One of the questions I get the most common questions I hear from first time home buyers embarking on their journey is about lenders. It’s hard to underestimate the importance of working with the right lender. In a market where contingencies are few and prices continue to climb, you need a lender who can support you in the ways that will take you to your finish line along the least stressful path.
Top tips for choosing a lender in a competitive market:
Don’t focus on rate alone. This will get you working with an internet lender like Quicken Loans or Rocket Mortgage which will leave you, your agent, and the sellers frustrated by lack of response and delays.
This isn’t the time for big banks Commercial banks like Bank of America, Wells Fargo, Chase, etc. are a great option when you want to refinance into a new loan and a lower rate. Typically rates are not much lower than what you’ll find with the local lender your agent recommends, but the timing with a big bank is where you’ll run into issues. Sometimes you can get lucky and your loan officer will be responsive and present, but more times than not, they tend to sell you your loan and move on to getting the next loan sold. On top of that, their underwriters are busy. They are working on processing loans for purchases and refinances fro loans across the country and frequently only have a very limited amount of time to focus on any one file. When you’re in a refinance situation time is not as important, so long as you rate lock doesn’t expire, but when you’re purchasing a home and under contractual deadlines for timing, you can’t risk your loan officer not responding and underwriting taking their sweet time.
Local lenders are invested in your deal Loan officers who work primarily in your local market understand your local market conditions. They understand the pressure on them to perform when loan contingencies will eliminate you from the competition. These loan officers are involved in your transaction start to finish; they know when something might be starting to go sideways and can catch it quickly so it doesn’t explode the transaction. Frequently their underwriters are in their office, or in an office nearby; if the deal needs to be prioritized it can be brought to the front of the list. And because of the flexibility and localized control and attention, these loans can often be closed more quickly – all selling points a seller will appreciate.
It is in every buyer’s best interest to talk to the lenders recommended by their agent, or friends and family who purchased recently (in similar market conditions). Don’t worry about your agent’s recommendations – RESPA disallows kickbacks, referral fees, or any kind of consideration between lenders and Realtors, so you can rest assured that your agent is making their recommendations because they want you to have a smooth transaction with no surprises. No one wants a deal to go sideways, no one wants surprises. The recommendations I make to my buyers are for lenders who have done a fantastic job for other clients in the past. They are responsive, thorough, and available when we need them. On the rare occasion that we hit a speed bump, they bend over backwards to ensure the deal doesn’t derail and all parties remain satisfied.
In a competitive market, working with a reputable, local lender, one the listing agent may be familiar with (or at minimum, their company) is a point of negotiation for constructing a winning offer. When constructing your offer is the primary point of negotiation, it’s crucial that you set yourself up for success in every way available. Who your lender is may not seem as important as price and terms, but it is certainly a factor the listing agent considers and speaks to when advising their clients. Make the conversation about your offer a slam dunk on every level.