Should We Shop Around For A Lender?

Dave,

Simple question: should I shop around for a lender? I’ve heard it’s good to interview a few different real estate agents before starting the home buying process. Is it the same thought for lenders or are they all pretty much the same across the board because of regulations, etc.?

Thanks man!
Gregg, Fruita

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Gregg,

Clearly you have read my column and realize I can be pretty verbose, but in this instance I think I can keep it fairly short! It is really pretty simple, no two lenders are the same and it is in your best interest to shop around and I am not necessarily talking about shopping around for the best interest rate!

Just like in real estate or any other profession, you want to find someone who works in lending full time! They should have years of experience and knowledge. Most importantly he or she should be up on all the latest lending requirements and programs and know what it will take for you to get a loan approved. I know everyone is human and can make mistakes, however it still amazes me at the sloppiness/last minute rush that some mortgage lenders put their clients through when it comes down to crunch time. I understand there is a load of paperwork that is required from the buyer when obtaining a loan and getting all that paperwork processed is a time consuming process that requires systems and processes to ensure proper handling. As with anything you have to ask questions! 

Some simple questions to find out more about your prospective lender might be:

• 1. What kind of experience do you and your team have? If they don’t have a team working with them, move on….There are too many details that can get overlooked.

• 2. Can I get references? If they don’t readily hand them over, move on.

• 3.How much time do you need to fund? If they hesitate or say more than 45-60 days, move on (30 -45 days is typical).

• 4.Can you guarantee an on time close? Most should not hesitate to give you a firm closing date. Remember you MUST be timely in document submission. Many times, it is not the lender, it’s the buyer who is dragging their feet and that causes a loan to either not close or delay closing.

• 5.What are my estimated closing costs and are there any other fees or costs I should know about? They should be able to provide you a good faith estimate of all your costs right up front.

Clearly you should find out about the interest rate and the closing costs each lender will charge. However, I will drop this little nugget on you…you will not care or be worried about your interest rate and closing costs if your loan hits a major snag 4 days prior to closing and you lose your dream home. Imagine having to scurry about looking for a short term rental or ponder moving in with the in-laws for a few months while you sort out your homelessness. NO THANK YOU! Experience matters! I know cost is always part of the equation, however knowledge, experience, track record and reputation are more important. Trust me, when a deal starts to go bad, you will throw cost out the window in trade for someone who knows their way around a difficult deal and can find a way to get it closed. Even more important is to find a lender that never lets you get near a situation like I described above. 

Like everything else, do your homework on your lender. No two lenders are created equal and some are better than others. That being said, we have some wonderful lenders in this town who do an excellent job and are really quality people! Another good way to evaluate a lender is by reading online reviews. 

So much for keeping it short! I guess there’s always next time. I hope this helped.

Dave Kimbrough
The Kimbrough Team

We're having trouble navigating a home loan online, any advice?

Dave,

We are starting the process for looking for a new home.   We are currently renting, but have decided that the interest rates and home prices are attractive enough to lure us into home ownership.  We filled out an application from a lender online and found out our credit score is only 674, we thought it would be much higher as we are not aware of any missed payments etc.. in the past.  We thought it would be easier to get a loan than it appears it is going to be.  We both have good jobs and have held them for several years and do not understand why our credit score would not be higher.  Can you fill us in on why our credit score might be low and what we can do to get it higher so we can qualify to get a new home?   Looks like, from checking on line, we need a credit score around 700 to get qualified for a new loan, is this a typical qualification standard?  Thanks for your help and advice.

Troy and Jennifer, Orchard Mesa

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Troy and Jennifer,

Sounds like you are headed in the right direction, with one small detour, I would recommend you  stop filling out forms online and go to a reputable local lender and sit down with a loan officer who can help you evaluate your financial capabilities and help you put together a strategy for getting your credit score in better standing and get you into a good loan, while rates are still attractive.  It sounds to me like a 674 credit score is “pretty good” and should not preclude you from buying, so I posed your question to one of our trusted resources, James Pulispher, Regional VP at Fidelity Mortgage and he agrees.

“There are two basic loan types.  FHA and Conventional.  The Conventional type of financing is much more credit sensitive than the FHA financing.  It may be that an FHA loan would be the best option in this scenario.   A conventional loan would likely still allow financing, depending upon what was on the credit, but might simply charge a higher rate of interest in order to provide the financing.  As a general rule you must have a 620 or better to obtain financing, which this particular buyer certainly does have.”

James also points out, “Many internet lenders have over‑layed the credit standards that exist, allowing them to only deal with the top tier customers. This customer would certainly have viable financing options when dealing with a local lender, and should not be discouraged about buying.”  The internet can be a good thing, but does not replace your local expert’s advice.  By establishing a local lender, that you can trust and can count on, you will put in place an important piece to your long and short term financial needs.

According to James, your credit scores looks at many things.  “One item that can influence credit scores is the utilization of credit.  35% of the credit score takes into account what percentage of available credit is owed on revolving accounts. (ie. credit cards)   The lower percentage of available credit that is owed, the better the score will be.  This customer may have paid all bills on time, but may owe close to the limit.  This could lower the credit score.  That doesn't necessarily create negative credit, but does lower the score.”  As you can see, your credit score can be impacted by many things, but also having a “go-to” person to discuss these issues with can literally be a life saver. 

To get your score up, continue to pay your bills on time and try reducing some of your debt burden.  By reducing your debt burden, I mean pay down some of your revolving accounts that can lower your debt to income ratio which will in turn raise your score.  Remember, one or two missed or late payments can cause your credit score to drop up to 10% and it can take a year or longer to get it back up. 

