Knowing Your Lender Makes for Smoother Transaction

Just recently a new couple arrived in Anchorage to shop for a home and a mortgage loan. They spoke with the loan officer who happened to be on duty at the first mortgage company they called. “We just couldn’t understand her,” they reported. “The terms she used and what she said about our credit and how much money we need scared us.”

At the same time a corporate buyer was working with a major full service bank on multiple purchases of residential investment property. That customer was saying that it had an excellent working relationship with its bank officers. If the bank didn’t finance the purchases with a residential loan it could sell in the secondary market, the corporation was told, it would finance them with the bank’s own money as a commercial transaction.

The young couple went shopping for another loan officer with whom they felt more at ease. The corporate buyer continues a happy banking relationship. Neither has said much at all about loan fees, closing costs and interest rates.

Are you shopping for a mortgage loan? If you are like most people you may think the interest rate is the most important factor you when you choose a lender. This may be true sometimes, but compatibility with the loan officer is even more important.

Loan officers come in both sexes, all ages, many ethnic groups, and vary widely in personality and approach to real estate lending. Ask around when you are shopping for a residential or commercial real estate loan. When someone makes a recommendation, ask for information that helps you decide how you and that loan officer might mesh.

The great divide in real estate lending is between the full service commercial banks and the mortgage companies. The latter have no capability in commercial lending, except for the occasional investor who buys nothing bigger than a four-plex. Commercial lending is the province of the banks, who put their own money into many deals, or participate with secondary sources like the Alaska Industrial Development and Export Agency.

Mortgage companies, by contrast, dominate residential lending. It’s not their money in the deal: they sell the loan they originate in the secondary market, to AHFC, Fannie Mae, Freddie Mac, and securitized pools guaranteed by FHA and VA.

Mortgage companies often sell the servicing rights, too. You only learn at closing that the institution that created the loan is not where you will be making payments. Banks generally keep their servicing, a plus for customers who prefer to speak with someone in Anchorage if there is a question about the loan and how payments are being applied.

Do you have an established banking relationship that goes beyond simply keeping accounts there? Banks offer a full range of services, so you may discover advantages in working with your bank’s residential lending personnel. Is your business or professional practice financed at a bank? If so, ask your commercial loan officer for an introduction to the most capable residential mortgage loan originator in that department. Your loan officer is likely to choose someone he or she believes you will work well with.

A limitation at your bank, however, may be its menu of loan programs. The loan types at your bank may be more limited than at some of the mortgage companies. You might not want anything more complicated than a 30-year fixed rate loan, or perhaps an adjustable rate product with annual and lifetime caps. Banks offer these basic products; the more exotic loans come through mortgage companies.

A more subtle difference between banks and mortgage companies is how their personnel are paid. Most mortgage company loan originators are on a commission basis. Only a few of the originators working at banks are commissioned: most are salaried. Certainly there are many salaried loan officers who are pleasant and service-oriented. But the loan officer with an incentive is one who only gets paid if he or she can meet your need and earn your trust.

Ask the loan officer about his or her support personnel. These processors are the people who make all the difference between keeping your loan moving forward and being part of a problem. Some institutions keep a pool of processors on the organization’s salary. The busier commission-paid originators have processors on their personal payrolls. A loan officer with a staff and payroll to meet is likely to have incentive.

The downside of the loan officer with a staff is feeling cut off from the person you chose in the first place. This production-oriented operation might not feel as comfortable if you want a one-on-one relationship with your loan officer through the entire process.

Getting a mortgage loan is like getting undressed in public. Get a compatible loan officer and try at least to start with a sense of humor and you will survive.