How To Choose A Lender

Speaker 1: [0:00] Hello, hello, and welcome to another edition of the Awesome in Seattle podcast. This is Christian Nossum of the Awesome Nossum Group at Wilson Realty, and today we are talking about how to find and select the right mortgage broker, or another way to put it, the right lender, to help fund your real estate purchase. This can actually play quite a big part in getting your offer accepted, so this is really important, and we're gonna go over all the pros and cons and what you can do and what you shouldn't do when selecting. So let me introduce my co-hosts, the awesome agents of the Awesome Nossum Group. First, we have Reed Watson, the fellow Seattle native.

Speaker 2: [0:41] That's me.

Speaker 1: [0:42] We have Mel G, otherwise known as Melanie Gadami.

Speaker 2: [0:48] Hey. Hey, hey.

Speaker 1: [0:49] We have Jason Saldarriaga, the data guru.

Speaker 3: [0:54] Me. I wanted I wanted, like, an awkwardly long pause.

Speaker 1: [1:01] And last but not least, Les Cutting, the dog whisperer.

Speaker 4: [1:05] Why am I always last? Hello, everyone. How y'all doing?

Speaker 1: [1:08] Next episode, you'll be first.

Speaker 4: [1:09] Good.

Speaker 1: [1:10] Maybe. So for the, for all of you listeners that are potentially brand new to home buying, or even if you're not brand new, this is probably a better explanation of it, um, let me kinda explain what role the mortgage broker or your lender plays in all this. So it's actually really important to choose who your lender is for a lot of different reasons. Interest rates are one of them. That's the one that most people think of. Um, there's gonna be a lot of other ones, but first let's start with interest rates. So securing a good interest rate is super important, but the truth is they don't really vary all that much from the best rate you can get to the worst rate you can get, uh, because your specific situation will dictate how good or bad the interest rate is. So let's go over that a little bit more.

Speaker 5: [2:01] Because there is so much attention put on interest rates when the media discusses the real estate market, sometimes home buyers end up selecting a lender based solely on a slightly lower rate when the broker may not be the best fit. Understanding how rates are established gives a better perspective for selecting a bank to work with. The Fed sets the rate, and what causes them to vary between lenders are the fees that each individual bank adds on. So rate quotes will typically only vary within a 0.25% gap. More importantly than getting the lowest rate is selecting a lender that will support you throughout the process and help you close the deal. Here in Seattle's uber competitive market, selecting a lender who can help get your offer accepted is just as important, if not more important, than getting the lowest rate.

Speaker 1: [2:54] Knowing the questions to ask is half the battle when it comes to selecting the best lender to work for you. Let's go over some of the more important questions that buyers should be asking

Speaker 2: [3:05] I think one of the most important things for buyers to ask potential lenders is whether or not they're able to pre-underwrite you as a buyer. Most buyers aren't in a position to increase the amount that they can put down or to offer all cash on a house, but a great way to make your offer more attractive without spending more money upfront is to request a fully pre-underwritten pre-approval letter from your lender. Basically what sets this approach apart from a standard pre-approval letter is that the lender has done most of the underwriting process before the offer is even made. So this process includes verifying your income, assets, debt, property details, all in order to issue a final approval on your loan application. And what's really fantastic about this is that you can waive some contingencies and shorten your closing timeframe, which makes you all the more competitive in this market.

Speaker 3: [4:02] Amen, Reid. You're spot on. You know, something I tell a lot of clients, it's about i- in a competitive market as a buyer, when it's competitive in the buyer side, which we're currently living through- Mm-hmm … um, a lot of this is about taking on more risk, um, in order to compete. It's not just accepting the risk. There are strategies to mitigate the risk, but you still need to take it on in order to compete against these other offers from buyers that are willing to take on tons of risks or all cash buyers. So, um, just something to keep in mind. When the broker has already completed all the steps that you just mentioned, it really just makes the offer more competitive, more attractive, and it's better for the buyer because it can enable a few specific things among many. First off, you can close faster. You don't have to go through the underwriting that you as a buyer would have gone through after getting your offer accepted because you've already done that. So that can shave a few days off of the closing period. After all, all cash offers, they can often close in, what, 10 days?

Speaker 1: [5:12] Mm-hmm.

