The best Loan Officer? How to decide.
While serving in Leadership with the Mainstreet Organization of Realtors, I was ask to serve on a panel of Speakers for a Mortgage Association conference. When asked what Realtors want most from a Loan Officer, I answered Integrity. Immediately, a Loan Officer jump to his feet from the crowd, and blurted out that was not his experience. He said, all Agents want from him is to get the Loan file closed as fast as possible by any means necessary. The room went up for grabs, and I never got the opportunity to explain my interpretation of the word Integrity.
Integrity means to me truthfulness and transparency. I like recommending Loan Officers who tell me the odds of getting my Buyer finance, with the understanding I’d prefer they place the Buyer in an assignment plan of action to get more credit worthy, before taking a chance an Underwriter just might approve the file.
Having this information affords me the opportunity to say to the Buyer let’s follow the Loan Officer’s instructions even if it means we may need to delay your purchasing to make sure when you find the home you really want, we can negotiate with confidence knowing you don’t have to have a concern whether you can procure the financing.
On New Year’s Eve I was standing across the street from Trump Tower in downtown Chicago. While looking up at the Tower I witness a Jeep slam on the breaks to not run through a red light causing the Nissan SUV behind him to slam into the rear of the Jeep. The Driver of the Nissan laid on his horn while slamming on his brakes to avoid the hit. What a hit he did. The Nissan Driver immediately jumped out his damaged vehicle yelling at the Jeep Driver saying, why on earth would you slam on breaks like that knowing you could get rear ended. I made a quick selfish decision to not participate as a witness because I myself needed to get back home to get dressed for an annual New Year’s Eve party I attend.
The accident made me think about the inconvenience both Drivers were going to experience that memorable evening. Whatever their plans for fun that night, those plans for both were going to be a later arrival, or the plans cancelled. They both would probably never forget the accident because of the timing of the very last final hours of year.
When a contract is negotiated, fully accepted, thoroughly in the deal pending process, and I get the news the Buyer can’t be financed, the experience is very much like a car accident. Fortunately, this rarely happens because of the Integrity of the Loan Officers I recommend my valued Clients allow to serve them.
However, life as we know it comes to a halt when this does happen. Everyone involved in the transaction are severely inconvenienced to the point of frustration turning into expressed anger, and trust just walks out the door. I must immediately go into damage control mode to do whatever I can to get my Client to move from emotional thinking to rational problem solving thinking. This can all be avoided when the Loan Officer is not afraid to express this file has a very slim chance of closing.
I like referring Loan Officers who have systems in place to keep me informed on the progress of the mortgage processing.
A contract to purchase becomes like a promise from a Buyer to a Seller stating this is what they’re going to accomplish in this time frame. The Seller begins to plan their life around this perceived promise, and is thrown into a whirlwind when their relocation plans get blindsided by a Buyer not financeable. Buyers are equally devastated because they feel like their dream has just been stolen from them.
The Seller especially starts to question who lied to them, and how can this be allowed to happen?
I like referring Loan Officers who really focus on Customer Service. They’re professionals looking out for the best interest of their Client, offering the best terms, always being assessable whenever their Client have a question, concern, or fear, and a Loan Officer thinking long-term when serving their Client, as a sincere effort to establish their Client for life. This just simply means they understand good old fashion honest hard work is always rewarded with referrals.
My Respected Colleague below really gives an excellent break down of how the financing industry works, and how the Consumer can get the most out of their procuring financing to purchase a home. This is information you will want to share with your Love-ones and friends.
I would genuinely appreciate being the Realtor you recommend to serve them. Thanks
Buying a home for most people is the largest financial transaction of your life. Finding a Loan Officer that is licensed, educated, experienced, professional and ethical is probably the most important decision you'll make next to actually picking out that perfect dream home.
Most people these days pick their mortgage company one of three ways:
- Calling the bank where they have their checking account
- Going with whomever the Realtor suggests
- Online search (but usually only for the person quoting the lowest rate)
None of these in and of themselves are right or wrong, but here are some tips to know and understand:
First, understand that the mortgage company or bank that you choose in most cases has little to do with the success of your transaction. Essentially all mortgage lenders have and offer the same basic programs with the same underwriting guidelines. FHA loans for example are FHA loans no matter who you call. So in most cases, there is nothing special that one lender has over another.
Yet for others, there can be some differences, especially if you are on the edges in terms of loan approval. For example, a well known big bank will not offer FHA loans over a 45% debt ratio, while some mortgage lenders (like us) will go to 50% debt-in-income ratio. This is a good example of why a mortgage broker may be a better choice, as they offer the products of multiple lenders, as opposed to just their own.
Using this one example, you may have lost out on your dream home simply because you chose the wrong lender.
Licensed Loan Officer Versus Simply Registered:
All mortgage Loan Officers must have a tracking / registration number known as an NMLS number. But having this number does NOT mean the Loan officer is licensed, or experienced.
Loan Officers at banks, credit unions, or mortgage lenders owned by a bank or credit unions can be, but are NOT required to be licensed in any way. Loan Officers at non-bank mortgage companies or brokers ARE REQUIRED to have an individual mortgage license.
You can check if your Loan officer is simply registered, or fully licensed by searching them on this public web site: www.NMLSconsumerAccess.org.
