View Recommended Local Lenders
Choosing one lender over another can be very confusing, actually. Many shoppers erroneously think it is all about the rate, and they consequently go with the lender who quotes the lowest rate.
It’s not all about the rate. Here are some tips when choosing between lenders.
- Go local. Shop loan originators that are local. They may be part of a national franchise, but you want the loan originator themselves in your town so that they know your Realtors®, know your insurance rates and taxes and typical seller concessions. Local lenders are highly preferred over out-of-state, often online companies.
- It’s not about the rates. Well, it is, a lot. But lenders are able to play all sorts of games with the rate and costs of a loan. They can, for example, offer a lower rate, but by charging the buyer origination points on their loan, which they wrap into the financing or closing costs. In spite of the lower rate, they may actually cost you more. The only way to effectively compare a lender’s true cost is to get the Good Faith Estimate, or GFE.
The GFE is a government mandated document that a lender must provide. It strips out the money shell game and quotes you your loan costs. You will see at the bottom of the page the A + B box. This is the lender’s costs, depending on the quoted rate. You can then compare that box to another lender (be sure to get the quote at the same interest rate and term!) and know which lender is more affordable.
- It’s not all about the money. A more expensive lender may have attributes worth more than just money to you. While lending has a lot of black and white rules, there is also a subjective gray area that proactive and experienced loan originators can help with to get you over the hump or through other lending obstacles.
The lending process is also the most time consuming part of buying a home. A proactive and energetic loan originator that can get to closing on time can easily be the difference between crossing the finish line and not, and therefore might easily be worth a little extra.
- Don’t assume the builder’s lender is the right lender. Yes, the builder and their lender may have a special deal between themselves to help pay off closing costs. And yes, often the builder’s lender is an option worth considering. But not always. For example, the lender may not participate in Tex Vet, which may be far more financially rewarding to you than the builder’s lender’s terms. Also, seller concessions with a builder are negotiable, too, and it is worth a try to get the builder to contribute to your closing costs even if you have a lender that is not their preferred one.
- Don’t’ assume your Realtor® can recommend the right lender. As a Realtor® who recommends lenders, and recommends asking a Realtor® about lenders, this may seem a little hypocritical. But as a failsafe, it is a good idea to not take your agent’s word for granted. Lending and loans is not a Realtor’s® core competency, and the lending rules are so vast and complex, that it is not practical for an agent to be an expert. Do some of your own due diligence, and then run what you find past their agent. Get their feedback and recommendations, but don’t limit yourself to a real estate agent’s loan expertise.
Remember, it should never cost any money to get a preapproval, cost worksheet and GFE from a lender. In fact, you should never be paying your lender anything. They will get their fees at the closing table when you actually buy the home.
You are also not bound to an agent who supplied your preapproval, even after you are under contract for a home. It is a very good idea to get the lender decided upon as early in the process as possible (remember, the lender paperwork is the biggest hold up during the process), but it has sometimes been necessary to switch lenders midstream. This is possible if the one you are working with is just not working out, or another lender provides better options.
Shopping in the Fort Hood Area? Here are a few local, knowledgeable, and high-speed lenders I recommend!View Recommended Local Lenders
Please share any comments below!
Brian E Adams, REALTOR®, GRI
StarPointe Realty Central Texas LLC
Licensed in the State of Texas