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Pointers on What to Look For When Selecting the Right Lender

January 23, 1994|ELLEN JAMES MARTIN | SPECIAL TO THE TIMES; Distributed by Universal Press Syndicate

To the industry, it's known as the "front office from hell." It's the mortgage company with the rude receptionist and the loan officers who couldn't care less.

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"What you want are mortgage people who will love your loan," says Stuart Tyrie, an office manager with GMAC Mortgage, the nationwide lender.

"You wouldn't buy your black Cadillac Seville from a salesperson who treated you badly. And your mortgage involves a lot more money than a Cadillac," Tyrie observes.

Mortgage specialists say there are many reasons to exercise caution in selecting a lender--whether for a home purchase or refinance.

"There are lots of horror stories out there about bad loan servicing," notes Paul Havemann, a vice president at HSH Associates, a New Jersey firm that tracks mortgage rates for consumers throughout the country.

What makes the selection of a mortgage lender all the more difficult is that the several waves of refinancing booms have brought a sudden influx of newcomers to the field who are trying to take advantage of the strong demand for home loans.

Many of the upstart firms have been created by seasoned loan officers who spun off from larger companies, but others are much greener.

"It's a mistake to shop for a mortgage lender on the basis of rates alone. You have to think about service too," GMAC's Tyrie says.

Here are pointers on how to pick the right lender:

--Look to real estate agents for the names of trustworthy lenders.

"Every agent knows a couple of lenders who are very reliable and won't run you down the road," says Jack Bateman, who sells homes through the Re/Max realty chain.

Keep in mind that real estate agents count on dependable lenders or their deals won't go through. And a lost deal means a lost commission for the agent.

"The last thing you want is a cockamamie story from the lender about why he can't get the papers to the closing table in time," Bateman says.

Not only are real estate agents a good source of referrals, but using an agent's name can give you more clout with a lender. That's because a lender knows the agent can be a source of repeat business. Chances are, he'll try to please customers the agents send his way.

"You'll have the power of numbers working for you. A lender wants to keep his referral base going," Tyrie says.

--Pick the brains of friends who have taken out a mortgage lately.

Probing questions about how a lender handled past loan applications can help you select the right firm, mortgage specialists say.

GMAC's Tyrie suggests you pose questions such as these: Did the lender fulfill his promise on how fast the loan would be processed? Did he stand by his rate and point guarantees? Did he handle papers in an orderly way without you having to make repeated requests for the same documents? Did he return your calls on a same-day basis?

"Your friend will tell you whether his experience with the lender was a piece of cake or a nightmare," Tyrie says.

--Don't rule out a lending company on the basis of size or age alone.

"Everyone is suspicious of little start-ups. But every firm was new at one time," says Havemann, of HSH Associates.

The issue is not how long a mortgage firm has been around but how experienced its principals are. In the same way, the size of the firm is not the key but whether it is competent, honorable and motivated to make your loan.

Why should a borrower take time to investigate a small lending company? Because the smaller firm, with slightly lower overhead, may be in a position to offer a better deal on mortgage terms, to be more flexible in qualifying standards or to be more user-friendly, according to Havemann.

"From a small lender, you might just get exemplary service," he says.

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