How to Choose Your Lender

Tips for Making the Right Choice

Early on in any buyer consultation, I always highlight the importance of talking to at least two loan officers before launching a purchase search.  Why?  Because only after that conversation will a buyer really know what they can (or should) afford and what makes the most sense in terms of a down payment and loan structure.  

Though I should really step into the picture after that upfront loan officer discussion, I find that buyers typically reach out to me first.  They almost always ask me for lender recommendations – which I happily make – as well as wonder how best to evaluate which loan officer/lender will work best for them.  This blog is born from the many conversations I’ve had with clients about what matters when selecting a loan officer.  

I hope these tips will prove helpful to you as you leap into the great beauty contest that is selecting your lender.

Competitive Rates  – At the end of the day, no matter how personable, responsive and skilled a loan officer might be, it’s the mortgage rate they offer you that matters most.  As one client once said when debating whether to jump lender ships upon learning that a lender I recommended would offer a better rate than the one with which they’d built a longstanding relationship – “I won’t remember the loan officer’s name in six months but I’ll remember that I’m paying more for our house than I could have.”  Harsh as that may be, it’s the truth.  So, all else being equal, the rate a lender offers you is paramount.

24/7 Availability – A loan officer who works banking hours is not the loan officer for you!  The majority of deals get done after hours and on the weekends.  It’s important that your loan officer be available at all times (even on vacation) in case you find your dream home and need a pre-approval letter to accompany your offer.  One of the reasons I encourage clients to shy away from big banks and credit unions is most of their staff and loan officers don’t work the hours necessary to get deals done here in Northern Virginia. And they’re often not available when needed most.

Plain English – I’m sure we’ve all encountered those fast talkers who know their own business so well they forget that others don’t.  Those types tend to skip across the foundational details, sometimes leaving us non-experts in the dust.  Lending is a complex business interwoven closely with economic factors like unemployment, federal government policy and the stock market.  A good loan officer is one who can explain the state of the lending market and various loan products in plain English, walking a buyer through the pros/cons of different options in an understandable fashion.  It’s so important that buyers understand the consequences of a certain loan choice (e.g., 30 yr fixed conventional v. ARM product).  It’s a loan officer’s job to help a buyer navigate to the right option and ensure the borrower understands what they’re choosing. 

The really great loan officer is the one who is solutions-oriented, able to contextualize the prospective loan into the buyer’s financial and tax picture. I always tell my clients that a loan officer is about more than the mortgage – they also serve as an adviser, helping clients make borrowing decisions that make the most sense from a financial and taxation standpoint.  Think of a financial planner, tax adviser and loan officer all bundled into one package of problem-solving excellence. 

Transparency – It’s important that a lender be open with a buyer’s realtor, especially when it comes to the appraisal valuation and status of a loan approval.  The best outcomes are from transactions where the loan officer is regularly updating a buyer’s realtor with the status of the deal – that’s because realtors are following the contract timelines and contingencies, working diligently to ensure they are satisfied.  Things go much more smoothly if a loan officer provides periodic, even proactive, updates to a buyer’s realtor.

Collaborative – I have a stable of loan officers with whom I work regularly and that I generally recommend to clients.  They are informal partners.  Collaborators if you will.  While it’s ultimately my client’s choice who they prefer to work with, I am always delighted when they select a loan officer with whom I’ve worked before and know to be open, transparent, responsive and creative.  I work hand in glove with loan officers at each key intersection of the transaction – i.e., appraisal and finance contingencies – and am always grateful when we bring a transaction to a close in a smooth and timely way.

Self-Funding – It’s important to understand the difference between a mortgage broker, a bank and a correspondent lender.  My vote is that a client go with the latter as correspondent lenders offer the best rates and most streamlined process to closing.  They fund their own loans at closing and sell them later on in the secondary market.  This allows them greater control upfront and the ability to offer the best pricing given multiple investors/outlets. Correspondent lenders have entire operations staff in-house, from processing to underwriting to closing.  This is very different from a mortgage broker who originates and places loans with multiple lenders and then adds their fees or margin on top of that loan/rate.  They do not have direct control over operations as they send the loan for underwriting through the lender.  A bank will set pricing but is generally plagued by bureaucratic-laden processes and an inability to satisfy the tight contingency and closing timeframes demanded by the Northern Virginia market.  If you want to dig deeper into this, check out this useful blog on the topic.

Timely Closings – In my 80+ transactions (as of this writing) over the last several years, 70% or so of which have been for buyers, I’ve never had a buyer fail to close on their purchase on time.  Why does that matter?  Because if a buyer doesn’t close on time, they’re in default under their purchase contract and risk losing their earnest money deposit.  That’s not something I ever want to see happen!  Hence, it’s critical that my clients work with loan officers that I know are guaranteed to help them cross the finish line on time.  In practice, that means getting a loan underwritten well before closing and issuing a closing disclosure well within the legally-mandated 3-day window prior to closing.  

I hope these tips will help guide you to the best possible loan officer/lender for you.  Please feel free to reach out if you’d like to discuss selecting the right lender.  I’m always happy to be a sounding board on this all-important decision!

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