There is more involved in selecting the institution that will lend you money to purchase or refinance a home than depicted in the Hollywood classic; It’s a Wonderful Life. Capra, F. (Producer and Director). (1946). It’s a Wonderful Life [Video file]. In the movie, Mr. Potter is the greedy, bank lord that charges too much but appears to be the only option to his clients. It is George Bailey, the humble guy who sacrifices all to give both the most pleasant experience and best rate in town.
In Small-town (Big-city), USA there are so many options it’s difficult to know who might represent Mr. Potter, or where to find George Bailey. Snappy marketing implies you can download an app, and just like your drive-thru dinner, be finished in a flash.
The truth is, you get what you pay for.
Nationally recognized banks and mortgage companies that might be owned by a Mr. Potter type character employing hundreds if not thousands of people, creating a big-box factory of sorts. Along with that big-box experience, comes factory low pricing. Or so it seems. Educated buyers beware. There are certain costs associated with doing a loan that are virtually unavoidable, even if a company says they will pay for them, they are getting their money from you one way or another. While many consumers are enlightened enough to ask about the interest rate, there is more that goes into the price paid for a loan than a percentage rate. Unfortunately, if neither you as the Consumer, Realtor, nor Lender ask enough of the correct questions, the tab you are picking up could vary by thousands of dollars, even with the same Lender. Empowerment comes in considering the whole scenario, discovered through subsequent questions. So, consider rate with all of the other costs involved in the transaction. It’s not merely a button that you push to get the “right” loan or “best” interest rate.
Bigger doesn’t necessarily mean better.
Factories are known to be streamlined, mass producing a product. But when something goes wrong on the conveyer belt, there are lots of product casualties. Loan factories are notorious for not closing on time, causing a domino effect that could cost you the home you are purchasing, and your earnest money deposit. Rates may expire, or you may be put into a loan that fits the Loan Officers level of experience versus the best loan for you. The brands you know, and think you can trust often design their process so that you will only speak to your Loan Officer during that initial commitment. When a customer makes contact, a brief amount of time is spent to get just the basics and pass it on to the next guy. If you’re a seasoned mortgage professional, you might not need an extended conversation with your Lender and prefer the streamlined pricing that goes along with the streamlined process. But, what if you are a first-time homebuyer, what if you don’t know if you even qualify because you’re self-employed or a recent graduate, and you have questions that come up after that initial contact?
How do I find George Bailey?
More agile, and personal in nature, like where George Bailey would have worked, an experienced Mortgage Banker or Broker may have started their career at a big-box institution, while learning the ropes. However, that doesn’t mean they have anything to do with making a withdrawal or issuing stocks. Mortgage Bankers are lending you money either from their corporate purse or from a line of money they can draw on to grant you a loan. It’s a singular institution. A Mortgage Broker is the middleman between you and the institution, potentially shopping your desired loan to several institutions. If you are working with a Realtor, ask for the Lender they recommend, as they will have established relationships with Bankers or Brokers. If you are looking to refinance, you can still contact your Realtor as they don’t mind offering free advice, it’s a relationship building experience. You might also find a Mortgage Banker or Broker located next to your Doctor’s office, or in a professional plaza, and when you do, it indicates several things, first of which is experience.
Does experience cost more?
Not necessarily. They are likely operated by a small business owner or someone who has direct contact with the owner. Typically, their businesses are established over years or decades, where respect and trust of repeat clients, Realtors, and their Title and Escrow Officers is earned. Because there is a plethora of details that go into helping you select the best loan for your financial health, including things like rate, term, down payment, loan type, credit score, job history and how long you’ll be in the home, the question instead might be asked. How much does their experience save you?