Finding a Competitive Lender

Three Basic Types of Lenders

1. Loan Officer - A loan officer is someone who works for a company that originates loans. A loan officer is typically compensated a percentage of each loan they originate and close. Some loan officers have teams of people they oversee or have hired to help them get buyer's loans through closing.
2. Mortgage Broker - A mortgage broker often does the job of a loan officer, but isn't tied to one lender. A Mortgage broker will often compare rates and loan packages from different financial institutions to find the best deal for you.
3. Credit Union - A credit union often hires loan originator to help their members complete the steps needed for loan approval. Credit Unions often employ salaried or hourly workers to keep costs lower for their members.

Important Things to Consider when Comparing Lenders

Many buyers interview lenders to compare rates and often choose the lender with the lowest interest rate to reduce the amount they are paying in interest over the term of the loan. Having a great rate can literally save thousands of dollars over a 15 or 30 year loan. A few other important factors when comparing loans in a competitive market include:

• Loan Origination Fee - A loan origination fee is often the mortgage broker or lender's compensation for completing their job. A lower loan origination fee will reduce your closing costs as a buyer, but a lower interest rate or other lending fees can easily change your out of pocket expense.
• Fees - Other fees a lender charges on the front end can also impact your closing costs like appraisal fee, doc fees, etc.
• Professionalism - You may be able to save a good amount of money on a lender, but it's worth considering how much you are willing to pay for a good lender. A good lender can help keep your transaction moving smoothly and on time so there aren't any surprises at the end of your due diligence or on closing day. There are sometimes bumps even with a good lender, but a great lender will have the experience to know what to do to overcome the challenge.
• Motivation - As we mentioned above credit unions usually  save members money on fees by paying their loan officers a salary or hourly rate. Comparing that with a Mortgage Broker or Loan Officer who only gets paid when your purchase is finalized it's easy to see that credit union employees have less vested interest in making sure your loan works out for you.

TIME, often forgotten but very important.

The most important aspect of a loan that buyer overlook in a competitive market is time. With historically low rates many lenders are flooded with refinancing loans. The underwriting department can only handle so much volume and many lenders are having to fight to get their loans processed in a timely manner. A lender with a great underwriting department has been able to close out loans in three weeks, and often a month despite the volume the loan companies are experiencing. Many unmotivated lenders are pushing buyers out forty-five to sixty days for a closing.

In a competitive market with multiple offers the faster you are able to close the more attractive your offer may be to a seller. If your lender is able to close your loan in three weeks and another offer's lender is requiring a month and a half a seller could choose your offer due to a faster close to liquidate funds. 

Having a shorter time under-contract also reduces your risks. The longer you wait to close on a home the more opportunity there is for something to change in your financial picture. For instance, if something like a loss of job (God forbid) were to happen five weeks after your contract and you closed four weeks your situation would drastically different than if it took six weeks to close. By closing in four weeks you unfortunately have lost a job, but have a home to live in and lender will often work with you on payment plans due to job loss. By planning to closing on week six the lender would deny your loan due to loss of occupation and all money spent on inspections and deposits for your purchase are wasted. Sellers and their agents are very aware of this risk, especially in an unpredictable world and prefer faster closings to reduce risk.

Finding a Great Lender

A great person to talk to about lender is your real estate agent. They have the experience of working with many lenders, local and national, to know who is doing a great job especially in the motivation and professionalism categories. Pro Realty Group has worked with many lenders and we're here to help our buyer clients reach their real estate goals. Feel free to give us a call/text at 336-265-7253 to get started.