The 7 Questions You Must Ask Your Mortgage Lender
When it’s time to find a loan, not all mortgage lenders are the same. Choosing a lender with a solid reputation in D.C.’s highly competitive real estate market can often decide the winning offer. I highly recommend interviewing prospective lenders. Here are the questions to ask BEFORE deciding which lender will earn your business.
- What is Your Response Time? What you’re looking for here is a lender who is available to you as close to immediately as possible. Real estate is a 24/7 business. I am always reachable by phone or email well beyond traditional business hours/days and I expect a lender to do the same. If a lender isn’t available evenings or weekends, or takes more than a few hours to respond to an email or phone call, it could make the difference of you getting a house, or losing one. Ask the loan officer how responsive they are and what hours they keep. And don’t just take their word for it! “Test” this out when you are communicating with them in the initial stages of your research. If you aren’t happy with their responsiveness now, it won’t get better.
- Where is Your Office Located? Local is best. That isn’t to say out of town lenders are bad, but a local lender understands the pace of the market, works with appraisers who are familiar with market values and knows the intricacies of doing loans in this area. There is also a better chance that a listing agent has heard of or worked with a local lender. This can work in your favor when you make an offer on a property, since they will assure their seller that this is a well-respected lender.
- Is Your Underwriter in the Same Office? Buyers do not realize how critical this is until they are in the middle of a loan and it goes off the rails. Your loan officer having direct access to communicate with the underwriter who is the decision maker is of the utmost importance. With some lenders, their underwriting is in another city or state entirely. Not only does the loan officer not know the underwriter, but their file, a.k.a. your loan, goes into a queue and gets assigned to an underwriter who can develop a list of additional requirements. Once you satisfy those and your loan officer provides the documents to underwriting, it rarely goes back to the same underwriter. It lands back in the queue where it can be assigned to anyone in the pool and they may send another list of different documents. I’ve seen clients get stuck in this vortex for weeks and it never ends well.
- How Long Does It Take to Turn an Appraisal Around? In a market like D.C. where buyers often have to waive their contingencies to secure a home, it’s important a lender have a quick turnaround on appraisals. This is bank specific and depends on who they use. Non-local banks tend to employ national companies which dispatch appraisers and it’s often the case that an appraiser may be licensed to work in D.C. but they lack the knowledge of the market here. Often if they live far they only come to D.C. a certain day of the week. All of this can slow the process down quite a bit.
- How Long Does it Take After All Documentation and Appraisal is Received to Underwrite the loan? It should be a week or less. If it’s more, there is probably a lot of red tape the bank has to get through and that often is not a good sign.
- On Typical Loans, How Often Do Underwriters Ask for Additional Documentation? This should be uncommon or very minimal since experienced lenders know what their underwriters will require before the loan can be approved.
- How Quickly Can You Close a Loan? The answer should be 30-45 days.
Other Things to Know:
I only recommend lenders with proven track records in offering competitive rates, responsiveness and ability to close on time. I do not receive a penny of compensation for any of the recommendations other than knowing you are working with an honest, trustworthy lender who will get you your dream home.
Credit Unions: Buyers often hear that their credit union will offer lower interest rates. Often they do, but the interest rate is just one piece of the puzzle. Ask about/test their responsiveness and ask who your point of contact is and if you ever be passed off to other “team members.” Continuity of Service is critical in ensuring nothing falls through the cracks. And always ask about their “fees” which can often offset that low rate you locked.
Online Lenders: Often advertise low (teaser) rates, but lower rates don’t matter if the lender cannot close on time. The online lending world’s unfamiliarity with our market here often results in a learning curve for the loan officer that we won’t have time to nurture.
Your Personal Bank: It is totally normal for you to want to use your personal bank. The truth is that having your accounts in the same place often doesn’t matter – you will still have to send in the statements. If you go this route, make sure to have a local loan officer (ask me, I have some good names for the big banks!) Also know that their approval process can be filled with more red tape and closings can take 2 months at the biggest of the national banks.