Aren't All Lenders The Same?
A lot goes into your process when buying a home. It is a big event. Finding the right neighborhood, a great floor plan, the right number of bedrooms and of course, the right price! The purchase of a home will be one of the biggest investments you will make in your lifetime.
One of the primary details in any home buying process is how you plan to
pay for the home. If you have all cash, great! No worries! The process will be a smooth one! However, most of us are not fortunate to have that kind of cash lying around the house. That is why it is so important to work with a lender that understands the process.
Many people think what's the difference? Who ever can get me the best interest rate wins! Think again. There are many factors you should consider in choosing a lender. This one company and one loan officer could make or break the deal with one simple mis-step!
When chosing a lender, here are a few tips to consider in making a decision, not all lenders are the same:
1) Is the company you are considering a Mortgage Broker, Mortgage Banker, Bank or Credit Union? How long have they been in Business? Understanding the difference between types of lenders will help you make a more informed decision in choosing the best fit for your needs. A Mortgage Broker can shop your loan with many larger lenders but do not lend their own funds. A Mortgage Banker does lend their own funds, but may be limited in the programs available. The Mortgage Banker will probably not collect the payments on the loan. They will sell the loan to a larger company. A Bank also lends their own funds and will probably collect the payments on the loan. They may have more strict lending guidelines than a Mortgage Bank. A Credit Union will also lend their own funds, may collect the payments but may also be limited in the programs available.
2) How long has the Loan Officer been doing Mortgage Loans? Experience in understanding the loan programs and the best loan for your situation can save you thousands of dollars up front as well as over 30 years.
3) Does the Loan Officer listen and understand your current financial position? It is important you are working with someone that can offer solutions to problems you may be facing. Anything from credit issues, money for a down payment, time on your job. A good Loan Officer will be able to provide advice on the best approach in handling every situation. There are programs available for with people with credit scores as low as 620, they will be able to advise you on how to improve your credit score. They will know the programs available for 100% financing in your area as well as which programs may allow gift funds. BE AWARE. If any loan officer says it is necessary for you to "fake" any documents or misrepresent anything on your loan application, this is considered LOAN FRAUD and is punishable by law. A good Loan Officer is able to help you through situations without needing to "fudge" on anything.
4) Interest Rates and Fees. Most Lenders are competitive in rates. Compare rates with different lenders and the costs associated with obtaining the loan. The thing that may vary greatly is fees. It is a good idea when shopping for a mortgage loan to ask for a Good Faith Estimate of Costs to compare what charges the lender may be charging. Settlement fees, title fees and recording fees should remain consistent but may vary by a small percentage. Once you are in escrow, these fees will be determined and should not increase.
5) Time periods. Understand how long it will take your lender to process, underwrite and close your loan. Many of the larger lenders and banks may take longer than you have on your contract. Make sure they are
able to comply with contract dates or make your offer according to the time frame it will take your lender to complete the process. You do not want to face penalties from the seller for not closing on time. The Loan Officer should be able to tell you from beginning to end what to expect. Do not be left in the dark.This is YOUR loan. You should not have questions about where in the process you are.
These are just a few points to consider when looking for a lender. Any one of these items if not handled by a professional could be costly in your transaction or cause the loan to go south at the last minute. Working with a qualified Loan Officer at a reputable company will ensure less stress on your part. In addition, you should feel comfortable with this person. You are entrusting them with every aspect of your income and assets and you want to know the information will be kept confidential and handled with care. You wouldn't buy a car without driving it; you shouldn't get a loan without interviewing some lenders!
Not all lenders are the same. If you need assistance in finding a lender, please feel free to contact me and we can discuss!
Making the Home of Your Dreams A Reality. As your Agent of Possibility it is my intent to make your home buying or selling process a smooth one!
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Hey, Stephanie - I just got home for lunch and see that you've got yourself a featured post here. Congratulations! And I'm the first to comment! Congratulations to me! LOL
Stephanie, I love your posts as they are always full of important information for our clients! This is another good one about lenders and the importance of selecting one carefully! ~ Susan
Stephanie...yes...hearty congrats for job well done on the post-eroo. And to the post, I work with 2-3 lenders and all are competing for my business. Customer service has never been better. Results are predictable and I do favor one over the others even though they are all able to perform. Thank you
Best
Good info - especially in these challenging times. Thanks!
AZ now requires its loan originators to be licensed . . . that's huge for our industry.
GREAT post, Stephanie! !!!!!
An excellent and informative post. Two things however. As far as I know, there are only two programs that will allow 100% financing. One is US Dept of Agriculture (USDA) which is limited to rural properties and VA loans, which are limited to veterans. Secondly, virtually all banks sell their loans also. Lenders do not make money loaning you money. They make money when they sell the mortgage to an investor.
Sthephanie, they definately are not all the same. It is nice dealing with someone that will be honest when you ask for a pre-qual letter on whether he really thinks it will pass underwriting.
Great post, and I agree with most of it. However, most lenders now will not give out a GFE prior to a full application being taken. At best, you'll get a Fee Breakdown worksheet. (What the old GFE use to be).
