It never ceases to amaze me how people treat the most expensive transaction that they will ever do in life as a commodity. Would you get surgery at McDonald’s if they got into the health care business because it was the cheapest place to get it? Or would you talk to numerous different doctors based on experience, referrals, track record, and interaction with their staff and systems? I know as you read this blog you would say the answer is that you’d go with experience and track record and not shop solely by price, but trust me, when you shop for a mortgage, your opinion will suddenly change. When human beings shop for a mortgage, they suddenly get cheap and ignore experience and execution, even though it is very likely the single most important transaction of their lives.
I constantly have people who have talked to their own bank, a credit union, have scoured every website they can find, and have talked to several large banks, all in an effort to shave every possible penny off of the transaction costs. If you talk to any local realtor who is involved with mortgage financing regularly, they will tell you that the only place to source a mortgage these days is with a local, direct lender. Online lenders have can have issues and so do many other sources. Below is a real email that I recently got from a friend who works at a big bank. This type of story is repeated regularly:
Subject: URGENT Help on a Deal
To: Brian Martucci
I hope you are well.
If you get this in the next few minutes please give me a call or just respond to this e-mail. I have a deal where we screwed up the appraisal. Here is the deal, need to know your rates, and how quickly an appraisal can come back.
Purchase price $899,900
First trust 30 year fixed $625,500
Income, assets, credit, reserves, DTI, are all pristine.
The appraiser that got assigned to the deal has no idea what they are talking about, is not local, and really blew the appraisal and lowballed it. The realtors are furious and I need help, and I need it fast.
Let me know if you can do anything. Appraisal needs to be ordered today and back in 5 days.
It goes on. First of all, I could barely get an appraisal in 10 days, let alone 5 days. More importantly, I’m wondering what the consumer was thinking? Were they just shopping price, or did they ask questions about experience, execution, turn times and reputation? A mortgage is a very complicated transaction and needs to be handled quickly and nimbly, on a very local, grassroots level.
Talk to your local realtor, talk to numerous friends, ask loan officers how they can guarantee appraisal quality, and ask how they can assure you of needed turn times. Many mortgage operations are too sprawling, and they cannot laser focus on an enormously complicated transaction, which is full of minutia and hundreds of steps, and that type of minutia is unfortunately where the current state of the mortgage industry is.
Do not shop solely by price and realize that massive entities are not always good at doing complicated things. Use a local, direct lender. It will save you hassle, contractual issues with the seller when you have to delay things, and ultimately cost.