How Do You Decide On A Lender?

Question

I'm looking to purchase a home in the Philadelphia/South Jersey area, and I'm wondering how everyone has come to decide on a lender that's right for them for a mortgage? I'm looking to get pre-approved ASAP, and have especially been looking into the 203b and 203k loans (depending on the house, of course) for lower down-payments.

In which way do you recommend embarking on my search process? Do you recommend any lenders from experience?

Charlie MacPherson · Answer

@Chris Mason Or worse yet, the listing agent DOESN'T vet the lender.  The deal gets signed, the seller then places an offer on what they hope will be their new home and gets it under contract.

Underwriting gets the buyer's loan package and only then starts to pull all the required paperwork, only to find (as happened to me) that the buyer works under the table and hasn't filed tax returns in YEARS.  This buyer cannot finance a dog house.

The seller's deal blows up because the buyer cannot get financed.

The seller's next home purchase blows up unless he can afford two mortgages.

If he didn't have a home sale contingency in place and the purchase blows up, he may lose his deposit.

The seller's property goes back on the market, but is now stigmatized because a sale failed and that's visible to the public and buyer's agents.

Buyers assume that there must be something wrong with it, so they don't look at it.

Days on market pile up.

That triggers the need for price reductions, costing the seller actual money and affecting his ability to buy his next home.

Lenders who give out these worthless pre-approvals should be held liable for the seller's damages and have their licenses shoved down their throats - and then be banned from the business.

Nina Ricci · Answer

@Caleb Heimsoth Thanks, Caleb! Okay, I see - that's good to know. Feel free to reach back out if you've had any particularly good experience with specific lenders, too!

Charlie MacPherson · Answer

@Nina Ricci Be sure your lender does their homework BEFORE giving you a pre-approval.

There are still some who give out pre-approval letters that aren't worth the paper they're written on.

At a minimum, your lender should have you submit bank statements, W2s, tax returns and pay stubs.  That and a credit report means that your pre-approval is probably good.

When representing a seller, I always vet the buyer's lender by investigating this before accepting an offer.

As a buyer, if someone gives you a pre-approval without all this documentation, (sometimes called a pre-qualification), neither you nor anyone else involved has any idea whether you can actually buy a property or not.

I've seen this in person back when I was newer in the business.  I never let it happen again.

Michael Evans · Answer

Ask your real estate agent for some mortgage broker referrals, also the same with a good title and escrow company that they are used to working with. It will speed the process up if they all work together

Ian Walsh · Answer

What is the intention of the property?  What is the condition and when does it have to close?  Long term or short term financing?  There are tons of lenders out there with all kinds of appetites.

Nina Ricci · Answer

@Chris Mason Ohhh - interesting, Chris. So it's pretty much a risk for the borrower, it poses competition for the legit lenders for pre-approvals, but those who issue out low/no doc pre-approvals kind of get to thrive on people who want to just get it done quick and simple. And there will always be people who want to take that route. I can definitely see how that would be frustrating!

Chris Mason · Answer

A frustrating on my side as a lender is that sometimes we lose business to folks doing no/low doc prequals. The consumer thinks the lender not asking for any paperwork is "easier" to work with. But then, as you say, listing agents vet the lender and no offer gets accepted.

Nina Ricci · Answer

@Kevin Romines Oh, Kevin, that's a great idea! I always find so much comfort in posing a question to a wide variety of people and then seeing what everyone has to offer. I guess that's why these BiggerPockets forums are a big hit with me as well, haha. I'll definitely try out this method. Thank you!

Nina Ricci · Answer

@Charlie MacPherson Ahh okay, this is helpful. I will definitely make sure of that! I looked into one lender while I was just browsing one time, and they only asked for a credit score; I thought it seemed a little fishy, haha. Thanks, Charlie!

Kevin Romines · Answer

Call the one party that knows what all lenders in the area are doing? Call a few title companies, tell them the type of loan that your interested in and ask who has competitive rates and fees and who closes those loan most often and on time. If you here a few names come up more often than others, then call those loan officers.

How Do You Decide On A Lender?

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