A conversation I have had multiple times in the past few weeks has centered around my buyers' “readiness” to make an offer on a home. Many of these buyers have been disappointed to learn that they are not – yet – in a position to make an offer on the house that has them so excited. That is not only a disappointing conversation for them, it is a difficult conversation for me because I never like discouraging anyone. Today I choose to view this as an opportunity to better prepare them for what is likely to be one of the biggest financial as well as emotional life decisions they will make, at least in the near future.
So what’s going on? Many people are still unaware that buying a home is a team effort, and an integral part of that team is a well-qualified mortgage lender. What do I mean by this? Buyers need to be aware that a large number of purchase-and-sale transactions never close. Transactions often fail during the inspection phase, but many often fail because something goes wrong during financing. As your Realtor, when you come to me ready to buy, I need you to be pre-approved by a mortgage lender so that we can put our best foot, and best offer, forward on that home of your dreams. I need a written pre-approval letter from your lender for the offer you are making. And then we need to all work together throughout the transaction to make sure the details and timing of your contract stay on track so your purchase closes on time and as smoothly as possible.
What can go wrong? First is failing to be pre-approved when you find the home that excites you. The pre-approval process doesn’t necessarily take long, but in this market even a day or two can mean the difference between getting an offer in or losing out to someone better prepared. You need to know in advance what documents you will need to provide when actually applying for a loan, you need to know how much you can afford to spend on a home, and you need to know how those mortgage payments fit into your financial planning for your future. That takes sitting down with a good lender in advance of house shopping, and you should expect the process to take a few days.
Second, choosing the wrong lender can negatively impact your chances. Really? Yes, absolutely! The mortgage lending business is extremely competitive, and not all lenders are created equal. Not all have the same education, training, experience, or ability to serve their clients. First and foremost, mortgage lending is a sales position, and the goal of the various lending institutions is to get you, the customer, to buy what they are selling. It doesn’t matter what name is behind the individual or what interest rate they promise if they can’t or don’t get your loan closed on time. Their failure to perform can cost you YOUR house – yes, really – not to mention a great deal of grief and heartache. And when presenting that pre-approval letter to a seller, if your lender's name rings alarm bells, that can be the difference between having your offer accepted or having it rejected.
So how do you find the “right” lender? First, find your comfort zone. Decide whether or not you are comfortable going through the process electronically (many lenders are set up so you can apply, submit documents, get approved, and obtain a loan, all online) or whether you prefer to sit down, face-to-face, with someone.
Second, ask for referrals! Don’t assume the place you currently bank, the online lender that offers great deals, or the name you hear on the radio with discounted rates or rebates is the best place to start. (Rates do play a role in your decision, but the bottom line should be who can best get this accomplished for you.) Do you have a Realtor? Ask them for a couple of referrals. Believe me – we are VERY invested in getting your transaction closed for you, and we will do our best to refer you to someone who will work with us as well as with you to make your dreams come true! Ask your attorney, or your CPA. Do you have friends or family who have recently completed a purchase? Ask them. See if any names come up more than once. And remember – you are looking for the name of an individual within a company, not the name of the company itself. Your service will only be as good as the individual involved.
Finally, interview your prospective lender. Sit down with them in person or talk to them on the phone. Make sure they are available to you. Ask about their processes. Ask about their timelines. Ask about their successes and their failures. Ask about APR’s and Truth in Lending and Loan Estimates and anything and everything else you can think of. They should talk to you about all of that as well as discuss your credit with you, your financial goals, and how your loan will fit with your hopes and dreams for your future. Make sure you are comfortable with the individual you choose as well as with the company behind them. At the end of the day, your mortgage loan will be originated, processed, approved, and closed by the people you choose to work with. Companies and their systems will be behind those people, backing them up, but it is the individuals who will make it happen. Ultimately you want to look for someone who will focus on you, and not just on your loan.
As always, if you have any questions, please feel free to ask. I’m here to help!