How to Get a Home or Property Loan

Where do I get my loan?

That is a great first question.  There are so many options out there.  Most Realtors have found at least a few great lenders that they like to recommend. The best lenders are those that help their clients get into good loans with great rates and do their best to get that loan with little to no problems as well as quickly.

How to find a good Lender

It is generally a good idea to talk with at least three different lenders to see what rates and fees they can offer you. I’d also find out which loans they may recommend for your personal financial situation. 

Have a good conversation with the various lenders. Through this process you are likely to find one that will work well with you. It is really important that the lender be able to listen to your needs and that they can be with you every step of the way through the process.

Why I suggest Mortgage Brokers

When I discuss lenders with my clients I often give them the name of a couple of lenders that are loan brokers.

Mortgage Brokers can generally broker a loan from a number of sources.  This is one of the biggest advantages to using a mortgage broker. They can listen to your financial picture and help you find a loan that will fit your needs. 

One of my clients was able to get better rates and fees from a major national bank through the loan broker I recommended compared to the mortgage officer who came from the same bank.  

The one drawback I have experienced from a mortgage broker, however, is finding a loan for a challenging property.

When to go to a Local Bank or Credit Union

When I am trying to get a buyer into a property that has loan issues, whether it is a lot, a modular or manufactured, or in a niche area with appraisal issues, I will strongly urge my client to talk with one of the local, community banks or credit unions. 

The local banks and credit unions are in a much better position to understand the various local markets and the appraisals that come out of those areas with comps that are not standard. Local banks generally have a vested interest in helping fund local projects and homes. Some of the local banks do not sell the loans but service them in house.

When to go to a Major Bank

The third category of popular lending options are the major banking institutions such as Bank of America, Wells Fargo, Chase Manhattan etc.  

These banks are large conglomerates with multitudes of personnel and departments in separate areas all over the country. They may have the ability to offer better rates or fees then some of the other institutions. I have worked with some of these “in house” lenders and have found for the most part they do fine as long as the property is a standard home with relatively few issues. If your credit is A grade the loan goes through generally very quickly and smoothly. 

The biggest problem I have seen with some of these larger conglomerates is the lack of really great customer service. If you don’t care about someone really helping you understand the loan your getting or the process you are going through then it may be a good financial move to get a quote from one of these lenders as well.

Timing for a Loan 

At this point in our market it is a great idea to talk with your lender about timing for a loan closing on the home you want. For instance, Bank of America was requiring 60 days for a home I just worked on with a gal. The lender we used could have gotten the loan done in less then 30 days if the seller wasn’t using Bank of America as well.

Cogs in the Wheel

The following is how my experiences have left me feeling about the various lending institutions I have dealt with over the years. Picture a machine with cogs in the wheel.

• Mortgage Brokers usually seem to have their wheels greased and on caffeine! Who cares how many cogs they have. They are bright, happy and running for you.

• Community banks have few cogs and seem to go at a fairly good pace. Pretty steady humming. They can do a good job and if a hiccup occurs they seem to roll with it pretty well as they all communicate with each other.

• Large Banks have many cogs and the cogs don’t always work together. Or the one cog doesn’t always know what the other cogs are doing and they run against each other. If you get squished in between the cogs no one notices. The machine just keeps running. No one really knows who is in charge of the wheel. Seems like it just runs by itself. But if you can get in while it’s running smoothly, they can crank a lot of stuff out. They just don’t take hiccups in the machine very well. 

Your experience may be different and you can certainly dialog with me about it but after 12 years of working with all the various lenders I have seen a fairly similar pattern in the various lenders I have worked with.

Next Week: We will explore different types of loans. We don’t want to tire you out too soon!

Financing Issues in Buying a Property

1.    Buyer qualifications

2.    Buyer needs

3.    Property classification

4.    Location of Property

5.    Type of lender used

6.    Type of loan required/desired

7.    Appraisal issues

As you begin to think about placing an offer on a potential property, the fact of financing comes up. How will you ultimately pay for your purchase? Do you have the available cash for the down payment, closing costs and the inspections and appraisals? Do you want to use all cash for your purchase? Can you re-finance an existing property to pay for your new purchase? Do you need to get a loan? What kinds of loans are out there? Which loan will fit your needs best? Where do I start and which option is best for me?

Choosing a Lender

These are just a few of the questions you may ask during the lending process. There are just as many when it comes to choosing who your lender will be and many things to consider while making your choice. To start with, it is often a great idea to get some referrals from your Realtor and then discuss your needs with at least three lenders to get an idea of which one may have the best deal for you.

I often recommend my clients look at a variety of lenders and banks depending upon their situation and the property they are looking at. Some banks are simply a better fit for one property over another. Banks lend differently on a standard “stick built” home versus a modular or manufactured home. Improved lots are a bit harder to lend on and many banks will not lend on them unless a construction loan is being sought after. Raw land (meaning no utilities stubbed to it) is very difficult, if not impossible to lend on. In the cases where the property is going to have a difficult time with a conventional loan, I often recommend to the seller, as well as the buyer, to consider seller financing. Seller financing can be a very streamlined loan and can be very beneficial to both parties if the terms are good.

Why Location Matters for Lending

In addition to the  “type” of property you are looking at, we need to look at location as well. Some locations are simply easier to lend on over others. The lending process requires an appraisal. An appraisal is an opinion of value for the day written by a trained professional appraiser. The appraiser has very rigid guidelines he/she has to follow while putting the appraisal together. We will go into a little more depth on the appraisal process in a separate section. For now we will just concentrate on how the location can affect the appraisal process.

Niche Markets

One of my areas of expertise is the Springdale, Utah, market. Springdale is a very unique market. It is highly desire-able and only has a handful of properties available. As we know from economics, demand and supply drive pricing. High demand, low supply drives pricing up. The appraisers goal is to find at least three similar sales in the past 6 months to a year. In a small niche market like Springdale, that is often very difficult. The appraiser is left with possibly three sales in the past year but the sales are not similar. The appraiser then has to do a lot of justifying dialog in his/her appraisal. I have seen banks outright reject the appraisal and deny the loan because they don’t want to base their loan off of an appraisal that is too far from “standard”. In these cases I often recommend talking with a local bank instead of a large national chain bank or a loan broker. Local banks and credit unions will know the niche market and understand the difficulties of the appraisal process there.

So far we know we have to consider:

a.    Buyers qualifications, abilities and personal needs in choosing a lender and a loan.

b.    Type or classification of property we are trying to purchase.

c.    Location of the property in terms of available comparisons.

We also need to consider the lender we use. Does our lender work for a national or statewide bank? A local bank or credit union? Or is our lender a loan broker? Is our lender licensed to do business in the area of the property? Is our lender qualified? Can we work well with our lender?

Interview your Lender

All good questions to consider. Beyond these questions we should interview our lender to see if he/she can work well with us throughout the buying process. You want to have a lender who can help guide you with the dates in your contract and actually help you meet those dates. Can your lender help you get the right loan for your needs? Good interest rates? Discount points? Closing costs for the loan? All of these questions should be considered when shopping for a loan.

If you have a CPA or a tax accountant it would also be wise to discuss your lending options with this person as well. They are getting paid to help you use your money wisely and they can be an invaluable part of your purchasing process.

Next week… we will ponder a bit more on differences in lending institutions and types of loans to look at.