Getting Pre-Approved for a Home Loan in San Diego: What to Look for In a Loan Officer AND How a Lazy Loan Officer Can Ruin Your Transaction
Your lender is your partner in the purchase process, and many buyers don't realize until it's too late how important it is to find a very good loan officer. It is very difficult to switch lenders in the middle of a purchase transaction (for several reasons), but it's often difficult to tell a good loan officer apart from a bad one before you get to that point (and by then, it's already too late). In this article I give you seven critical tips for what to look for in a loan officer and caution you about how a lazy loan officer can ruin your transaction.
Tip #1: Find at least one top mortgage professional to consult with for a pre-approval. There are thousands of loan officers in San Diego County. Some are excellent, some are average, and some are downright bad. If you are buying a home in San Diego, your choice of loan officer can have a great impact on your transaction and your home buying experience. In fact, your choice of loan officer can even cause you to lose out on buying your dream home (it happens more often than you think). I estimate that as many as 1 out of 5 transactions falls out of escrow because the buyer can't get his/her loan (and these buyers almost always have a pre-approval letter from a lender). How can someone be pre-approved and still not get a loan? It has to do with the loan officer (good, average, or bad). Don't settle for average (and certainly don't settle for bad). You can have the best with a little extra time and research. How do you find a top mortgage professional in San Diego? Start with Tip #2...
Tip #2: Wrap your mind around this truth: If you need a loan to buy your home, you can be "held hostage" by your lender if your loan officer messes up during your transaction (as much as you plead, as much as you want to buy the home, as much as you try to stall the seller from cancelling the transaction, if the loan officer can't come through for you, then you don't have the money to complete the purchase). When you have a contract to purchase a home, you will obviously agree with the seller on price... You will also agree on a closing date and on a date that you have to remove your loan contingency or cancel the transaction. As much as you want to close on time, if your lender isn't ready or hasn't funded your loan you cannot close (and the seller will be very frustrated that you aren't holding up your end of the agreement). The seller may cancel or threaten to cancel (which is an extremely frustrating experience to go through as a home buyer). One of my clients a few years ago actually worked for a bank. The client was offered a "great deal" (an employee discount) to get a loan through the bank he worked for. Long story short, the loan officer turned out to be terrible at communication, the loan did not get approved on time, he said it would just be a few more days, but after a few days there was still no progress and no returned phone calls, the seller was furious but let it slide, "just a few more days," the loan officer finally said again but still no progress, the seller threatened to cancel the transaction multiple times, the buyers had to cancel their movers, the buyers were stressed out to the hilt, the seller's agent got extremely pushy, no one was happy, I kept stalling the seller's side, and about 40 days after the scheduled closing date we got the transaction closed (through sheer luck - most transactions like these would have been cancelled long before). No home buyer wants that experience, so how can you avoid it? Tip #3 will move you in that direction...
Tip #3: Find a loan officer who cares about closing your loan. If your loan officer works for a big bank and gets paid a salary to sit at a desk and help customers fill out loan applications, there is a good chance that the same loan officer will not be very helpful when/if there is an issue with your loan approval during the purchase. This loan officer doesn't get paid any extra for closing your loan (or at least not enough extra to be motivated to put in the extra effort when your loan gets difficult). A loan officer who gets paid on commission will usually care more about closing your loan (for obvious reasons).
Tip #4: Work with a loan officer who has something else to lose if your loan gets messed up (other than the commission from your loan). Tip #3 above is helpful, but this tip is even better (in my opinion) for ensuring that your loan officer gives you 110% effort until your loan is closed. If your loan officer, for example, has enjoyed receiving multiple referrals from your buyer's agent, your loan officer is much more likely to do whatever it takes to get your loan closed and to be a good communicator about the issues along the way. The reason for this is that a buyer's broker like me will stop referring clients to someone if the loan officer can't close a loan or is bad at communicating (that is just bad for repeat business, referring my very important clients to a bad loan officer). Like I said, if your loan officer has been the beneficiary of receiving lots of referrals from your buyer's agent, I think that adds to the likelihood that the loan officer will do whatever it takes to make your loan funding process go as smooth as possible (so the referrals keep coming). I have experienced this several times from the opposite end. I don't boss my clients around, so I've had clients who choose their own loan officer without my input. In some cases, these loan officers have become very difficult to work with when things start to go wrong. If the loan officer has messed something up and realizes that he/she has a frustrated buyer and a frustrated buyer's agent, he/she often checks out of the transaction mentally. He/she knows the buyer isn't going to be a return client, and he/she knows the buyer's broker isn't going to be sending referrals any time soon. He/she wants to close the transaction, but often does so with the least amount of tact and communication as possible. That can be very frustrating for the buyer (and you don't usually find these things out until you are in the middle of the transaction and already committed to this lender - so you are held hostage in a way - you just have to put up with it)!
