Ok. If you need to start by sitting down with a good loan officer and talking through your situation, how do you decide who to sit down with? It’s a good question, and like most good questions, there is no easy answer. But here are some thoughts.
Knowledge and Experience. There are a myriad of loan types and loan programs, all with strengths and weaknesses and all with their own rules and restrictions, and all of this is constantly changing. Matching this fluctuating universe with your situation and your needs is not simple. Further, as you work through the purchase process, there will be many points at which the loan officer’s knowledge of your loan program and its rules may be critical. You need to work with a loan officer who has a lot of experience and does a lot of loans.
FHA Loans. If you have a down payment of less that 20% of the purchase price, an FHA loan may well be the best option for you. The only way that you’ll get an honest evaluation of the pluses and minuses of an FHA loan is if your lender is approved to originate FHA loans. If it’s possible that your down payment will be less than 20%, and particularly if it may be less than 10%, begin with a lender that routinely handles FHA loans.
Recommendations. Anyone who has been through more than one home purchase knows that the loan officer and the other mortgage company staff need to do their job right and do it on time. They also need to maintain good communication with everyone involved if the transaction is going to work smoothly. You can’t evaluate a mortgage lender on this issue unless you know people who have worked with them before. Get recommendations from your co-workers or from your real estate broker, and use those recommendations to pick someone to start with.
Mortgage Banks vs. Mortgage Brokers. A mortgage bank initially loans its own money and then transfers the loan to the funding source. A mortgage broker claims to shop for the best loan they can find and originates the loan through that source. Some people claim that mortgage brokers can find you better deals. Others claim that brokers are simply “middle men” and that their added commissions will increase your costs. I strongly prefer mortgage banks, because your loan officer will have closer relationships with the processors and underwriters upon whom we depend to get things done right and done on time.