At the bottom of the page, under licenses and registrations, there will either be one or more states listed, which means the person is licensed. If it indicates something similar to "Federal National Mortgage Originator", this is a fancy name that means they are NOT licensed.
Being licensed versus simply registered does not automatically indicate if a Loan Officer is a good choice or not, but if one was doing the largest financial transaction of their life, I'd probably lien towards someone who has had to take schooling, pass state and federal testing, and is required to complete continuing education each year to be licensed, versus someone who didn't have to do any of those things to simply be registered. Heck, even your hairdresser needs a license!
Using this example, you may have lost out on your dream home because of the the unlicensed, and inexperienced Loan Officer you chose.
Understanding Closing Costs and Interest Rates
Not only do most lenders only offer the same underlying loan products as everyone else
(Fannie Mae, Freddie Mac, FHA Loans, VA Loans, USDA Loans), but they all have the same basic underlying closing costs, get the money to lend you from the same source, and interest rates are based on the same bond market everyday.
This is why you'll notice all standard rate quotes are almost identical. This is why you'll notice all closing costs quotes are almost identical.
All lenders have the same basic closing costs; appraisal, credit report, state deed taxes, county recording fees, title company charges, underwriting, origination fees, etc. However, how lenders charge them to you can vary, and this is tied directly to your interest rate.
For example, assume your shopping, and one lender says your closing costs are $5,000, and the next says $3,500. The lower price sounds good, and that would be true if the rates were the same. But they almost never will be.
More overhead equals higher rates
Advertising and buildings are expensive. A well known "Quick" lender for example advertises all day everyday on all TV channels, and radio stations all across the country. You can't go anywhere on the internet without seeing one of their paid advertisements, like a Google banner ad.
How much does all that cost? Must be millions. You are foolish to think that higher cost isn't passed along to you in terms of the interest rate they charge you.
Sames with the big lenders with branches everywhere. Brick and mortar costs a lot, as does paying hundreds of millions for stadium naming rights.
Lender Credits
Lender credits towards your closing cost is a tool lender use to lower your out-of-pocket closing costs up-front by slightly increasing your interest rate.
By doing this, the lender requires less initially because they make it up by collecting more in interest over time.
Some lenders start right out of the gate by saying they don't charge origination, or maybe they will pretend to pay for things like your appraisal. Someone is paying those items, and it is always you.
Now there is nothing wrong with taking a slightly higher interest rate to lower costs today. We do it all the time. But just understand that you are still paying for those costs, just in a different way.
Look at this example 30-yr fixed screen shot from today for a $200,000 loan. At 3.875%, lender would charge an additional $750 in discount points to "buy" this lower rate on top of standard closing costs, but at 4,125%, lenders would reduce your closing costs with a lender credit of $2,250. The monthly payment difference between the two rates is $29.00.
Internet Lenders
There is nothing an internet lender can offer you that the local mortgage lender down the street can't offer. They do not have lower rates, they do not have lower closing costs. But there are many things the internet lender can't offer.
One big item is local knowledge, and dedication to the community. Some kid working in a cube in Detroit, MI could care less about my back yard or Minneapolis, St Paul, MN.
I constantly get phone calls from people who started a mortgage application with a previously mentioned "quick" internet lender. They complain about high pressure sales, lack of product knowledge, mandatory up-front fees, failed closings, and more.
I also get a lot of calls from people who filled out an inquiry form at places that Lend from a Tree. Funny and cute commercials about applying in your underwear, but this place isn't even the lender. Rather, they take your name and information, then sell it to as many real lenders as possible for around $40 a lead. You are then inundated with calls from all these lenders trying to one up the other with false and misleading promises to get you to use them.
Big out-state internet lenders also NEVER have the ability to offer any state of local first time home buyer, or down payment assistance programs.
Using this example, you may have lost out on your dream home because you picked an out-state internet lender who doesn't offer the first time home buyer loan products available in your area.
Realtor Referrals
In theory, a Real Estate Agent referral to a Loan officer should be something of value, but not always. This is essentially because there are two underlying types of referrals.
A referral because the Real Estate Agent has worked with the Loan Officer for a long time, and knows them to be a licensed, knowledgeable, experienced mortgage professional looking out for your best interests. This is a good referral.
A referral because the Loan Officer works for the same company, or otherwise is heavily influenced by the owners of the Real Estate Company to refer to a specific lender or internal Loan Officer simply because it makes someone else money regardless of the qualify of the Loan Officer.
While not automatically bad, the second type of referral is highly suspicious. Tips to this type of referral are that the Loan Officer works for the same company, they share office space, or if you have already told your Real Estate Agent you have a lender you are happy with, and they become pushy or start talking negatively about your choice to get you to go to their choice.
The Bottom Line
As you can see, your Loan Officer choice is important. Ask questions, get answers. Just because someone refers, they advertise a lot, or appear to be quoting a super low rate or closing cost doesn't mean they are the best for you, or that you shouldn't shop or get a second opinion.
Take the time to pick a great lender, just as you take the time to pick the perfect house.
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Joe Metzler is a Senior Mortgage Loan Officer for Minnesota based Mortgages Unlimited. He was named the 2014 Minnesota Loan Officer of the Year, and #98 of the Top 100 Loan Officers in the Nation for 2015 by Origination News. He provides Home Mortgage Loans in MN, WI, and SD. He can be reached at (651) 552-3681
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