Choosing a Mortgage Lender

by | Apr 18, 2020 | Mortgages

Optimize the timing
One of the first things a prospective buyer should do is find an experienced and responsive mortgage lender before making a purchase. In many cases, this could be six months to a year prior to when you want to buy a home. People often delay reaching out to a lender until they have saved a sizable down payment and are ready to put an offer in on a property.  

Lender referrals from your agent
Your agent will know which lenders are responsive and have a history of strong past performance. While all lenders promote their capabilities and offerings, going through the escrow process is the only way to have visibility into their performance. Promises are just that. Relying on your agent’s knowledge can help you weed out the under performers. 

This increases the chances of having your offer accepted since listing agents will be confident that financing issues won’t derail the deal.

Your agent will know which lenders are responsive and have a history of strong past performance.

A thoughtful and strategic approach to the home buying process can have long-term positive impacts on your financial future. It never hurts to gather information early in the process; you then have a solid base to make informed decisions.   

Who you partner with matters
There are several important reasons to find a responsive and reputable lender:

  • Without a thorough financial review and resulting pre-approval, you will not know what purchase price you qualify for. This is a crucial first step to determine the range of prices you might afford when looking for a property. A reputable lender will be able to perform a comprehensive review and give you objective information on what you can afford to pay for your purchase.
  • All purchase offers must be accompanied by a pre-approval letter from your lender stating the loan amount for which you qualify. While nearly any lender can generate a pre-approval letter, an experienced lender will also advise you on what financial decisions can help you meet your home buying goals, and conversely, what decisions may harm your credit and therefore limit your purchasing power.
  • A pre-approval letter is a great first step but I recommend you request having your file underwritten. Your lender sends all your documentation through underwriting which will expose any potential issues prior to entering escrow. By addressing potential issues beforehand, you will be in the best possible position on offer day and will outshine other buyers in a multiple offer situation.

The hallmarks of a good lender are, first and foremost, someone you feel comfortable working with and sharing all of your financial information. It may sound silly, but if you don’t feel at ease with the lender, ask your agent for another lender referral. 

Questions to ask a lender you are evaluating
By knowing what to ask, you can better qualify a lender to make sure they will provide you with the highest quality service which increases the chances of the best outcome.

  • Will you be the primary contact throughout the entire pre approval and escrow period? If not, how many people can I expect to interface with?
    The more people involved in the process, the more likely something will go wrong. Each handoff of your case provides a chance for miscommunication so look for a lender that has clear visibility into all the steps in the process.
  • Will I be able to reach you on weekends and evenings in the case I urgently need a pre-approval letter or need to confirm mortgage payment or PMI (private mortgage insurance) amounts?
    Particularly in a sellers market things can move very quickly. It is very important that you work with a lender who is responsive and available in the event circumstances change or you need a status update.
  • How long have you been in the industry?
    Experience counts, so make sure your lender has deep experience in the industry across a number of economic cycles. If the lender has lived through bull and bear markets they will be in a better position to advise you on the best course of action given the current economic conditions.
  • How many loans did you close last year?
    The more volume a lender does, the more exceptions they have encountered and the more familiar they are with lending guidelines, which change quickly. This generally means they are successful at what they do and have the experience to navigate unexpected circumstances.

High Touch Service
Many large banking institutions, like Bank of America and Wells Fargo, offer compelling rates, credits, and special discount programs. However, their mortgage business is only a small part of their overall operations and these organizations are interested in a high volume of transactions to justify their rates and discounts. Additionally, the loan process is handled by multiple departments who don’t necessarily communicate well. This can result in a siloed and opaque loan process, making it challenging to get answers on loan status. 

The process of working with a large institution can be bureaucratic and onerous at best, and impossible to close financing at the worst.

The process of working with a large institution can be bureaucratic and onerous at best, and impossible to close financing at the worst. As a result, I generally recommend working with a lender who manages the process from start to finish whenever possible. There are multiple benefits of working with an experienced lender who can provide you with their full attention:  

  • Experienced lenders are known within the community of realtors and offer credibility based on a history of successful engagements.  
  • They offer the highest level of service and are consistently responsive to both client, buyer’s agent, and the listing agent. This enables the seller to feel confident about the potential buyer’s financial standing thereby increasing the odds of your offer being accepted.  
  • Qualified lenders have a network of experienced, local property appraisers familiar with the competitive East Bay real estate market, and are better able to manage your transaction from end-to-end to ensure an on-time close of escrow, and identify outside the box loan options.

While it is ultimately up to each buyer to choose a lender with whom they are comfortable, I urge all of my clients to compare options and look at the range of benefits a high touch lender can offer before making a decision. While you may receive better terms or a slightly lower interest from a large bank, a highly responsive lender will more easily facilitate your purchase with less work and frustration. This results in a stronger offer and a faster close so you can begin living in the home of your dreams.

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