Working With a Lender – What You Need to Know to Get Started

There are very few reasons why someone would choose to purchase their home without a loan. Interest rates are at historical lows, and there are tax benefits that make the return on using your cash somewhere else extremely attractive. Assuming getting a loan is your preferred course of action, a lender will need to be chosen early in the homebuying process. This decision is critical upfront because you should not submit an offer to purchase a home without a lender pre-approval. A mortgage pre-approval, according to Realtor.com, is “a commitment from a lender to provide you with home financing up to a certain loan amount – basically the stamp of approval that you have the money, credit history, and other credentials to buy a home up to that price.” Without this commitment, sellers – especially those in Austin – will not take your offer seriously and will ultimately choose another approved buyer.

To get you pre-approved, a lender will ask for a list of paperwork that will likely include the following:

• Copy of borrower’s driver’s license
• Pay stubs for the last 30 days
• 2 years of tax returns
• 2 years of W2 forms
• Statements for the last 60 days of all of your asset accounts
• Copy of the most recent mortgage statements on all properties owned
• Copy of the homeowners insurance and property tax bills on all properties owned
• Evidence of all HOA payments due on all properties owned if applicable

This seems like a lot of information; however, it is imperative that you pass all of this to your lender in a timely manner so your home search can begin.

Picking a lender doesn’t have to be a challenging task. Lending is a highly regulated business, so most believe there is not very much differentiation between lenders. I know this isn’t true because we work with them daily. Lenders must play by the rules; however, not all lenders have to be good at what they do. It would be foolish to not consider the fact that a lender could cause you to lose a home due to poor performance. Below are the 3 core qualities all buyers should look for when choosing a lender.

1. Reasonable fees and interest rates. Lending fees affect the cash required at close and interest rates affect the cash required during monthly payments. Both can put pressure on a homeowner’s affordability very quickly. A lower interest rate, however, is usually why a buyer may choose one lender over another because fees are generally consistent. An example of how rates can affect a payment can be seen in the following table. The reason I use the word reasonable is because sometimes you get what you pay for.

30 year amortization. Principal and Interest only.

2. Reliable. When a real estate agent recommends a lender to his customer, there typically is no incentive for the agent. That is certainly the case for our company. We recommend our preferred lender because they have proven to be the most reliable business in the industry. We have had numerous buyers choose to go with big brand banks and online providers chasing the slightest savings only to experience issues nearly every time. Ask for a lender’s track record of closing on time and choose the one you feel has the best answer.

3. Customer Service. The cheapest lenders usually come with little to no customer service. It is nice to have someone working for you who will answer all of your questions, educate you throughout the process, and be flexible enough to get creative or speed up underwriting, when needed, to save a deal. You don’t get this type of service with online providers or other types of discount brokers.

Choosing a lender and getting pre-approved for a loan are two major milestones that must take place early during the home buying process. Choosing a lender shouldn’t be a task taken lightly and, yet, the recommendation of your agent should have a lot of weight. Ask a lot of great questions so you choose the right person to be in business with.

Contact the Williamson Group at info@wgrouprealestate.com to get a lender recommendation