Tip #5: Work with someone with a track record of success that you can verify. So how do you avoid these nightmare scenarios that I mention in this article? Trust but verify. If you have a loan officer that you've done 10 purchase transactions with in the last two years, you obviously know if you can count on that person or not. Most home buyers don't have that, but someone you know may just have that. Your buyer's agent is a good place to start, but if your agent doesn't have any good referrals, check with friends, family, and co-workers. The theory here is that, if the loan officer worked well for someone you know and trust, there is a good chance that the loan officer will work well for you, too. If your buyer's agent has a solid relationship with a good loan officer, this can be even better (see Tip #4 above). As a buyer's agent, my livelihood relies on my clients being able to close their purchase transactions, and my sanity relies on my clients being able to close their transactions without a lot of stress and hassle with the loan approval. It's in my best interests for my clients to have a low-hassle transaction. I have met and worked with many, many loan officers, and it's important to me that I only refer the best of the best to my clients.
Tip #6: Do your research to make sure that not only is your loan officer someone you can count on, he/she is also offering competitive interest rates and fees to do your loan. If you find that another lender has a better interest rate or lower fees, you can often get your preferred lender to match the other lender. With a little extra research and time you can have your cake and eat it too (low rate, low fees, and great loan officer). In my opinion, it is often not worth the sacrifice to go with a lender that you are not sure of because that lender has a lower fee or a lower rate. It's important to get the right combination of competitive rate, competitive fees, and great loan officer. For a fool-proof way of accomplishing this, read my article called: 4 Steps to Negotiating the Lowest Rate and Fees for Your Home Purchase Loan.
Tip #7: Make sure your loan officer is thorough up-front during the pre-approval process. If a loan officer is lazy, he/she will do only the bare minimum at the beginning, and here is why. Loan officers realize that most people are going to shop around for a loan. Many loan officers take the approach that they just need to pre-approve as many people as possible and some of them will stick. Some of these loan officers do not want to take the extra time necessary to do a thorough pre-approval (which involves more than just having you fill out a loan application and running your credit). The loan application and credit report are important pieces to your loan approval, but your lender will need to verify everything before the loan gets funded. And during the lender's "verification" or underwriting process, they are going to find issues that should have been addressed up-front. Your loan officer should be asking you for (and reviewing) copies of bank statements, tax returns, W2s, pay stubs, etc., etc. Going through all of this can take hours, and many loan officers don't want to do that for you unless you already have a property under contract. Take it a step further and ask your loan officer if he/she can run your loan through automatic underwriting. This gives you a preliminary decision about whether an underwriter will approve your loan application. The lazy loan officer skips all this stuff and sends you a pre-approval letter to make you feel confident. Then you bring him/her a purchase contract (and you've worked hard to get to that point), and a few weeks later your lender comes to you with the bad news that he/she can't do your loan (for a multitude of reasons, but it always comes down to that the loan officer didn't do the work up front to identify potential problems with your approval). Lenders these days have strict guidelines, and their underwriters are paid to look at every little issue. Hopefully your loan officer will already have looked at (and solved) every little issue before your loan gets to the underwriter. If not, your "lazy" loan officer can be the reason that (A) your loan doesn't get funded and you have to cancel your transaction or (B) your transaction has unnecessary stress added to it (which is no fun for anyone).
In summary, it's just as important to find a great loan officer as it is for you to get a low rate and low fees. If you are able to accomplish both (low rate/fees and great loan officer), you are putting yourself in the best position to have a great transaction (in regards to your loan). Some day, if you refinance your loan, it's maybe not the end of the world if you put more emphasis on low rate/fees (and possibly even go through an online lender). If the lender messes up your loan in that case (or takes longer than normal to fund the loan), at least you already own the house and the only thing you've lost is time (you can always go through another lender to do your refinance if need be). When you are purchasing a home there are important deadlines that are crucial to your transaction, and your selection of loan officer will have a great impact on your happiness throughout your loan purchase. If you have any other questions about this, I'm always happy to help you!
Justin Gramm is the founder and principal broker of Globella Buyers Realty, your San Diego Exclusive Buyer Brokerage.
Exclusive Buyer Agents do not list homes for sale and never represent sellers. They have no "inventory" to try to sell you. They can represent you in purchasing any home. They are specialists at representing buyers only on the buyers' side of the transaction. Exclusive Buyer Agents work to get buyers the best price and terms when they buy a home.
If you have excellent credit and plan to buy a home or condo in San Diego County within 90 days, contact Justin Gramm to hire an agent on your side of the transaction. More about Justin Gramm on Google+. Call Justin at (858) 437-2662 or E-mail.