How to Find the Right Lender

Top Five Ways to Find an Excellent Lending Partner

The term Lending Partner may sound odd to some, but it's the best way to describe a lender's relationship to you. And just like a partner he/she can be your best ally or worst enemy! Normally you wouldn't know which until it is too late! That's where this little guide comes in. With the information in this guide you can gain some insight into how to pick an excellent lending partner. (You don't want a 'pretty good' lending partner, right?)

1. Does your potential lending partner specialize in the type of loan you need?

There are literally hundreds of loan programs available for a loan officer to choose from. The programs cover everything from tapping into the equity in your home, financing the construction of a new home, remodeling or refinancing. With so much variety and so many options expecting to find a potential lending partner that specializes in refinancing to handle your construction loan with equal finesse is like expecting a foot surgeon to perform brain surgery on you and having it turn out well. I suppose it could turn out alright, but it's not likely (but you probably wouldn't really mind if it didn't since you wouldn't know it!). Make sure that your potential lending partner specializes in the type of loan you need. They will be able to recommend the very best loan for your needs. If your selected lender is really good they will recommend you to another loan officer if you need a different type of loan. Look for a lending partner that specializes in the loan you need.

2. Has your potential lending partner used the loan they are recommending to you?

You would be less confident to take health advice from an overweight and out of shape doctor versus a doctor that is in great shape. Like wise you wouldn't want to get a loan from someone who hasn't used the loan programs they are recommending. If using the program your potential lending partner is recommending is such a good thing then it is realistic to expect that they would be using the same advice they are recommending. Ask your lending partner if they have used the loan program they are recommending and if not they should have a very compelling reason to explain why not.

3. Does your potential lending partner really look out for your best interests?

Many lending partners would like to make you "feel" like they are giving you the best deal. It is common to hear phrases such as "no points" or "no closing costs". That doesn't mean the lending partner is not making any money for doing your loan. Typically they are making more than the rest of your potential lending partners, but they aren't required by law to show you how much on your Good Faith Estimate of closing costs. Here is how it works. The lending partner will be paid by the lender or bank what is called a Yield Spread Premium (YSP). The bank or lender pays the lending partner the YSP for giving you a loan with a pre-payment penalty and or a higher rate. So, in reality, you are paying the lending partner for doing the loan, but by way of a higher rate/payment and or by having to pay the pre-payment penalty if you sell or refinance your home within the first 2-3 years of obtaining your loan. For clarification a prepayment penalty generally equates to six months worth of interest paid in lump sum when you refinance or sell your home. If you are considering a bank that does not have commission paid loan officers then the bank will generally give you the higher terms and prepayment penalty in conjunction with more demanding qualifying parameters to ensure they make that money as profit. Find out how your lending partner gets paid. If they are offering to get you a loan for the least amount out of the potential lending partners you have talked to, find out why.

4. Will your potential lending partner develop a game plan to help you qualify if you don't qualify now?

Many potential lending partners will be glad to help you obtain a loan if you are very well qualified, because it makes their job very easy. However, if you have any problems qualifying most will turn you down and tell you that you can't get the loan. A true partner would instead let you know what you need to do to qualify for the loan. Your partner would help you make a game plan so that you can get approved ASAP for your loan. If you don't qualify for the loan you applied for, your lending partner should provide you with a game plan for qualifying. And if they didn't offer a plan, get a new lending partner.

5. Is your potential lending partner more interested in your future financial position or closing the loan?

You should expect that a loan officer wants to make a living just like anyone else, but that shouldn't excuse his/her focus to be on something other than your future financial picture. Look for the loan officer you are working with to ask you questions about your financial goals in conjunction with picking the best loan for your situation. An Excellent Lending Partner will make sure that your financial goals and the loan you are after match. And will bring to your attention any discrepancies between your project and your financial goals. They will give you information that will help you stay on track. If they answer questions you have cryptically or are not asking questions about your financial future you can be fairly certain they are more focused on the close of your loan than your financial future. Carefully evaluate your first meeting with the potential lending partner; if they are not interested in your goals, KEEP LOOKING!

There are lots of qualified and honest lending partners out there, but there are also less valuable lending partners and the difference can be hard to spot at first. Use these five tips to find the most excellent lending partner for your next project. If your next project is new construction of a residential home, contact us using the information below and put us to the test. Find out how well we match up with your future project and how excellent a lending partner we make.

Written By: Gary Chapman ||
Created: Aug 18, 2005 || Updated: Nov 18, 2005
.

Articles

3 Reasons why 2007 is the best time to build your Dream Home

3 Reasons why 2007 is the best year to build your California Dream home.
More...

Apr 30, 2007

How to Find the Right Lender

Finding the right lending partner can make all the difference. What is a Lending Partner??? A Lending Partner is ...
More...

Nov 18, 2005