Speaker 3: [5:13] Um, and so the faster you can close, the more competitive, um, the more you'll stand out. The second thing, if you're pre-underwritten, you as a buyer have the option of waiving more contingencies. This is that whole risk mitigation thing that I'm saying. You can waive financing because you've already done your part of the financing. Appraisal is separate. That's a separate discussion, but at least you have the underwriting p- section done for yourself as a buyer, so you can waive that contingency, making yourself more competitive. And then I think this is really important, the third be- quick. As a buyer being pre-underwritten, it really can help you get a very clear picture of your options, of your finances, of your budget. And so you're able to know the game you're playing, the parameters in which you are limited. And it'll help, especially if it's a competitive offer and there's a bidding war, you'll know later rounds in the bidding war what your limits are. And having that information on day one, or really day zero That can only help. So in the current Seattle real estate market, selecting a lender that will pre-underwrite you is pretty much essential. Very rarely do you see competitive situations work out for buyers who are not pre-underwritten.

Speaker 1: [6:39] Yeah, and I think this is a good spot to point out that most lenders don't do pre-underwriting. Uh, it's usually all they will do is pre-approve you, uh, or pre-qualify you.

Speaker 3: [6:50] Getting- Why won't they?

Speaker 1: [6:52] Well, because getting pre-underwritten… Good question, Jason. Uh, getting pre-underwritten- That's not a

Speaker 3: [6:56] leading question.

Speaker 1: [6:58] Not at all. Getting pre-underwritten is time-consuming, and it costs the bank time, and banks are not in the market to lose money. And if you don't ever end up buying, but you got pre-underwritten, you could be losing that bank some money in the terms of time that they had to pay an employee. So most banks, especially the big ones, do not do this. There are some mortgage brokers and local lenders in the Seattle area that do pre-underwrite, and we can definitely recommend those to you if you need a recommendation. Uh, but it's, it's not a standard practice, for sure. So, um, but it is almost imperative that you do it in this market where it is so competitive. So if you do need a recommendation, just let us know.

Speaker 4: [7:46] All right. So before you start vetting banks, um, I would make sure you have a real estate agent you trust, for example, the Austin Austin Group. We're all fantastic. Um, very good agents. We can become your best resource for navigating the whole entire home process, obviously, and we also have good lender referrals within our network. If an agent is experienced, they will, they'll know what lenders are good to work with and which are not. So here are two questions that you should always ask and consider when looking for a lender. One, are they local? And two, do they have a good reputation? Friends and other people in your network can also be a good resource for those who have gone through the home-buying process. But take a little time to reach out to people you know and who have bought homes in the area and ask who they've used and if it was a good experience. One thing I'd also like to throw out, um, you know, sometimes you should use your… You should depend on your agent because, um, we've done the process before, and, you know, if we're closing deals, or if you have an agent that's closing deals, um, they will definitely know what lender will get the job done. You should lean on your agent because we know who can get the job done. And I should point out as well that we don't get any- anything or a kickback for referring you to a lender. So if we recommend someone, um, you should probably look into that rather than just pick a big bank because it's a big bank that you know. If we've worked with someone before, there's a good reason why we're recommending them.

Speaker 5: [9:15] I agree with Les. Talking to people you trust is a great place to start. My next step would be to also browse online and look at reviews of local lenders. Another important thing to consider is the size of bank that you'll be dealing with. In my experience, larger banks can be slow. In a competitive market like Seattle, it can be crucial that the lender moves quickly, and larger banks may not have the ability and capacity to give you the attention you need to close a deal on a tight timeline, which from my experience working with buyers who have used larger banks, it caused major delays with just the turnaround time from when you order the, the appraisal to when the appraisal report comes in. And that just trickles down and just it can cause the closing date to be pushed out and just create, you know, a bunch of different inconveniences that doesn't need to happen.

Speaker 1: [10:06] Yep. And I'll also add that even, I'd say, most of the local credit unions, especially the big ones, they're also just as slow as the big, gigantic banks and corporations out there. So just because it's a local credit union does not mean that they're necessarily gonna be quick. A lot of the local credit unions, even especially the big ones that we all know about and see the commercials for, they are quite slow. Um, so just be aware, just because it's local and it's a credit union does not mean they're gonna be quick.

