Choose your Lender Wisely, Austin

(I re-publish this article every year after completing one of several of the most difficult lending transactions of the year. This tends to happen when buyers do take my advise and decide that the bank that they have been doing business with for years would never let this happen to them...and then it does).

Real Estate lending has gone from sort-of complex to very complicated and difficult--during the past few years. It used to be that the rules of lending seemed fairly stable, but now lending has become as dynamic as the property itself. One of my roles as a Realtor is to assist in making the big picture process happen Faster, Better and Easier than you trying to figure out the Austin Real Estate maze alone. The puzzle involves a host of people and businesses--title companies, builders, inspectors, contractors, realtors and of course--mortgage lenders. Although everyone knows how important getting a good loan can be, not everyone realizes that choosing a lender is more than just finding a great rate.

A mortgage lender can have a "make or break" impact on your Real Estate transaction. Most lenders look the same on the phone and during the initial meeting. The signature meeting. Some may promise you a quick close, verbally guarantee that they never drop a deal and tell you that they have the best rates on the block. But finding a lender capable of delivering what they promise may be a different story. It took me years of trial and error to find lenders that I believe are some of the best in the business to recommend to my clients. 

Now your first question might be: "Tim, how much money do you make when I use your lender?" Well, first of all, my lenders are not "my" lenders. I don't make anything if you choose to work with a lender that I recommend. The laws that govern this behavior dictate that when a supplier on my team is giving me something because I recommend them to you--must be disclosed to you--the client. So, then why would I recommend a lender if I don't make something from this recommendation? Answer: Happy clients and closed transactions. You only have to watch a few deals fall apart due to an incompetent lender or supplier who does not understand the business to know that the people on a Realtor's extended team are as important to his business, as his own knowledge and experience. It takes a team of professionals to make it all happen seamlessly.

Choosing a lender that makes big promises and then can not deliver on the schedule--is a problem. Choosing a lender who does not explain fees or POC's or tells you something verbally and fails to put it in writing--is a problem. It may not sound like a big deal at the time, but 4 weeks into the transaction, when it all starts to fall apart, the little details are the things that matter the most in Real Estate transactions. I have seen serial home buyers surprised by their own bank's handling of their new loan--to the point that after the second or third schedule slip the buyers were ready to walk away from the home that they wanted so much to purchase (risking the loss of earnest money, option money and inspection fees)! The frustration of dealing with a bad lender is something that is hard to over come.

When choosing a lender, you shouldn't think that it is only about getting the best possible rate quote. You drive by some great lenders and some not so great lenders every day. When looking for a lender, I recommend that you consider:

1) Verify that your fees are competitive and if you are paying to buy down the rate--find out how much you are paying to buy it down.
2) Make sure you are not paying for anything outside of closing (POC) that make your Good Faith Estimate look more attractive upfront.
3) Find a good rate and lock it while rates are low (you knew that one).
4) Find out if you can get a float down option for the rate.
5) Most importantly, make sure you have recent recommendations from someone you know about the lender that you are choosing. Don't just find someone online that appears to be a good lender or has a good pitch. You will be sorry if you do. And don't think that by choosing your current bank that you have all of this wired. In fact, your current bank may be the last place you should look to get a new mortgage loan. The fact that they are servicing your loan well has nothing to do with what this article is addressing. Nothing at all. Two entirely different processes and people involved.
6) The biggest thing to consider is listed below--in house underwriting. This is a big one. 

What makes a good mortgage lender? Great service. Experience. Tons of industry knowledge. Sorry, new kids on the block. Working with a loan counselor who is new to the business is probably not wise at this point in time. It is a difficult and challenging time and in my opinion, not a good season for those just getting started as loan counselors. My #1 preferred lender is one of the top lenders in Austin (actually, I believe she is one of the top lenders in Texas).

One last bridge to cross in this conversation. When you choose your lender, find out where their team is located. I don't mean the boss and assistant--I mean the decision makers. One of the most important players in the lenders team is the underwriter. If your lender's processors and underwriters are not in the same office--you may have a challenge ahead. And by challenge, what I really mean is that you may be in for the ride of your life. On this ride you should expect to lose some weight, a few teeth and a bit of hair. Yep. You are probably in for a different experience than your last mortgage. When the underwriters are located in a different city and state you should expect a serial process that really does not get started in earnest until about 7-10 days before closing. You may be one week from closing when you hear for the first time "Well, we are going to do everything that we can to make this work...". And expect to start getting drop-dead requests for information that you thought you had already provided. Now, you may get these same requests from any lender these days, but the key difference is timing. A good lender is attempting to be proactive by putting your file in front of the underwriters early on, not during the last week before closing. But when your lender's underwriters are in a different city and report to different bosses, your file will come up when the other 300 files get cleared. Just before closing. It can be a very harrowing process for the buyer.

Choose your lender wisely. It is complicated. It is difficult. And choosing the wrong lender may only result in a small stomach ulcer--if you are lucky. And if you are unlucky, it may result in a failed contract. It happens every day in Austin. It is still probably the biggest reason why contracts do not close today.

If you are ready to start talking to lenders, ready to start looking for your next home in the Greater Austin area, whether it is your first home, second home or your last home--give me a call first.

Let's Talk. 

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