When it comes to finding a lender for a mortgage loan, many borrowers take the same approach as with most other needs – they resort to the internet. This approach can be very fruitful, but it can also have some pitfalls. Today, we’re going to discuss some of the advantages of working with on-line lenders as well as advantages of working with local lenders.
Often times an on-line search for mortgages will result in finding mortgage brokers that are advertising very competitive rates. While getting the lowest interest rate is a goal for most borrowers, it may come with some unforeseen costs. Mortgage brokers usually have access to multiple investors so that they can “shop around” for low rates when it is time to lock in a loan for their borrowers. Generally speaking, the more investors they have access to, the better chances of getting a very competitive rate.
ONLINE LENDERS
So why not go on-line to find a mortgage broker that can offer a low interest rate? Because the rate is only part of the equation. Is the broker charging discount points to be able to offer such a good rate? If there are points involved, the lower rate could results in a worse financial scenario for the borrower.
Most mortgage brokers do not participate in the processing or underwriting of the loan. The mortgage broker is just a “middle man” that is paid to link a borrower with an investor and is left out of the most critical part of the loan approval process. They often gather the information from the loan application, along with supporting documentation, and then send it off to the investor so that they can process and underwrite the loan. Many times, the loan will have some “issues” that require additional documentation or explanations from the borrower. In some cases, the broker is not aware of any issues with the loan. Even worse, if they are aware of the issues, they have no control as to how the issues can be corrected or how long it may take to get the problem resolved.
Another important aspect of any loan is the appraised value of the property that is being used as collateral. If your mortgage broker is from a different part of the country, how do you know that they are using appraisers that have a keen understanding of the nuances of property values in the DC Metropolitan area? Just in Northern Virginia alone, property values for similar type homes can vary greatly by zip code, school district, and city. It is important that the appraisers understand these differences when compiling an appraisal report.
LOCAL LENDERS
Sometimes it is important to be able to have a face-to-face meeting between the lender and the borrower. Many borrowers would prefer to hand deliver valuable and sensitive personal financial information versus sending it via email or some other electronic format. In addition, it is also comforting for some borrowers to be able to shake hands with the people that will be making the determination of whether a loan of hundreds of thousands of dollars will be approved.
There are mortgage programs that are specific to a general area or state. Recently, VHDA was offering to pay 3% of a sales price to qualified borrowers purchasing a home in Virginia. The benefit to borrowers qualifying for this program could be as much as $15,000! Having knowledge of these types of programs is essential when determining the best loan solution for borrowers. It is unreasonable to expect a mortgage broker from another part of the country to know about specific programs in your area.
OUR PREFERRED LENDER
Intercoastal Mortgage Company is a local lender with headquarters located in Fairfax, VA and has been providing residential loan solutions for the DC Metro area since 1987. Intercoastal Mortgage Company will fund loans that have been processed and underwritten “in house” at our Fairfax, VA location. Similar to mortgage brokers, Intercoastal Mortgage Company (ICM) has access to multiple investors which allow us to look at various outlets when locking in a rate for a borrower. If the borrower has good credit and income, it may be as simple as seeing which investor has the lowest rate at time of the loan lock. If the borrower has experienced credit challenges, a short sale or foreclosure, ICM has access to investors that will service loans of this type. Perhaps there are programs such as the VHDA grant program that can save thousands of dollars for the borrower. We work very hard to keep updated on all local loan programs.
Because the processing and underwriting is completed “in house”, ICM is able to meet closing dates that many mortgage brokers are unable to meet.
The appraisal process is completed by having access to multiple “local” appraisers that know the DC area very well. The “pool” of certified appraisers that ICM uses have all shown their knowledge of the local area for an extended period of time.
The chart below sums up the advantages of working with a local lender versus an online lender.
As you can see, a local lender can access multiple investors to offer very competitive rates, along with excellent service and timeliness that is extremely important in today’s lending environment.
NMLS # 838973
Keith Harris
Senior Loan Officer
Office: 703-259-0788
keithh@icmtg.com