Winning with the Right Lender

It’s more important than ever in a hot real estate market to choose the right lender for your home purchase or sale. Most buyers select a lender based on their advertised interest rate, but did you know that lender may not be able to get the property closed on time or worse yet, not at all?

A savvy real estate professional will tell a buyer to get pre-approved for a loan BEFORE shopping for a property. I typically recommend one or two lenders that have a good reputation and track record for getting their loans closed. It is important to listen to this advice and interview these resources. I have a short list of lenders that I refer based on the needs of my client. Different lenders specialize in different types of loans. As with any professional, each has their own expertise and has built a team around them for success.

To get on my lender list, each lender has to have a completely open and honest work ethic, not sell my client a loan based on what the lender is going to earn from the recommendation, but rather recommend the loan product that best meets my clients needs. They also have to have competitive fees and rates. Then, I insist on in-house loan processing and underwriting. My clients speak to the same team members throughout the process and get good communication. If a problem of any sort pops up, it can most easily be resolved if these staff people work alongside each other in-house. No voice mail hell. Finally, to get on my list, the lender has to have a panel of pre-screened appraisers with years of experience in the geographical area where my client is purchasing. The lender can’t speak to the appraiser, and the lender doesn’t know who on the list will pick up the assignment, but there is no question of competency or whether or not the appraiser will turn in the appraisal in time to close a property by the closing date.

Many lenders (not mine) use another type of appraisal process by ordering their appraisals through an appraisal management company. These lenders electronically submit an order to an appraisal management company, a profit center for the big banks that own them, and the company then puts the appraisal assignment and the amount they are willing to pay for the work out “for bid”. The lowest bidder typically picks up the job and he or she may not even be familiar with the area. Even if the buyer pays a higher fee to expedite the appraisal, sometimes the appraisal management company doesn’t pass the additional money collected to incentivize the appraiser to pick up the order. The order can sit unfilled for weeks because appraisers are in short supply right now and the fee offered by the AMC isn’t worth the appraiser’s time. When this happens, a delay can cause the buyer to lose a property.

So now you can see, there are BIG differences between lenders. When making your decision, you will want to consider rate, but more importantly, service, communication and the appraisal process. Does this lender use a panel of experienced, local appraisers or does this lender turn in an appraisal order to an appraisal management company? The results can vary widely.

For the very best success, I recommend a strong, local lender, with the attributes previously described. Typically, this a mortgage broker who has a variety of loan programs, including portfolio programs, conventional conforming and non-conforming jumbo loans. The mortgage broker interviews the buyer, pulls credit, verifies assets and employment based on an electronic loan application and then issues a letter stating the buyer’s creditworthiness. We use this letter showing the buyer’s financial strength when we make an offer on a home. In a competitive real estate market, this letter and the lender’s reputation can make the difference when a seller is considering offers. As a listing agent, I always contact a potential buyer’s lender as part of the evaluation of offers to inquire about the lender’s loan processing, underwriting and appraisal process.

A strong, local lender is far superior to the bureaucracy and lack of service one generally gets from one of the big banks. Unless the buyer has a special relationship in their Private Client department, the process can be painfully slow and that reputation follows them among the real estate community. Remember these banks own the appraisal management companies. The big banks have a reputation for poor communication and taking much longer than a traditional mortgage company. They also often have processing and underwriting in a different city altogether. For me, they are not a good option for my clients especially if we are competing with multiple offers.

Some buyers want to use a credit union for their loan. Credit unions are member driven and their rates and service are generally good. However, they have a fiduciary to their members and don’t take risks on unique properties. Because of this, I find their appraisers are much more conservative. If a property doesn’t appraise for the sales price in the contract, the buyer may not be able or willing to put more money down to get the loan to value ratio required by the credit union. Sellers should keep this in mind when reviewing an offer from a buyer who is using a credit union for financing.

Technology has touched many facets of the real estate industry and many of those changes are good. Buyers can see lots of properties quickly, sign documents remotely and save a lot of time. Sellers can get world wide viewings of their home and review a comparison of offers from anywhere. The internet lender however, leaves much to be desired and would be my last choice if presented with multiple offers. As a real estate professional, I need to interact with the lender frequently to meet deadlines in the contract both on the buying and selling side. Communication is difficult and who knows how the appraisal process will go. So, just say no to the internet lender.

The first step to finding the right lender is to find the right real estate professional who has years of experience in selecting the right resources for your individual needs. Real estate is local and so is lending. Choose right for the win.

Laura Duggan, Broker/Owner, West Austin Properties, 3312 River Road, Austin, TX 78703, laura@westaustin.com, 512-750-2425.