For most borrowers, your home is your biggest investment. According to the Federal Reserve’s statistical accounting release, the amount of net worth that Americans dedicate to real estate is on the rise. Household investors (i.e. not businesses) now own almost $26 Trillion worth of real estate, which represents about 25% of our net worth. That’s a lot of eggs in one basket! Most homeowners are as choosy as possible about the house they live in. But did you know that you can be equally choosy about your mortgage lender and loan product? The loan team at Ruoff thinks your financial blueprint should be as perfect as your floor plan.
Many factors come into play when choosing a lender and a loan product. Consider the following before signing on the dotted line:
You should always work with someone you trust. Go with your gut first. A secondary, but also important factor in building trust, is to assess the experience of your L.O. Can he or she provide you with references? How long have they worked in finance? How long has their lending institution been in place? Ruoff has been in business since 1984. That encompasses quarter-century of experience including survival of the Great Recession!
Ease of Application
It’s the digital age. There’s no reason you need to take time off work to fill out lengthy and confusing paperwork in order to get a loan. Your lender, just like the rest of the world, should utilize the technology at their disposal to make your experience better. Your application and many subsequent communications with your loan officer can take place entirely online which means you will get up-to-the-minute notifications of your loan’s progress. To make the process even quicker, you can have a Digital Closing Experience and e-sign your closing paperwork.
The benchmark loan term for mortgages is 30-years. This may or may not be the best fit for you. Talk to your loan professional about length of time to payoff and how a shorter or longer term might compliment your overall financial plan.
Loan Officer Relationship
Your Loan Officer will work with you very closely in your mortgage transaction. It is important that you feel compatible and that your personalities don't clash. When choosing a loan officer, think about your communication style and if they are willing and able to communicate with you that way. For example, do you love talking on the phone, or do you prefer coming to their office. Maybe you like a more hands-off approach and prefer to email or text.
You will also need to consider the intellectual aptitude of your loan officer as well as his or her emotional maturity. Real estate transactions involve large sums of money and the transaction can intensify unexpectedly. Can your L.O. stay level-headed and work with all parties such as the Realtor, title agent, and underwriter? Is he or she in good standing within the local community? Do they have enough financial training and experience to advise you on one of your largest and most important investments?
Fees can vary from lender to lender. Thankfully, our free market system allows for a breadth of competition that generally keeps fees in check. If you’re looking at a unique mortgage product, fees could trend higher. Study your Closing Disclosure and discuss any fees with your lender. All fees charged should have a reasonable explanation behind them.
Unique Loan Scenarios
Some loans are complicated. Do you need a short-term loan? Do you need an exotic loan product that favors asset verification over proof of income? Lenders can’t be everything to everyone, so find out if your lender can service your financial nuances. If your loan officer can make it work, they sure will! But every now and then a borrower’s situation is so unique that they’re better-served by changing lenders.
Not every loan amount falls within the typical range. If you need a jumbo, super-jumbo, or even a micro-loan, find out if your preferred lender offers it before you proceed with a credit pull.
If you’re in the market for a cashout refinance, first find out how much your lender is willing to provide at closing. Then, lower that amount to the minimum you need and inquire about the interest rate at that tier. Using your home’s equity as a cash vehicle can sometimes help your financial picture if it means consolidating your debt load. This is an area of finance that requires careful thought and solid advice from your loan originator. (See “Personality/Trust and I.Q./E.Q.” above.)
Time to Close
If you want to close fast, tell your lender and be ready to pull your documents together quickly. Find out how much time your lending company needs to process and underwrite your loan. The national average is 35 days, but Ruoff’s average is just 18 days. A speedy closing requires a solid lending institution as well as a loan officer who stays in great communication with all parties (not just the borrowers, but the real estate agent, title officer, etc.)
Conversely, if you need an extended rate lock tell your lender this from the start. Some borrowers need extra time to get their financial ducks in a row before closing. For example, the underwriter may request that you save a certain amount of money or pay-down some debt as conditions for final loan approval. Also, if you’re buying a house and have negotiated a closing date more than 30 days out, find out how long your interest rate will stay locked. In a market with rising rates, you may want to pay extra for an extended lock. An extended lock comes with a reasonable fee that could differ between lenders. You could also choose not to lock your rate early and instead secure the market rate when it’s time to schedule closing. Keep in mind, your rate must be locked before the closing is scheduled.
Yes, the rate does matter after all. It’s just not the only thing that matters. Your interest rate will likely stick with you for a long time – maybe even 30 years. Of all the documents to pay attention to, check out the Loan Estimate. Learn what each item means and use this document to compare the total interest you will pay across lenders. This is especially important if you anticipate taking your loan to term (i.e. not selling or refinancing during the term of the loan).
From personality to payoff scenarios, and down to the rate itself, there is much to consider when obtaining a mortgage. Take care in finding the lender and product that work best for you. And above all, don’t be shy about asking questions. Anyone with your best interests in mind will welcome your inquiries.