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Updated:         May 31, 2018

When you buy or refinance a home, one of your primary concerns will be finding a lender you trust and upon whom you can depend to assist you through the entire process. While borrowers often select their lender by calling around "shopping" for interest rates, it is not the most effective way to select a lender.

Interest rates can be volatile, changing quickly and without warning. Thus, an interest rate you are quoted today may not be available when you are ready to proceed with your transaction. More importantly, in the absence of an interview during which the lender can obtain specific information about your individual qualifications and loan needs, the lender will be unable to provide specific information or recommend the loan program that will best meet your specific need.

Finally, the rate quoted via a phone call is likely to be the lender's 15 day price. Obviously, most callers will not be in a position to close their loan within a fifteen day period. The quote, in essence, is merely a "get them in the door" quote. A more realistic interest rate quote may be one for a 30 or 45 day period . . . a more realistic period of time for closing a purchase or refinance transaction.

Today's loans are typically sold to investors. The result is that all lenders today have all the various loan options available and their funding sources are all mostly the same. Thus, interest rates, at any given time, should be the same for all lenders. While shopping for rates during any specific time period, one should be suspicious of any lender's quote that is far different than all the others . . . it is likely to be a quote that is "too good to be true".

So, if interest rate shopping is not the advised way to select a lender, what should a prospective borrower look for in choosing a lender? Here are a few factors for your consideration.

1. Select the lender who actually "interviews" you, asks about your future plans (i.e.; how long do you intend to reside in the home) and exhibits the desire to counsel you regarding the many available loan options. Then, you will be better able to rely upon the information that you receive. Additionally, does the lender exhibit knowledge and a willingness to educate you? Remember, the loan process should not be a mystery and knowledge is power . . . your lender should be willing to make certain that you understand all aspects of the lending process. Only then will you be in "control" of your loan process.

2. Know the difference between the various "types" of lenders . . . mortgage bankers, mortgage brokers and portfolio lenders. A mortgage banker not only originates the loan but also underwrites and approves the applicant and then funds the loan. Unfortunately, since a mortgage banker typically loans their own money, there can be times when they either do not have funds available or the pricing may not be the most competitive available in the market. If the mortgage banker does not have a loan program to meet your need, you may not be offered the most appropriate loan for your specific need. A portfolio lender is one who has sufficient resouces that they can sometimes offer a loan that they will “keep in lthier portfoliw” rather than selel it into the secondary market. In this way, a portfolio lender may be able to do a loan hat cannot otherwise be accomplished by other lenders.

On the other hand, a mortgage broker serves as a conduit to several lending sources. A significant advantage of a mortgage broker is the ability to submit a loan request to different lenders. This allows the mortgage broker to "select" the lending source that will best meet the need of the loan applicant. A mortgage broker's lending sources typically include mortgage banking conduits as well as portfolio lenders. A mortgage broker might be thought of as a "one stop shopping" service for loans.

Years ago, the savings and loans were the typical portfolio lending sources. Their expertise was the shorter term loans like equity line loans, etc. After the savings and loan collapse, Credit Unions stepped into the vacated lending arena. While Credit Unions will make long term mortgages they mostly lend their depositor's funds on the shorter term loan instruments. When making a long term home loan, they often require the borrower to qualify under the same guidelines as other mortgage lenders. In this way they could use the same conduits for the sale of the mortgages as mortgage brokers. Unfortunately, they are not always as competitive in their pricing. To be fair, it should be noted that these sources will sometimes accept a loan that can not otherwise be placed.

3. It is a good idea to check on a company's longevity in the business and their reputation within the community when selecting a lender. Humboldt Home Loans staff has over 60 years of combined experience in the mortgage industry. We enjoy an excellent reputation among all elements of the home finance community.

4. Determine the lender's "lock-in" policy as a part of your investigation. While the interest rate for most loan options can be lock in for periods of between 15 and 45 days, there are a few loan programs that can not be "locked" until the borrower has been approved. Unfortunately, there have been situations in which it has been "implied" that a borrower has been locked in for a rate, only to be disappointed as the transaction reaches its final stages. Make sure that your lender will remain in constant contact with you as you determine the optimum time in which to lock in your loan. Your lender should be willing to provide you written assurance that you have been "locked" at a given interest rate.

5. Finally, when choosing your lender, trust your intuition. Select the lender that you sense will always make decisions that represent your best interest. Who demonstrates knowledge and competency and puts you at ease by listening to you and answering your questions? When you talk to a lender and it feels right, it is likely to be the best situation for you. Stop shopping and initiate the "partnership" with the lender and proceed with your loan.

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