I’ll get straight to the point--don’t just work with the first lender who responds to your online inquiry. That simply means the lender has a good lead management system, but it doesn’t necessarily mean that the rest of their processes are as clean.
It’s incumbent on you, the prospective homebuyer, to do your due diligence when shopping for a mortgage. This is a big decision, so I want to make sure you’re armed with key information to help make the best decision for your family!
The first thing to note is why, as a military homebuyer, you are appealing to a lender. Well, there are three big reasons why lenders want your business:
- Military families have stable incomes and good income history.
- As a group, military homeowners are more likely to remit mortgage payments on time and avoid default.
- Military homebuyers by-and-large avail of the VA Home Loan, which is one of the most profitable mortgages for lenders (not because of the costs associated with the mortgage, but because they tend to be 100% mortgages rather than 80:20 conventional loans).
Now that you know why a lender might want to work with you, here’s why you should speak with more than one:
Notice I didn’t say the best rates! Good interest rates are definitely critical in helping to either increase your purchasing power or help you keep within your monthly budget, but the lowest interest rate isn’t everything.
If a rate seems too good to be true, then take your Grandma’s advice--it probably is too good to be true.
The best lenders don’t always have the cut rate prices. In fact, some of my clients who've chosen to work with lenders purely based on saving an extra few dollars every month have typically had the most challenging mortgage experiences. Sometimes those extra few dollars a month that the lender is charging come from their higher costs of having better transaction coordinators and better systems for rush ordering appraisals--all features that can help keep get you out of TLF and into your new home quicker and with less stress! Because, really, who doesn’t have enough stress at PCS time?!
I don’t say that to encourage a belief that you get what you pay for, though; there’s no need to rush out for a Cadillac experience in the VA Home Loan mortgage. However, when you’re working with a lender who emphasizes client care above all, that should extend to helping you out in a pinch with a few extra dollars toward closing costs. I’ve even seen some good lenders help cover important items such as home warranties.
What the best lenders do offer, though, is a healthy combination of education and transparency.
These are essential to military families who are buying a home for the first, second, or fifth time. We operate in a regulated world defined by standards, systems, and operations, and we rely on transparency in order to make good decisions for our families. We live by checklists to PCS here, there, and across the globe. The outside world doesn’t necessarily abide by the same set of rules, but a lender with a good reputation for working well with military families will respect them.
By respecting the "rules" that govern how military families engage with the world, I mean that the lender will clearly spell out the process and provide absolute clarity on all costs--particularly out-of-pocket costs--with a client prospect.
Here’s what that clarity from a good lender looks like:
- A good lender will ensure that the military family understands the weight of the financial obligation that they are committing to, knowing that there is a potential that Uncle Sam could compel a move away from their new home at any time.
- A good lender will work with the military family’s real estate agent to make sure that there is clarity with the budget from the beginning, so that both the agent and the homebuyer know exactly what price point to stay below. In this scenario, there’s no pushing the budget just to earn a greater commission on the loan.
- A good lender will also provide clarity to the agent on exactly how the agent will need to negotiate in terms of closing costs to make the home purchase feasible for the family. This one is critical because so many military families simply don’t have the cash available to afford closing costs, and without the education from a lender (and ideally from the real estate agent, too), they may enter the home buying process without realizing that a zero down VA Home Loan doesn’t necessarily mean zero closing costs. Many military families have to bring thousands to the table to closing, and it’s critical that the lender keeps all parties abreast of the financial situation.
There are many other questions to ask when interviewing your prospective lenders, but a comfort level with the amount of explanation and clarity that you receive should be your highest priority. So, engaging in a conversation with the lender about their process will help you assess whether you can work together as a team to successfully acquire a home for your family. If all that lender can offer you is the "best rate on the market," move on. You can always negotiate your rate with a good lender.