Decisions, Decisions... How to Pick a Lender For Your Portland Area Home Purchase
A little more complex than picking apples. Or maybe not, I don’t know a lot about apple picking.
There are a million blogs out there about how to pick the right lender, but we’re going to drill down a little deeper (as per usual) in our quest to produce the most informed home buyers and sellers as possible.
I know this isn’t the most exciting topic to read about when it comes to home-related blogs, but I assure you that it will be worth it.
Read through to the end for my strategy on how to secure the best rate AND work with your preferred, trusted loan officer!
The Best Rate Wins! Except When It Doesn’t…
Clearly I’m going to drive this whole “picking” analogy into the ground.
Before writing this article, I did a google search for “how to find the best lender”. Most of the blogs talk about “shopping around”, getting loan estimates, looking up reviews, etc. But, all of it revolves around finding the best rate.
That advice might work when you’re refinancing, but doesn’t make much sense when you’re getting pre-approved for a home purchase.
Why is that? Doesn’t the best rate win???
If you’re thinking about buying a home, then generally you’ll need to be pre-approved well before you actually find a home and place an offer. Between the time you get pre-approved and begin to place offers, rates will have changed.
Just because on one particular day you find a lender with a lower rate than their competitor, it doesn’t mean the tables won’t turn by the time you get an offer accepted.
The Factor That Can Be Even MORE Important Than Rate
Trust. This is something that is enormously important when selecting a loan officer (and Realtor!) but people don’t put a lot of consideration into it. Why is this so important?
A loan officer that is trying to maximize their volume, but has poor success in converting clients to closed loans, is probably focusing on churning out a ton of loan estimates. If they are going for volume over quality, then they are probably not taking the time to pull accurate figures when they are providing you an estimate.
For instance, there are a bunch of fees involved with a home purchase that are part of the estimate. A good loan officer will ask questions about the home you are interested in, will contact the title company to get accurate title fees, will pull real property tax information, and will include other miscellaneous fees such as HOA, insurance, etc. that are as accurate as they can make them.
A loan officer that works high volume will likely use estimates for most of this and so their final figures may be wildly inaccurate.
Other Things That Can Make Or Break A Purchase Money Loan
When I can’t get a lender to respond…
Communication and availability. So often loan officers are difficult to reach. What if you find a home that’s a little above the pre-approval letter your lender gave you? What if you need to have them run numbers on a home to make sure the total payment will be affordable. And what if while you need this information, there’s an offer deadline of Sunday at 10AM?
This is NOT at all farfetched, and in our extremely fast moving market, homes go pending over the weekend ALL THE TIME. You need a loan officer that is responsive.
Even worse horror stories are lenders that didn’t run the numbers properly for the pre-approval, precipitating a chain of events where the buyer spends a lot of money on inspections and the appraisal, only to find out after month that it was all in vain because the loan officer miscalculated and the loan is declined in underwriting.
Once you get an offer accepted, your loan officer manages the loan process. If they are difficult to reach, they may not be paying attention to the details. A bad loan officer can cause your earnest money to be at risk by failing to meet contractual obligations. This can include failing to order the appraisal within a certain time period or waiting too long to begin processing (usually within 3 business days of mutual agreement). Through mismanagement of the transaction they can cause a delay in closing that can cost EVERYONE a lot of time, stress, money, and potentially even killing the sale entirely.
Yes, I’ve had all these things happen, and pretty recently, too.
That’s Great That I Need A Loan Officer I Trust, But Isn’t The Bank Important, Too?
Things can certainly vary from lender to lender. Some banks can be very difficult to work with. For example, there are banks that will require you to share the home inspection report with them, and use that to require repairs prior to closing. Some banks have more stringent underwriting guidelines than others, although this is becoming more homogenized over time.
Most importantly, different lenders have different loan programs. Talk to loan officers about your specific situation, and be completely transparent with them! They may have some really good loan programs that fit your situation, even if you have non-traditional income, credit issues, or are self-employed.
You may also consider talking with a mortgage broker. Brokers are basically wholesalers. They don’t lend money. Instead, they connect you, the buyer, with the best loan program they can find for you. This may mean that they can get you a better loan than a bank, especially if you have a unique situation that requires a more creative loan program.
A Great Strategy for Getting the Best Rate AND Loan Officer
So, since you’ll have no idea which lender will offer you the best rate until AFTER you’ve found a home to place an offer on, how can you insure that you’re getting the best rate and working with the loan officer you want to?
Here’s my strategy:
Get pre-approved with 2-3 lenders. I often suggest contacting your bank, a local loan officer your Realtor suggests, and maybe a local credit union. Sometimes people also contact online lenders. Choose whoever you want and I will work with absolutely anyone, just be aware that the online lenders are generally all about volume, working with a large quantity of clients through call centers.
Talk with the loan officers extensively. See if they’re willing to give you plenty of time, either on the phone or in person. Ask them detailed questions about their experience, if they will be available for urgent needs over the weekend/evenings, if they research all the fees when providing estimates, and who you will be communicating with once loan processing begins (is it a call center somewhere, or the loan officer’s assistant that works in the same office?). Ask them where loan processing takes place and how easy it is to contact the processor. Ask them for references.
Figure out which loan officer you are the most comfortable with and trust the most.
Talk to your Realtor about how to place offers with multiple pre-approval letters. (Not all agents know how to do this.) Ask them to write the offer with the stipulation that you’ll choose between these lenders and begin loan processing within the standard 3 business days of mutual acceptance.
Once your offer is accepted, contact all 3 lenders and ask for a Loan Estimate based on the specific property.
Take the estimates to the lender you trust the most and go over them in detail. If they don’t already have the best rate, fees, and terms, see if they can improve it for you.
Usually, that lender will go to bat and find you the best loan program. But, if they can’t, a trustworthy lender will tell you when you’ve found an incredible deal and they can’t beat it. Depending on how big of a differential it is, it may still be worth it to work with the lender you trust the most!
