Many people choose the bank they deal with regularly to be their lender of choice when the time comes to purchase a home. This keeps all of their financial business with one organization at least unless the loan is sold, as often happens after a mortgage loan is written.
Some choose banks other than the one they deal with regularly, some accept the lender that a home builder uses to get closing costs paid, quicker approval, and often a quicker closing, while others use Mortgage Brokers.
Banks usually give a number of choices for loans, but Mortgage Brokers can often give a greater selection of choices as they can "shop" the loan for the best rates and terms.
Very few people however consider choosing a lender based on the transaction itself, something I believe can be a better choice.
What do I mean by selecting a lender based on the transaction?
Obviously, as a Realtor, I am asked for lender recommendations regularly. By going over how I choose a lender to recommend you will get a good idea on the right questions to ask a lender based on the transaction.
Here are some basic observations on a few lenders that I have had experience with, either as lenders I have recommended or ones that my buyers have chosen themselves.
- Regions Mortgage - Generally can close in 30 days or less. Their processing goes quickly and they let you know early in the process if they need more paperwork or if they are running into any issues. The "clear to close" usually comes a couple of days or more before the closing. The loan officers I have dealt with have updated the buyers regularly but do not seem to update the buyers and listing agent without us calling first. No closing I have had with them has ever been delayed. Overall they have been a pleasure to work with.
- Wells Fargo Home Mortgage – Very popular with buyers. Presently requires 45 days to close. Any changes to documents require 72 to 120 hours for them to process. Their underwriters appear (at least to me) to only start looking over the paperwork a few days before closing, even though they may have had the paperwork for 40 plus days. They often promise what is called a "clear to close" shortly, only to be delayed several days which can often delay the closing. I have never received a "clear to close" before the closing date. Instead it comes on the day of, or after the scheduled closing date. Although there are many issues with this lender and many delays the loans do go through and my experience with many of their loan officers has been that they keep everyone in the transaction updated, such as the buyer, the buyers agent and the listing agent. If you decide to use Wells Fargo Home Mortgage be prepared for delays in the process and possibly a delayed closing.
- Bank of America – Hands down, from my perspective this has been the toughest and most frustrating lender to work with. Even though the Real Estate Contracts have a clause that states the buyer gives the lender permission to communicate with their Realtor they often say they will not honor that. Some have said to have the buyer fax in a separate letter giving permission to give updates to the Realtor, but then will not honor that either. Some of the loan officers will give some updates, some will not. The lack of communication is what often causes the most frustration. For example, on one loan with Bank of America where they would not give the Realtors any updates, the buyer would let me know that the lender said everything is fine, only for me to get a phone call on the day of the closing from the Underwriter saying the closing will not take place today, because they never received one document they requested from the buyer. The buyer assures me the lender never asked them for any other documents and just a couple days before had said everything was set for the closing. The closing did go through, but it delayed the closing date by a few days. I personally do not recommend this lender due to the issues I have run into, however many buyers choose to use them so we deal with them from time to time.
- United Wholesale Mortgage – When you need to close quickly, this is the company to go with. Buyers cannot contact them directly to get a loan. Instead you would go to a lender or Mortgage Broker who uses United Wholesale Mortgage as one of the lender choices. As a Realtor, I have lender contacts that do loans through this company. How quick can they do a closing? How about less than 10 days. To do this the buyer does have to get all requested documents to them quickly and they can be stricter on loan requirements than other lenders.
Although I have only included a few lenders to give an idea on how different each lender can be. There of course are hundreds or more lenders to choose from, each with their strengths and weaknesses. In the end, all of the lenders get the job done, it is just some make it an easier, quicker or more pleasurable experience. It is also important to understand that a lender may be able to close in 30 days, but then change their policy and suddenly require 45 days. It does happen occasionally.
Now you might be able to see what questions to ask based on the transaction. Each transaction has different requirements. How quickly do you want to close? Maybe the transaction requires a quick close such as happens with a short sale. Will the lender keep you updated along the way, and also keep the buyers agent and listing agent updated.
Your Realtor can give you great recommendations, or of course can help you come up with the right questions to ask your lender.
If you want to close in 30 days or less, obviously Wells Fargo Home Mortgage might not be the best choice, Regions Mortgage might be a better choice.
What if you want to close very quickly such as in 10 – 15 days. Well then you would want to choose a lender such as United Wholesale Mortgage. This is ideal especially for many short sales where as a buyer you have waited 3 – 6 months to get an approval from the lender or lenders. They have now issued an approval letter that says it is good for 30 days from the date of the letter, but although you received it today it was dated two weeks ago. Yes you might be able to get the closing date extended, sometimes not, and sometimes you have to pay a per Diem, but wouldn't it be easier to use someone who can close in 10 days and not have to worry about it.
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