I am in the process of moving older posts from my old blog at http://www.smartmortgageadvice.com/ to Activerain and testing out off the shelf software http://www.smartmortgageadvice.wordpress.com/, so please bear with me. I made a comment on Brian's blog that consumers should shop for loan officers instead of shopping for a mortgage. I wanted to expound on it.
The reason I say you need to shop for the loan officer and not the mortgage is because mortgages by in large are a service. When you obtain a mortgage, it is the loan officer who will make or break your experience. The loan officer's primary responsibilty is to guide the client through the financing process. Regardless of the interest rates and closing costs you receive, ultimately the loan officer is the one who is going to be responsible for ensuring you have a smooth purchase. I don't want to make this post overly complicated, but let me put this another way to get my point across:
Unlike what you see on HGTV, buying a home requires entering into lengthy legal contracts, is rife with stress and emotional conflicts, has the potential help you make or lose thousands of dollars, and is the place that you will call home. In most major cities, we are talking a typical investment of $300 to $500k just to get a starter home. Don't you think it is in your best interest to ensure that the person who is handling your largest financial investment be qualified to not only advise you on your financial options but also vetted to ensure they are dependable and can ultimately deliver at the time of close?
Most consumers go about getting their mortgage by shopping on price - interest rate and closing costs. I posit that this is the wrong way to shop for mortgages. First, because the mortgage market is so fluid and pricing is so individualized to each person's situation, it is impossible for a consumer to know if they are getting the "best" deal. Second, most consumers usually have no idea what type of mortgage they want. I would say half my clients initially choose the wrong mortgage until we discuss their goals and objectives with the home they are purchasing. Third, because there is no way to hold lenders to rate quotes, consumers have no way of knowing if what they get on the day of closing will be what they wanted. They have to put their faith in the lender to deliver which gets me to my next point. If you have to put your faith in the lender, you should go about choosing your lender the same way you would choose any other professional - interviewing the loan officer like you would an attorney, CPA, or any other service professional.
I am not saying interest rates and closing costs are not important. However, what many consumers fail to do is strike a balance between expertise and costs by treating their mortgage like a commodity when in fact it is not the mortgage you are paying for, but the loan officer experience and dependability which cannot be commoditized. On a $500,000 investment, saving $50 should be of no consequence. While you don't want to over pay, you also don't want to nickel and dime your way out of a good deal either. A good loan officer will always get you a competitive rate, but a competitive rate does not always come with a good loan officer. Which version one do you think is more likely to close?
Put another way, would you rather hire an attorney for $100 bucks an hour who ALWAYS wins or hire an attorney for $75 bucks an hour who MIGHT win? So, would you rather hire a loan officer at 6% who ALWAYS closes on time or the random loan officer at 5.875% who MIGHT close on time, ultimately jeopardizing your $10,000 deposit in earnest money?
Before you even start talking interest rates, you should be discussing things like:
1) Your loan officer's education and professional background? Was your loan officer an accomplished professional in another industry and do that have an established track record in the mortgage business or were they hawking cell phones at a mall kiosk two weeks ago?
2) Your loan officer's client base? They should be able to describe their typical client which should generally be similar to your demographics. Most successful loan officers generally have a niche or deal with certain type of clients the majority of the time and will gladly tell you.
3) Is your loan officer a home owner? Does this really need explaining?
4) How well does your loan officer assess your needs? Do they immediately start quoting rates or do they complete detailed due diligence before spouting off rates? Most good loan officers do not "quote" rates without getting a FULL APPLICATION which means they need to fully assess the scenario. There are too many variables to just start spouting off rates. Can they logically explain why certain programs are better than others?
5) Ask yourself, how you got the loan officer's name. Most successful loan officers work almost exclusively on referrals. Was the loan officer referred to you by your Realtor, family, or co-workers? If the loan officer cold called you, it means they have no business and a weak referral base which means they are not established. You have been warned.
I could go on and I will probably revise this post. However, I just wanted to get some thoughts down on the topic...
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