By giving out a GFE upfront, the lender is then obligated to guarantee all the fees with basically no changes for 10 days. Lenders aren't going to do that now.
Grat post, and very relevant.
Great post Stephanie. Mike is correct that lenders are actually now prohibited from giving a good faith estimate before certain mandatory things happen, one of which is a property selected (approved offer). The new upfront disclosure is the Initial Fee Worksheet which actually has much more information then the new good faith.
Good synopsis for consumers. Knowing the different loan types helps us help our buyers select mortgage providers.
Stephanie: Being from differing states could account for little minor discrepancies here and there ... but the overall message you convey is superb ... and the one that counts. Finding the right lender is more important now than it has ever been before. There will be little difference in quotes on rates. You are so right on that point. Where a client needs to be most aware is actual costs of the loan and if the loan officer has the ability to get their loan through processing and closing successfully. Not all lenders can do that. That message cannot be stressed enough ... and I greatly appreciate you doing so.
Gene
Russel~ Thank you and yes, Congratulations to you! I am so honored you are the first to comment! ; )
Thank you all for your comments~ Yes, each state will certainly have it's own regulations and requirements for mortgage originators. California is required as well for anyone originating a mortgage loan be licensed.
There are so many different programs available, each varying state to state, even county to county. It is imperative that as a consumer you work with someone that has the knowledge of the local market in addition to the federal programs. The key is working with someone who provides more than just "lip service".
Getting a referral for a lender is a great way to work with someone who can get the deal to the closing table. No matter if it is from a friend or family member who has used them successfully or from your agent, knowing the loan will close is the key!
Good information, however with the updated regulations, as already noted, the GFE is no longer readily available without basically a full application. Paul and Mike make good points in their comments - and Joe's comment, unfortunately has to be locally delineated, as every company that may offer an upfront estimate is probably calling it something different.
For further information on licensing of Loan Originators, Loan Officers and their companies - you can refer clients to: http://mortgage.nationwidelicensingsystem.org/consumer/resources/Pages/default.aspx
Furthermore:
All state licensed and registered mortgage companies, branches and mortgage loan originators for the following states can be found on NMLS Consumer Access (unless otherwise noted):
Alaska Arkansas Arizona Connecticut California District of Columbia Georgia* Iowa Idaho Indiana Kentucky Louisiana Massachusetts Mississippi Montana North Carolina North Dakota Nebraska* New Hampshire New York* Oklahoma Oregon* Pennsylvania Puerto Rico* Rhode Island South Dakota Tennessee Texas Vermont* Washington Wyoming*
*Mortgage Loan Originators will be added in 2010.
For the following states, NMLS Consumer Access only contains state licensed mortgage loan originators: Delaware Michigan
Also, at least in Washington, we have seen most of the Mortgage Brokers close up shop due to new regulations that require them to pay for some of the fees - but at same time requires all funds that used to be used to make their profit now be used only for the client's benefit.
If you are in one of the above listed states -- you will want to concentrate on Licensed Loan Officers, who have been through national/state testing, as well as background checks.
Great information Steven! Thank you for providing such a detailed list!
Stephanie: Thanks for this. You've done a great job summing up a very confusing process for the customer. Good job! And congratulations on your featured post!
Stephanie - I always encourage my clients to consider past client testimonials in addition to the information you mentioned above. Anyone can offer a great rate today, but I think the most important factor is.... can the people involved in the transaction (loan officer, processors, underwriters) be successful in getting the client from application to the closing table in the quickest time frame with the least amount of bumps in the road.
I've found when there are no hiccups in the mortgage process the buyer is more at ease. This is exactly why I provide my clients a list of three stellar loan officers in my local area and encourage them to meet with all three and possibly another they've had the time to research to ensure they'll be able to deliver in every aspect of the transaction.
Great Post!
I enjoyed reading all your honest advice about finding the right Mortgage Lender.
Heather Burns
Home Mortgage Consultant
Guild Mortgage Company
425-945-8035 Office
206-714-3522 Cell
206-577-2901 Efax
hburns@guildmortgage.net
Apply Online: http://www.guildmortgage.net/heatherburns
Follow me on Twitter: http://twitter.com/urownlo
Stephanie,
I derive 90% of my business thanks to referrals from Realtors and have done so for my entire 20+ year career as a mortgage professional. Your advice is superb, to say the least!
Steven Cook pointed out the NMLS licensing site. Realtors need to know this important fact about Loan Originators in today's market. To obtain my MLO License, I had to undergo a criminal background check, fingerprint check through the FBI database, credit report, ten year employment and residence history, a Pre-Licensing education class and a National and State-specific examination.
LO's who work for Banks are exempt from the NMLS Licensing requirements; they need only be registered with the system.
Mortgage Banker, Mortgage Broker, Bank or Credit Union Does it really matter? Not really, In my opinion the knowledge and experience of the Loan officer is the most important ingredient to the success of a purchase. If they are knowledgeable and experienced you should have little concern where they work, because they know the name on the door can make or break them. I may be bias in that I am a Mortgage Banker, but I believe Qualified and experienced Mortgage Bankers and Brokers are the best choice for most consumers. Because Mortgages are the only thing they do, they do it better.
