. In fact, Uncle Sam has made it unbelievably easy to compare mortgage deals apples to apples.
It’s called a Good Faith Estimate, or GFE. All mortgage providers – lenders, brokers and bankers – are required to complete this HUD form and provide it to a potential customer within 72 hours of receiving your completed application. That means that within three days you can have three competing financing deals in front of you – and all three in the same format, so it’s easy to compare.
Now I have to tell you, each mortgage is different, so even on identical forms you’ll see a lot of differences. But that doesn’t matter- you don’t want to read the GFE line by line. You want to go right to the bottom line, and see how much money you have to bring to the closing table and what your monthly payment would be. That’s what you base your decision on, not all the gobbledygook they lay out in between.
Again, don’t get hung up on the interest rate – lenders try to lure you in with a lower interest rate, meanwhile charging you an extra $3,000 in fees that you have to pay at closing. That just doesn’t add up. Stick to the monthly payment and the up-front money and you’ll be able to pick the best deal out of the bunch every time.
In the beginning, the application process may take a while. But once you do a deal with a broker, he’ll have all your information – your paystubs, your tax returns – in his files already, and he can put together a GFE at the drop of a hat. Which means you can close deals – and adding to your positive cash flow – in no time.