My team and I combined have sold over 1,200 homes in our careers. We have seen deals fall apart for every reason you can imagine; from horrific findings in home inspections to buyers passing away mid-escrow. The cause we find most frustrating though is deals cancelling due to lender issues. The reason lender issues fall into a different category of frustration is because most are avoidable by having a good lender involved from the beginning. Real estate transactions already have enough moving parts that can go wrong, we have to make sure we control every variable we can.
Hear it straight from the horse's mouth
For this topic, I thought it would be most beneficial to have a trusted lender write about how to choose a lending partner. This gentleman, Ruben Lopez, is amidst the top 1% of Prospect Mortgage and has personally helped countless clients of mine.
"Choose your lender like you choose your brain surgeon"
As a mortgage broker, I often chuckle when I hear realtors talk about their horrific experiences with their lender. It is not that I’m unsympathetic. It’s just that the stories often sound the same. They frequently open with a common theme: the lender was an out-of-town family friend of the buyer, or worse, a representative from an obscure online company who offered some juicy, irresistible interest rate. The plot is also often the same: there was no initial consultation other than a brief phone discussion about rates. Then it gets interesting; days go by with no communication, calls go unanswered, and contract contingency and closing dates become treated like mere suggestions rather than legally binding conditions. The conclusions of these stories are sometimes scary. The realtors found out at the 11th hour that the loan had some difficulties. Or worse – and more common – that same lender who gave every assurance that this loan was a “slam dunk,” simply couldn’t get the deal done in the end.
many lending issues are avoidable
I’m not trying to judge anyone. Any lender who has been in the business more than three days has surely had their share of transactions where things seem to go sideways from the get go. In fact, I usually try to defend my lender peers by explaining to realtors how complicated today’s lending process can be. But, I do see a lot of lenders making mistakes in the area of “client experience;” mistakes (that could have been avoided) that leave their realtor partners pulling their hair out. So, for realtors, here’s a simple three step guide to selecting your lending partner.
select your lender with these 3 steps
#1: Choose by ability, not rates
Choose your lending partner based on their ability to close a loan, NOT on the rates that lender can offer. The reality is that most lenders’ rates differ by very little. As a very smart real estate broker once told me, “What good is a low rate quote if the deal doesn’t close?” Today’s lending process is like brain surgery. Do not allow your clients to put their financial future – and your commission -- into the hands of someone just because they are the lowest bidder. An educated, experienced loan officer can offer a host of services that are much more valuable than a low rate.
#2: Make sure they are an educator
Ensure your lending partner has an 'educator' approach to dealing with your clients. Remember that the lender you refer is an extension of you. So, listen to a few lender-buyer conversations and take note of your lender's approach. Also, make sure your lender always performs a thorough consultation with your buyers during the pre-approval process. Look for clear signs that your lender genuinely tries to understand each buyer's overall financial goals, and puts together a sound mortgage strategy unique to your buyer’s needs. A great lender will take the time to educate your buyers, and when they do, two things will happen. First, your lender will earn their trust. And secondly, you will look like a superstar for referring a top notch partner.
#3: Keep it local
Ask any experienced realtor about out-of-town lenders and you'll understand why. Strongly encourage your buyers to use a local lender, preferably someone who you know, trust and regularly -- perhaps even exclusively -- work with. Non-local lenders can add complexity to an already-complex transaction in many ways. First, using an out-of-area lender could bring an out-of-area appraiser who may have a hard time bringing in the property at value. Also, listing agents prefer pre-approval letters from (local) lenders whom they know and with whom they may have even worked. This is especially advantageous in a multiple offer situation. Finally, the more local your lender is, the easier it is to get updates on the status of your deals.
Trust is the most important factor
The bottom line is that your lender partner should be someone you trust completely. It should be someone you do not have to call each week to get a status on your buyer’s loan. And, if your lender partner is someone you truly enjoy on a professional and even personal level, you will really start to see your business fly. Doing regular business with a lending partner who is also a friend means that you both have a deep, vested interest in the other person’s success; and that makes all the difference in the world.