Trust, But Verify (Your Lender)
I woke up this morning to a text from a first time home buyer client, it read: “how much time do I have to shop lenders before it’s too late?” M is 25 years old, a rock climbing coach and saved $75,000 while living at home with his parents to achieve his goal of owning a home. He came to me pre-approved with a lender I’d never worked with. We’ve been under contract for over a month, waiting for the Seller to satisfy their suitable housing contingency. The message was not one you look forward to this late in the game and that early in the morning!
The gist is that the lender utilized a first time home buyer program likely intended for folks with a lot smaller down payment and assets than M. The benefit of the program is a reduced interest rate, but it’s restrictive in how much savings you’re allowed to have. There’s a bit of irony in a first time home buyer product that limits one’s liquidity. M is a saver and understandably concerned about being denied the reserves. Further, the lender had told him that he qualified for a closing cost grant which he in fact did not. To remind you, we’re more than a month into our contract. Earlier in the deal, he was told his rate was locked, but when I reached out to his lender with a question, the lender said he’d been floating it.
M has been a dream to work with. Smart, soaks in everything we cover on showings, does research and expresses gratitude for my time, insight and perspective. I can’t say the same for every client, but I’m lucky that it’s the majority. Sometimes by the time buyers get to me their skepticism has started to form a callous, and with how regular disappointment is in this industry, I completely understand. Friends and family fill their heads with woe, tell horror stories and amp up their vigilance.
This is why I keep a tight knit crew and hold high standards for the lenders and attorneys I work with. I know all too well how one bad apple can spoil the bunch. And let me be clear, the bunch isn’t the deal, the bunch is the client’s sense of security, comfort and confidence. Paramount in any real estate transaction is the client’s sense that their fiduciary responsibility is being taken seriously and they’re in caring, capable hands.
There’s only so much I can do when someone comes to me with a lender. I don’t want to steer them. I don’t want to make assumptions. I don’t want to erode the trust I’m developing by moving them away from the one decision they’ve made before getting to me. However, I do want to express a few important things I’ve learned about lenders over the course of my career and here they are:
Big box shops largely perform just as you’d expect them to. Think: Bank of America, Sovereign Bank, Citizens, Rocket Mortgage, etc. Slow communication, limited program flexibility and poor customer service. My hypothesis is that they don’t have to work as hard to earn their client’s business due to the immense volume of leads they receive by being the Walmart of lending. If they lose you, there’s always their next lead.
If your lender doesn’t get back to you the same day or isn’t available on nights and weekends, there’s someone with better customer service out there who wants your business and can match their rate and terms.
The bait and switch. I cannot tell you how many times a client of mine has been baited and switched by a lender. They go through the pre-qualification process and they’re quoted a phenomenal rate, so phenomenal I don’t trust it! I have them ask for a loan estimate and low and behold, there are hidden fees and points artificially reducing the rate and undisclosed to the buyer.
Just recently a couple came to me with a pre-approval from their local credit union. Their credit had been run and their pre-approval read 5.875%. We go under contract, the lender discloses the loan and the rate is 6.5%. BYE FELECIA! Don’t tell me they didn’t know, they’d already assessed all rate determinant documentation. Sneaky, amiright?
A good lender will ALWAYS advocate for a buyer going with the rate, terms or program that serves their best interest. The lenders I work with understand that this is or is one of the biggest financial decisions of a person’s life. They may be disappointed to miss out on business but they’re genuinely happy for anyone who can secure cost savings.
Many of the people I work with become my friends but effectively start out as strangers. I do my best to develop relationships that respect the relationships that have already been formed B.A. (before Andrea) but ultimately if there’s a product out there that will save them money or provide a better customer experience, I’m piping up!
