The wrong lender can cost you a LOT – and I’m not talking about rates & fees.
Choosing a bad lender can cost you several hundred dollars (or more) or even the house of your dreams.
Imagine finding the perfect house. Because the market is shifting, your offer is accepted and you’re making plans for your future in the house you fell in love with. You’ve gone through the mortgage application process. Inspections are complete and issues resolved. Appraisal ordered and complete, yay! The home appraises!
And now, you wait…the dreaded underwriting process seems to drag on forever. But you get a conditional approval. Whew! The anticipation! Closing day is around the corner.
Then bam, a day or two before closing, your lender with the awesome rate and great TV ads denies the mortgage. The money you spent on inspections, the appraisal, and possibly your mortgage application…pffft. Gone.
Lenders prequalify buyers; they look at credit score, work history, debt to income ratios. Basically, they want buyers with a healthy financial history. Likewise, Buyers should research lenders to make sure they are reliable and a good risk. Hint: having great ads does not mean they are a great lender! Shopping for the best rate or the best deal is obviously important, but it’s more important that you are actually able to get to the closing table.
Some loan officers are either inexperienced or sloppy and do not fully qualify buyers (or the property) until too late into the process. They are notorious for hooking hopeful buyers in with a sweet rate, or other carrots on a stick…only to pull the rug out from under them with a denial a few days before settlement.
This happened to two of my clients. Both were using the same lender, a lender with an aggressive and compelling national ad campaign. Less than a week before closing, whoops, sorry, no mortgage for you!
How do you avoid this? Trust your real estate agent to connect you with a loan officer with a solid track record. Use a local lender your agent trusts.
I only recommend lenders I’ve worked with successfully in the past. They will put you through a more rigorous (and reliable) approval process up front, to avoid wasting your time with junk pre-approvals that could later be denied. This will save you money, time, and anguish.
By the way, contrary to some myths out there, reputable agents do not recommend someone because we “get a piece of the action”; Federal Real Estate Settlement & Procedure Laws (RESPA) are in place to make sure agents don’t recommend a lender for their own financial gain.
Obviously, a savvy homebuyer wants to shop for the best rate possible. Just make sure you do so with lenders that are solid, aren’t in danger of going out of business, or are not laying off employees to the point that it’ll affect your ability to get your loan. Make sure the lender has a solid reputation among real estate professionals.
Agents typically recommend lenders who:
- Have proven to be reliable
- Get loans approved and closed in a timely manner.
- Offer competitive rates.
- Honor the rate and terms they quoted. (Not ones who offer a lower rate to hook you and then sneak in fees or a higher rate later.)
- Have excellent communication with the borrower as well as the agent.
Using a local lender your agent recommends could easily be worth more than any potential savings “promised” from an unknown or risky lender.