The best practice for choosing a lender when buying a home in Austin is a bit counterintuitive. Most buyers start their search by checking mortgage rates at different banks or lending institutions and choose the lender who posts the best rates online. Though rates are a piece of the puzzle (and a large piece considering the effect interest rates have on your monthly payment), they are not the entire story. Here’s how to choose a lender when buying a home in Austin.
Work with a Mortgage Broker or Banker, Not a Big Bank
Mortgage brokers will take your financial story to all the different banks and find the one that will give you the best interest rate. If you walked into Wells Fargo, they would sell you one of the loan programs they have. They wouldn’t tell you Chase has a better loan program for you. A mortgage broker will. A good mortgage broker can save you a lot of time and have access to sources of money that aren’t available to the public.
Won’t I Pay More to Work with a Mortgage Broker?
No. Mortgage brokers are paid by the lending institution they bring the business to. You won’t pay any more to work with them than you would a loan officer at a Big Bank.
You can call around to different lenders and ask for interest rate quotes and they can essentially give you any number they want. If you don’t have a signed contract, you can’t lock your interest rate. Lenders who can’t get business using traditional methods use rate calls as a bait and switch game. They’ll quote you a crazy low interest rate, take your application and when you find a house they’ll quote you a market interest rate and say rates went up. If you don’t have a backup plan, you might not have time to find another lender in the time period you have to close escrow.
Posted Interest Rates are For the Most Qualified Buyers
Interest rates that are posted online are interest rates for the most qualified, least risk buyers. Buyers who don’t have near perfect credit scores, have more debt than a lender wants to see, or who has made a late payment or two may not qualify for the posted interest rate. A mortgage broker can look at your financial story and determine which lender will give you the best rate given your credit score, debt to income ratio and financial history.
Ask How they Will Get You the Lowest Interest Rate Possible
Perhaps the most important question is how a mortgage broker will shop banks and lending institutions to get you the best possible rate when the time comes. Mortgage brokers who have a strategy are generally more effective than mortgage brokers who make two calls and pick the lower of the two interest rates. At this stage of the process, finding out how the mortgage broker will ensure you’ll get the best interest rate available to you is much more important than a rate they can quote you over the phone.
If Your Lender Doesn’t Perform, It is You Who Suffers the Consequences
The most important aspect of choosing a lender is finding out if they are reliable and will perform under the terms of the contract. If the answer is no, you are the one who will suffer the consequences. The lender is not a party to the contract. They haven’t put up earnest money or signed any documents saying they would close by a certain date. You are the one who has the most to lose if a lender can’t perform. When choosing a lender, make sure you trust that this lender will meet the deadlines in the contract. If not, you might lose money, or even the house.
Choose a Local Austin Lender, Who You Can Visit in Person
For me, this would be one of the highest criteria on my list. Too many times have I seen out of state lenders hide behind phones when they dropped the ball. Recently, I was even hung up on after asking about a $6k mistake the loan officer made. The lender, a big bank call center in Missouri, simply hung up when I asked how they could have missed a $6k mistake that would have to come out of my clients pocket. He said if they wanted the loan, that’s what it would take to get it and didn’t feel one ounce of responsibility for his error. Lenders who live and work in your community have to continue to live and work in your community. They seem to take a lot better care of their clients than call centers who have no accountability in your market. Work with someone local.
Ask Your Buyer’s Agent for Lender Recommendations
An experienced buyer’s agent has worked with several lenders over their career. They know who hasn’t performed and who has a reputation for dropping the ball. On the flip side, they know the lenders who time after time have smooth closings with no delays. Use your buyer’s agents experience to your advantage and ask them to recommend the three best lenders they’ve worked with over the years.
Interview at Least 3 Lenders Before You Make Your Decision
A lender that’s a great fit for one person might not be the best fit for you. Speak to at least three lenders so you can get a sense for who will do the best job for you. A reputable lender should be more than happy to sit down with you, explain their loan programs and what they’ll do to help make the loan process as smooth as possible. This way, you’ll have a direct comparison and can choose the best lender for you.
Ask Your Second Choice Lender to Be Your Backup Lender
It can’t hurt to have a backup. If something goes wrong, the backup lender will be able to step in and pick up the pieces. Most are willing to act as your backup lender. Simply ask if that would be a possibility, so you can rest easy that the lending aspect of the transaction is secure.
Need a Recommendation for a Great Lender in Austin?
We know several great mortgage lenders that have helped our clients over the years. We’ll be happy to send you our lender list. Just email us at info@11OaksRealty.com and we’ll send it right over!
Considering Buying a House in Austin?
Our team of buyer’s agents has a combined 55+ years experience representing buyers. We know how to help you find the right house, negotiate a great deal (even in this strong seller’s market) and make the process as fun and easy as possible. Check out our Austin Home Buyers section for more about the home buying process and how our team works. Then fill out our Buyer Survey, email is at info@11OaksRealty.com or call us at (512) 827-8323 to schedule a no obligation consultation.