Lending: Eliminating the Uncertainty When Financing Your Next Home
February 9, 2017
Previously we covered some key thoughts and questions to ask when selecting a potential real estate agent. In this article we are going to look at the next person you will be working with during the home buying process, the lender.
Lending has the potential to be one of the most unstable parts of a real estate transaction. In the previous article I asked, “Would you trust a part-time investor with $200,000?” The same question applies when selecting a lender. Would you loan a complete stranger $200,000 without checking a few things first? Many buyers tend to only think about the monthly payment amount and not the huge sum of money they are being entrusted to pay back.
Imagine at the closing/escrow table a person comes in with $200,000, and you sign for it. Then you slide the $200,000 across the table to the seller, right before he walks out the door to never be seen again. Without a doubt, this would make the financial transaction so much more consequential and real. This is why the lender is responsible to ensure the $200,000 will be paid back. After all, the seller just walked out with the money and the buyer is on the hook for it. Oh, and the Lender, they are on the hook as well. So believe me when I say they have certain guidelines they have to adhere by, and those guidelines is typically where the uncertainty comes from.
The uncertainty does not need to be there, and that is what frustrates me as a real estate broker. I have lost count on the number of times we’ve had to recommend new lenders to our clients after another lender dropped the ball. Some common excuses we hear are:
- -On closing day the Lender says, “Sorry we cannot close your loan.”
- -Less than two weeks before closing on a six month build, “You don’t have the income to qualify.”
- -Even “I have been on vacation, my family needs my time too so we need to push your closing.”
- -“We cannot meet a 30 day closing, no one can. It will have to be 45-60 days.” (not true, I work with a lender who closes in 8 days, and it only takes 8 days because of Disclosure Laws.)
I could go on and on about the excuses I’ve heard over the years. Imagine you have already invested money into purchasing a new home, your belongings are packed, and you receive a phone call similar to one of the scenarios above. I’ll be honest, it infuriates me. It infuriates me because the uncertainty does not need to be apart of transition.
As with selecting an agent, relationship alone is not a good enough reason to use a specific lender. It gets them in the door, but should not be the qualification to get them the job. Here are some questions to ask when searching for a lender:
Questions for your Real Estate Agent:
- Who do you recommend and why?
- How many of your previous buyers have worked with this lender?
- Would you stake your reputation on them?
Questions for the Lender*:
- How long do you take to close a purchase transaction?
- What percentage of your loans close late (after the contract closing date)?
- What percentage of your prequalified loans are denied during the underwriting process?
- Will you send me weekly automatic email updates, as well as email updates, each time my file moves forward in the process?
- Do your processors, underwriters, and closers work in your office with you?
- When will you pull a full, tri-merge credit report? (don’t worry if you don’t know what that is, they should)
- When will you run my file through automated underwriting?
- When will personally review all my income and asset documents?
Look at the reviews. What are people saying about them locally? A great lender somewhere else may not be great where you live and vice-versa. People can tell you any number of things about themselves, but Google has a way of showing the truth.
In the next article I’ll cover a few of the costs required when purchasing a home, look for Let’s Talk Money: “What do you have?”
*Lender questions provided by Marcie Hines (NMLS 233626) at Cornerstone Home Lending
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