How to choose a mortgage lender?

Question

I am looking to buy my first property and I am not sure how to choose a mortgage lender. I have been pre approved by two lenders and they basically gave me the same options and a similar rate. So I was just wondering if there is anything else I should think of when choosing a lender?

I found the first lender by filling out an online form and then a well-known online mortgage lender in my area called me. (actually, I've been getting a ton of calls from mortgage lenders ever since I filled out that online form - it was probably a dumb thing to do).

The second person I spoke to was recommended to me by my real estate agent. I have never heard of the company he works for and know nothing about it other than they are a direct lender and whatever else I can read on their website.

My next step was to talk to someone at well-known brick and mortar big bank.

Should I talk to a mortgage broker?

Does anyone have any advice about the difference between getting a mortgage from a recognizable online-only lender, a direct lending company that most people have never heard of or a well-known big bank?

If the rates are the same, does it matter?

Any potential for shadiness that I should be wary of?

Thanks BP!

Zaid R. · Answer

First of all congrats on taking action. There are all types of loans from all types of institutions/people - shopping around is very important here.

"Should I talk to a mortgage broker?" It won't hurt but keep in mind that brokers are, in most cases, middle men giving you a loan and charging you a percentage/fee for it. You seem to be smart enough to avoid this

"If the rates are the same, does it matter?" Of course, what a lot of institutions/brokers do is get you with the fees/ origination costs...etc.

Keep an eye out on:

1. The interest rate

2. Monthly payment (I like to throw the numbers in my financial calculator/excel to see if I get to the same number)

3. Fees: Origination fees/ Credit check fees and (my favorite) 'Miscellaneous fees'

What I would do if I were you:

1. Check online. Sites like lendingtree.com would do the searching for you and can give you some options

2. Talk to credit unions in your area. A lot of them offer lower fees than banks

3. Get 5 quotes from 5 different banks/credit unions. Structure it so that it's for the same amount, that way you're comparing apples to apples

Hope this helps, good luck

Pat S. · Answer

I'm interviewing two loan officers this week and in a similar situation, both came highly recommended. I'm pre-qualified by my national bank at the moment, but I prefer to build a long term relationship with someone in my market area since I plan to buy several properties there.

In addition to the information above, I asked them about their ability and experience with lending beyond the first 4 loans, if they work with private investors who might have funds for short-term opportunities and other outside of the norm situations.

Since I also plan to buy-hold some properties for the long term, I asked them about their seasoning requirements for income producing properties.

I was plesantly suprized by their answers.

Pat

Bryan L. · Answer

If you talk with 3 of 4 good Realtors in your area, they will tell you who the best mortgage lenders are.  Cause the Realtors know.  If the loan doesn't go, the sale doesn't go, and the Realtors earn no commissions.

Albert Bui · Answer

I love CU's and use them myself but they are ultra slow so its probably not good to plan on a quick closing with limited contingencies or trying to be more aggressive with your closing terms.

CU's do have some pretty decent pricing but if the borrower places value on have certainty of being able to deliver on time it might be a sketchy proposition.

I use CU's mainly for their niche portfolio loans and non conforming products.

CU employee's are compensated on salary which most CU's will tout that will offer more objectivity when working with customers but the problem is if you're not incentivized and you're just running a 8-5 job then your level of advice and service are representative of that environment. In my experience in doing loans with CU's the loan officers are nice however the CU's load them up with too many files for them to provide that level of service/skill I think most borrowers would want or deserve so its not their fault really.

George P. · Answer

ask about closing times too. some are 6 weeks, some are as little as 3 weeks.

i need to feel comfortable talking to them, otherwise i wont take them. at the end of the day, we are their customers.

Albert Bui · Answer

Zaid mentions some good points above too to take into account when looking for a lender.

Some other less apparent differences are:

- accountability - How important are you as a customer to the lender ? An independent loan officer who was referred to you by an accountant or a realtor is really going to have to perform (under the gun) so they can keep the referral partner looking like a super star as opposed to online lenders or retail loan officers who collect leads from the marketing umbrella of a big bank or big company. I may be a bit biased because I am an outside/independent loan officer but having accountability is important because I take it very seriously when I get a referral from another professional like an agent, attorney, etc. Independent loan officers or mortgage brokers know its all about relationship and people not just numbers because its how they obtain their business the mindset is just way different than a corporate banker job

- advice/customer service - a good lender will be able to help guide you through the process from the procedural steps of the process along with setting the proper expectations of whats next so that you're not only financially approved but helps you through the emotional parts of the process because if you wing the process atleast from the lender end it can be very stressful for borrowers which I learned in my early days of doing this. Getting objective advice for your specific scenario, mortgage options, costs, pro's and con's of each, will depend on the skill level of the loan officer but this is a huge. Most consumers think the lowest rate equals the best option (pure social conditioning) with out looking at terms, tax implications, lifestyle/cash flow planning down the road, or even assessing the risk, exit strategies, asset protection, contingency planning etc.

There are probably ton more but hope that helps point you in the right direction.

I would ask for a referral and vet out the loan officer online or from past clients.

George P. · Answer

I agree.  I think Albert will get a podcast soon.

Mala S. · Answer

Wow, this is all great information. Thanks everyone!

The property I am interested in is a foreclosure and my realtor recommended a lender that is familiar with the process when it comes to foreclosures. I don't understand why an "expert" in foreclosure lending is necessary, is it really that different from buying from a regular owner?

He was very helpful and knowledgeable but I am just keeping my options open, although I do have to decide within a few days if my offer is accepted.

Also, he quoted me approx. $11,000 in closing costs for a $200,000 property. This seems excessive to me...

Zaid R. · Answer

Great points Albert

How to choose a mortgage lender?

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