- The Washington Times - Thursday, March 31, 2011

While some enthusiastic potential homebuyers jump right into touring homes or perusing the Internet for properties, wiser buyers will shop for lender services before they shop for a home.

Among the many reasons that consumers should interview several lenders before choosing one is that each lender interview can be an educational experience. Potential borrowers can learn about their loan prospects while they pick up clues about whether they will be comfortable working with this lender.

The lender-borrower relationship is intensely personal, since borrowers must disclose every detail of their finances. For most people, the best place to start shopping for a lender is by gathering referrals.

“Buyers should talk to financial planners and Realtors to ask for referrals because the opinions of these professionals are valuable,” says Nathan Burch, president of McLean Mortgage Corp. in McLean.

Brian Fein, regional sales manager for Mortgage Master in Rockville, suggests that consumers reach out to friends, family and colleagues or anyone they trust for references, including Realtors and title companies.

“Consumers should actually ask for referrals for a lender and a loan officer, because it is essential that people work with a qualified, licensed loan officer and a lender that has been in business for a long time,” Mr. Fein says. “There have been so many changes in the mortgage industry within even the past six months, so when you ask for a referral you should make sure that the person giving the reference has worked with that loan officer or lender within the past six months.”

In addition to asking for referrals from trustworthy business associates and friends, Diane Cook, a mortgage broker with Metropolitan Mortgage Services in the District, recommends checking on the credentials of the lender.

“Mortgage brokers who have had additional training and take continuing education classes earn a ‘certified residential mortgage specialist’ or ‘CRMS’ designation,” Ms. Cook says. “This is a national designation from the National Association of Mortgage Brokers and consumers can search for a broker with this designation on the NAMB website [www.NAMB.org].”

Mr. Fein says consumers can check to see if their loan officer is licensed at the Nationwide Mortgage Licensing System website (www.nmlsconsumeraccess.org).

“Consumers can check on the name of the company and on the name of the individual loan officer for a license, but employees of banks do not have to be licensed,” Mr. Fein says.

Mr. Burch says credentials such as a “certified mortgage planner” and a “certified mortgage banker” can give consumers more confidence that they are working with someone committed to their career in the mortgage business. He also suggests checking with the Better Business Bureau and doing an Internet search for complaints against a lender or loan officer.

Homebuyers can work with a mortgage banker, someone who directly represents an individual lender; or a mortgage broker, who works with a variety of lenders.

“A mortgage broker works with multiple lenders and can shop for consumers to find a loan that works for them,” Ms. Cook says. “A loan officer with a bank will be restricted to working only with the loans offered by that bank.”

Mr. Fein says the advantage of working with a mortgage banker is that a banker is “more hands-on and will have more control because he is handling the process from start to finish.”

Ms. Cook says that there are no additional fees for working with a broker compared with a mortgage banker. However, new legislation that goes into effect Friday eventually may have an impact on the way mortgage lenders are compensated.

“Borrowers should do their due diligence and speak with their own bank to find out what loan options are available in addition to meeting with a mortgage broker,” Ms. Cook says. “Sometimes big banks are overloaded with too many applications and cannot provide individualized service, but everyone should check first with a financial institution where they have a banking relationship.”

After gathering a few referrals, potential homebuyers should plan several phone or face-to-face interviews with loan officers.

“Borrowers can certainly use the Internet to compare interest rates, but they are better off working with a local lender, someone they can meet with in person,” Mr. Fein says.

Questions to ask during an initial meeting with a lender include:

  • How long have you been in business? How long has your company been in business?
  • How many loans have you personally closed?
  • May I have some references from previous clients?
  • What fees will I be charged?

Mr. Fein says, “A good-faith estimate won’t be provided until the borrower completes an application, but a lender can provide an ‘estimator’ sheet that can be used for comparison purposes when someone is shopping for loan services.”

  • Do you specialize in any particular type of financing?

For example, investors may want to work with a lender who has completed a number of investment loans, while first-time buyers may prefer working with someone with plenty of experience with individuals who are new to the real estate market.

  • What kind of paperwork do I need for a loan preapproval? When will the preapproval expire?
  • Can you help me if I have credit issues that need addressing?

“One of the most important parts of this initial meeting should be a frank discussion between you and the lender,” Mr. Fein says. “The lender should have a checklist of questions to ask you, such as your estimate of your price range.

“It is important to discuss your comfort level with your monthly payment as opposed to how much you want to borrow. This part of the discussion is much more important than the current interest rate, because borrowers need to think carefully about how much they want to spend on their housing each month in terms of their entire budget.”

Mr. Fein says borrowers should consult with two or three lenders to get a comparison of what they will be like to work with, not just to find the one with the lowest fees or the lowest rates.

“Borrowers should be looking for an experienced loan officer who will set their expectations appropriately and who will make the loan process work as smoothly as possible,” Mr. Fein says.

Taking the extra time to find the right lender can not only make the buying experience easier, it sometimes can make the difference between buying a home and being unable to arrange financing.

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