September 24, 2013
How’s the Market?
By Richard Selzer
How to Hire a Lender
Last week, I talked about how to hire a
REALTOR. This week, I thought I’d review
the basics of hiring a lender.
A lender’s job is to find a loan with the best rate available
for you. With the Dodd-
Frank Wall Street Reform and Consumer Protection Act of 2010, banks now have very little
flexibility, so most lenders will quote you similar if not identical rates for the loans you
If you’re not shopping for a lender based on rates, what are you shopping for? The
quick answer is: someone you can work with.
From earlier columns, you may remember that loans vary. The loans available to you
will depend on your income, credit history, employment, marital status, other property
holdings, cash available, and other factors. The loan you need will also depend on whether
you want a 15- or 30-year term, a variable or fixed rate, the type of property (i.e., land,
residential or commercial), your plans for the money (e.g., construction loan), and more.
The lowest rates available are typically for someone buying an owner-occupied
residential property who has excellent credit, a secure job, and enough cash for a 25 percent
So, how do you identify a good lender to help you find the loan you need at the best
possible terms? First, ask your
REALTOR. He or she is likely to be the most knowledgeable
person you can find when it comes to people who understand your real estate needs as well
as which lenders would be a good fit. You can also ask friends and neighbors, your insurance
agent, your accountant and your attorney.
Conventional lenders include banks, savings and loans, credit unions, and mortgage
brokers. Occasionally, borrowers work with hard money (private) lenders or sellers willing to
carry a note (act as a lender). When I say “lender,” I’m talking about conventional lenders
Lenders are paid a percentage of the loan amount by the borrower or lending
institution (or sometimes the seller). Because the industry is so competitive, there is little
difference in costs. The best way to compare loans is get the terms as close as possible, then
compare annual percentage rates (APRs). The APR is calculated after considering the
prepaid finance charges (loan fee, lender charges, and escrow fee). APR is not something the
average Joe (or even really bright Joe) can usually calculate. Your lender can and will
calculate this for you.
Getting back to that original question, if you’re not choosing a lender based on rates,
what are the criteria? Here’s a list of questions I recommend pondering.
1. How much work will they take off of you?
Buying a home is stressful
enough without a lender who expects you to do a bunch of legwork. They
can facilitate your efforts.
2. Are they good communicators?
Can they work well with you and your
? Even if you don’t have a finance background, you should feel
confident that you understand what’s going on with your transaction.
Do they tell you in advance all you need for the transaction or is there
one more condition to meet each week?
Clearly, in almost all
transactions, unforeseen issues will arise; the need for additional information
is not unusual. But a good lender will plan ahead and keep these issues to a
Is your lender local? A local lender needs repeated referrals to be
successful. This works in your favor. Internet lenders from Timbuktu who
have never been to or heard of Ukiah don’t care if they ever get another loan
from Ukiah. This does not work in your favor.
At Realty World Selzer Realty, and I expect at other real estate offices around town,
we have a DO NOT USE list for difficult, incompetent, or unscrupulous vendors. Lenders
can end up on that list. That’s why I say, the best person to ask about which lender to use is
REALTOR. REALTORS work with lenders all the time and know who they trust to do a