Shopping Around For A Great Mortgage Lender?

A mortgage, typically the largest financial transaction of your life is far too important to place into the hands of someone who just quotes rates, but is not capable of advising you properly and troubleshooting the issues that may arise along the way. But how can you tell if you are working with a licensed, experienced mortgage professional?

Here is the Inside Scoop on how to identify a professional Loan Officer, and the best lender

Bank Loan Officers (Simply Registered) versus SAFE ACT (Licensed) Loan Officers?

There is a BIG difference YOU need to understand

Washington has been busy protecting consumers from bad lenders right? Not really. They have only done half the job, and sadly, the general perception by the public as to who is the better lender choice is completely wrong. The perception is that the brokers and the non-bank mortgage lenders created all the mortgage problems and the real estate bust. This simply isn't true, and realistically, just the opposite is true.

Consider the fact that Fannie Mae, Freddie Mac, and banks make the rules, and the banks review, underwrite, and fund the loans for brokers.

Changes made to the lending industry in 2011 requires all loan officers to have a tracking number, known as an NMLS number (Nationwide Mortgage Licensing System and Registry). It should be displayed on their business cards, E-Mail, web sites, all correspondence, and most loan documents.

The display of the NMLS number may make many believe the Loan Officer is licensed. Sadly, this isn't true, and working with an unlicensed, untrained Loan Officer can cause you many headaches and hassles.

Simply put, Loan Officers at Banks, most Credit Unions, or Mortgage Companies owned by a bank are NOT REQUIRED to be licensed, take classes, take continuing education, or pass any state or federally mandated tests to be a Loan Officer!

Licensed Loan Officer or Application Clerk

It is hard to determine if a Loan Officer is fully licensed or simply a registered application clerk. When looking up a loan officer on the federal lender verification web site, you have to go to the bottom of their NMLS identification page and look under State Licenses/Registrations or Federal Registration heading.

A LICENSED Loan Officer will say "State Licenses/Registrations" and will have one or more STATES listed with all their state licensing information listed.

An UNLICENSED, but simply REGISTERED Loan Officer will say "Federal Registration" and the something like "Federal Mortgage Loan Originator".

Now I am not trying to make this into a David versus Goliath story, but I am trying to emphasize the huge differences between Loan Officer training and education. As the new licensing and testing requirements rolled out across the country, many Loan Officers who have been unable to meet the new requirements, and especially those who have failed the new tests, have simply gone to the large banks to work.

Questions to Ask Your Loan Officer

Here are FOUR SIMPLE QUESTIONS Your Loan Officer Absolutely Must Be Able To Answer CORRECTLY.

IF THEY DO NOT KNOW THE ANSWERS - RUN, DON'T WALK RUN TO A LENDER THAT DOES!

1) What are mortgage interest rates based on? The only correct answer is Mortgage Backed Securities or Mortgage Bonds, NOT the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions. DO NOT work with a lender who has their eyes on the wrong indicators.

2) What is the next Economic Report or event that could cause interest rate movement? A professional Loan Officer will have this at their fingertips. For an up-to-date calendar of weekly economic reports and events that may cause rates to fluctuate.

3) When the Fed "changes rates", what does this mean and what impact does this have on mortgage interest rates? The answer may surprise you. When the Fed makes a move, they are changing a rate called the "Fed Funds Rate". This is a very short-term rate that impacts credit cards, credit lines, auto loans and the like. Mortgage rates most often will actually move in the opposite direction as the Fed change, due to the dynamics within the financial markets. For more information and explanation, just give us a call

4) What is happening in the market today and what do you see in the near future? If a Loan Officer cannot explain to you how Mortgage Bonds and interest rates are moving at the present time, as well as what is coming up in the near future, you are almost guaranteed to be talking with an application clerk, not a professional with whom to entrust your home mortgage financing.

Be Smart... Ask Questions, Get Answers!

