Choosing a lender can be an overwhelming process but it’s a vital step on your way to becoming a homeowner. We spoke with local lender, Kim Majors, for tips on what to look for when you’re shopping for a lender and comparing offers. You’ll see her guidance below along with our perspective from the real estate side.
A rate isn’t the only thing to consider when choosing a lender! A home purchase is an important event and it is good to do your research to find someone you trust to help you along the process. Look for someone that can provide the full package: great rates and customer service!
Selecting a Lender
- Availability: Are you choosing a lender that will be available when you need them? Is your lender available outside of normal business hours? While you are home shopping, you might notice that you need a lender that can help with a payment estimate, a pre-approval letter, answer questions, etc. outside of normal business hours. It is important to choose someone that would be available to you so you aren’t left scrambling.
Realtor perspective: here are just a few common situations where lender availability is important to your home buying success
- You could find yourself in a multiple offer situation where it would be beneficial for the lender to call a seller’s agent to verify and reiterate your loan qualification.
- Questions can always come up and getting an answer quickly is important as this industry moves fast. Swift, informed decisions from buyers are rewarded. Can a quick calculation be done? How high can you push an offer, if necessary? What down payment options or loan types might be most beneficial to you? How will a low tax rate, extremely high HOA fees or even flood insurance influence your purchasing power increase or reduce? These are all situations where it helps to be able to reach your lender outside of regular business hours.
- Local Expertise: Are you choosing a local lender that is familiar with the market and area? You want someone that will be familiar with the fees in the area as well as appraisal turn times, market competition, etc. A lender that knows the fees will help you have a realistic idea upfront for closing costs, monthly payments, etc. to avoid any surprises at the closing table. A lender familiar with the market and known locally can also help you in a competitive situation. A pre-approval letter from a local lender can help give you that edge!
Realtor Perspective: Termites in Colorado Springs are rare, but we’ve seen national lenders insist on a termite inspection and then potentially deny or delay closing because of it.
- On Time: Are you choosing a lender that can commit to meeting the contract dates for appraisal, loan commitment and closing? You want to make sure your earnest money is protected by meeting all of these dates.
- Word of Mouth: One of the best ways to choose a lender is through a referral or through positive reviews. Purchasing a home is a major life event and you want to make sure you are in good hands! What better resource than someone that has had experience in working with that lender!
- Customer Service: Find a lender that will take the time to educate you on the loan process and various loan options that are available to you. Whether this is your first home purchase or your 5th, it is important to understand the process so you feel comfortable throughout the transaction!
Choosing the best offer for you
- Get a written estimate! Make sure you aren’t only looking at the interest rate. Are there fees involved in the rate? Are you paying any discount points or an origination fee for the rate? You want to make sure you see the full picture and don’t be afraid to ask for an estimate in writing. If you are comparing lenders, the written estimate will show you the estimated closing costs as well as the rate and estimated monthly payment. Here are some key points to think about in comparing lenders:
- What is the interest rate and are there any fees being charged for the rate?
- What are the lender specific fees?
- Third party fees like title fees, recording fees, etc. will be the same in the end no matter what lender you use. When you are comparing estimates to make a decision you will want to look strictly at the lender fees, rate and charges for the rate.
- Most lenders will have an option with a base line rate (paying no fees for the rate) as well as paying points to buy down the rate. You can even request an option with a higher rate and a lender credit to help cover closing costs. Don’t be afraid to ask for various options and use a lender that will take the time to explain those options to you. Every situation is different and it is important to find the path best for you. If you are comparing lenders, it will be difficult if one lender is quoting with a discount point for the rate and one is not. Make sure you request similar scenarios to help compare apples to apples.
- When you are looking at an estimated monthly payment, remember that property taxes and insurance will be estimated unless you already have a specific property identified and an insurance quote. If you are comparing various lender payments it is important to note the differences so you are making a true comparison. For example, if one lender’s total payment is $40 less than another it might just be due to the figures they are estimating for taxes and insurance. In the end the payment will be adjusted specifically to the property.
Many thanks to Kim Majors for providing this detailed information about selecting a lender and a mortgage loan. If you have questions, please reach out to Kim at 719-964-4624 or Kim.Majors@bankcentral.net. If you’re hoping to buy a home in the near future and need an excellent real estate agent on your team, give us a call at 719-219-9739 or contact us to get started.