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The Lowest Rate Shouldn’t Be All You Value

Shawn Von Talge



08-12-2013

The lending landscape has and will continue to change, thanks to the “housing bubble”, “mortgage meltdown” or whatever other name you wish to attach to it. This in connection with government intervention (i.e. Dodd-Frank Act, BASEL III, etc.) has forever erased what we had come to expect in attaining mortgage financing. That brings me to what you, as a consumer, should value besides dealing with a lender advertising the lowest rate. We all know rate is very important and no means am I saying it’s not. There are just other meaningful things to consider when you are choosing a lender (see below).

Responsiveness:
What good is it to have the lowest rate if you can’t get timely communication with your lender/loan officer? Without consistent and timely communication a real estate transaction cannot close smoothly. It’s hard enough to get things accomplished in the current environment much less trying to do it with poor communication. How long does it take for your loan officer to respond to your emails and/or phone calls? Are they attentive to your needs and efficient with their responses? If it takes more than a few hours then you are with the wrong company or loan officer.

Dialogue:
There is a fine line between too much detail, thus confusing you, and not enough. It’s imperative that you are explained what loan programs are available and why some are and are not an option for you. For instance, USDA/”Rural Development” is a very popular program in Mid-Missouri. However, if you are buying a home in St. Louis or Kansas City this program may not be an option (even though it’s available). It’s important that you deal with a loan officer who will explain what programs are available in the market place and then in turn explain which one’s you qualify for and which ones you do not and why. For instance, both MHDC (Missouri Housing Development Commission) and USDA (United States Department of Agriculture) have income limits. So it’s certainly possible you and your family do not qualify for these programs simply based on your income.

Expectations:
This may be the most important aspect in the home buying endeavor. Lenders can offer all types of rates but if the expectations are not conveyed and set throughout the home buying process then you will not be happy. For instance, there are certain documents that are a requirement given the loan program, lender and other factors. If your loan officer fails to prepare you for the process (i.e. setting the appropriate expectations) then when asked for these documents you will not be prepared, confused and more than likely frustrated as to the “why”. It’s important that you do business with a lender/loan officer that is clear, concise and detailed in setting expectations both from you and them.

Closing on Time:
What good is all of the above, including the best rate, if you do not close on time? Meeting the deadline on your closing contract is crucial and it’s important that the lender you are dealing with values this just like you, the seller and the agents involved.

Controlling the Tangibles:
A huge part in being able to deliver on the above is controlling all aspects of the transaction. Meaning does your lender originate, process, underwrite, dock-out and fund their loans “in-house”. This type of control is a big component in being able to delivery on-time every time and should not be taken lightly.

Post-Closing Monitoring:
Most lenders ignore this aspect of origination. It’s important that your loan be professionally managed after you close. Why is this important? The market is constantly changing and it’s imperative that you are in the best mortgage product for you, your family and the changes that have passed and/or approaching. For instance, if you closed at a rate of 5% and now the market is offering 4.25% it’s important that you have a professional that will monitor this for you and then notify you should the need arise and savings be present. Market newsletters, home-owning tips, annual reviews and many other factors are important after you close your loan.

Closing Costs:
What costs does the lender charge (i.e. Not third party charges like appraisals, recording, title, etc.). Are there any discount points built into the rate they are advertising/offering. Are their costs above the “normal” charge seen in most originations? Evaluating a lenders fee is important and some will earn every aspect of what they charge, others will not.

Hopefully this post will enlighten you to some of the other aspects you should consider prior to choosing a lender solely based on their interest rate. Ask the above questions, listen, and take notes on their answers. Do they have these systems in place and if not then why? Rate is important but there are certainly other things to consider when selecting the right lender.

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