4 tips for Choosing a Mortgage Lender
/I've spoken before about the importance of getting pre-approved for a loan before you start looking for a home. It lets you know exactly what you can afford and it also makes you ready to make an offer quickly when you find the right house. Today I'd like to talk about some things to think about when choosing the lender you will work with for the purchase.
1. Choose a Loan Officer You Like
I always say that you must work with a real estate agent that you like. Working with a loan officer you like is nearly as important. The home buying and selling process can be stressful. Surrounding yourself with professionals who you enjoy working with can help to alleviate that stress. The opposite is also true. If you are unhappy with your loan officer it can make the seemingly nit-picky process of obtaining a mortgage so much more frustrating.
2. Choose a responsive loan officer
This one's pretty important too. I've had deals with the nicest of nice loan officers, but that does me no good if she won't answer her phone or return emails. There are times you need something quickly from your lender. The purchase contracts have deadlines and things inevitably come up at the last second. If your loan officer has a history of taking a day or two or more to respond to you this can cause problems. I don't expect a loan officer to answer calls and emails at all times of the day of course, but one that responds within a few hours (perhaps longer on weekends) is a winner in my book.
3. Big banks or local lenders, what's better?
When I'm asked for a recommendation for a lender I often recommend a local mortgage company before I suggest a big bank. In my experience, local companies work all aspects of the loan "in-house." This means that when your loan is in underwriting it's in an office down the hall. And when the underwriter is finished and it moves to the document prep phase it just moves into another office in that same hallway. When you work with a large corporate bank this is rarely the case. Often each part of the loan process is handled by a different person in a different state. This can cause delays. It's hard to keep everything straight and communicated efficiently when the people that are working on it don't know each other and are in different time zones.
That being said, there are times that using your personal bank may be a benefit to you - some banks will offer fee discounts to their patrons. As part of your shopping for a lender ask if your bank offers you any of these benefits. Also ask them if all of the work is done in-house or if it'll be done by departments elsewhere. Then you can start the process with knowledge and write extra time into your contract deadlines if needed.
4. Use the APR to Comparison Shop
Although the interest rate you get on a loan may not vary much from company to company, every lender will have a different fee structure - different origination fees, credit check fees, appraisal fees, etc. There are very strict laws that govern lenders. One law requires lenders to give you an Annual Percentage Rate (APR) that incorporates all those fees and the interest rate into one number, the APR. I honestly have no clue how that number is calculated. I just know that it includes all the costs of the loan. But every lender calculates them the same way so that you can use that number to shop for the best price. For example, Say two lenders will be giving you a 30 year fixed interest rate of 4%. Because their other fees are different, the lender with an APR of 5% is cheaper than the lender with an APR of 6%.
If you are choosing between two lenders and the one you like is more expensive than one you don't like as much, ask your favorite to try to match the other lender's price. Mortgage lending is very competitive and many companies will often work to get your business. It never hurts to ask for a discount. Sometimes they won't be able to match the price completely, but they may come down if they can. Also paying a little extra can sometimes be worth it to work with a lender that will do a better, quicker job.
Now go choose that lender!
Choosing a lender can see overwhelming, but it doesn't have to be. Educating yourself to the process is the best place to start. I've worked with some great and not-so-great loan officers over the years. I'm happy to refer you to some of the best. Just give me a call.
I'm also ready to help if you or anyone you know has any real estate needs.
