One motto I follow in life is: do not be sold, be educated. One of the favorite t-shirts that I have is an old, tattered blue t-shirt that has the words “I Need Advertising To Help Me Decide” written across the front. I love the sarcasm and the not so subtle message. It is discomforting that so many people let themselves get sold, as opposed to taking the time to learn, study, analyze and decide using proper business analytics. I see this in the mortgage world more than you would think.
I am surprised when people choose a mortgage lender based on a phone call that lasts a few minutes. Consumers need to realize that loan officers and mortgage brokers are salespeople, and their job is to sell you on what they have available, not necessarily what is best for you.
How do people get sold or misled?
I have spent 25 years telling people they do not need to refinance when other lenders tell them they should. Some people refinance when they do not need to, and get sold on paying a bunch of discount points that cost thousands and thousands of dollars in closing costs and create a 6 or 7 year recapture period on the costs, when the average refinance I see is more like 12-18 months. Or they get sold on refinancing to an FHA loan with mortgage insurance, off of a Conventional loan with no mortgage insurance, because they have little equity left and FHA only requires 3.5% equity, but the PMI costs are enormous and makes the refinance too costly.
Or I see people getting sold 2nd trusts when they should pay PMI, or being told they can go to settlement faster than they can when they cannot.
Lenders can be less than honest on their Good Faith Estimate.
Sometimes lenders convince consumers that say they have the best interest rates when they only have 1-3 choices of lenders they work with, instead of numerous banks.
Condo Education: I see consumers being told little to nothing about the questions to ask when buying or refinancing a condo. And the list goes on. As I said before, do not be sold, be educated.
Things to look for in a lender
There are numerous data points consumers should be asking questions on. Some consumers do not even know what type of lender they are working with, which is critical. You should also consider asking about:
Experience: of the loan officer, the lender, and the management team.
Website: does the lender or loan officer have one. Do they put useful data on it. And do they use it to be more transparent?
Education: what will the loan officer or lender do to help educate you?
Turn times: what are their average turn times for the type of loan you are doing? Will they put it in writing? Ask for turn times for loan disclosure preparation, appraisal, underwriting, condition review, and preparation of closing documents.
Appraisal Management Company (AMC): ask them who their Appraisal Management Company is (are they good, why were they chosen?), how many appraisers are in it (hopefully as few as possible), and how were the appraisers in this AMC sourced?
Team: does the loan officer have a team? An assistant to access in case they are unavailable? Where is their loan processor located (hopefully local)? How and when is the loan officer accessible?
Getting the best rate quote means nothing if you do not get your loan to closing, and on time. Ask a lot of questions. Do Not Be Sold, Be Educated!