How does one go about choosing lender? How do I know who will give me the best rate? Is there someone out there that won't charge closing costs? What if I have to bring a LOT more money to the closing table than the lender told me I would need? Will they cheat me? Can the lender promise that my loan will close on time? Are they asking me for too much documentation? What if there is a pre-payment penalty and I didn't catch it in the paperwork. Should I read all the documents prior to loan application? I don't understand what they mean.
All these are good questions-but they really just skim the surface of what you need to know when choosing a lender. First and foremost don't worry about your lender cheating you or having to bring more money to the closing table than was disclosed to you at application. Federal law has just about made those worries obsolete. Whatever the lender has disclosed to you at application with regard to your fees is what they are going to be unless there is a significant change in some facet of your loan. There are circumstances that can generate a change in fees such as a re-inspection on your appraisal-but what you see on your estimate should be within a few hundred dollars of what they will be when you close. Title companies and lenders are now held to a very high standard with regard to fees.
Isn't it best to go with the company that has the lowest interest rate? I often talk to folks who think that it is all about the interest rate. Low rates are great-but I often tell clients that if they have found a rate that is significantly lower than every one else in town-something is off. It is not unusual for lenders to quote low to get the client into the bank/mortgage loan company. And it is true that rates change daily so if a lender quotes you a rate and it takes you three days to go in to talk about your loan, the rate may have changed-and not necessarily for the better. Choosing a lender because they quote you a lower rate is somewhat like throwing a dart at a moving target. Perhaps you will get lucky-the again...
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Rather than make the interest rate your criteria for choosing a lender, let's try a different approach.
Many people think the logical place to start is their own bank or credit union. And that may work well for many folks-but keep in mind that the bank or credit union has one source of money so you may not be getting a look at the best options out there. And from personal experience at my own credit union-let's say I have been very unimpressed with how they go about consumer lending-who gets the thumbs up, or is declined and the reasons behind the decision.
Another option and in my opinion a better option would be to take a look at a mortgage broker such as Tippecanoe Mortgage. We offer money from several different sources and we don't expect you to move your depository accounts in order to obtain the mortgage. We have the ability to approve a broader range of borrowers due to the multiple nature of our investors. Of course I would say that since I work for a mortgage broker but it is true that we offer a choice.
Let's look at some other things you may want to consider in your search for a lender-such as:
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The experience of both the loan originator and the company they work for is critical. Lending has changed dramatically in the past six years. It is important to choose someone who has worked continuously through the changes.
Communication is another exceedingly important factor in today's world of mortgage lending.
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That should go without saying (but is going without saying communication?) What a borrower needs is a lender who will answer their questions, explain unfamiliar procedures, documents and terms, and keep the borrower in touch with every step in the process. Communication begins prior to commitment to the lender. If a loan originator can't call you back when he/she is trying to make the sale, how well will they communicate throughout the process? That is a good question to ask yourself. And by the way, communication isn't just about -
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Communication is also about bad news. Low appraisals, unexpected inspection results, factors that affect the interest rate to the worse, denials-there is plenty of bad news to go around in the mortgage business that must be communicated with solutions.The ability to find a solution to problems is another hallmark of a good company that employs knowledgeable experience originators. Many people have issues or situations that put them "out of the box" with regard to mortgage lending. Maybe it was a job lay off or a foreclosure. Perhaps it was relocation, or working for a temp agency, or a fire that destroyed the previous residence. All of these are problems that have come across my desk to be solved in the past 12 months.
But how do you know how an originator communicates? Or whether or not they are good problem solvers? Ask around. Often the best referrals come from friends and family. At Tippecanoe Mortgage a very large percentage of our business comes from past clients. If we have done a good job for someone they are only too happy to talk about it.
Check various lender's websites. If all they offer is basic information in a generic format, you may want to shop further. Our new website www.tippecanoemortgage.com is stuffed full of information that is useful to the consumer-including a link to this blog as well as an online application.
There is so much more to choosing a lender than selecting the lowest interest rate. Consider all aspects of the process you are about to enter into prior to going with the lowest rate-there is a lot more to the equation than the bottom line.
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