The Importance of Trusting Your Mortgage Lender
So many of the relationships in our lives are built on trust. You trust your best friend with your deepest secrets. You trust your doctor to give you the best care to keep you healthy.
But what about your mortgage lender – how far should that trust go when you are buying a home or refinancing your current loan?
Benefit from your lender’s expertise
“You have to gut-check yourself when it comes to your lender. If it’s a personal decision, and there is risk associated with the unknown, then only you can make that decision,” said David Reischer, a real estate attorney in Manhattan.
For instance, if your lender or banker is prequalifying you for a mortgage, and he/she tells you that you can look for a home as high as $400,000. That number makes you almost gasp for air. You already know that you would be much more comfortable financial-wise with a $250,000 house. Go with what you feel, know, and understand about your own situation, Reischer says.
Just because a lender has crunched the numbers, looked into your credit history and put together some numbers does not mean that they know you, your lifestyle, or your future goals.
“A mortgage lender shouldn’t be giving you the insight to manage that risk. It’s foolish to even ask them. They aren’t your buddy or friend,” he says.
Picking the right lender is important
Lenders make money off of writing loans. That’s something many borrowers forget, he says.
But picking the right lender to help you through the whole complicated process can be as easy as asking friends and family who they recommend that treated them well.
“There are scammers out there that try to hide the ball,” Reischer says. “They try to change the deal to get better results for themselves.”
Reischer says that one of the good things that came out of the mortgage fiasco was a database created in 2008 as part of the SAFE Act (Secure and Fair Enforcement for Mortgage Licensing Act). Hence, the Nationwide Mortgage Licensing System and Registry (NMLS) began. Just go to the NMLS Consumer Access site and enter a lender’s name and address to see if they are licensed. It’s just one more way to find someone to trust.
Trust also means that you actually like the person, can get along with them, and feel comfortable giving them such personal information about your finances and life. You will be spending a lot of time with them either in person, on the phone or online because getting a mortgage can be very time-consuming and frustrating, Reischer says.
“The whole question of trust comes up a lot when the deal is changing frequently,” he says. “If you are in the process of getting a mortgage, it can be 45-60 days of working with a broker or banker to get it. The deal changes sometimes. You are already locked into the process. You will be hesitant to start the process with someone else if you don’t trust the person.”
Transparency is the key, he says.
“If the deal changes but the expectation of the borrower is not so much cause for concern if the banker has managed the expectations of the customer in the beginning. It is ideal of a skilled loan officer who has seen enough of the perils and pitfalls of mortgages to educate the borrower that X might happen or Y might happen,” he says.
The lender needs to map it all out for you. The customer is much more comfortable with any chances if the banker or broker has managed their expectations throughout the process, Reischer says.
“There are curve balls thrown at even the best loan officers. For instance, when the appraisal gets done, it might bring to light certain open violations and problems. The lender might then have to put the loan into a different product,” he says. “The deal changes. Points might change.”
Things like this happen all the time. For instance, the appraiser goes out and finds a separate structure on the property that maybe just a cottage. Then, that appraiser has to describe the property as a two-family property. It changes things.
“But those changes need to be managed. And the loan needs to be changed. It’s all about communication and trust,” he says.