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Long Beach Homes, Realtors...
... and Lenders Oh My!
As a Long Beach Realtor many buyers contact me in need of other services. We Realtors generally have a group of vendors that have become valuable team members. Vendors who have proven themselves over the years to provide great customer service and care for our clients.
The sub-prime problems have really shaken up the industry and have changed not just the way loans are approved but relationships between Realtors and their preferred lenders.
Recently I sent a buyer to a local Long Beach Lender, who we have used occasionally on and off for several years. The client needed credit cleaning so they would be in the lenders hands until such time as they were ready to begin their house hunt - about 2 months was estimated. I made a follow-up call to the lender, about 5 weeks into the 2 months, to check on their progress and asked "How are things going with Mary and John?" He replied "Who?". I was stunned! He quickly remembered who I was referring to and then told me that the credit cleaner had some personal issues and it didn't work out. HUH? No calls to me and my buyers were left unattended. The lender apparently didn't understand the level of trust that was placed in his hands.
He called the buyers, brought them into his office for a 3 hour meeting and arranged a loan for them, then called me to let me know what he had done and the terms of the loan. He complained about a collection on Johns credit for $130 and one on Mary's for $30. Both were items in dispute that they did not owe, minor junk that should not have mattered. As a result he quoted them an additional 2% interest on both the first and second, jacked their fees up to over $14,000 plus a $6500 origination fee and told both the buyers and myself this was the best they could hope for. When I asked him if he was actually going to be able to close this loan he said "I hope so?". Well folks, that is just no-where near good enough for me or my clients. He is soooooo fired! I call this kind of work shlock and there is no place for it in my business, not now, not ever!
Mary and John came to my office the next day. We spent the entire day together. They called Brian Brady, Americas Most Opinionated Mortgage Broker who laid out a very do-able financial plan for them. They were treated with respect, loans were arranged for them-at very reasonable interest rates, pre-penalty's were done away with, a financial plan was put into place for the buyers to re-finance both loans in 6 months and make their dream of owning a Long Beach Home come true, without getting raped financially. (There is enough equity in this Long Beach property to allow this strategy.)
Mary and John opened escrow yesterday on a Long Beach Home that they are ever so excited about.
Brian provided us with a loan-commitment letter immediately. For those of you who are unfamiliar with this term let me explain this in simple terms. Unlike the run of the mill loan brokers, Brian is a Direct Lender. That means that the actual lenders trust him so much they have given him the power to approve the loan, based on their guidelines, himself. Brian is the end of the line. If Brian says you are approved, you are approved!
I would like to explain the value of a Loan Commitment letter (or lock-in letter).
- It tells the buyers they definately have the loan that was quoted to them and provides them with security and negotiating power.
- It tells the buyers agent that the loan will close and their work will not be in vain. In todays market this equates to negotiating power folks and I just love to negotiate.
- It tells the seller that they have a secure escrow that will close without any loan problems, worth giving up a few dollars for, especially if you have fallen out of escrow once or twice already.
- It tells the listing agent that they are dealing with professionals and a secure transaction. A smart listing agent will advise their seller that this is a 'best possible scenario' situation and worth giving a bit for.
- It provides a transaction in which everybody WINS.
Any lender who cannot provide you with a LOAN COMMITMENT LETTER within a couple of days, has not secured the loan on your behalf. No matter what they are telling you!
This is the reason so many Long Beach Homes are falling out of escrow. Agents do not know enough about the loan process to demand lock-in letters, or loan commitment letters from the buyers lender.
Listen closely Buyers: If you have a loan commitment letter, you do not have to worry about being Baited and Switched.
Bait and Switched, hmmmm, how does that happen? Well a realistic lender quotes you a rate that makes you gasp for air. Your FICO is not great but it's OK, you have had some late payments, your salary is OK but not really outstanding, and you want a better rate, so off you go shopping.
Be careful they are waiting for you.
You speak with several lenders who assure you that the big bad OTHER LENDER was just ripping you off, but they can get you such a deal:" ("Do you know that old saying? If it sounds too good to be true.... it probably is.") So you go ahead and sign on for the lower rate. Don't feel bad, a lot of other people have fallen into this same trap. These lenders are charismatic and convincing. But they do not provide you with a LOAN COMMITMENT LETTER, because they cannot, they have not secured the loan.
A couple of weeks into your escrow the big bad lender calls the poor little buyer and states "You know that loan I mentioned (no commitment words being minced here) well that program has been discontinued, but I have this other program that is a good fit and will only cost you a tiny bit more in interest. He never mentions the fee schedule for this loan and you don't know to ask. When it comes time to sign your loan documents, the lender is nowhere to be found, the fees are double what you were originally quoted, the lender will not answer his phone, neither will his manager and you are faced with a nightmare decision to make. Either pay the undisclosed outrageous fees, or back out of the escrow within days of closing, possibly losing your good faith deposit, maybe the seller will extend the escrow a month so you can try to secure another loan? Never a good situation to be in.
- Protect yourself.
- Hire a great Realtor.
- Hire a great Lender.
- Demand a Loan Commitment Letter.
- If you don't get one - RUN!
- Go find your home with secured financing.
***Clients names are fictitious, but you know who you are.
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