Times are rough for home buyers in Denver these days.
They spend months searching over limited inventory, race to write offers on properties they like, and often have to offer $10,000 – $30,000 over the listing price just to have their offer considered. When a listing agent reviews offers with the seller one factor they are looking at is the pre-approval letter from the buyer’s lender. A seller may not know the difference between a letter from a national bank, an out of town mortgage broker, or a local mortgage broker, but you can bet that the listing agent will, and likely guide the seller towards the most trustworthy option – the one that is going to get everyone to the closing by the smoothest route possible.
I have worked with buyers who chose to get a mortgage through their bank, buyers who chose an out of state mortgage broker, and buyers who choose a local mortgage broker. My preference time and time again is a local mortgage broker. Seeing how bad things can (and do) go with the other options has made me a local mortgage broker cheerleader for life. Here are the reasons why I feel it is important to use an experienced, local mortgage broker.
- Options – Mortgage brokers have tons of information on loan programs, and options. They are used to working with a very diverse assortment of buyers, and those who have been in the business for a while know all the rules, tips and tricks to help just about anybody secure a home loan. They can explain all the programs and options that work for you to give you the biggest financial benefit. Banks can do this as well, but they are limited to share only the programs that they offer. A mortgage broker will always have access to more banks and lenders that may not deal directly with the public, and that can save you money.
- Availability – The home loan process can be overwhelming and exhausting. There are so many forms, documents and financial information that lenders require that it’s enough to make you think you’ve promised them your first born. You’ll definitely want a friend, someone you can call outside of “banking hours” if an issue pops up in the real estate transaction or during the loan application process. A mortgage broker can offer the personal service that you need. Unlike a bank, a mortgage broker is doing all of the work, from loan origination to closing, they will know your application inside and out and be able to communicate on your behalf with the lender, title company and the real estate agents. If you work with an out of state bank or mortgage broker you may have to potentially deal with people and documents being unavailable when they’re needed because they’re outside of your time zone. In addition, an out of state broker or bank may not have any idea what the state of the market is and how long it currently takes to order and receive an appraisal in Denver (something that is required of the lender). This leaves you vulnerable to delays in the contract, at risk of losing your earnest money or termination of the contract due to the poor performance of the lender.
- Accountability – Most mortgage brokers get paid on commission, so if the deal doesn’t close, they don’t get paid. That means that they are invested in seeing you get to closing because it is mutually beneficial. A local mortgage broker is also likely looking to gather referrals, and your future business (in case you refinance), which means that their local reputation is important to them. Out of state mortgage brokers can hide from angry clients, and real estate agents without much threat to their reputation. Big banks with frequent turn over are also not as concerned about a bad review as an individual or mom-and-pop mortgage broker would be. I don’t think that making money and avoiding threats is how mortgage brokers operate, but it’s nice to know that if you’re three days from closing and a clerical error shows up on a tax document that there is someone who is doing everything they can to make sure you close on your new home in time.
Having a lender letter from an experienced, local lender may help your offer get accepted over another, but at the end of the day (or contract) you want to have the lowest mortgage rate you can. Mortgage brokers will likely be able to get you the lowest rate available, but the bottom line is to shop around. Not all mortgage brokers are good, and not all banks are bad. Just like you would with an insurance or new doctor, compare service providers. Ask questions, check credentials, and read reviews and testimonials. I have a short list of really wonderful, local mortgage brokers that I’m happy to share if you’d like a recommendation. It’s important to find someone you can trust who can provide you with the best mortgage rate, financial education, and personal service.