Low Rates are Important, but Trust and Local Loan Delivery are the Keys
By Ivan P. Choi
What do you need to know about mortgage lending in 2016? Most consumers on average will experience the mortgage process only a few times in their lives. So, without much context and practice, consumers generally judge a lender on one thing: a low interest rate. In the mortgage business, low rates are sexy and enticing, which is good if the consumer can actually have a loan delivered well at that price. The consumer does not benefit from anything if the loan doesn’t close. And stress throughout the process can spoil a low rate as well.
The irony is that the majority of consumers do not actually do the work of shopping for a low rate, nor do they have a basis to understand a good lender from a bad one. In 2013, the U.S. Consumer Financial Protection Bureau (lending regulatory agency created by President Obama) released startling statistics: 1) Almost half of mortgage borrowers seriously considered only one lender, while 2) 77% of mortgage borrowers applied for a loan with only one lender.
These statistics show that even after the financial crisis of 2007-2008, after all the crimes committed in real estate and mortgage, the consumer by majority continues to trust the first mortgage lender they meet. Without validating a lender’s true ability to deliver a loan, consumers move forward based on rates and information gleaned from the Internet, friends and family.
While the Internet provides lots of good information about mortgage, the fact of the matter is that consumers are best served by a local lender in the community. The reason is old-fashioned: Consumers can hold a local lender accountable. Also, lenders who have a track record in serving the local community typically have a vested interest in helping neighbors responsibly with a mortgage loan.
Real estate agents can be helpful in identifying top lenders in the local community who deliver loans in a good way. Top real estate brokers, who complete high numbers of transactions each year and have no financial interest in a lender, can readily give consumers feedback on which lenders do a good job at any given time.
In many parts of the Inland Empire, about 60% of all real estate transactions have mortgage financing attached. Top-performing, ethical real estate brokers have firsthand knowledge on which local lenders can perform. And the best part is this: these real estate brokers can tell you which lenders actually close loans well for buyers.
Ivan P. Choi, Branch Manager, imortgage Corona