Choosing a Lender (Part Two)
How To Shop Your Loan
So, how do you choose a good lender – one who can close on time and make your offer stand out in a sea of others?
First, ask your Realtor. Sure, you can ask your friends, and definitely ask the internet (the name of a prospective lender and “reviews” is a good initial search), but your Realtor should be able to point you toward several lenders with competitive rates and fees as well as good service.
Once you’ve gathered a list, choose the top three lender prospects based on your research and the strength of the referrals. (If you don’t make it to three, two is the minimum. It should go without saying, but trust me, it doesn’t: a list of one is not actually shopping your loan. So don’t start the process unless you’ve identified at least two lender prospects you’re committed to speaking to.)
Next, email each of the lenders you’ve selected and ask them to call you, then see how long it takes them to call. If you can’t get them on the phone now when you’re a prospect, you’re very unlikely to get a timely response after they’ve won your business, so this is an important gatekeeping step.
Once you have a lender prospect on the phone:
- Ask about rate and terms, including fees. Do not just ask about the rate. (Remember, fees should be another deciding factor for multiple reasons.)
- Ask how the loan will be processed and who will be available to answer your questions from contract to closing.
- Ask how much time you should build into your deal from contract to close. Look very skeptically on any lender that suggests you must build in 45 or more days between contract and closing. This is slightly inside baseball, but the most reliable lenders have all revamped their internal processes to accommodate the TRID changes, and are now faster than ever. You should be looking for a market-friendly answer of no more than 30-35 days.
- Get a direct phone number for the lender. No one in real estate keeps bankers’ hours, so it’s important that your loan originator be accessible. Ideally, they’ll offer their cell phone number, direct office line, and an email address that they check frequently. That said, do not abuse this level of access. Lenders have lives outside of work too.
- Share your mortgage goals with your prospective lender, including how long you intend to live in the home and the money you have available for down payment and closing costs. Answer any questions the lender has both completely and honestly.
- Now repeat this conversation with your other lender prospects.
By the last phone call, a clear winner may have emerged, but if not, rely on your gut. Your lender needs to be someone you trust.
Whoever you choose, once you’ve settled on a lender, go through their formal pre-approval process and provide any documents they ask for. This will make your preapproval letter stronger when the listing agent for your dream home calls to verify it.
More information on the home loan approval process and pre-qualification vs. pre-approval is available here. And don’t forget to check out our upcoming post, Best Practices for Buyers: Don’t Make These Five Mistakes Between Contract and Close.