Now that we are in the home buying season in the Baltimore, MD area, let's talk about how to choose a home mortgage lender.
Let's face it, many lenders are just not good. They are like used car salesman who just pump out pre-qualification letters, send buyers out looking for homes, get buyers expectations up and then pray that the loan will close.
What a waste of time and emotional energy for all parties involved. There has got to be a better way. Let's talk about it.
10 Tips for Choosing a Home Mortgage Lender
1. Partner with your real estate agent to do your research
A good real estate agent should be knowledgeable and care about your loan terms. You don't want an "old school" agent who just opens doors, drives a fancy car and smiles a lot. You need someone who knows the numbers. Though your agent does not need to be a loan expert (if they were, they would be a lender), they do need to understand loan options, loan terms and have opinions on what lenders are telling you. Partner with your agent. And, if your agent is clueless, get a new agent.
2. Get lender referrals
Get lender referrals from your real estate agent (she should be able to give you at least 2) and from friends who have bought recently.
Do not just go online and do not just disclose your information to just anyone. Social security numbers, bank accounts, financial information - this is important information - and you do not want to just type it in to websites and/or disclose it to people you do not know. Be careful. Get referrals first.
3. Get on the phone and call a few lenders
Yes, take the time to speak with these lenders.
- Do they answer their phone?
- Do they take time for your call?
- Do you get the sense that they are knowledgeable and will educate you on the terms of your loan?
- Or do they delegate you to an assistant and tell you "not to worry"?
Choosing a lender is a big decision and it amazes us how many people just choose whoever has the best teaser rates. Loans are complicated and you need to take the time and do your homework here. I know, like insurance, that this is not fun. But you have to do it. You are going to "live" with this loan for perhaps 30 years so do it right.
4. Some questions to ask the lender
Are they familiar with your type of loan? Your price range? Your geographic area? Have they closed these types of loans recently? If you are getting an FHA loan, don't work with a lender who only focuses on 20% down loans.
If your price point is $300,000, find a lender that works this price range, not one whose average price is $800,000. Can a lender work in all price ranges? Yes, it certainly is legal. But a good lender often specializes and you want the lender that is best for you and your type of loan.
5. The lender's office structure
Does the mortgage lender answer the phone? Do they have an assistant? Do they have in house underwriting? Is there an office?
Getting a loan from contract to closing is complicated; there are many parties involved. You need a lender that is "on it" every day, i.e., sends out updates, has an assistant that is knowledgeable, pleasant and experienced and that has an in house underwriter so that changes can be made quickly and efficiently. Beware of the lenders that are large banks or online as you will often get caught in the voicemail maze and will not be able to get the service you need in a timely fashion.
6. Get educated about home mortgage loan terms
Yes, I know this is rough and can be unpleasant. But you, not your real estate agent, must understand the terms of your loan. It is your loan and no one else's.
- Do you understand the terms?
- Do the terms change over time?
- What is your monthly payment when all expenses are included?
- Are there any hidden fees?
- How much money do you need to bring to the table?
- Has your lender taken the time to educate you on all of these details?
You do not want to feel the pressure of figuring all of this out at the closeting table. Take time, in the privacy of your own home, to read documents, ask questions and get educated before you are at closing and everyone is staring at you.
7. Get references from recently closed customers
Contact some recently closed customers and ask:
- Did the loan close on time?
- Were there any last minute issues?
- Should you ask certain questions that you may not have thought of yet?
The last thing you want is to be surprised at the closing table. This is not fun. You want to make sure you have a seamless closing so asking these questions now will help you prepare for later.
8. In house underwriting for home mortgages
This is a big one and I know that I mentioned it before.
There are many changes happening this summer with the loan process and with so many parties involved, it is highly likely that changes will have to be made to the loan during the pending process.
Your lender needs to have access to an in-house underwriter so that changes can be made quickly and efficiently. The underwriter looks out for the best interests of the bank and is usually a very conservative, numbers person.
Often lenders, real estate agents and the parties involved in the deal, renegotiate terms that the underwriter rejects or changes. Better to know now than later. Let's run everything by the underwriter before you get your hopes up.
9. Check on the lender's reputation with your real estate agent and your title company
If you value your real estate agent's expertise (which I hope you do), ask him/her about his experience with this lender. Also ask your title company as the title company will be familiar with problems that crop up at closing.
10. Go house shopping!
When you have done your loan homework and partnered with a great agent and lender, your team is in place. Go shopping! Have fun and enjoy the search. Your team is behind you and will take care of all of the details while you plan your move. Congratulations!