Choosing a Loan Officer

Why Do I Need a Loan Officer?

If you’re looking into financing a property then one of the first things you’ll need to do is find a loan officer. You might be thinking to yourself, I’ll just call my local bank and take whoever they give me.

Here’s why that’s a bad idea. Think of how much time in a month you spend talking to your closest friend? Now add to that the amount of time you spend watching TV and double it. That’s roughly the amount of time you’ll spend working with your loan officer in a week.

More Reasons for a Loan Officer

Not a good enough reason? How about this then: companies who loan incredibly large amounts of money require a lot of personal information. They need your driver’s license, social security number, a copy of your credit report, your address, phone numbers, email address, mother’s maiden name, height, weight, shoe size, favorite color, name of your first grade teacher…you get the point.

Every piece of information doesn’t go straight to a computer that will keep it safe from prying eyes. First it goes to your loan officer who is required to keep a copy for up to three years. Your loan officer will become your new best friend.

How Do I Choose a Loan Officer?

I’ve worked with loan officers for years and know from experience that they don’t always work well with their clients. So how exactly do you make sure you find a loan officer that you can work with? Following is a list of ideas put together from my personal interactions with loan officers.

First, talk to friends and neighbors. Chances are you know a few people who financed their homes. Find out what company they used and get the loan officer’s name. Ask a lot of questions to make sure your friends’ experience was what you’re looking for.
When you’ve narrowed down your choices, make some calls and ask about the loan officer’s fees. Loan officers are not Robin Hood. They usually work off of commission and like their big screen HD TVs and swimming pools.
Do a web search and see what you can find out about the loan officer online.
Meet with the loan officer to find out if you can work together. If the visit doesn’t go well, move on.
Most importantly, find someone who is available and will communicate with you at the level you choose. Loan officers can be working up to 50 files at a time. They’re notorious for being unavailable and keeping their clients in the dark. Make it clear up front if you expect regular updates, and don’t work with a loan officer that doesn’t answer or return missed calls within a reasonable amount of time.

Loan Officer Summary

You might say it doesn’t matter, you can work with anyone for the short period of time it takes to close a loan, but the truth is some loans aren’t short. You could end up working with a loan officer you can’t stand for months. Besides, if you do the work the first time, you’ll already have a loan officer for your future investment properties.

The scary side of mortgages – Yield Spread Premium in Action

I’m not a mortgage broker or real estate agent. I’m a programmer and like most people not in the business, I have no idea what happens behind the scenes when buying a home, getting a mortgage, going into escrow, or any other real estate transaction process. So when I was hired to develop RateWindow.com I was told about how transparency will help the typical mortgage borrower, but still didn’t truly understand it. So, I went into my personal records and found a closing statement from a condo I bought a few years ago. What I found made everything clear!

I’m pretty sure you don’t know what Yield Spread Premium (YSP) is. It is hidden in most mortgage transactions until the closing statement is presented and home buyers are ready to close escrow and complete the home buying process. Below is an actual scan of a closing statement is which you can see the YSP among all the other fees that are associated with a home purchase.

ratesheet

In this case the YSP was over $3,800, a hefty chunk of change.

I didn’t even see it, until I re-read the statement 3 years later. It was probably mentioned during the 30 day escrow but at that time your head is spinning with all the docs you have to sign and things to do. Worse thing is, I was really good friends with the mortgage broker, and now that I understand YSP better, I will never look at them the same way.

Why is the YSP not even in a debit column?

because, it is not a direct payment. It is carried into the life of the loan, so not only is it a large amount, but it will be compounded by interest over the next 30 years. That alone will triple the amount.

If you are unfamiliar with YSP, you can do some research on it at the YSP wiki

An inherent problem with the Yield spread premium is that it’s anti-capitalistic. Typically, the borrower has no idea or does not completely understand how the broker is potentially compensated on the back end and therefore can’t truly price out the service being provided to the borrower. The definition of capitalism is a willing buyer, knowing all the facts and circumstances surrounding a service the buyer is considering purchasing (including how much the service provider is being compensated) makes a choice to use the service provider. Since the borrower typically has no idea or does not understand that the broker could potentially get paid on the back end, they can’t compare terms between brokers.

Back to RateWindow.com. Now that I understood YSP better, mind you I’m still a developer, and still don’t understand all the mortgage talk, I was ready to fully jump on board. I’m very proud to be part of the transparent movement now and know that I was the first to develop a web application that turned that $3,800 FEE into a rebate to the consumer.I can only hope for the future an in 5, 10, 15 years I smile when I think of all the rebates people will get with the services I helped make. I think the savings will be in the millions!

Click to check out RateWindow, even if you’re not in the market for a loan, I think you’ll see that it is a much needed service, especially with the current economic conditions of the nation.

In the eyes of a typical homebuyer, what is the lending process like? I'll talk about this in my next blog post.

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