One of the things that really makes me nervous is when my clients want to use their own lender. If I’m dealing with a seasoned property owner, I’m willing to take their word that this company is good. But when I’m dealing with a first-time homebuyer, that’s a whole different story.
The reason I feel uncomfortable is because I don’t have a track record to go on.
What’s important to understand about mortgage brokers and direct lenders is they are involved at the beginning, middle and end of the purchase process. Getting someone approved up front today is critical. You can usually get a pre-qualification letter from a lender in a few hours because all they are doing is running your credit score and taking your word on your assets and income. The more complicated and time-consuming pre-approval is a full review of your bank statements, tax returns and other supporting documentation. The approval is for both you as a borrower and the property as collateral.
Not only does the lender do an internal review but many loans are re-sold and have to be approved by the investor as well. For all loans here that are under $729,000, that usually means review by the Federal Housing Administration.
If you don’t have much experience as a buyer, how do you really know how quickly a lender will process your loan? Anybody can tell you what you want to hear to get your business. It’s another thing to perform to those expectations. And therein lies the problem.
Your Realtor has knowledge of who can and cannot perform tasks on tight time lines. Because of long-standing relationships, your Realtor can apply pressure to move things along. That won’t be the case with a new lender that neither of you knows well. So when a Realtor suggests someone, please take that advice. To ignore that puts your purchase at risk, increases your stress and wastes time.
Here’s a real-life example. My clients were adamant about using a large out-of-state lender. The bank said itcould give full approval for an FHA loan in three weeks and close escrow in six weeks so we wrote a contract with those time frames.
Well this bank with its Midwest processing center didn’t even order the appraisal until we were two weeks into our contingency period and the appraiser took almost a week to get it back to the lender. As a result, the buyer had to ask the seller for a 10-day extension on the financing contingency to get full approval. Hard to believe but it actually took the bank almost one week to read the appraisal and then realize that it wouldn’t be approved by FHA so a second appraisal at more cost to the buyer was needed.
Now we asked for a second extension, which made it clear we would not close escrow on time. Of course, if the bank selected an appraiser that resided in the same county as the property, we would have gotten better results because of the appraiser’s familiarity with his area.
Oh, by the way, five weeks after we started the process they wanted more documentation. One wonders why they didn’t ask for that weeks ago.
No surprise, the buyer is getting stressed and so is the seller whose plans are being delayed. I’ve bugged the bank almost daily but it doesn’t really care because I’m neither the client nor someone who may use that bank again. The good news is this sale will go through, but not on time. Luckily the buyer planned on closing before the lease was up and the seller had flexibility in delaying their purchase. Had we not planned it this way, it could have had an ugly outcome with a double move, storage costs, hotel costs and some unpleasant arguments.
So when your Realtor recommends someone, listen to them pro. Otherwise you take your chances.
Steven Hyman is the broker and owner of Century 21 Sunset Properties. He can be reached at 726-6346 or century21sunset.com