Just remembered another thing about choosing a lender…
A loan officer may promise you a below market rate and points in order to win your business. You may even feel very virtuous about your success in beating the poor guy into a lower rate.
However, it has been my experience that these deals are fraught with problems:
- Appraisals don’t get ordered in time.
- The loan officer mis-read the loan guidelines. You don’t qualify for that particular loan and now the loan officer is scrambling around, looking for someone else who will lend you money.
- Oops, now the interest rate is going to be higher because the new investor charges a little more.
- The loan officer promised you a low rate, but didn’t actually lock the rate in because he was gambling that rates would drop enough to make up the difference and instead the rates went up.
- The underwriter comes up with a list of conditions that can never be met by closing time. The seller is ready to cancel the deal because of the delays.
- The lender suddenly needs additional proof of income, assets, debts that were paid off — things that may not be easy to produce in a timely fashion.
- The loan takes so long to get approved that the rate and fees expire, then you end up paying a higher rate. (True story — in the bad old days of the 1980s, I worked for a savings and loan where the bank president routinely locked entire shopping carts of loan files in a closet until the rate expired so the bank could get a higher rate. The loan officer would honestly say the loan papers had been misplaced. This was right before the savings and loan scandals broke. Boy do I have some stories from then!)
These may seem like exaggerations, but they aren’t. These problems and more have happened on transactions I’ve been involved with. In each case, the buyer has gone with a lowest-bid loan officer, against my best advice. Often, the time off from work in trying to take care of the problems has come to more than the savings offered. Certainly they’ve cost a lot in terms of aggravation and bad feelings. And some have never gone to settlement at all.
© 2007 Susan Pruden