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How do I select a lender or loan officer?
If you’re looking to buy a home, selecting a lender or loan officer is a very important decision. That’s the financial arm of your ability to buy a home. And so it’s an important decision. We’re gonna discuss this today. First thing we wanna discuss is the difference between banks and brokers. And it’s not necessarily one being better than the other because there are pros and cons of each.
But just in a nutshell, a bank typically has access to their own internal programs for loans. They have their set of criteria. They have their set of different options that you can choose from. More often times, and some times, they just have one program. And brokers often times have access to many, many many different programs and loans and different lenders that are providing those loans. And so, we’ve found that brokers can provide a lot of different options for you. But if you have a great relationship with a bank or credit union, still recommend talking with them so that you can just compare, and do a little comparison as you’re shopping for the right loan program.
So costs … and we’re gonna talk about a few different things here. There’s the interest rate versus APR, which is really important to understand. A lot of lenders will really promote their low, low interest rates. But sometimes they have higher costs to close the loan. They have a lot of different fees that they could include, or higher fees. A lot of the fees are federally regulated, but they can still vary. So what an APR is, or annual percentage rate, is it includes those fees and the interest rate, combines it all together over the course of the loan, and tells you what the APR is.
And so, if someone’s showing you the interest rate at, say 4 percent, ask for the APR. ‘Cause if one lender says 4 percent, or two lenders are saying 4 percent, but one of them has an APR of 4.2, and the other one is 4.1, well you know that that extra percentage is actually additional costs. So, that’s really important to understand. Also, understanding closing costs and what the origination fees, and being able to compare those across a couple of different lenders.
Now again, they could be pretty similar and so you don’t wanna scrutinize it to death. But it’s important to understand what you’re getting into up front. And then the timeline. So how quick can they prepare everything, and work with your real estate agent, work with the title company, get everything processed, get the appraisal ordered, get your finances, everything in place? We’ve experienced with some bad lenders, we’ll say bad just in the sense of this topic here of understanding the timeline and being able to close and get everything prepped promptly. That sometimes lenders get very busy that they wait til the last minute, or the last week to start processing and underwriting the loan, which is a formal approval process of all the criteria of the loan.
So great lenders will be proactive, and they’ll be able to get things in place early on, and not wait til the last minute. And so you want a lender that’s really proactive. Now pick one, and say, or two in the beginning. You don’t wanna string them both along and then just at the last minute decide to go with one. But in the beginning, start interviewing one or two or even three different lenders, banks, and get in the idea of who you like with a relationship. Who has a great reputation? Who is proactive like we talked about? Who gives you great communication, keeps you in the loop? And just start getting a feel for it.
Of course, comparing fees and APRs and all of that good stuff. But you gotta start picking one and making a slush and start interviewing. Talk to your real estate agent. They may have a few referrals for you as well as talking to your friends. Put it out on Facebook. Hey, anyone work with a great lender? And you’ll start getting some really good response that way. I hope this has been helpful. If you have any questions, feel free to reach out to our team. We’re more than happy to help you out in any way we can.