What to Expect – Getting a Home Loan
Getting a home loan these days can feel like you are stuck in a customs line hearing “Your Papers Please…”.
Like you have something suspicious in your luggage!! That is because Lenders are companies that have internal cultures. Some of those cultures have been shaped by legislation and fines and are now very conservative. In those cultures, the tie never goes to the runner like in baseball. Somewhere in these organizations, a person is being tasked with enforcing their house underwriting rules about paperwork and loan documentation. That person may even be rewarded for no post-closing loan issues. So, since the only relationship in play is the one that affects their job and compensation, they can issue demands left and right so that their company “never again” takes a bad loan due to the new government regulated buy-back conditions. Perfectly understandable. Still sounds like “Your Papers Please…”. There is nothing mean-spirited about this. It is actually very matter-of-fact and non-emotional on their end. Big banks can be examples of this and I am not picking on them for any reason other than to prepare our clients for what this experience can feel like.
Another factor in play with larger Lenders is that they may choose to artificially lower their interest rates to capture more of your business down the road (banking, credit card, etc). This is usually the draw or “teaser” if you will. The prospect of a lower rate can be down right irresistible at the beginning of the process. However, when your Earnest Money is at risk and the Seller threatens to take it because you cannot close on time – the situation can be very stressful.
Make no mistake – Lenders are approving loans and it does not take 20% down.
There are also Lenders who are willing to get the deal done if it “should be done”. These companies are typically smaller and more local. These “correspondent” Lenders have more flexibility to consider exceptions rather than continue to badger the Buyer for more documentation. Why would they do this? It is simple. They make their money based more on personal relationships and originating home loans than banking services so they work to preserve the “relationship” that brought them the business in the first place. Most loans have to conform to Fannie Mae guidelines because they are resold to loan servicing companies. This means that there are many guidelines that have to be met regardless of the Lender. However, there is still enough latitude to allow the loan approval process to be thorough without making you angry. Some of these smaller companies actually lend their own money too which means they have even more flexibility.
Our goal for our clients is to have them use a Lender that will only ask for what they really need when it comes to paperwork. We use Lenders (or more accurately Loan Officers who work for Lenders) who exude confidence, advocate for our clients, help them take the shortest route possible on documentation, communicate often and close on time. People do have choices – they just don’t have choices at the END of the process. At that stage, you just have to suck it up and pacify the monster you chose.
- Get personal referrals for Loan Officers from people who know first hand about recent performance
- Shop around with a few to compare
- Work with a professional to help make sense of all of the numbers so you are comparing apples to apples. Also to compare the conversations and service experiences. Not all Loan Officers have the same sense of urgency and “can do” philosophy.
- Work with someone local so if there are issues, you can go visit them (or their boss) in person.