MY NUMBER 1 MORTGAGE SHOPPING TIP:

Google the Loan Officer you are thinking of working with! Do you get any hits? What are they? Does the Loan Officer appear to be highly respected and quoted with lots of links? Then you are probably working with a professional. Can't find anything, or maybe just a listing on the company web site? That probably wouldn't be who I would pick to handle my largest financial transaction.

Mortgage Shop Effectively and Smartly

Once you are satisfied that you are working with a top-quality professional mortgage advisor, here are the rules and secrets you must know to “shop” effectively.
First, IF IT SEEMS TOO GOOD TO BE TRUE, IT PROBABLY IS. But you didn’t really need us to tell you that, did you? Mortgage money and interest rates all come from the same bond market, all lender essentially underwrite to the same guidelines, and all loans have essentially the exact same closing costs.

If someone is quoting a significantly lower interest rate, or significantly lower closing costs, you better ask a few more questions and find the hook. Is there a prepayment penalty? If the rate seems incredible, are there extra fees? What is the length of the lock-in? If fees are discounted, is it built into a higher interest rate?

If you talk with four lenders, and three all same about the same, and one is magically significantly better - you didn't stumble of a great deal. You stumbled on a the biggest liar!

YOU GET WHAT YOU PAY FOR.

If you are looking for the cheapest deal out there, understand that you are placing a hugely important process into the hands of the lowest bidder. Would you ever want to travel in a car or airplane that had been built using the very cheapest materials, built by the very cheapest laborer? Probably not. Best case, expect very little advice, experience and personal service. Worst case, expect that you may not close at all. All too often, you don’t know until it’s too late that cheapest isn’t BEST. That being said – we are not the lowest quote you will see. Of course our rates and costs are very competitive, but we have also invested in the systems and team we need to ensure the top quality experience that you deserve. If you want the cheapest – head on out to the Internet, and we wish you good luck. But remember that this is the largest financial transaction most people will make in their lifetime, and that the cheapest rate on the wrong strategy can cost you thousands more in the long run.

MAKE CORRECT LOAN COMPARISONS.

When looking at various interest rates, closing costs, and APR, do you really understand the math between the various quotes? Don't worry, most people don't. A no closing cost mortgage isn't really no closing cost. The cost is hidden in a higher interest rate. A low interest rate comes with higher closing costs. The lowest APR absolutely does NOT mean the best deal. Since lenders know that many consumers are not educated in the process, they quote based on APR, which is easily manipulated, and worthless as a tool of loan comparison.

UNDERSTAND THAT INTEREST RATES AND CLOSING COSTS GO HAND IN HAND.

This means that you can have any interest rate that you want – but you may pay more in costs if the rate is lower than the norm. On the other hand, you can pay discounted fees, reduced fees, or even no fees at all – but understand that this comes at the expense of a higher interest rate. Either of these balances might be right for you, or perhaps somewhere in between. It all depends on what your financial goals are. A professional lender will be able to offer the best advice and options in terms of the balance between interest rate and closing costs that correctly fits your personal goals.

UNDERSTAND THAT INTEREST RATES CAN CHANGE DAILY, EVEN HOURLY.

This means that if you are comparing lender rates and fees – this is a moving target on an hourly basis. For example, if you have two lenders that you just can’t decide between and want a quote from each – you must get this quote at the exact same time on the exact same day with the exact same terms or it will not be an accurate comparison. You also must know the length of the lock you are looking for, since longer rate locks typically have slightly higher rates.

Again, our advice to you is to be smart. Ask questions. Get answers.

As you can imagine, we wouldn’t be encouraging you to shop around if we weren’t pretty confident that we feel that we can give you a great value and serve you the very best.

More than likely, this is one of the largest and most important financial transactions you will ever make. You might do this only four or five times in your entire life but we do this every single day. It's your home and your future. It's our profession and our passion. We're ready to work for your best interest. Thank you for giving us the opportunity.