How to Choose a Good Lender

We often talk about the red flags in real estate transactions, but today we’re sharing some of the green flags to look for when in search of a mortgage lender. Our aim is to empower you with knowledge and positive indicators to help you make informed decisions when selecting a lender for your home buying needs. By focusing on the green flags, we want to provide you with the tools to identify reputable lenders who prioritize transparency, fair practices, and customer satisfaction.

Verifying that the potential lender you will be working with is licensed and operates legally in your state will ensure their adherence to common practices and legal document requirements. If your potential lender is also a member of industry associations such as Puget Sound Mortgage Lenders Association PSMLA or regulated by relevant financial authorities that is a great sign of their commitment to upholding ethical values of lending

When a lender asks for documentation to be sent it allows for information provided by the potential buyer to be verified. This will ensure that the borrower’s financial and personal details are accurate and complete and minimizes the risk of incorrect borrowing power information. Lenders are often required by law to verify information and maintain proper documentation to comply with regulatory requirements.

By reviewing your proper documentation, such as pay stubs, bank statements, or tax returns, your lender can evaluate your financial situation more accurately. This will also give the opportunity for a more personalized loan term based on your financial profile. For example, if the borrower provides documents that demonstrate a stable income and a good credit history, the lender may be able to offer lower interest rates or higher loan amounts. When you see a lender is committed to transparency and responsible lending practices, it’s a green flag!

A good lender will provide you with a written agreement that clearly outlines the terms and conditions of the loan. They will fully explain repayment schedules, interest rates, late payment policies, and any other relevant details to ensure transparency and avoid surprises. Knowing what to expect financially is one of the best things a buyer can know upfront such as earnest money deposits!

Tying into the importance of a lender asking for documentation, when you see that a lender has reached out to verify your place of employment you can have confidence that they are thorough in their assessment process! A reputable lender will typically obtain your consent and handle the information in compliance with relevant data protection laws.

It is important to note that different lenders have varying policies and procedures that sometimes does not require them to contact your employer. However, when they do, it can contribute to a more comprehensive and reliable loan assessment process.

Having a lender evaluate your credit score allows for them to assess your ability to repay a loan and determine any risk factors. This will also help to ensure that you will have a fair interest rate, loan amount, and repayment period. Pulling your credit will also allow the lender to verify the information you provided in your loan application. They can cross-reference details like your employment, address, and financial history to ensure accuracy and consistency. Any red flags that could affect your loan application will also be identified from a lender properly assessing your credit score

This shows that a lender is interested in understanding the context and purpose behind a borrower’s credit inquiries. For example, multiple credit inquiries within a short period of time can negatively impact your credit. If a lender asks about these inquiries, you will have the opportunity to provide a valid explanation that can help reduce any negative assumptions that might be made about your creditworthiness. Discussing any inquiries on your credit can foster a relationship based on trust and transparency with your lender so they can better understand your overall credit situation to make a more informed judgment.

One of the most difficult things to deal with when trying to make progress on purchasing a home is not having someone to directly contact! A lot of questions can go unanswered, anxiety and frustrations can build up, and your confidence in the process can go down. When you are able to directly contact your lender this enables for clear and effective communication through the entire loan process. Your lender should be able to provide you a tailored experience that will address your needs and your concerns.

Your lender should also be able to provide feedback and updates in a timely manner with real-time information to reduce uncertainty and provide a peace of mind.

Be sure to ask your potential lender what their system is for backup when they are out of office. Do they have an assistant? Do they have someone else that will be stepping into their place when they are on vacation? It is important to know who you can contact and when at all times.

It is important to emphasize that choosing a lender for the purpose of receiving fast results (or the lowest price) may not be in your best interest. Rushing into any loan agreement without thoroughly assessing the lender’s reputation, terms, and conditions can lead to unfavorable terms, hidden fees, or even falling victim to predatory lending practices. Taking the time to research, compare lenders, and consider all the factors we have mentioned above can help you make an informed decision and secure a loan from a reputable lender that has your best interests at heart. Remember, the extra effort upfront can save you from potential financial hardships in the long run!

If you need help with choosing the right lender for you, contact one of our agents and they can also point you in the right direction!