Shopping for a lender can be one of the most overwhelming parts of getting a mortgage. With this, we will be talking about the three types of lenders that you need to shop with, Also the questions that you need to ask, and finally, we're going to talk about the warning signs of lenders. If you're in choose the right one and not end up with a bad lender.
So first let's figure out who we need to shop with. There are three types of lenders.
Now, before we talk about that, we need to talk about this big myth about multiple credit inquiries. So, you actually have 45 days to get your credit polled. If you get a pull today, you have an additional 45 days to get it pulled in an unlimited amount of times with mortgage inquiries. So it all has to be the same. It can't be a mortgage and a credit card and an auto loan, but if it's all the same, you can get unlimited mortgage inquiries within a 45-day window, and it will only count as one inquiry.
One inquiry is only going to change your score by three to five points. So the government wants you to shop for a mortgage. That's how you're going to save the most money moving forward.
Now, the first lender that I want you to shop with is a local credit union. To find a reputable credit union, local to your area. That way you can get a solid quote, just simply based on your local neighborhood.
Then, what I want you to do is a shop with a mortgage broker. So one that you can shop with is Credible (link: https://www.credible.com/a/state-licenses/). Credible is my sponsor, so what they are is a mortgage comparison website.
What you can do is enter some information on their prequalification for them, and immediately see and compare rates from lenders that have already pre-qualified you, that we can shop and see, which is going to be a good option for you.
Also, know that Credible does pay to Win the House You Love a prequalification or an advertising fee when you do choose to fill out a prequalification form and that's credible operations, NLMS 1 6 8 1 2 7 6.
Another option that you could do to find a broker is going to www.findamortgage broker.com. This is going to match you up with local mortgage brokers in your area.
Then you can also look at a certified mortgage advisor. This is a certification provided by Barry Habib, who is an industry leader in the mortgage world. So that's going to be a really good option for you to find an advisor who has that certification ready to go to help you out.
Also, what you want to do is look at a bank or a big lender.
So something like Churchill Mortgage, Caliber Home Loans, PNC Bank, those are all really solid options as a bank or a big lender. Now, why do we want to get three different quotes from three lines? The reason we do this is this gives us a really good spread of seeing what types of loans are available to you because you don't want to just compare three different banks or three different credit unions or three different brokers.
You want to get a spread because each of these types of lenders operates a little bit differently than the others. So this gives you a really good range to see how these different companies operate with their processes like, and what types of loans and rates and costs they can provide to you. So that's going to give you a really solid spread going with one credit union, one broker, and one bank.
Then you also want to read reviews. Reviews are a really powerful way for you to understand the person that you're working with on the other side of that company. So for instance, what you could do is look up a local credit union and find their reviews. It would be even better if you can find the reviews specific to the loan officer that you're working with.
They don't have to have tons and tons of reviews, but you at least want to see is there positive feedback from this lender. And if there's not, if they don't have any online presence, then maybe you might want to try to steer yourself to somebody who has a bit of a reputation of helping clients through the process.
Now, let's talk about some questions that you want to ask. There aren't key questions that every single person has to ask. And as you go through this process, there are going to be questions that you have about your mortgage, about buying about the home buying process in general. Those are a hundred percent fair questions to ask.
Don't ever feel like there's a bad question to ask a loan officer or a realtor. They are there to help you. They're part of your team. So ask them questions, but I think some really key ones to ask that you may not think of off the top of your head.
Number one is what are your turns times? So turn-times are how long it takes that lenders underwriter to look at your file and issue and approval. Knowing this turning time is going to be really helpful to see how quick or slow will this lender be. So for instance normally really quick underwriting turn time would be two days.
I've seen underwriting turn times, honestly, be up to two weeks, especially in this kind of COVID market. Understanding that is going to help you figure out once all my documents are submitted by my loan officer to the underwriter, how quickly will the underwriter actually tell me an answer back with my approval.
Also, you want to ask, what are your Section A Fees? Section A Fees are the fees that are specific to our lender. Do people make the mistake of first asking what are your closing costs? And that's a loaded question because closing costs incorporate all of the costs of purchasing a home, not just the lender costs.
