When shopping for a Real Estate lender which is most important?  A. Rate  B. Reputation of Mortgage Lender  C. Both A and B.  Obviously the answer would be C.  With interest rates again nearing all time lows, many are shopping for homes. 

The first step I encourage clients to take in their home search is to become pre-approved with a lender. The BIGGEST mistake a potential buyer can do is to randomly search the Internet and choose a lender based on rates alone.

As a Realtor, I work indirectly with many lenders whether I represent the buyer or the seller.  Some lenders are a JOY to work with, they are pro-active, process things in a timely manner, close on time or earlier and are communicative to both their client and agents involved in a transaction.  When I see their name accompany an offer on a pre-approval letter it makes me smile.  However there are some that make me cringe.

So what can you as a consumer/buyer do? (this works for refinancing as well though).  Be proactive - don't just ask about rates.  Here are "Questions buyers and should ask a mortgage lender" from the Texas Association of Realtors it will save you grief in the long run.

...Suggested questions you might ask a lender:

• How large is your company, and how long has it been in business?
• Are you a licensed mortgage broker or loan officer in Texas?
• Is your company a mortgage banker or a mortgage broker? (A banker lends its own funds; a broker searches mortgage sources and arranges for you to receive financing from the lending entity)
• What is the name, phone number, and e-mail address of the person who will actually be processing my loan application?  How accessible is that person? (note: This is KEY!)
• Tell me about all loan fees. What fees must I pay up front? What fees will I have to pay at closing?
• How can you assure me I won't pay any unnecessary "add-on" fees?
• Do the costs you are quoting include the lender origination fee?
• Are there loans available with no origination fees? No closing costs? Reduced closing costs?
• What are your interest rates?
• Is there a fee to lock in my interest rate?  How long can I lock in the rate? If interest rates go down, can I relock at the lower rate?  If so, will there be a fee for that?
• What information must I provide to get a mortgage loan?
• What documentation will I have to provide?
• Will you require current tax returns? (Take note of this especially between Jan. 1 and April 15 if you haven't prepared your return yet)
• How long will it take to get complete and unequivocal loan approval and be ready to close? (this is KEY!)
• I plan to stay in this house for ____ years. Can you show me the breakdown of  any ARM loans you offer vs. fixed-rate loans to see which could save me the most money in my situation? (NOTE:  see what the cap is on how high the interest rate could rise on an ARM)
• What is private mortgage insurance?  Other than a 20% down payment, how can I avoid the private mortgage insurance?
• In the last three months, how many loan applications have you taken and how many have you been unable to close?
• Can you give me the names and phone numbers of two or three people for whom you've funded loans in the last two months? (NOTE:  privacy laws may prevent this - you may ask for the name of Realtor involved in the transaction - they can give you the feedback you would need)