“Erin – how can a loan officer screw things up?” I am asked constantly by my clients. Dishonesty. Lack of Ethics. Laziness. Lack of knowledge. Let me put it to ya’ll this way: there are a lot of moving components in a real estate transaction that must all take place within a 30-day escrow period, and screwing any of them up can lead to a disaster! Where do I find a great loan officer, you ask? Ask someone you know and trust for a referral.
Not all loan officers are created equally. Please – on the first meeting you have with a prospective loan officer (which should take place before you start your actual home search), it is imperative you ask many questions and get a lot of information up front. Remember – you will basically be giving all of your private, confidential financial information to these people, and a home purchase is one of the largest and most significant financial transactions most people ever undertake.
1) What type of loan should I get? A good loan officer will thoroughly interview you and your finances prior to suggesting any particular type of loan. Would a good dentist recommend pulling a tooth before he looks in your mouth?
2) How much can I spend on my home purchase? Beware of the loan officer who tries to “over-qualify” you. They are still out there. Just because you can qualify for $500k does not mean you can or should spend $500k! A loan officer will use a debt-to-income ratio of your gross (pre-tax) income to qualify you for a mortgage loan…make sure this is a ratio that you can live with. For example, let’s suppose your monthly income before tax is $6,000, and the loan officer determines you can afford a payment of $3,000.00 per month. Well after tax, let’s suppose your net monthly income is $4,500.00 – do you want 2/3 of your income each month to go toward the monthly payment? You will have $1,500 left for groceries, car payments, gas, utilities, etc…You need to know before you start the purchase process what purchase scenario is ok with you!
2) What are the discount points and origination fees associated with said loan? Borrowers can use “points” to basically buy down an interest rate. For example, by paying a point, you may be able to go from 6.25% interest to 5.75% interest – and save $X on your monthly payment for the life of the loan. Points are not free! A point will cost you 1 percent of the loan amount up front- so if your loan is for $500k, each point will cost $5,000.
3) What other fees are associated with this loan? Find out what the origination fees are…basically a good lender will not hide these items from you – make sure to ask your loan officer for what is referred to as a “Good Faith Estimate.” This is basically an itemization of ALL the fees associated with obtaining a loan…there are lots of them, like the Appraisal fee, credit report fee, lender’s title policy, escrow fees, recording fees, taxes, notary fees…
4) Will there be a pre-payment penalty? If you decide that in a year (or two..or up to five years for that matter) after your home purchase you want to sell or re-finance, you may be subject to a penalty. Generally, prepayment penalties allow a lender to collect an additional six months of “unearned interest” if you pay the loan off early. Find out if your loan will have a pre-payment penalty, and what the terms are.
5) Do you offer a “rate lock” on this loan? Interest rates change on a daily basis. Find out if you can lock in to your rate, and if there are any fees associated with doing so.
6) Are loans approved in-house? Ask if there are underwriters on staff that approve or reject the loans, and/or issue condition for the loans prior to approval and funding.
7) When I sign my loan paperwork right before the close of escrow, will you be there at the signing to answer any questions if they come up? The answer to this needs to be yes! Occasionally there are errors on loan documents, and it is much easier to correct issues if the loan officer is there and can call the underwriter or whoever and get the problem resolved. Obviously an out-of-area loan officer may have a problem personally attending the signing…take my advice and do not use a loan officer that does not physically work in your area.
Anyway, once you have completed your initial pre-qualification process, put your chosen loan officer in touch with your real estate agent. They will have to work closely over your escrow period. Just because Uncle Bob is a loan officer does not make him a good choice to do your loan. Ask him all the same questions…trust me, you do not want any surprises when you are signing the final paperwork for the house of your dreams!
Ok, so now the information you have all been anxiously awaiting!…Contact Marlena Olson with the Vitek Mortgage Group. Marlena has worked with Vitek for about 10 years, which is rare in this business. She is, by far, the most ethical, honest, and hard-working loan officer I have ever come in contact with, and I have referred many of my clients to her. She can be reached at 916-486-6900 or firstname.lastname@example.org.