Choosing a Lender
Today, I got up out of bed and got ready to go to a final walk-through, which is, you know, the thing you generally do right before a closing. The walk-through was set for 10AM. Closing has been scheduled for 12PM today for well over a week. Per my usual routine, after getting ready, I call the closing office at around 9:30. Here’s how the conversation went:
Me: “Is everything ready for 12 today?”
Them: “I don’t have a closing set up for today anymore.”
Me: “Um, why not?”
Them: “I was called by the lender yesterday and told to reschedule it for the 16th. I asked if I needed to let everyone know and they said they already have.”
Me: “Shit. It would have been nice if Wells Fargo would have informed the most important people in the transaction, my buyers, that they didn’t need to take the day off of work anymore because they’re not closing.”
That conversation led to a little reflection on past lender experiences, so I figured I would share a little of what I’ve learned.
Never, ever, Ever, EVER, ever, ever, ever, ever, ever, ever, ever choose and out-of-state or online lender. They rarely turn out well. Let’s get this out of the way: You will not save money. If you do, it will be a negligible amount. Don’t let the “no closing costs options” and the “3.99% interest rates” and such fool you. You ARE GOING TO PAY FOR IT in one form or another. Here’s what they don’t say on those advertisements:
-> No Closing Costs Option – Most lenders can offer this if you simply ask. Want to know why most people don’t choose this option? They jack up your interest rate to MORE THAN cover what closing costs you would have normally paid. You’ll end up paying those closing costs several times over in higher interest over the life of the loan.
-> 3.99% Interest Rate (or whatever low amount you’re offered) – Most lenders can offer deeply discounted interest rates, but again, somebody’s going to pay for it. It’s called a rate buy-down, or buying points. Don’t want to pay 5%? Sure, buy that sucker down to 4%. It’s going to cost you more cash up front, but it can definitely be done.
Out-of-state and online lenders are always hard to work with. Think about it for a second. If you’re looking at a home in Huntsville, AL, are you going to call a Realtor from San Francisco to come down here and show you houses? Of course not. Out-of-area people don’t know or understand our market. They don’t have contacts in our market. Hell, it almost takes an act of Congress to get them to get an appraisal ordered. It’s just much harder to get things accomplished when you don’t know the people you’re working with.
The average time from contact to closing, locally, is around 3-4 weeks. I’ve NEVER had an out-of-area lender close one in under 5 weeks. I’ve NEVER seen a buyer save money by using an out-of-area lender. On the contrary, most tend to get hit with lots of bogus and higher-than-average fees. The biggest and best reason to never use an out-of-area lender is simple. If/When something screws up, you can’t march down to their office and get things done. You get the runaround. Think about calling a credit card company trying to get an issue resolved. You have to talk to 30 different people to find out what the hell’s going on. Who want’s to do that with the biggest purchases of their lives? Not me.
That’s not to say that EVERY experience is like that. Just the ones I’ve had. Like:
-> Purchaser was pre-approved to purchase a home. Two months later, and three mortgage officers later, my purchaser was no longer approved to purchase the home of their dreams due to a “lender oversight”.
-> Purchaser was pre-approved (used lendingtree to find a lender) by an out-of-area lender. Two months later, after multiple calls to numerous supervisors, we close. Purchaser ended up paying over $1,500 more in closing costs than they would have with a local lender.
-> Purchaser was pre-approved with an out-of-area lender. After 45 days of no progress, the lender then decided the purchaser could no longer obtain financing. The purchaser went to a local lender, was approved, and closed on their home in under 3 weeks.
Don’t get me wrong, choosing a local lender isn’t always a guarantee of a fairytale ending. You can choose a local screw-up, too. They’re just less common. It’s all about the numbers. An extremely high percentage of out-of-area lenders tend to have trouble closing a loan smoothly here, while a low percentage of locally originated loans tend to end badly. I don’t think it has so much to do with the Huntsville area as much as it has to do with the fact that these lenders don’t close enough volume in this area.
Choosing a Lender
Most importantly, choose the mortgage OFFICER first, then the company. Follow your instincts. Never choose the “full of shit” guy/gal. You know who I’m talking about. There’s one in every family. If you’re talking to a lender, and you say to your husband/wife, “He kind of reminds me of Uncle John”, and Uncle John is one of the most “full of shit” people you’ve ever known…..run. Don’t just walk, get the hell out of there. I promise you, it’s the right decision. They’ll only tell you what you want to hear and they suck all of the air out of the conversation and will never get anything done. If you have to fight to get a word in….the next word you should say is “NEXT”.
You can tell when someone knows what they’re talking about. Choose them. Just try to start locally and go from there.
