Tips for Choosing a Mortage Company or Lender
When buying a home, there are two general ways to pay for it: paying cash or using financing. The most common type of financing for a home purchase is a mortgage.
There are thousands of lenders, and narrowing down the options can be a little overwhelming. Naturally, it makes sense that you want to find the best deal and lowest cost of borrowing, but other factors are also very important when it comes to choosing a lender.
Starting with the basics - when we refer to a lender, this is the individual who you are hiring to help you obtain a mortgage. A mortgage company is who the lender works for. The lender you choose is in large part your point of contact throughout your transaction along with their team, and they are responsible for your customer service experience. In doing your research, we recommend checking out lenders' reviews or testimonials - if they don’t have any, that might be a red flag.
Different mortgage companies have different loan options. Some operate as mortgage brokers, offering loans from different investors. Other companies finance their mortgages “in-house” and may have fewer options but more competitive pricing. We believe that the lender is more important than the mortgage company, although good lenders generally work for good mortgage companies that offer competitive loan options.
The lender you choose may impact the following:
☑ Whether or not your offer is accepted on a home
☑ Your interest rate
☑ The structure of your loan and your out-of-pocket expenses
☑ Compliance with the contract timelines
☑ The success of your financing and on-time settlement
In summary, there is a lot of potential benefit in choosing a qualified and knowledgeable lender and a lot of risk in choosing one that is not. We strongly recommend making this decision carefully and finding a customer service-oriented reputable lender who will be able to help you achieve your home purchase goals
In doing your research, we recommend checking out lenders reviews or testimonials - if they don’t have any, that’s definitely a red flag. Here are a few other things we recommend looking for:
Here are a few other things we recommend looking for:
Local
Their physical office location is in MD, DC or VA. This is the address that will appear on their pre-approval letter. Their underwriters and processors also work out of a local location. The lender you choose should be experienced with financing situations specific to the jurisdiction of your search.
Why This Matters
Local lenders are knowledgeable on the somewhat unusual types of properties, or property-specific situations that arise and can provide guidance. Local lenders also tend to work on a reputation basis, and that adds a level of accountability.
Lastly, time zones matter! There are many steps of the purchase process that require responsiveness and where timing matters (in particular - settlement!) When a lender or the loan origination team is operating 3 time zones away it inevitably leads to delays and buyers (and their agents) not having timely information.
Note:
Large banks may have local branches BUT that doesn’t mean that the actual team processing your mortgage after contract ratification is local! We’re looking at you Bank of America, Chase, Wells Fargo...
Responsive
Our real estate market moves quickly and the lender you choose needs to be responsive to time-sensitive requests. How will you know this in advance? You may not, but keep track of how long it takes them to respond *during business hours* to your questions and requests. If they respond slowly to you (the customer) chances are good that they are even less responsive to agents. Are they only available 9-5 M-F? If so, that’s not going to work for anyone in the transaction.
Why This Matters
Say you check out an open house on a Sunday afternoon and fall in love, this is “the one” and you definitely want to submit an offer. You learn that the offer deadline is Monday afternoon (not uncommon!). Let’s also say that you want to know what the monthly payment would be for this house, with current interest rates - probably useful info for deciding on an offer right? If you reach out to your lender on Sunday evening for a specific estimate of your costs, will they have this information to you on Monday morning? If not, you are missing important information that could impact whether or not this home fits your financial objectives and what offer price is best.
Knowledgeable
Experience matters with every member of your home buying team. Financing may seem straightforward on the surface but there are so many intricacies that arise both in terms of individual loan approval and the loan approval of the property. A lender needs to be able to navigate atypical situations with ease, spot red flags before they become issues, and be able to accurately let you know what to expect.
If using a specialty loan product (for example a first-time buyer program, or renovation loan) ask the lender how many loans of this type they have closed. How many in the last year? With these specialty types of loans, the most important factor is going to be how knowledgeable and experienced they are with the specific type of loan.
Why This Matters
Many transactions are smooth sailing, but the ones that are not, are complex situations with many interconnected parts and variables - and as a buyer, you want to be in the best possible position to successfully navigate these challenges so that you can successfully complete your purchase. No one likes surprises that cost time or money, and a knowledgeable lender can help save you both.
Offer Competitive Contingency Timelines
Multiple offer situations are prevalent in all areas of our market, the length of a financing or appraisal contingency can be a deciding factor in which offer the seller accepts (along with the seller’s confidence that the lender you’ve chosen will be able to perform). Even if not a competitive offer situation the price or other terms a seller may be willing to accept could depend on contingency timelines - a seller who needs to move quickly may take a lower offer if they would know within a shorter timeframe that your loan was approved.
Why This Matters
In a competitive offer situation, the terms of a buyer’s offer will be compared with the terms of other buyers’ offers, and the seller will attempt to evaluate their risk. Risk for a seller is usually thought of as the likelihood that the contract does not successfully make it to completion and they need to either accept a different offer or go back on the market. Longer contingencies create longer periods of “risk” for a seller.
In a non-competitive offer situation, this still matters. Would a seller potentially be willing to accept a lower price for a contract where the settlement date is earlier? Would they potentially be willing to accept an offer with additional contingencies if they knew the buyers loan would be approved in a shorter period of time? Yes.