Article 3 - What should I Ask a Mortgage Lender?

Mortgage lending today is a little trickier than it was a few months ago.  Lenders have gone back to more traditional standards of qualifying buyers.  Buyers are expected to have some of their own money for the down payment and reserves, as well as good credit. 

Now you are out shopping for a loan.  As a qualified buyer, you should expect nothing less than to have a lender that would love to work with you and will provide excellent service.  Try to get a comfort level with the lender’s expertise, service and ability to perform.  If you are not receiving the customer service, interest rate or loan program you believe you deserve – find another lender.  You are not obligated to work with a lender simply because they have pre-approved you, unless you have given them money to lock in a rate for you.  Be careful about committing to anything before you have the details of your loan in writing.

Starting the Process:

• Start by calling various lenders.  If you want to work with an independent Loan Broker, do yourself a service and call a few institutional lenders to gage the difference in terms of programs and fees.
• Do not let a lender pull credit reports on you without your permission; don’t give them your social security number and date of birth until you are ready to work with them.  Know your credit score in advance so that they can give you information based on your score.  Remember all programs vary depending upon your credit score, the loan amount and how much you are putting down.
• When you meet with your lender of choice, make sure you set the proper expectations: 

• Make sure your lender knows when you need to close escrow and confirm they can get loan approval and funding in time for the closing date. It takes a couple of days at least from funding before the loan will close escrow. 
• Verify that they will have your loan approval by the date in your purchase contract requiring you to remove your finance contingency (typically 20-days).
• Make sure your pre-approval letter explains the type of loan(s) you are getting, the down payment amount and any conditions needed to get final loan approval.  The conditions are important because you need to get those resolved before your loan(s) will fund.
• The lender will need to pull your current credit report themselves to verify your credit score and information.
• Be very clear with the loan officer regarding your mortgage payment budget.  They should either find you a loan with monthly payments in your comfort range or let you know immediately that they are unable to.  Insist on a formal Good Faith Estimate.  If the loan details outlined in the Good Faith Estimate aren’t what you expected, ask the lender to find a loan program that does work for you - or find a different lender before it is too late.  By law, lenders are required to give you a written Good Faith Estimate. 
• Find out what type of communication the lender prefers (phone or email); get a “direct line” phone number and email address; also the main office phone number and fax number. Don’t hesitate to call a manager if your loan officer is not being responsive.
• If you are working with a Broker, find out who your actual lender will be (the financial institution that will be funding the loan).

Questions:

• Ask a lot of questions.  Find out about the various programs available and how they would work for your individual circumstances (i.e. 30-year fixed, 40-year fixed, 5-year interest only, etc.). 
• Find out what the interest rate will be and any other fees such as buy-down points, origination fees, etc.  If you are getting two loans expect the “first” mortgage to have a lower interest rate than the “second” mortgage.
• Ask questions about the payments and the fees.  If the payments are too high, have your lender present options to bring the payment down.  You can pay points to bring the interest rate down.  This may cost you a few thousand dollars up front but save you much more over the life of the loan and it will help make the monthly payments manageable.
• Find out what you need to provide in order to get loan approved; make sure you deliver everything on time as promised.  The lender cannot submit your loan to underwriting without the proper documentation (bank accounts, W2’s, W4’s, retirement account statement, etc.).  If the lender asks you for additional information, you need to provide it quickly. 
• If your lender suggests you do certain things to improve your credit score for a better loan program and interest rate, do it.  If they offer to submit paper work to the credit reporting agencies, make certain you agree with and understand what they are doing on your behalf.
• If your credit score is under 720, ask your lender to run a credit analysis for you and give you instructions on what you can do to improve your score.  Typically, this will include paying down or paying off certain revolving credit cards and sending the paperwork to the credit reporting agencies to remove incorrect information from your credit report. 

Funding and Closing:

• Ask your lender and the escrow officer about how the process of funding and closing works.  For example, find out when you will need to sign your papers and put your money into escrow to meet the timelines for internal reviews, funding and recording.  It takes a few days from the time you sign your papers and put your money into escrow for the loan to fund.  It then takes another one to two business days for everything to record.  Once the loan and deed paperwork are recorded with the County Recorder’s office, “title” to the property transfers immediately into your name and you officially own the home. 
• The home does not belong to you until title has transferred from the Seller to you.  If your loan funds on Thursday or Friday, it may not record until Monday or Tuesday of the following week.  You can’t move in until title has transferred from the Seller to you.  The Seller may be willing to give you a “garage pass” to put your furniture in the garage, but do not count on this without a prior agreement since it creates a liability for the Seller. 
• Don’t expect others to just take care of everything for you.  In order to get a home closed, it takes perseverance on your part.  If you don’t hear from anyone for a few days, call and find out what is going on.

Be sure to check out the story on “How can I Improve My Chances of Qualifying and Staying Qualified?”



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