Choosing the Right Lender

In Buyers by Doug Phelps

Most buyer’s think of the lending aspect of a real estate transaction as a necessary evil. It is. The other perspective, however, is that a loan is a financial tool that 50% of a life altering transaction relies upon.

The motivating factor for most buyers in how they choose a lender is cost. Plenty of lenders run national advertising campaigns. Apply online, never meet the loan officer, share your most personal stuff in the cloud, get a loan. Their interest rate might be 1/8% or 1/4% lower to rate and their closing costs might be $500-$1,500 less.

To be sure, there are people who will gravitate toward this kind of loan. Question is, are there other criteria that are more important?

Something we want in a transaction for the most expensive purchase we make in our lives. Because of the contractual obligations and the financial liability, I define value as reliable execution at a fair price. A lender must understand a buyer’s local residential contractual obligations, have great execution in the lending process in a fast and reliable manner, promise a reasonable interest rate and closing costs, and at the time of closing guarantee the money required to fulfill on the contract will be there. This kind of high quality can come at a fair price.

Let’s break this down a little bit. Here are 7 things I look for in an extraordinary lender partner:

Availability and Communication – An exceptional lender will be personally available on evenings and weekends to a buyer and to me for questions, and make adjustments in a lender letter to match all offers. An exceptional lender will make a phone call to the listing agent when we are submitting an offer; this strengthens an offer and impresses the listing agent to encourage the seller to take the offer because of the strength of the lender.

Pre-Approval – An incomparable lender will provide an actual preapproval, not just a prequalification, on a loan prior to going under contract on a home. This profoundly strengthens an offer and puts a buyer in a position to negotiate on price because of the additional strength of this status.

Quick and Early Approval – A superb lender gets a loan approved quickly (through underwriting), not putting earnest money at risk.

Knowledge – A outstanding lender understands the Colorado real estate contract, the importance of the dates and deadlines, and owns responsibility for ensuring expeditious ordering, receipt and review of appraisals and other documentation in a timely manner to ensure continued compliance with the terms agreed upon in the contract.

Education of Loan Options – A unrivaled lender explains to a buyer all the financing options and the return on investment analysis associated with those options not only of loan types, but closing costs options, interest rate options and term options. These are important because a loan on real estate is a financial tool to help build wealth consistent with personal goals and objectives.

Funding – A great lender will close and fund their own loans. I want to be working with someone who is directly responsible for ensuring a buyer that the money is at the closing table at the time of closing. A buyer in the state of Colorado is in default if they show up at closing and the money has not arrived. That is the lender’s responsibility and a lot of lenders don’t know or don’t care.

Experience – The right lender understands a buyer’s needs, defines a roadmap and how they will work together, educates, and has a buyer’s interests first and foremost so a buyer never worries.

I want a buyer to choose a lender for these value reasons, not for a .125% difference to interest rate or a few hundred dollars less in closing costs.

The best scenario: I can control the quality of a buyer’s experience if I have influence on the lender chosen. Won’t you let me help?

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