This Ask Dave column should be entitled, Ask James, but it is all good and relevant information for any home buyer or consumer who really does not understand the world of credit scores.  We throw the term “credit score” around loosely and many times do not fully understand what it is or what impact it really can have on our financial picture and purchasing ability!  Hope this helps and happy house hunting! : )

Dave Kimbrough

The Kimbrough Team

What are the most important things to consider when evaluating your homeowner’s INSURANCE policy?

Dear Dave,

We recently bought a house and have been looking at what exactly our homeowner’s insurance covers.  We are quickly learning that there is a lot more to it than we initially thought and it is actually more complicated that we imagined it would be.  What do you think are the most important things to consider when evaluating your homeowner’s insurance?

Linda – Grand Junction, CO

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Linda,

I will admit, your question is going to teach me a thing or two about homeowner’s insurance, as I must admit it is not something I have spent any significant time looking over.  I have spent the past 15 years trusting my insurance agent, Mike Daniels at American Family Insurance, to make sure we have the right insurance coverage.  So where better to turn for a little help in giving you a credible answer?  I asked Mike to give us some insight into what you need to look for when reviewing your homeowner’s policy.

“Keep in mind that every homeowners needs are different and very personal, finding a local company and a local representative is a leading factor to ensure you are getting proper guidance and counsel.  There are a lot of great people in the business.  There are

2 homeowner’s policies that are very popular, HO3 and HO5.  Both of these will cover all named perils, however the form 5 will throw in some supplementary coverages that some will find important and some will not.

Everyone should pay close attention to look over the named perils of how the home is covered.  These primarily include fire, smoke, theft, windstorm, hail, explosion, vandalism, and frozen and broken plumbing.  Every company or agent should provide you with a brochure of all the named perils and supplementary coverages included with your policy.  When the policy comes in the mail, take the time to review the coverages and then also spend time reviewing the exclusion section of your policy.  It is important that if you have questions to call your agent to answer your questions or correct anything that may need to be fine-tuned.

As a home owner you need to consider the dwelling amount, how much will it be to re-build your home?  Make sure the insurance policy will cover that amount in full.  It is also important to know how much the deductible amount is on your policy.  Make sure to ask yourself how much you can afford if you have a loss?   The higher the deductible the lower your premium costs will be.  Generally speaking, if you maintain your property, you should be able to go with a higher deductible.  Lastly you also need to consider personal property loss.

When we are looking at personal property coverage, the questions to ask are how much? And how is that covered?  Also consider any specialty items you want covered such as jewelry, coin or gun collections or just any collection or specialty items you want to make sure are covered.  Lastly, look for discounts including Alarm systems, age and type of roofs, age of home, complete renovations.  It is also possible to save by combining other insurance needs including automobile and umbrella policies.  MOST IMPORTANTLY, review your homeowner’s policy at least every two years!” 

Well, that about covers it and as you can see, there is a lot to it and being a bit overwhelmed is completely understandable.  I always recommend, find an agent you can trust and build a relationship with.  I know, for our family, when we need our insurance to kick in, we can trust Mike has us properly covered.  Consistently review your policy with your agent to ensure you are both staying on top of your policies and things that may have changed so you are properly covered if you ever have to make that call.  

Dave Kimbrough

The Kimbrough Team 

Have a question? Ask Dave!

Advice For Providing Banking Passwords For A Mortgage Loan Application Portal?

Dave,

We were applying for a 30-year fixed-rate mortgage. Our credit scores are in the 800’s, and we were applying for a mortgage in order to avoid IRA withdrawals and the taxes. This mortgage company is pushing us to use an internet portal that requires all of our passwords to our banking and investment accounts. Having had my security hacked twice, I refused. They said I could furnish copies of the accounts, but when I did, they made it so difficult for me that my only course would be to furnish my passwords. Am I wrong to be concerned about this?

- Kathy, Grand Junction

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Kathy,

First, I think congratulations are in order for the 800+ credit scores! It's not very often that we see those kind of credit scores so a little pat on the back is in order. As for your question, I do believe you have good reason to be concerned, but to be sure I posed your question to James Pulsipher, Branch Manager of Fidelity Mortgage.  He knows the Mortgage industry better than anyone I know, so I figured who better to ask than James!

Here’s what he shared with me, “I think that you are right to be concerned. In today’s tech-forward culture there are many solutions like this that are designed to make the process of obtaining a loan easier. However, it is just an option – not a requirement. The reason that this option has become available is that many people would prefer to provide that information instead of providing the documentation. I would simply let the lender know that you are happy to provide them what they need outside of this automation. What they will likely need is a 60-day statement on any banking accounts of reference. Hope that helps.”

Good to know that you have the option to provide the information outside of their internet portal.  EVERYTHING is going the route of being easy and less cumbersome as our lifestyles are busy and time becomes more and more valuable. On a personal note, I know when I applied for a loan a couple of years, back with James, that Fidelity also uses a portal. I was intimidated and concerned at first, but quickly found that I fell in love with the ease of following the process and providing documentation online versus delivering paperwork. By the time we were done, I very much appreciated the collaboration of my accountant, James’ office and the ease of sharing needed documentation through the portal. Keep in mind it is always good to be wary of how you provide SS#’s and bank accounts to those requesting them. 

One note is to NEVER send either your bank account numbers or SS numbers via email. There are hackers and scammers that are CONSTANTLY scanning each and every sent email for numbers that fit the right character configurations of both and when they find a match consider yourself in serious jeopardy. I have several stories I could bore you with that would provide you with the proper amount of fear to never email either. 

The bottom line…you are right to be concerned as our information is no doubt under constant assault! You know the old saying (my mom would be proud!), “It’s better to be safe than sorry!” Great question and thanks for reading “Ask Dave”.

Dave Kimbrough
The Kimbrough Team

Have a question? Ask Dave!