My concern is when Agents/Realtors do not educate them self and are closed to working with different lenders. In Northern ohio many Brokerages have Affiliated Business Arrangement with Lenders and Title Companies. Because Agents/Realtors are strongly encouraged to use the AfBA, I believe a dis service is done to the consumers. That is a subject for another day.
Possibly this post is partially inspired by a Borrower that called me today for a loan to Price Check the Realtor Preferred Lender. The Realtors Preferred lender was quoting the borrower a loan with Similar Closing costs however the rate of interest offered was a Half Percent Higher than I offered the borrower.
Stephanie,
Nice post. I've originated as a broker and with an FDIC insured bank.
Not all banks service the loans they originate. In fact, many sell them the same way the non-depository bankers do. The profit is made in "churning" the money rather than collecting interest on a 5% note. The only reason rates are still low is because the Feds are still buying most of the mortgages. Rates will have to go back up to get the private sector to purchase mortgage debt.
Brokers, bankers, and smaller banks often originate through different lenders. Many bankers and banks have their own underwriting and processing staffs giving them a speed advantage since the brokers have to package the loan and send it to the lender for approval.
You can no longer get a Good Faith Estimate until the buyer makes a complete application with the lender.
Tom
Stephanie, Of course you know I am not surprised to see you write such a well constructed and thought out post on choosing a lender. Agents with your understanding of finance are a dream come true for any mortgage professional....you know we would stalk you for your business, don't you? LOL!
What great advice for consumers. They really do think the ONLY thing they should be concerned about is rate. That's the least of their worries,, in my opinion.
Thank you all for your comments! Coming from an extensive career in mortgage banking, I too am partial to mortgage bankers and brokers as their concentration is specifically mortgages. However, as you stated Tim, it really does not matter what type of institution the mortgage originator works for as long as they are qualified and understand what it takes to make a loan. Each customer has different needs or financial situations. Working with a loan officer who knows how to overcome obstacles from the beginning to end of the process is crucial to completing the transaction.
Understanding the process for the consumer upfront with the different types of lenders helps avoid confusion when they are presented with loan documents with the name of a different company or receive a notice for their first payment and it is with a different company than who they obtained their loan from. Yes, most commercial banks and often credit unions will sell their loans on the secondary market as do mortgage bankers, but are more likely to maintain the servicing than a mortgage bank.
I am fortunate enough to have a wide variety of mortgage professionals I work with I know can get the deal done. By having a network of loan officers as brokers, bankers, credit unions and institutional lenders provides my clients the ability to work with a mortgage professional they feel comfortable working with.
Deborah, I thought that was you following me around for days incognito! ; )
Stephanie:
Of course we know that they are not all the same, but many clients and potential clients seem to think they are.
good points
good reminders
thanks
Stephanie- this is one of the most consumer-centric posts I have seen in a long time. I used to originate before I started my firm, and can't find anything I'd take issue with.
Stephanie, these are great points for the consumer to consider when getting a loan. There are many lenders out there and even some good ones!
Some of us "bankers" are "brokers" too, the flexibility affords your client more options but experience does count! Although with all due respect I have known a few seasoned LO's that haven't put in enough time or effort in the recent years to know the current lending standards and are struggling with new compliance time-lines, hard to let go of the past. Rate and fee matter but service if bad is a deal breaker. Also, personally, like many here, I will not issue a GFE until I have a full application :)
There are a handful of states still transitioning to be compliant under the SAFE act and come December 31, 2010 all loan officers (unless you work for a retail bank or credit union) are required to have registered with NMLS. You can check here for your LO http://www.nmlsconsumeraccess.org/
Thanks Stephanie for the post. I have enjoyed logging in to hear the perspective of many here. Helps me get to know what you all look for and understand the challenges on your side of the transaction.
Great point and great post. If a loan officer appears to be skeptical disclosing everything; BEWARE. The client should be walked through the process step by step. I am a firm believer in disclosing and communication. Often times the client just doesn't know what to ask.
I also advise my clients to Google people. You never know what you will find!
Great post!
Hi Stephanie - I am a broker, corespondent and a bank! My mgmt team rocks : ) The biggest problem with shopping rates is that rates are a moving target. Unless the quotes come from multiple lenders at the same exact time one doesn't know if they are really comparing apples to apples. Fees can also change but once disclosed cannot increase. This is a great blog post thanks!
excellent post!
All lenders are definitely not the same. It's important to get the right one, and right is not defined by the lowest interest rate or fees.
Wow, Stephanie! You got two featured posts since RainCamp! That's pretty cool! And again I'm wondering why some yo-yo sitting nearby didn't reblog this. Hold on. I have some bopping to do.
Stephanie, this is great basic info about why we need to make sure we recommend solid lenders to our clients who are getting a loan. For all the work that goes into a sale, we want it to get to closing.