Back in what Realtors called the “good ol’ days” a prospective home buyer would consult with the Realtor first and then act on their Realtor’s recommendations. Most of the time.

Yes. There were those times when the savvy home buyer who had bought and sold a few homes and knew the process pretty well would have their preferred real estate professionals.  They might have a bank or mortgage person they had done business with before or a home inspection company or title company. However, for the people who were buying a home for the first time or who hadn’t bought or sold a home in many years, the Realtor’s recommendations were welcomed.

Today?  Not so much.

One of the unintended consequences of the huge real estate bubble that was created in the early 2000s is that prospective home buyers understand the importance of getting a lender lined up and getting “pre-approved” for a mortgage.

You might think this is a good thing. I’m finding out it really doesn’t work that well.

Home Purchase vs Refinancing

To be clear, I’m not talking about the home owner who wants to refinance their home.

Those folks may want to go to the bank they have all their various account with or who might be advertising the best rate or even go online. The process of refinancing, while still very cumbersome, is nothing compared to trying to make a home purchase.

The home purchase has a lot more nuance to it and a lot more that can go wrong with the end result being tons of stress and the real possibility that the loan won’t go through leaving the prospective home buyer out in the cold with no loan and no home.

Who Are You Dealing With?

That’s why it’s important to work with a reputable mortgage lender who can:

1. create a process that is smooth, methodical and helps reduce the overall stress of the home purchase and,
2. make sure the prospective home buyer gets to settlement on the date stated in the Contract of Sale.

You would think that this type of thing is a no brainer. Think, again.

Many “mom and pop” or “boutique” or online mortgage lenders will have a loan officer who originates the loan – meaning they’re the ones that convinced the prospective home buyer to let them do the loan. However, after the initial application or “pre-approval” (Notice how I put “pre-approval” in quotes? Think about that.) the loan officer is really out of the process and is very good at passing the buck to his or her underwriting department or wherever.

Credit History and Home Appraisal

The appraisal is a great example.

You go in an fill out your application, sign the huge number of Disclosures and pay for a credit report and appraisal.  Both are critical to the loan process.  If you don’t have good enough credit, you can’t get a mortgage.  If the house you want to buy doesn’t appraise for the amount you and the home seller agreed to in the Contract of Sale, the bank won’t lend you the money you need.

Typically, if you have good enough credit you can get this “pre-approval” letter. You then go out and find the home you want to live in and place an offer on it, negotiate the details and send the finalized Contract of Sale to the loan officer and tell him or her you’ve found the house and it’s time to get the mortgage finalized.

When The Bank Drops The Ball

If the mortgage lender drops the ball on the appraisal, it could very well kill the deal and the home you thought you were going to move into vaporizes.

The sad fact of modern life is that many home appraisals are coming in much lower than the Contract price.  Believe it or not, even though the buyer and seller have agreed upon a price, the home appraiser has a different opinion.

It’s the appraiser’s opinion the mortgage people go with. They don’t care about what the buyer and seller agreed to.

That’s why it is critical to get the appraisal done early in the process and, if it’s lower than the Contract price, the appraisal report needs to be released to the prospective home buyer and their buyer’s agent in order to begin the tricky negotiation with the seller and listing agent to adjust the Contract price so the prospective home buyer can still get the financing they need.

Low appraisals have been know to kill the deal because the seller doesn’t (or can’t) sell their home below a certain price.

The longer the mortgage lender ties up a low appraisal in underwriting or waiting for a review or whatever will also move everything closer to the date when the financing contingency expires putting the buyer’s earnest money deposit at risk.

After all, if the financing contingency expires it’s like telling the seller that everything is hunky dory and the money will be at the settlement table.

It can be a real mess.

That’s why it is important to consult with your Realtor about a good lender, up front, before you pick a name out of a hat.  Even large, well known banks have been known to have lousy mortgage departments that can screw up you life, if you’re not on them every step of the way.

Your Realtor will have the experience with a good lender with a reputation for getting things done in a timely way so that:

1. the  process is smooth, methodical and helps reduce the overall stress of the home purchase and,
2. the prospective home buyer gets to settlement on the date stated in the Contract of Sale.

Bottom line. The lender your Realtor recommends will get you into the house you want on the settlement date.

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