Wow it has been a long time since we spoke! Sorry for the delay people…that is if you are still out there listening. I promise to get better with my communication. On that note lets talk about lenders! So you found a house, your contract is accepted, your inspection is a success…..now what?!?!? I often tell my buyers that the inspection is the toughest part but given the week I have had I am going to go out on a limb and say that lenders are now the toughest part of the negotiation.
IMPORTANCE OF CHOOSING THE RIGHT LENDER
The lender you choose is in my opinion one of the single most important pieces of the deal. Without an adequate lender you might as well throw the deal away from the start. Each contract in the DC area has whats known as a financing contingency and appraisal contingency. The financing contingency essentially states that on X day after mutual acceptance the buyer will deliver to the seller a letter from the lender stating that the loan is approved. The appraisal contingency is similar but you are delivering notice that the appraisal has been completed and the purchase price is approved by the lenders underwriting department. If you fail to deliver the financing contingency the seller could deliver a notice in which you have three days to respond. If you are unable to respond or produce a commitment letter from your lender then your contract becomes void. If your contract because void because of this notice then your earnest money deposit is NOT at risk. HOWEVER if you release the financing contingency and later on in the transaction your deal falls apart because of financing your earnest money deposit is then at risk….yeah, that sucks! With regards to the appraisal, once the seller delivers notice you have three days to produce the appraisal and remove the contingency. If you fail to do so the appraisal contingency is lifted and the contract moves forward. What really sucks is if you lender misses this deadline and then you find out 10 days later that the appraisal came in lower than anticipated and you now have to make up the difference or risk losing your earnest money deposit. Bottom line is that your lender needs to have their shit together or your get screwed. Scared yet? Check out some helpful pointers below:
WHAT TO LOOK FOR IN A LENDER
If the first part of their name starts with Bank and ends with America STAY FAR AWAY. That is my first tip. I have worked with this bank many times and every single time they let my clients down. The bitch of this is that the clients end up paying this bank $400-$500 for an appraisal which is non-refundable! So….what to lookout for:
1) You are trusting this person with your future…30 years of your future to be exact so before you start searching for homes start with a search for lenders. Be sure to interview them thoroughly and see what services and commitments their bank offers. Aside from rate (which isn’t the most important thing) what else do they offer? How can they be held accountable if they fail to meet deadlines? Afterall…..if you don’t meet your deadline you can lose your EMD so why shouldn’t they lose something besides your business?
2) Direct and local are always best. Stay away from the big chain banks like Bank of America and Wells Fargo. These banks are too big and have way to many layers.
3) Credit Unions and USAA generally can’t compete. Yes Hill staffers, that means you don’t belong using your Congressional Credit Union account when you are ready to take the plunge and buy. Credit unions often have very lengthy approval processes and cannot offer competitive time frames with regards to the financing and appraisal contingencies. Also if you are in a competitive situation and the seller is looking for a quick settlement, that’s not going to happen with a credit union. Sorry!
4) Underwriting should be in-house. When this happens it means your loan officer has quick access to the person in control of seeing the loan through and when deadlines creep up they can act quick and deliver.
5) If you have to call a 1-800 number every time for an update that’s probably not a good lender!
6) Rates aren’t everything. How much do they require you put down? What options do they give you if any? Some lenders now do 5% and 10% down loans with no PMI!
7) If you don’t understand what you’re doing ASK QUESTIONS!!!! I hate it when buyers get to the closing table and have no clue what they signed up for.
DO REALTORS GET A KICKBACK FROM LENDERS THEY RECOMMEND
So you are hesitant to accept my recommendation of a lender because you probably think I get some sort of kickback or incentive? WRONG!!!!!! In DC, MD and VA it is illegal to accept any sort of financial incentive or kickback from lenders, title companies or any other parties to the transaction. That doesn’t mean it doesn’t happen but for the most part it doesn’t. Realtors recommend people because these are typically people we have good working relationships with and we know they are going to get the job done. Plain and simple.
Well, that’s if for now! Stay tuned for more.