When shopping for a lender you might think that finding the lowest interest rate is the most important thing, however your rate is only one piece of the puzzle and the best rate does not always equal the lowest payment! Many lenders will not allow you to lock a rate until you have a contract on a home. Interest rates change every day, and one lender may have a better rate today and the same rate as his competitor tomorrow. Being competitive in the mortgage industry is much more involved than just quoting a rate. Yes, you want your lender to be within 1/8th to 1/4th% in rate with the competition because interest rate is important, but there is much much more to shopping for a lender! Read on for some questions to consider when shopping for a lender.

• Does your lender ask the right questions to help tailor your loan to maximize your cash flow?
  • I.e. Does it make more sense to put down a smaller down payment and take out a higher tax deductible mortgage in order to use savings pay‐off loans; or if your home needs updating/repairs, again, a smaller down payment would allow you to use cash savings to make the needed changes right away vs. waiting to save renovation funds or taking out a more expensive debt via HELOC or credit card to pay for repairs. On the other hand you may want to put down more cash to buy down your rate, or you might want to offer slightly more than list price and ask for a seller concession to help cover closing costs. If your lender is not considering your unique needs, you need a new lender!

• Does your lender give you the option to try to “match” another lender’s quote?  
• Does your lender show you the break even point when paying discount points so you understand the cost and how long it will take to recoup the upfront money you pay with points?
• Does your lender show you what numbers to compare when comparing estimates from different lenders? Most of the fees on the estimate are from the settlement company. You need to know which fees the lender charges and how to compare those fees. APR can be a good comparison tool.
  • **True lender to lender comparison is solely based on the APR** and comparing lender specific fees. Otherwise, loan estimates depend on market data such as title company fees, and various charges that may or may not be applicable. For example home inspection fees and title insurance fees may or may not be on the estimate depending on the lender. You’ll want your lender to include these so you get a better idea of the full picture of your charges. 
  • Given the NAR settlement of 2024, you’ll want to check if your buyer broker agent commission is included as a potential cost. 

• Does your lender take time to explain the appraisal contingency and come up with a plan in the event you need to waive the appraisal contingency in order to be competitive? This is especially important in a competitive market!   
• Does your lender look at your credit and discuss credit rescoring to improve rate and lower costs?
• Does your lender discuss Monthly PMI vs Single Premium vs Financed PMI?
• Does your lender offer a variety of loans? Variety is important if you need a creative loan. For instance, if you don’t have much cash on hand, want to buy before you sell, or have a high debt-to-income ratio, you’ll need a lender willing to work with those circumstances.
• Does your lender have knowledge and access to grants, down payment assistance options and lower rate income sensitive programs?
• Is your lender local and well known to the community of realtors? This helps build relationships, confidence and can help secure acceptance of your offer.
• Is your lender available evenings and weekends if needed? Many times contracts are negotiated in non business hours.
• Does your lender offer in-house underwriting? This is not a dealbreaker per se, but it can certainly be very important. Here’s why: smaller banks are typically better in the lending world. Big banks like Bank of America and even some credit unions, can be very slow-moving. Small, local banks are much more agile, can make exceptions more easily, and typically know everyone they are dealing with throughout the process. At a larger bank, your lender might have underwriters in a different state.
• Does your lender attend your closing to be available to answer important questions at your closing? 
• Does your lender maintain the relationship after closing and update you on potential savings via refinance or PMI removal?

As you can see there is much more to consider than just interest rate. Working with a local and experienced lender who can chat through your best options will make a world of difference! If you need help finding a great experienced local lender, we can help. Contact us today!