English: Equal Housing Lender emblem
English: Equal Housing Lender emblem (Photo credit: Wikipedia)

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

qualify for.

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

down payment.

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

here.

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

REALTOR

? Even if you don’t have a finance background, you should feel

confident that you understand what’s going on with your transaction.

3.

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

minimum.

4.

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

your

REALTOR. REALTORS work with lenders all the time and know who they trust to do a

good job.

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