So you can make the mistake of choosing the wrong lender. Just based on asking that question. Section A Costs are just what the lender charges. Closing costs include the lender charges plus other things like taxes and insurance and title costs, recording fees, things that the lender themselves, they don't charge, and they're just going to estimate.
So ask what section eight costs. These are what the lender charges. In Section A Costs are what's on page two of your loan estimate. The loan estimate is the document that your lender is going to provide you. It will show your rate, your loan amount, your monthly payment, your closing costs your down payment, all of that.
Then what you'll see as Origination Charges. This is the number that your lender specifically is charging. They don't control all of the other fees. They're only going to be able to control the Section A Costs. So when you're comparing lenders, you want to make sure you're only looking at Section A Costs. Everything else is an estimate and not able to be guaranteed by the lender.
A huge one is who will be my main point of contact throughout the process. Sometimes with bigger companies what can happen is your first talk with one person, you get approved with them, and then you get handed off to another person and then maybe you get handed off to another person. And it can be frustrating because you don't know who your point of contact is during the process.
So it's important to know that if you're going to be working with the company, you will be asking these questions: Am I going to be talking with the loan officer the entire time, or will it be handed to a processor? Is there another person that I'll be talking to? Having this understanding is going to help you figure out if that lender is gonna be good for you to work with. Because you might not care. If you talk with multiple people.
On the other hand, you might really care to only talk with one loan officer throughout the entire time. That way you can have one consistent point of contact. So make sure that you know that upfront that we don't get it. Get handed off to somebody in the realization, this is not really what we were looking for.
And then ultimately, do they have the heart to the heart of a teacher now you're not going to ask this question. Hey, do you have the heart of a teacher, but Dave Ramsey talks about this a lot about an advisor, somebody who has the heart of a teacher. So when you ask questions, are they patiently willing to explain the process to you? Or did they tend to ignore you or brush you off or try to skirt around the answer?
You want somebody, who's going, to be honest with you. Who's going to help educate you through the process in a way that helps you feel more competent and comfortable moving forward. So with that, before we get into some of the warning signs, let's have a CalmMoment.
So I know how overwhelming it can be to talk with a lender or a realtor because there's this so much vulnerability in this fear when we're sharing so much information about ourselves and our financial life, not only that, but we're sharing so much and we have this fear of being taken advantage of by a salesperson.
So when you go through this process, just know that it's perfectly okay. To be a little bit on guard too, to have some sensitivity. Towards the vulnerability and to want to build trust with somebody before you share all of that information. So we'll talk about how you can figure out how to guard yourself on some warning signs that you can look out for.
But ultimately just know that it's perfectly okay to have that guard up a little bit, but what you ultimately want to do is make sure that you ask questions that way you can feel comfortable with the people that you're working with. And by asking these questions, you're going to be able to get a good idea of the heart of the person that you are talking to.
That way, whether it's a realtor or a loan officer, or anybody involved in purchasing, you'll be able to find out is this somebody that I can trust with my financial information with this emotional complexity that is involved in the home purchasing process.
So let's go ahead and talk about some of the warning signs that you need to watch out for with the lender. Now not all lenders are out to get you. I don't want you to think that with these warning signs that you always need to be on guard and feel like somebody could be taking advantage of you because that's not the case. Most lenders are really good and they have your best interest in mind, but we also need to keep out on the lookout for some warning signs, some red flags for maybe we need to start looking at another lender.
Number one is quoting just a rate with limited information. Now, this can be a kind of controversial with lenders themselves, but I know that when I quote rates for people, it is entirely unfair for me to just quote a rate without any other information. If somebody calls and says, "Hey, what's your rate?" I can give you a rate based on a scenario off of a specific credit score in a specific income, a specific down payment, all of that is going to affect the rate.
So it's not fair for me on the phone to just say, yeah, the rates are 2.7 when in reality, that person has a lower credit score or maybe their income is too high for a specific loan program. So it's not fair when somebody just quotes a rate. Normally, a loan officer needs to have the full picture of what's going on to be able to give you an accurate rate.
There's a difference here between somebody taking you through this long strung out process versus somebody saying, Hey, can you give me a little bit more information to be able to quote a rate.
So make sure your loan officer is actually asking you things. That's why some of these internet quotes are insane where they just come and say, yeah, the rates of 1.5%. You're thinking, what are all the qualifications? What's everything involved in that?
