Last week I closed on 2 transactions that nearly didn't and also cost my clients and myself undue anguish and stress. I had this listing, with buyers going with a VA loan (we were due to settle in 40-days). Roughly 20-days into the deal the buyers unbeknownst to us were getting a bit nervous with their lender (Oh, yes they weren't local to Maryland) not having the necessary items done to get the VA loan approved, so they decided to entertain another loan program (FHA). Well about 2-weeks prior to settlement an appraiser comes out, what no one knew was that appraiser was FHA not VA, not even the lender knew (which is hard to believe as they would have gotten assigned an appraiser from VA and known it was a VA appraiser). So appraisal came back and we all thought we were going to closing on time, but low and behold...NO, as the appraisal was FHA and all the docs were VA, and this was the day before settlement that we found this out. So back to the drawing board, VA appraisal had to be ordered (with a RUSH) and basically hope and pray that it comes in okay for us to settle. Well with the lender not being local and quite frankly not knowing how to do a VA loan, we were all getting nervous that it wasn't going to happen. Now, I'm not going to say in nearly 20 years of real estate that I haven't had a transaction be delayed, but I can honestly say that I haven't had a transaction be delayed with so many problems before. You see it probably wouldn't have been such a huge issue if it wasn't for the lender not being local and my sellers also in the process of purchasing a new place that had a seller that had 2 previous transactions fall through because of lending issues and also had a backup contract that was ready to step in and take my clients place if anything happened (which was about to), also this seller was also in the process of relocating out of state and purchasing a new home. Well, as you can imagine we did not settle on time, my clients signed an extension to this past Friday with the buyers of their home and we were also able to convince the seller of my clients new place to also sign an extension to this past Friday. So the VA appraiser came out on the Monday of the extension week and we urged him of the importance of getting this in ASAP. Well, the buyers were so nervous that they decided at the last minute to change over to FHA as that appraisal was done and all that was needed was to convert all the docs from VA to FHA. Well long story short we got to settlement just under the wire on Friday the final day of the extension. What you ask is the moral of this story and what does this have to do with choosing the RIGHT lender....
Well, you see when a realtor refers a buyer to a lender they work with on a regular basis, it's not because they are getting any type of consideration (monetary or otherwise- it's illegal), it's simply because when I personally hand off a sales contract to a lender I know I won't have to worry, I won't have to get involved with the loan more than I need to and I know it will settle on time (no 11th hour surprises). I understand that for buyers getting that great rate is very important, but as a buyer you must/should look at the whole picture in choosing your lender. Many buyers shop the rate from lender to lender hoping they are going to get a better rate from Lender XYZ over Lender ABC, but sometimes that better rate is coupled with headache & heartache and sometimes even surprises in fees. I can't tell you how many times I've had buyers find lenders from the internet, or someone they know from church that started out sounding like a great deal, but ended up being extended and when we came to settlement there were always additional fees tacked on and in one unfortunate case clients that had 800+ mid range scores put into a sub-prime loan program.
With this past transaction I had there were red flags:
- #1-Lender was not local, not only is it important to go local, but to go with a lender that your realtor works with on a regular basis. Most realtors work with at least 2 or 3 lenders so ask for all their names and contact all and see which one not only gives you the best rate, but you feel good about.
- #2-If you go with a specialized program (FHA or VA), make sure that your lender is "APPROVED". VA & FHA are specialized and scrutinized by the government and that being said many lenders don't like to do them as they are more difficult to do and there are many fees that a lender can not pass on to the borrower. But if you go with an approved lender that has done these loans on a fairly regular basis, they will know what needs to be done and how to do it to get it done on time. My seller's went VA on the purchase of their new home. From acceptance of contract to VA committment letter we were less than 2-weeks, that's because I referred my client to a local lender that does VA, and knows what to do to get it done fast.
- #3-Make sure your lender is responsive not only to you, but your realtor. More times than not when a transaction sours due to a lender dropping the ball, you will find the lender will stop taking calls or answering emails especially from realtors. Yes, the lender owes no obligation to responding to me as the seller's realtor and in some ways even not to their clients realtor. But that lender should if they have nothing to hide, be responsive and keep everyone informed of the progress so as to alleviate the stress.
So, the moral of this long painful story is, listen to your Realtor, as they may REALLY know how to save you money & time.
PS: From the day before settlement to the following Friday, I had no less than 50 calls a day flying between myself the buyer's realtor the other seller's realtor and attempts on getting a hold of the lender. Also, factor in some 30+ emails a day along with another 50 text messages.