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5 Traits Of Good Lenders
Interest rates is one of the critical elements that entice consumers to choose one lender over another.
But if the interest rate in itself is the sole determinant in deciding which lender to go for, 9 out of 10 lenders would close shop by the end of their first year of inception.
So what really makes a good lender in the eyes of consumers and borrowers in general? What special traits do they possess that make borrowers willing to become their customers even though there are lower interest mortgages around the block?
Here are some traits to consider.
It’s not an exaggeration to say that as much as half the number of borrowers don’t really know the interest rate they are signing up for.
And for those that do, probably half don’t know what they would be paying from the second year onwards.
And for those that have reached this far, maybe another half would not know the mechanisms that affect the movement of mortgage rates they would be paying.
Some lenders make it a point to make their loan structures as complicated as possible for the layman to comprehend. And their loan officers don’t explain them very well either. That is assuming they even understand the complex structures themselves.
I won’t name names.
But I do know of a few banks who offer loans based on a “board” rate. This board rate is determined by their own internal mechanisms which are not revealed to borrowers. And they can just send out letters anytime stating a rate increase and demand payment from the poor borrower.
Because the average home buyer don’t know any better, they probably thought that this is how the mortgage industry works. And they sign up for these types of loans without knowing that they have taken the bait.
A good lender is straightforward and make it a point to explain their loan programs in plain English while avoiding jargon as much as possible.
2) Different types of loans for different properties and situations
There is no ONE mortgage that rules them all.
Different types of real estate and varying personal situations make certain types of loan more appropriate for the borrower.
For example, new homes that have yet to complete construction can often have owners who do not eventually move into the house when completed.
This could be because they suffered a huge bout of buyers’ remorse, realize that they cannot financially support the house, deciding against moving in because of divorce, etc.
This is why a more suitable loan structure for under construction property is one that has no commitment period (lock in).
This enables borrowers to pay off the loan without incurring any redemption penalties.
If you run into a lender with just a standard mortgage or two to choose from, it is an indication that they do not care enough for the borrower to conceptualize different types of loans to cater to different types of situations.
You should move on to the next lender unless the loan has an unbeatable killer rate.
3) Competitive rates
It goes without saying that different lenders would offer different loans with different interest rates.
While some banks make servicing niche markets their specialty and charges a higher interest, lenders who serve the mass market should have fairly competitive rates compared to their competition.
Sometimes a lender can be too headstrong to give you a more favorable rate against the competition. Yet sometimes, it’s because a banker refuses to endorse it because it can affect his commissions.
Anyway, it doesn’t hurt to just ask for a better rate.
What’s the worst that could happen?
4) Mindful of deadlines
Real estate transaction concern various deadlines that stipulate certain actions to be taken before a given date.
One of those could directly involve financing. And in many cases indirectly.
For example, you might gain possession of an option-to-purchase stating that you have until a specific date to exercise the option. Yet without confirmation from the bank that you mortgage is approved, there is no way for you to proceed with the purchase.
A good lender would move mountains to ensure that you have sufficient time to close.
I have experienced this myself when particular deals have time to spare and the lender takes a week or 2 to formally approve a loan. And when a loan is needed urgently, an in-principle approval can be obtained within hours.
When lenders make an effort to care for you, it is a good sign that you personal interest is being taken care of.
5) Takes care of existing customers
One of the biggest puzzles in the mortgage lending industry is that lenders often do not reward existing customers and prefer to offer the best deals to new customer acquisitions.
This is a clear signal that they value new customers rather than current ones.
Since you are already in the bag, the focus shifts to new prey.
To dig deeper into how a lender treats it’s existing customers, you have to speak to people who are already their customers.
You could be floored at the horror stories being told.
The good part is that customers who feel that they have been hard done by the lender often has no reservations to tell you their horror stories.
Finally, don’t go for lenders that are well-known by default.
Lenders after all, offer the same product which is… money.
Just because you borrow from a household name does not mean that a dollar borrowed from them equals to two in the real world.
Look for for attractive mortgage rates. And also freebies that come with borrowing from them.