One of the most common questions any Realtor gets is, “Which lender can get me the lowest rates?” While rates are vital, the better question is, “Which lender provides the best value?”
The loan officer handing your loan can either make life fairly simple or incredibly miserable. The one you found online may have promised the best service and the lowest rates with no paperwork headache, but that person is probably not the person who will provide the most value.
I assure you, just about every Realtor I know can share horror stories of phantom loan officers who, half way through the loan process, stop returning calls and responding to emails. The reason? Probably something to do with those rates they quoted that were half-a-percent lower than local lenders, the rates they can’t actually deliver.
Typically, this comes at an awkward time, like right after you remove your inspection contingencies and plan to move forward with the loan and purchase. Hopefully, you didn’t remove the loan contingency, notwithstanding the promises of your online lender.
While many online lenders are competent and ethical, few are willing to put in the extra time required when a loan demands special handling, for example when your credit score is three points below the threshold or your debt-to-income ratio is half-a-percent too high. A good loan officer will work with you to show you how paying off the right credit card can change your debt-to-income ratio or getting that one negative credit comment corrected can increase your credit rating by 10-15 points, maybe more.
A good loan officer will also let you know that a $1,000 gift from your Great Aunt Mathilda applied properly could mean the difference between the bank requiring a 10 percent down payment versus a 20 percent down payment, or a quarter-percent difference in interest rates, maybe whether you can get the loan at all.
Many of the other advantages of working with a local lender recommended by your Realtor are as follows.
- The Realtor you know and trust knows and trusts the lender.
- Local lenders are available for face-to-face meetings, which can streamline communication and coordination.
- Local lenders are more likely to work with a local lending institution, keeping your money in the community where it benefits you and your neighbors.
- In a place as small as Ukiah or Willits or the Mendocino Coast, lenders know they may run into you at the grocery store or the Little League field. They have every reason to treat you right.
- Most importantly, the fact that your Realtor has referred you to this lender provides incentive for the lender to make every effort to close the transaction. This is how lenders feed their families—they need more referrals.
As soon as you decide you’re in the market to buy a house, you should ask your Realtor for a referral. Truly, this should be your first question to your Realtor. Start the preapproval process as far in advance as possible, so you can present your preapproval letter with the offer on your dream home, making your offer far more desirable than competing offers.
A loan officer should order a comprehensive credit report to make certain you’ll qualify for the best rates available and take action to repair problems early in the process, preferably before you identify the property you’d like to buy. Ideally, your loan officer will not just quote you available rates, but help you get the best rate you can qualify for without a lot of brain damage in the process.
If you have questions about real estate or property management, please contact me at email@example.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you’re a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 35 years.