CHOOSING A LENDER
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
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
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
Why Choose Humboldt Home Loans
web page/choosing lender