A home purchase can be a difficult process, and often negotiations on price or property inspection are difficult. However, the most difficult aspect of a home purchase inevitably seems to be securing your home loan. Lending guidelines have tightened considerably in the housing downturn, resulting in more documentation requirements, longer underwriting timelines and lengthier closing times. That is understandable. What is not understandable is when loan officers and lenders have a blatant disregard for contract deadlines and cause unforeseen delays. Real estate contracts are fairly strict and specific about terms, deadlines and the closing date. As real estate agents and home buyers, we have to adhere exactly to contract deadlines, otherwise we put our earnest money deposits or even the purchase of the home at risk. For some reason, we come across far too many lenders these days that take a lax attitude towards the closing date and feel that it is somehow OK to request extensions of the closing date at the last minute. While some mortgage delays are unavoidable, the behaviors we see from some lenders are simply unacceptable.
In today’s lending environment, there is always the possibility of delays in the process. The appraisal process is lengthy and difficult to control, and strict underwriting requirements may sometimes require more documentation and review time, particularly with more complex personal finances or credit situations. This is understandable and part of the game. No matter how simple your loan situation may seem, sometimes these hurdles come up, even with the best lenders. What separates out the best lenders from the worst is their ability to communicate what is happening to all parties in the transaction in a timely manner and prevent unanticipated delays.
One of the largest problems we see with lenders today is that many of them seem to operate in a perpetual state of “hurry up” on the transactions that are supposed to close soon, while ignoring the rest. Our agents have lost count of the number of times a lender is given a full 45 days to close a loan, then to have the rug pulled out from under them on the day before closing saying “the lender needs one more week.” Maybe I am wrong, but I can’t help but think that many lenders ignore the files closing later, and only pay attention to the urgent ones that are about to close. The consequences for real estate agents and home buyers for missing contract deadlines are significant. It is unfortunate that lenders cannot be held accountable in the same way, as their delays cause grief with buyer and sellers, often causing delays in moving, extensions of leases, or financial penalties.
Most buyers shop for a loan on financial terms only, picking the lenders with the best rate and fees, while ignoring the service aspect of the business. The difference between a smooth and relatively painless home loan process and a total nightmare relies on the service provided by loan officers and their support staff. Loan price is certainly important, but don’t ignore this important criteria when evaluating your loan options. Here are some tips when choosing a lender.
- Look for recommendations – Seek recommendations from friends, colleagues or real estate agents that have had a successful transaction with a particular loan officer. Real estate agents can be a particularly good source of recommendations because they have experience with numerous lenders from numerous transactions. As a real estate broker myself, I have a list of lenders that I trust, but I also have a list of lenders that I would like to avoid. Ask your agent if they have worked with your chosen lender before and whether the experience was positive or negative.
- Communication skills – This can be hard to evaluate, but you want a loan officer who communicates openly and instantly when your loan status changes.
- Full time mortgage professionals – There are a fair amount of part-time mortgage professionals out there who originate home loans to supplement their income. We have yet to have a positive experience with a part-time loan officer. You want someone with experience who does nothing other than originate home loans for a living.
- Pays attention to deadlines – A loan officer should be able to provide a timeline of how the loan process will proceed and should be able to provide updates as you progress through that timeline.
- Being local helps – There are definite benefits to working with local lenders, even if they are employed by large national banks. Local loan officers are in your time zone, available to meet in person if needed, and aware of local market conditions. That cheap lender you found 2000 miles away on the internet won’t look so good when your loan process goes horribly wrong.
- Honest and open about the numbers – The best loan officers we work with are upfront about all financial aspects of the transaction. They clearly outline the fees and rates and readily describe how they are compensated in the transaction.
- Personality fit – This is the intangible part of your lender choice. Talk to a few lenders and find out who you feel most comfortable with. The loan process can be intimidating and stressful, and you want someone on your side that is easy and reliable to work with.
All is not bad in the world of home loans. There are great lenders and loan officers out there, but sometimes you need to spend the extra effort to find them. It will pay off with a smoother transaction.