• By: RONALD ROBERTS

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  Interviewing a Mortgage Broker/Lender By Ronald B. Roberts Accredited Mortgage Financial Services L.L.C.

  Just to keep it simple, while there is a difference between a mortgage broker and a mortgage lender, I will be using the term “lender” synonymously. If you are buying a home, chances are you will be in need of a mortgage lender. Know that the lender you decide on will access your credit files….in other words pull your credit history. While I personally have never seen multiple credit pulls for a mortgage decrease one’s credit score, I always recommend having your credit report pulled no more than 3 times. Before committing to a lender, remember that you will be interviewing the lender and they will be working for you. I always recommend interviewing 3 lenders, no matter what. Sometimes, family, friends, a real estate agent you are working with, or even the seller of a property you may be interested in purchasing will have a recommendation for a lender but this never guarantees that you will actually receive the best deal going. What you should be looking for is the lowest interest rate with the lowest closing costs…..period. So, let your fingers do the walking and go interview 3 lenders, but first, lets go over what questions you should ask.

  1.What type of loan is best?

  A genuinely concerned and reputable lender will ask you questions with regard to your current occupation, desired length of time you plan to spend in the home, and the purpose for buying the home (short term flipping, long term investment, personal residence). This will dictate loan options that the lender can provide such as fixed rate, adjustable rate, interest only, etc.

  2.What is the interest rate and annual percentage rate (APR)?

  The interest rate is the rate in which your monthly note will be calculated on. The APR is another story. This is a complex calculation that includes the interest rate and all other related fees associated with your mortgage taking into account the loan’s term. But remember, not all lenders calculate the APR the same, so ask each one to itemize the list of fees separately that they use to calculate the APR, then compare them among the 3 lenders you are interviewing.

  3.What are discount points and origination fees?

  Discount points buy down the interest rate, meaning the more discount points you pay the lower the interest rate should be. Points are also tax deductible. Each point is equal to 1% of the loan amount. An origination fee is a fee that the lender charges to provide you the mortgage. It is usually 1% of the loan amount.

  4.Is the lender going to provide a Good Faith Estimate (GFE)?

  According to RESPA (Real Estate Settlement Procedures Act), a lender has 3 days after you have applied for a mortgage to provide you with a good faith estimate containing all of the costs of your loan. Even though this is a federal requirement, you might need to ask for it.

  5.Is the lender going to guarantee the Good Faith Estimate?

  This is where I say the rubber meets the road. A lender can never guarantee all associated costs with the loan due to unforeseen variables that may take place, but the lender can always guarantee their fees, such as origination and processing. The last thing you want to have happen is to get to the closing table and have unexpected fees that you were not informed about earlier. This can make for an ugly situation.

  6.Is the lender going to attend the closing?

  Always ask that the lender be present at the closing. Any unexpected surprises can be better resolved in person rather than over the phone, or much less via email.

  7.Is the lender going to provide you with a copy of the rate lock confirmation?

  Always request a copy of the rate lock confirmation. This assures you that you will receive the rate quoted by the lender for a specific amount of time. It also will show any yield spread premium to be paid to the lender, which I will discuss later.

  8.Is there a prepayment penalty?

  As a general rule, I suggest not going with a prepayment penalty.

  9.How much time will it take to fund the loan?

  Average closing times can range from 3 to 4 weeks. I have even closed some purchase loans within 7 days but this is rare and requires everything to go perfect. FHA, VA, and Rural Development loans can sometimes take longer, so find out early how long it will take, so that your emotions aren’t running high the entire time and having to call the lender every day.

  10.What is Yield Spread Premium (commission)?

  If the lender will be receiving a yield spread premium, this will be disclosed on the HUD-1 settlement statement at the time of closing. This has been a controversial subject for congress and consumer activists for years, and I will not debate its validity but will say that it exists, and can be a positive attribute for you if applied properly. Since this is actually a lender paid dollar amount for a desired interest rate, it can either be applied as a lender paid credit back to you to reduce closing costs, or can be paid directly as a commission to the lender/loan officer. What you need to know is that once the interest rate is locked (which is why I recommend asking for a copy of the rate lock confirmation), the yield spread premium is known, and unless you ask, can’t be negotiated to have some or all applied to your benefit.

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