The lender you choose is just as important as the realtor you choose!
A mortgage lender has complete control over the file from start to finish within their company. The money to fund loans at closing comes directly from the lender who approved the loan, nobody else. Good mortgage lenders have local processing, underwriting, and closing, but some larger lenders do have offsite processing and underwriting centers. You will never be waiting on funding from an investor at closing if you use a mortgage lender. Mortgage lenders do have to meet certain investor guidelines and loans can be sold after closing by all mortgage companies, but a lender funds the loan, and then sells the loan after closing.
A mortgage broker does not use their money to fund loans. In order for a loan to close with a mortgage broker, that broker shops the loan around to possible investors who will actually fund the loan at closing. The loan goes to the investor’s underwriter who has final sign off on loan approval. Many “approvals” from mortgage brokers are viewed weaker than from mortgage lenders because until a loan is submitted to the investor, there is no true approval. Another disadvantage is waiting on funds to close from the investor as the broker has no personal control over the loan funding. There is also a risk of lowering your credit score, as the different lenders pull your credit (while the broker is shopping your loan).
The mortgage industry is getting more and more strict in tightening guidelines and investor overlays. It’s best to choose a good mortgage lender (not broker) to limit the massive number of problems and issues that can arise through the mortgage process.
HORROR STORY: I recently received a contract on one of my properties accompanied with a loan approval letter from a mortgage broker. As always, I followed up with a phone call to talk to the lender- asking if credit had been checked, ratios verified, etc. and was assured everything looked great.
We proceeded with the transaction. The buyer paid for the inspections and appraisal. The seller completed all of the repairs, put a contract on a new home, paid for the inspections, paid for the appraisal and THAT seller completed repairs. Cohesively, the third seller went under contract and did the same thing…. you get the point. Everyone did a beautiful job of fulfilling their part of the agreement, and was ready to move!
5 days before the closing (for all 3 houses), the buyer’s loan was denied. There’s nothing anybody can do at that point. Movers were cancelled, utilities were cancelled, and most importantly… nobody got the home they wanted.
I had the buyer visit with a mortgage lender to see if they could save the deal; and it turned out his credit was way below what was required, his ratios were way out of wack, and no way could he get approved. You can see how much hardship could have been saved if he went with a mortgage lender to begin with, but how could he have known? We Realtors need to do a better job of educating our buyers on the good, bad, and ugly in the lending industry.
Don’t let your dream home slip through your fingers!
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