It is sometimes shocking to me as a real estate professional how little emphasis is placed on the most valuable part of the home buying or selling process. And I would venture to guess the average home buyer or seller would not agree, at first, with my assessment of what exactly the most important aspect of the transaction is.
Sure, nothing is unimportant when dealing with contracts, deadlines and inspections. But at the end of the day buyers and sellers share one common concern when dealing with real estate, and that concern is money. Without it, there would be no transaction and therefore nothing would be of importance. Unfortunately, buyers can often be haphazard with where, whom and how they approach getting a loan, which could really them cost big.
It’s easy to assume getting a great mortgage in today’s world is as easy as filling out a mortgage application and scrounging up a down payment. With all the ads and commercials out there I can see why buyers believe getting a mortgage from one bank versus the other is the same as selecting which food truck to go to for lunch. But after working in real estate for 11 years and witnessing multiple market shifts, I can unequivocally say there are major differences between the various lenders, some of which can make or break your next purchase or sale.
Banks may be your best partner in managing your checking accounts and credit cards, but when it comes time to lending money, they are often uncompetitive in their rate, unresponsive and most importantly lack ability to perform under tight deadlines.
Latent in any sales contracts are deadlines. You can expect two or three deadlines that deal specifically with your loan and require the lender’s compliance. And with those deadlines come consequences (to you) if they are not met by the lender.
We live in an area where housing markets are often competitive, so every detail that gives your offer an edge ultimately matters.
At the risk of getting too caught in the weeds, I’ll summarize a key point in one sentence: A buyer’s transactional speed and efficiency matter a lot to a seller, so buyers are often asked to shorten all of their contingency periods (within reason) to accommodate a seller’s angst.
Like it or not, most sellers have come to expect this after many years of a healthy sellers market.
So when your big bank (Wells Fargo, Bank of America, PNC, Chase) is dragging its feet on ordering an appraisal, or being unresponsive with a call center handling your questions, or worst of all requiring four layers of “approval” (each taking three business days) at every step to move your file forward, you are risking not being able to perform under those tight deadlines and falling into breach of contract.
Plus, many of those banks do not work on weekends, which can be inconvenient for you.
Online lenders don’t come with a great reputation for many of the same reasons big banks and credit unions don’t. Again I go back to local market knowledge and efficiency being two huge difference makers in the homebuying transaction. Without local knowledge we can easily come across an appraisal issue that simply means the lender won’t make the loan for the contracted price because they don’t see the value in the contracted price.
I’ll give you an example.
A few years back, I called a well-known 1-800 lender on behalf of my client who insisted on using it. When I said we were looking to write an offer on a two-bedroom condo for roughly $750,000, a mortgage rep told me that where the company is headquartered, 750k could buy you a six-bedroom mansion on a golf course. I was then promptly transferred to a manager, who wanted me to explain why the loan amount for a condo was so high. Suffice to say the buyer chose to go a different route and it all worked out for the best. Not saying it wouldn’t have using the dot com lender, but there was an immediate red flag or two.
So what are the alternatives — how do you succeed?
When it comes time to shopping for a mortgage, I would strongly encourage you to start with a local and trusted lender.
Believe me when I say there are a ton of great, honest and competitive lending companies in the D.C. area that all understand our local market conditions and will be fantastic partners in helping you compete for the property you want. They can and will move your file through the underwriting process, because they typically have in-house underwriters who work one or two desks away from the loan officer. They also have a list of trusted local appraisers who can get out there and finish a report in as little as seven to 10 days if necessary. Plus, they are often able to be a resource seven days a week and for every bit as good of an interest rate (if not better) than any credit union or bank I’ve seen.
Get a few quotes from local lenders, then your bank if you want. Ask each of them about their process and how long each step takes. Don’t just look at their rate but ask for a full “good faith” estimate where they itemize each charge.
My guess is your local lender will be less expensive and better situated to get you that dream house regardless of the competition.
You already have plenty to manage when buying a house, so selecting the right lending partner will give you one less thing to manage.
Jonathan Fox, a real estate agent and principal of the Fox Group with Coldwell Banker Residential Brokerage Dupont/Logan, writes an occasional column about Washington-area housing issues.