For the longest time, I have listened to loan officers talk about why people should do business with them; and 95% of the time their presentations boil down to three things – price, product, and service. On the pricing front, they talk about low interest rates and/or closing costs; on the product side, they position themselves as experts in a particular loan program (like a 203K or reverse mortgage); and on theservice side, they discuss turnaround time or how available they are.
Consumer expereince varied widely when too many under-performers worked in the marketplace. With the economic down-turn, those who were marginal performes had to exit, leaving the better performers. This has been a cunsumer win. In today’s marketplace, virtually every lender (and therefore, every loan officer) has very similar pricing, pretty much all the same products, and service is difficult to prove until you give them a loan to work on. My point being is that the changing lending landscape (tougher underwriting guidelines, loan officer licensing, stricter appraisals, and such) has eliminated virtually 70% of loan officers in America. The remaining people have been vetted and represent a very high quality group of professionals. (Not that there aren’t always a few bad apples, but there truly are very fewer than 5 years ago.)
So, when borrowers shop for loans on the old “price/product/service model”, how does a consumer differentiate between loan officers?
- § Ask for referrals – If you have a friend, co-worker, or family member who had a good lending experience, ask who they used. Talk to people who deal with multiple lenders (your real estate agent, attorneys, accountants, etc.) and leverage their comparative experience into making good choices. Loan officers who earn referrals typically go beyond price/product/service.
- § Seek out a mortgage advisor – Even today, with limited loan programs, there are many factors to consider when choosing the right mortgage. Your future income, the length of time you expect to be in the home, and your risk tolerance should be discussed before ruling out adjustable rate mortgages, for example.
- § Look for transparency – Demand a lender who freely and competently discusses rates and likely rate movements. Don’t buy into the idea that rates are conjured up in a mysterious way. Rates are derived by activities in the bond market and your loan officer should be able to explain, in layman’s terms, the factors that affect rates and upcoming events and economic reports, as well as, the most likely impact they will have.
- § Accessibility of information – Are you looking for printed materials and/or videos to guide you through the process? How about online workshops or home buying seminars?
- § Seek out a resource – You may need other professionals when buying a home (from insurance people, to home improvement people, to legal help). A good loan officer has a network of high quality referral partners to help you.
Many of the criteria for choosing a loan officer are less tangible than the old “price/product/service model”, but frankly, they may prove more valuable over time. A key to the mix is “open door”. If the loan officer is local they will know the market they are elnding in and they have a door you can walk into for help if things go sideways.