How To Pick Your Lender

There are mortgage brokers, mortgage bankers and federally chartered banks or credit unions. Mortgage brokers have been hit hard recently by many of the recent regulatory changes and typically lack the actual ability to approve and or lock a loan.  They take an application, compile documentation then submit the loan package to a third party to make the lending decision. They give up much of the control. 

Banks are usually limited in program choices and hamstrung by tighter underwriting. They have to answer to shareholders and wall street regarding profit margins.  To increase profit, they cut staffing and tighten lending guidelines to enhance their currently struggling loan portfolio.  Don't make the mistake of thinking that just because they hold you checking account or current mortgage that they will make it easy for you.  They will have to compile the same package of information that any company will ask for and they normally charge an up front fee to begin the process.  By the way, typical closing times mean nothing to most banks - you work on their schedule not by your purchase contract.

Mortgage bankers have the financial stability and direct lending capability of the bank coupled with the wide product menu and expertise of the mortgage broker. They control the file from start to finish and can typically close mortgages quickly at better rates and fees. From a global perspective, I see mortgage bankers as a clear winner.

How does the company operate?

Many people are dismayed when they find out where their loan is processed or underwritten….or where the appraiser is from. It is important to work with a company (and their affiliates) who understand the nuances of your local market. Asking the questions up front can save you headaches down the road.

What about the individual loan officer?

Your relationship with your LO (and their processor) becomes the most important ingredient to a successful transaction. How well do they educate you about the process, the requirements…the factors that determine your approval or the interest rate you will get? Many LOs are “order takers”. Others are weak in follow up or communication. This is difficult to determine on your own which is why the referral from another person who used them or your real estate agent has far more value than most people know (until it’s too late).

Too many people stay focused on quoted rates and fees and neglect to see the whole picture of what is needed from a lender. Look for great communication, superior information and education, understanding of the local market and someone who looks at your application as something more than a number. Be prepared to pay a little more (in most cases you will not due to experience and efficiency inherent to a real professional) to get a better experience (even though it might not cost you any more)….in the long run, lowering stress can be more important.