One question that typically pops up in discussion with friends or family is how does someone pick a good, professional mortgage loan officer?
Well, there doesn’t seem to be an “Angie’s List” for mortgage professionals, therefore the best answer is using someone who has been recommended to you. There is nothing like a warm referral, and most successful loan officers get most of their business from referrals.
Even so, what should a borrower look for? People have to understand that navigating the mortgage loan process sometimes is not for the faint of heart. And certainly getting the lowest interest rate is high on the list, but rate is not everything.
Here are some key things to look for as well as some questions to ask as you choose whom to work with as you finance a new home or look to refinance.
Time in the business
-How long have they been in the mortgage business? Before the mortgage meltdown in 2007, just about anyone could get into the business — and that was part of the problem. One day, they are selling Chevys, the next day they are handling your $350,000 mortgage — and not knowing the first thing about guidelines or mortgage insurance or FHA underwriting, etc.
Today, all loan officers — with the exception of those who work for federally chartered banks — need to be licensed and need to do continuing education to maintain those licenses.
One of the effects of the meltdown was that it cleansed the system of mediocrity and made those who stayed much more professional and accountable.
Having a loan officer who has a number of years under his or her belt should mean that they can rapidly understand a borrower’s situation and come up with solutions that will, at the minimum, give the borrower options — for better or worse.
-Ask the loan officer if they are mortgage banker or a mortgage broker.
What is the difference?
If the loan officer is a mortgage banker, then he most likely works for a company that is called a “correspondent lender.” That means that his company is delegated by its investors (Chase JP Morgan, Citi, USBank among many) to process and underwrite loans in-house to the investor’s guidelines. The company funds the loans from its own credit lines and then sells the loan to the investors.
A mortgage broker does not carry the capability to fund loans. They will take a person’s application and send it out to multiple investors who will underwrite the loan, thus reducing the broker’s control over the entire process. As more regulations and liability have come down on the industry, there are fewer brokers operating today.
You should know if your loan is going to be processed and underwritten at the loan officer’s place of work. Some of the best loan officers love to micro-manage the loan process and will know everything about a particular loan, therefore they can have direct one-on-one contact with their processor and underwriter, meaning better communication between the loan officer and his or her operations team. That is a big plus for the borrower.
-Can the loan officer give you a simple, understandable breakdown of how the loan process works and does that loan officer set realistic expectations?
A borrower should be told how the loan process works. What happens to my application after I sign all of these papers? How long should the process take? When should I hear from you or your processor?
A good loan officer should be able to give you a realistic timeline of how long it will take to process your loan. With the current refinance boom, many lenders are pushing closings out almost three months. Consequently, good loan officers also should go over expectations.
A best practice in the mortgage business is to “under promise and over deliver.” Simply, don’t tell the borrower what they want to hear, tell them what they need to hear and set conservative expectations, with the hope and intent that whatever challenges identified will be successfully solved sooner than later and better than expected.
Areas of expertise
-Ask a loan officer what are his or her areas of expertise. Just because a loan officer says he is an expert in originating FHA loans, that does not mean he is an expert in originating 203k FHA loans, which is a niche renovation product.
A good loan officer will be honest with a borrower on what he does well and what he does not do well. If a loan officer has only done one VA loan in the last six years, it might be best to work with a loan officer who does them all the time.
Hence, a good loan officer will pass up the commission, swallow their ego and pass you on to someone who will know how to handle a particular loan product. It is much better for a loan officer to hand someone off to a trusted colleague, than to try to do it themselves and fail and frustrate the customer.
The bottom line for most borrowers who are seeking the best experience is ask friends or family whom they have worked with and how were they treated from beginning to end. But ask the questions and then make a thoughtful decision.
Robert Nusgart is a loan officer with Mortgage Master Inc. in Baltimore. He can be reached at 443-632-0858 or by email at [email protected] Visit his website at www.RobertNusgart.com for the latest mortgage and financial news.