Naturally, the thought of moving into a new home is one of the most exciting times in life. But it can also be very stressful especially when it comes to getting the home loan. One of the ways to greatly reduce the stress of getting financing is to be prepared for the process. Most first time homebuyers are shocked and overwhelmed at how much effort & documentation is required during the loan approval process. In fact, most buyers who have not purchased a home within 3+ years are stunned at how different the process is now. This is why it is important for buyers to FIRST get pre-approved with the loan. Here’s why: Not only is it a way to determine what you qualify for, but it allows the loan officer to examine the documentation for OBSTACLES that will later come up. If the loan officer isn’t aware of the obstacles until escrow starts, there is a good chance there will be delays in the process and when under contract deadlines, these delays are very stressful for everyone.
Are all lenders the same?
It’s fairly common for buyers to think that all mortgage lenders are the same and that it doesn’t matter which one they choose. Nothing could be further from the truth. There are vast differences among lenders and even greater difference among loan officers. Many buyers instinctively decide to work with the lender who has their checking & savings account. But this is not always the best decision. Some lenders have “overlays”, which are additional restrictions and guidelines that might make it harder for the buyer to get approved. As a buyer, you want to find the right lender AND the right loan officer. Having the best of both has the highest chances of the best outcome.
Does the caliber of loan officer matter?
Yes! Your loan officer plays THE MOST critical role in facilitating the approval of the loan. Think of it this way; you wouldn’t just go to any doctor, hire just any accountant, or take your car to just any mechanic, right? The same type of care should go into choosing your loan officer. Many Realtors® have their preferred person, but you still want to get a couple different perspectives. More than asking about just the interest rate & costs (although both of those are very important) find out how experienced your loan officer is. Do they do anything special to assist in getting your offer accepted? How genuine, sincere and determined are they? Can you clearly tell they have your best interest in mind? This is a demanding process and it takes a special type of loan officer to be patient with you, yet tenacious with the other part of the process, all while getting you the best deal and superior service.
Questions most buyers ask
Most buyers ask these three questions:
1. What is the interest rate?
2. What are the closing costs?
3. What is my monthly payment?
And while these are definitely important questions, there is more that buyers need to know about the loan process. The lending climate is not at all what it was 3+ years ago and because it is so much more difficult to get loans approved, there are more important questions buyers need to add to their list of questions.
10 Questions most buyers DON’T ask, but should
1. Why should I work with your lender / you?
2. At what point do you lock my rate?
3. If rates drop after we lock, can I get a lower rate?
4. Ask if they are a lender who sells directly to Fannie Mae / Freddie Mac / Ginnie Mae. These lenders have few (or no) overlays and can sometimes make underwriting exceptions that can make the difference between “approval” and “denial”. Even if you’re the “cat’s meow” there are advantages with going to a direct lender who services their own loans.
5. Find out how they’re ranked on the top 100 list of Mortgage Originators. The list is online.
6. Are you able to escalate over an underwriter’s decision? (This can be the difference between “approval & denial”)
7. Ask what obstacles might come up and what the loan officer intends to do to overcome them
8. Are there any creative ways to structure the loan or offer so that a credit towards closing costs can be made available?
9. Are you able to close the loan in less than 30 days? Less than 21 days? Within 15 days?
10. Are there any strategies you can share to make my offer stronger?
In the pre-approval process, a thorough analysis of your documentation should be done. Many lenders to a very “surface level” analysis and based the pre-approval on a credit report and conversation. This might be okay sometimes, but the most assured way to do this is by reviewing all income & asset documentation and run the loan application through the loan software systems we use in the industry.
Justin Lees (NMLS 110154)
Sr. Mortgage Originator
W.J. Bradley Mortgage, LLC