Lenders are competing hard right now on interest rates, as you might imagine. As buyers decide which lender to work with, they may be tempted by some great looking rates being posted by online lenders. But working with an online lender may have its pitfalls.
So what should consumers know when choosing between an online and local lender?
As Realtors, Ken and I work with lenders every day and in the context of a home purchase, there are some important aspects of working with a mortgage lender that consumers should keep in mind.
First, it's important to know that the lender a home buyer chooses to work with can be the reason a buyer gets the home they love or loses out to another interested party. This isn't intuitive to people who don't work in this industry everyday, so why is this the case?
Realtors know which lenders have fantastic reputations, do their homework up front, and make the financing piece of the transaction run smoothly. And we know which lenders have less than stellar reputations and can end up throwing a wrench into the process mid-way through the transaction. As a listing agent, it's part of the Realtor's job to vet the lenders and advise their sellers on which lenders have the greatest chance of getting the job done. For sellers, the buyer's loan closing is the difference between them moving on time or having to start over with another buyer- so the loan piece of the puzzle is clutch!
In our market, having a local, experienced, reputable lender is the gold standard and they will:
- Do all their pre-approval homework upfront before submitting a pre-approval letter. And once we have the buyer's pre-approval letter we know we are good to go. Surprises should be kept to a minimum!
- Be available on the weekends for questions and to write updated pre-approval letters if necessary.
- Be available on the weekends to call listing agents on their buyer's behalf. This should be part of their process and goes a long way to help their buyers in the case of multiple offers. Lenders will call the listing agent for the home their buyer is interested in and let the listing agent know the buyer is well qualified to purchase that home.
- Be ready to help in case complications arise. Since financing can sometimes be tricky, it's important to have a person to help you who is invested in the process and outcome. Local mortgage lenders want to uphold their reputation and will be willing to pitch in and problem solve if the going gets tough.
I can't speak to all online lenders, but the reality is they won't likely be available on the weekends, you probably won't get a representative's cell phone number in case time sensitive issues come up, and it isn't typically part of their process to call listing agents on their buyer's behalf. While online lenders may offer low interest rates or loan costs, we've found the trade-off in accessibility, customer service, and diminished competitiveness in our market usually isn't worth whatever savings were gained.
If you would like the names of some local lenders that our clients have had good experiences with in the past, don't hesitate to reach out and we'd be happy to connect you!