Here’s how we shop for the right lender for you.
The Right Lender is the Best Fit
To begin, it’s important to understand that not all lenders offer all loan programs. Most lenders choose a niche that they can do very well, and build their entire operation around that niche. For example, a lender may specialize in loans for veterans or first-time home buyers. Some lenders do a great job with “Jumbo,” or non-conforming loans, while others find they are very good at offering the very best price for super clean conforming loans.
Related: What is a Conforming Loan?
So, the first thing we have to do to shop for the best possible mortgage for you is to define your circumstances, goals and concerns, so we can focus on those lenders who are likely to do the best job for your particular circumstances.
The Best Price is Always Good
All lenders draw their money from the same pool of money. Even big banks ultimately sell their loans, mostly to Fannie Mae or Freddie Mac. No lender has a magic pool of money where their wholesale cost of funds is any different than any other lender.
Nevertheless, for any given type of loan there will always be a price leader – a lender who is offering a better price at any given interest rate, or maybe even a very slightly better interest rate. What you need to know, however, is that the low-price leader is not always the same lender.
Like any other business, lenders have a hard time bringing in exactly enough business to keep their operations running at full capacity. They are most profitable when they are fully utilizing their production capacity, but they are almost never exactly there. So, when their business overruns their production capacity, they raise prices to slow the incoming flow of new business. When they have less business than they can effectively process, they lower their price to fill their pipelines.
We are often asked which lenders have the best price, and the correct answer should always be “It depends – let’s check.”
It’s Not the Right Lender if They Can’t Do the Loan
No system is perfect, so it’s not unusual for lenders to over-run their system and for their service to suffer as a result. If you are refinancing, maybe that’s fine – you will just need to be patient because closing your loan will take longer. If you are buying a home, however, that’s not possible. You signed a contract and agreed to close by a certain date. A lender that can’t currently close in that amount of time is not a good option.
In addition to speed, it’s important to choose the lender that will be comfortable with your circumstances. Some lenders will close your loan, but not until your file is 6 inches thick. (We call this the 6-inch rule of underwriting.) Some folks don’t mind providing every document conceivable to a lender, but others find it to be a horrible experience. A low-price lender who can deliver a loan quickly but scrutinizes every inch of your life might still be a bad choice for you.
The Process Looks Like This
Once we have determined what type of loan you want and what kind of niche-related factors are relevant in your case, we go shopping. We use an industry-standard SAAS software program that can shop over 100 different lenders using your specific profile. We input your home’s value, your desired loan amount, the type of loan, (conforming, non-conforming, VA, etc.) your credit score, and a few other factors. The software returns with live pricing from all the lenders that are offering the loan program that fits your needs.
The pricing offered by the top handful of lenders is always pretty close, so we look for the lender among them that is currently offering the best service and the least amount of hassle. We then submit your loan application to that lender. If there is anything about your circumstances that might cause difficulties in underwriting, we’ll check with that lender to make sure they are comfortable with it.
That’s it. Choosing the right lender is really pretty simple. If you want to see how this works, we are happy to run our shopping software in real time for you so that you can watch.
Call me today to see how it works.
This article represents the opinions of Casey Fleming, and not necessarily those of C2 Financial Corp. This analysis was prepared with the best information available at the time it was written. Neither Casey Fleming, nor C2 Financial Corp., have any magical insider information about bond markets, real estate markets or mortgage markets that would make economic projections any more reliable than any other source. No warranty is made that the outcome will reflect the projections in this article, and neither Casey Fleming nor C2 Financial Corp. are responsible for decisions that you make regarding your own choices about your real estate or mortgage or those of your clients.
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