As real estate agents, we get to see lots of lots of real estate transactions. There are smooth, surprise-free deals, but there are also pain-in-the-butt, super-stressful ones. If a real estate transaction is going to go haywire for a home buyer, 9 out of 10 times it is because they made a poor choice of mortgage lender. Here’s our advice on how to find a great mortgage lender.
Home purchase delays are almost always mortgage-related
When you get an offer accepted to purchase a home, there is a period of 1-2 weeks of due diligence with you and your real estate agent. In parallel, your mortgage lender has an ~30-day process to get your home loan approved. Throughout most of the closing process, you are waiting for the lender to complete their approval.
Delays in a home closing are hugely stressful for all parties involved and can often be avoided. In our experience in hundreds of transactions, it often boils down to the competence of your loan officer. Here are the main reasons that we see for delayed closings:
- Lender does not collect the proper information from the borrower for their underwriters upfront, causing numerous document requests and repeated lender reviews.
- Lender is not familiar with local closing procedures and timelines. (Often happens with out-of-state lenders.)
- Lender is non-communicative at time-sensitive parts of the transaction. Lender does not have open lines of communication to their underwriting, processing and funding departments.
- Home buyer (borrower) does not respond quickly to document requests from their lender.
As a home buyer, you should be available and prompt in your response to lender requests during the closing process. Every day you delay sending that updated pay statement is a potential day that your closing gets delayed. For the rest of the cases, you probably should have chosen a different lender.
The best loan officers know what their underwriters want to see without asking
A great mortgage banker knows what a complete loan package looks like before they submit it to underwriting. They ask you for a huge slew of documents at the point of application to avoid the back-and-forth document requests from their underwriting department. A poor mortgage lender fast-talks their way into getting your application and not much else, leaving a mess of document requests, file reviews and potential delays in their wake.
The best loan officers primarily do purchase loans, not refinances
Processing a loan application for a home purchasing is very different than for a refinance. Refinances are by their nature not as complicated as a home purchase loan. They are also not tied to critical dates and timelines. You will find that a loan officer who primarily deals in refinancing loans will often flub the details on a home purchase loan.
The best loan officers are local
Home buyers love surfing the net for the best interest rate and loan fees, often landing them with a lender who is 2,000 miles and three time zones away, making them hard to reach and sometimes unfamiliar with the closing process in your state.
Dealing with a high-pressure, time-sensitive transaction when your lender goes home for the day at 2PM your time is a recipe for frustration and delays. If they need any original copies of signed loan documents sent to them, you can add in an extra day for courier time.
We’ve also come across plenty of out-of-state lenders who don’t know the timelines and procedures for closing in our state. Some states do escrow closings, while many others do not. If your out-of-state lender doesn’t know the difference, they won’t deliver your loan documents early enough to close on time.
Our advice, stick with a local lender that you can reach in your time zone who intimately knows how to close a deal in your state.
Listen to recommendations from your real estate agent
An agent who does a reasonable amount of closings has felt the pain of working with a poor mortgage lender. They know reliable ones and they know the duds, and if they are like us, they keep a list of both the good and bad. Ask them who they like and tell them who you are planning to use. Listen to their advice. They are party to way more real estate closings than you or your friends.
It is illegal for a real estate agent to force you to use a particular mortgage lender. It is also illegal for the real estate agent to receive kickbacks from a mortgage lender unless they are actually a licensed mortgage lender themselves. Any good agent does not recommend a particular lender because of some kickback scheme. They recommend a lender because they trust them and have a history of hassle-free transactions with them. (Yes, unfortunately there are bad apples out there who recommend a lender for less pure motives as well.)
Ask your agent for mortgage lender recommendations. Run your choice of lender by your agent and steer clear when they have negative history with a lender, despite what your friends may tell you.
You sometimes get what you pay for
There is wild variability in the quality of service offered by mortgage loan officers. Sometimes in a quest to save $500 in loan fees, you choose the fast-talking salesperson who doesn’t know how to get a loan closed. By all means, shop for the best deal, but a small savings is almost never worth the hassle and delays of a botched mortgage process.