Speaker 2: [10:40] Yeah, and on top of just getting things done quickly, you do want somebody who's gonna respond quickly. Mm-hmm. So keep that in mind when you're asking around, reading reviews, or even talking to potential lenders. You want someone who is gonna go the extra mile for you. A good lender is gonna be willing to do things like talk to the listing agent when there are multiple offers on a property and really advocate for you and how secure your financing is. In a competitive situation, you just wanna stack your deck with as many fast-acting advocates as you can, and that includes a responsive real estate agent and a responsive mortgage broker. You wanna make sure that your real estate agent is always gonna be able to get an up-to-date preapproval or pre-underwriting letter as soon as possible because a lot of the time in this market you need to turn around quickly to make an offer. So when you get a referral for a lender, it's a great idea to ask do they respond quickly to questions and requests. That's something you can kind of tell as you talk with them as well. And some more good questions are does this lender usually close on time, and can they close quickly? So that's gonna be like can they close in 30 days? Are they closing in 30 days? Is that what they're actually doing? And then can they close in less than 30 days?

Speaker 3: [11:56] This is exactly where the value of a good real estate agent comes in, because they can speak to their past experience with different lenders. Like, you know, so if you go off of their recommendations and go from there, it's probably the best starting point because they have all this knowledge from past transactions.

Speaker 1: [12:15] Exactly. It's, it's huge. Lean on us. That's why we're here. We want this to succeed. We want you to succeed, so please lean on us.

Speaker 3: [12:23] Exactly. So i- going down the budgeting route, another thing that I really consider s- that separates a good mortgage broker from a, like, best in the world, greatest mortgage- mortgage, mortgage broker is how much energy and time that they're willing to spend with you going over the more minute details of your budget from, you know, budget breakdowns, cost outlays, what, what is negotiable, what's not, to different loan programs and options. Some len- lenders even Dive kind of deep into long-term financial strategy, which can kind of start to blur the line between a mortgage broker and financial planner. They are not financial planners, but obviously buying a house is a large part of many people's portfolio, so it's helpful to have a lender who can speak to that for certain buyers. When you meet with a mortgage broker, though, just see how much guidance they offer in all of those ways that I just mentioned. Ask them directly, "Are you willing to help me set up a budget?" If they are, it, it can really show that they are invested in your success as a home buyer. And at the end of the day, having another resource at your disposal only helps, right? So just keep your… Th- these little tips that we're kinda throwing out, this is really to inform you as a buyer to go in more efficiently and more productively towards the end goal, which is keys in hand.

Speaker 1: [13:56] Exactly. Yeah, and it's, it's really, really helpful and really cool for us on our end when the lender is willing to help you review the budget that you've set up so that you're not making a decision that later you are going to regret. That is the last thing any of us want, and working with a lender that is looking out for you and your best interest, not just trying to get you to get the biggest loan possible so they can get paid the most. Like, that's not what we want, um, and that's not what you should want either. So, um, it's, it's important to, to really work with someone that's, you know, being compassionate and trying to understand your situation and help you long-term. Because taking on a mortgage is a super intimidating thing.

Speaker 4: [14:42] As we've talked about in past episodes, houses in Seattle area are selling quickly, surprise, um, with many properties often going off market in less than a week. I think last episode we talked about that. I think it was, like, six days- Mm-hmm … or less. But anyway, when the market's competitive, sellers don't wanna waste their time with offers, uh, from buyers, unless they're sure the deal will close. So as a buyer, you wanna make su- you wa- you wanna make sure that your offer's the most attractive. Seven out of 10 times a deal doesn't close, it's because of financing. So do this. Set yourself up for success. Uh, save yourself time and disappointment by do your homework. Gathering referrals and vetting individual lenders helps ensure that when it's time to make an offer, the seller can con- be confident in you, your lender, um, and your agent that you can deliver and close on time

Speaker 1: [15:29] Yeah, it's a great point. Throughout today's episode, we may have referred to lenders as both mortgage brokers or lenders. It's one and the same thing in our industry, so, um, just realize that that's the same thing. Y- there's not a really a big difference there. Um, we're kind of using those two words interchangeably. So, uh, but with that, we will wrap it up. That was, uh, I think hopefully a very, very helpful episode for all of you listening. If you ever have questions or if you need a referral to a good quality local lender that does all the things that we are recommending, uh, just reach out. Um, you can send us a text, you can email us, uh, whatever you need to do. All of our contact info is right on our website, awesomeandawesome.com. We will see you next week, and as always, thanks for listening.

Speaker 6: [16:20] Thank you for being a friend. I've been watching a lot of Golden Girls. Sorry.

Speaker 1: [16:25] Bye. All right. Bye. Yeah.