Also not giving a complete cost breakdown. I see this all the time and it's so frustrating because what ends up happening is a loan officer just says, here's the rate, here's a few costs. And then they hand it over and they expect the buyer to be able to put the pieces of the puzzle together.
They expect you to figure it out, and then you get to the closing table and realize that things were a lot more costly than we realized because the loan officer only gave us a little bit of information. So a loan officer should be and should have the competence to give you a full breakdown. What that means is they're going to show you against Section A Fees, the things that they charge, but they're also going to give an estimate of all the other costs in the deal, things that they don't even charge.
The reason why is because this is the most ethical way to treat people is to show them here's what you can expect moving forward. That's the loan officer's job is to give you the expectations upfront. So if they're just showing you rate. And that's it. Then that's not really a good person to work with because they need to show you the rate. They need to show you what they're charging, does that rate cost points? Because sure you can get a 1.9% on your mortgage, but is it going to cost you $6,000 in points to pay that down to that rate? It's possible. The rate is irrelevant at that point if it's going to cost so much money. So I want to see what is the lender charging and then what is an estimate of all of those other costs.
Because sometimes the lenders don't include that because they want to win your business. And then once they have your business, then, and you're under contract, then that's when they say, "you still have all these title fees and insurance fees". Again, they don't charge that, but they should have shown that to you upfront.
Another one is taking longer than 24 hours to respond. Now, keep in mind, a, in a market like this, lenders are crazy, backed up with so much business going on, but still, you should be able to hear back from a loan officer within 24 hours, whether that's a text, an email or a phone call, you should hear back from them within 24 hours. If you don't, then that's when maybe we needed to jump to another loan officer.
Then finally, this is not set in stone, but if you feel an easiness, that's a perfectly good reason to move to another lender. Ultimately, you want to trust your gut.
I had an interview with Eric Martinez who just purchased his home recently and he said I actually stopped working with my first loan officer, just because I wasn't feeling the energy. He didn't have the same energy as I did, and that's a perfectly good reason to go with another loan officer.
This is a process that you're going to be in for probably 30 plus days for him. It was a six-month process. So you want to work with somebody who you enjoy working with. So if you feel an uneasiness or something, just doesn't sit right. Then it's perfectly okay to move to another loan officer.
So now finally do the numbers actually matter when we're comparing these lenders? The short answer is "yes", but there's a couple of little caveats here. So just because it's cheap doesn't mean it can close. And this is often true of a lot of these lenders that show you, they just flash low-interest rates all over the place. Just because they can give you a cheap quote. It doesn't mean they can actually close on time.
And this is where, why a lot of realtors have frustrations with online lenders, these lenders that just show rates. But maybe they're not effective at actually closing the loan because if they can't close it, then you can actually miss out on your house if you're not inside your contract closing date.
Also, sellers tend to not enjoy online lenders and more particularly sellers agents, don't prefer online lenders. And this is where some of these cheap lenders that you might see can actually close on time and they tend to have a reputation of not being able to close on time or just having miscommunication or a lot of frustration in the process because there can be some miscommunication. Because what these lenders are trying to do is they're trying to win your business just based on cost and not based on the service and you need to have a mix of the two.
That's why it's good to prioritize an effective lender who can close on time versus a cheap lender for your purchase. Because when you're purchasing, you have to keep in mind, you're under contract. You have a timeframe that you need to meet to close on that loan, and if you don't close, then the seller can void the contract. They don't have to extend it. You can actually lose out on that house. If the lender doesn't close on time for you. So you want to prioritize an effective lender, a well-trusted lender who can close on time, who can help you through the process. Who's good at service. Then if you want to refinance it, you can always use an ultra-low, cheap lender in the future to get a lower rate.
When you're comparing different lenders. So this credit union, a broker, and a bank, an easy way to compare is actually page three on your loan estimate that these lenders will give you has a comparison section.
It's going to show you in five years, the total you paid in principal interest and mortgage insurance, and low income. And the principle you paid off. So the top number is the most important. That's going to show you what you've paid in the total costs of this loan.
So it only shows us a five-year horizon, but this is going to give us a really good idea to see you can put page three side-by-side with all of these lenders and see, which is the cheapest one. That's probably going to give you the best, and the lowest net cost loan option.