Their ads are all over your television screen.  You see buyers swooning all over the house of their dreams.  And then there is a voice in the background telling them how important it is to have their mortgage lined up so they can take on the other buyers (some of whom may be all-cash) in the impending bidding war.  Just call the number on your screen, and we will help you blow the other buyers out of the water.

Well, it’s a little more complicated.

The ads are basically right.  You do need to talk to a lender very early in your home search. And a strong pre-approval from a lender with a good reputation in your local real estate community is an important early step in the process.  If you already have a mortgage or if you have a relationship with a bank that provides mortgage loans, you can start with the company you already do business with.  A referral from your Realtor is also a good possibility, and many brokerages have in-house lenders.

The offer you present to the sellers will include deadlines for completing the appraisal and removing your financing contingency.  If the deadlines are not met, the consequences could be severe, and your could lose the house. When the lender is accountable, not only to you, but also to an agent or brokerage that can refer or withhold future business, chances are they will try a little harder to create a smooth transaction.

I’m not saying that all lenders who run TV ads or operate mainly on the internet are bad.  It’s just that many agents have had awful transactions with them not meeting deadlines, and we all have really, really long memories –  when a transaction gets funky because a lender drops a ball, a grudge is formed that can last for an entire career. And agents share bad lender stories with colleagues for years!

Another thing to keep in mind is that some of these companies are not actually lenders, but lead sellers who pass your information on to struggling loan officers who pay for referrals – and they are likely to sell your lead to a number, sometimes a large number, of sales people for actual mortgage companies.  Your phone could ring off the hook for days, and your email will likely be swamped with lender spam.

Whether you are in a bidding war or the only offer on the table, any transaction that includes a financing contingency is somewhat risky for the sellers. All cash offers can be hard to compete against, but cash isn’t necessarily king.  Cash buyers often offer less money and terms that are not attractive to the sellers, and there are things you can do to be in a good competitive situation:

• Use a lender that won’t make the listing agent cringe. Local is better.
• Go in with a “pre-approval” letter, where the lender has run your credit, verified your assets and income, and run your package through their underwriters.  Many will give “pre-qualification” letters, which can indicate you have not been thoroughly vetted.
• If you can, include a large earnest money deposit, and a conventional loan will put you in a better competitive position than one with VA or FHA financing.
• Work closely with your agent to craft an offer that works best for your particular transaction.

If you are refinancing your home, using a TV or internet lender might be an option to consider.  With a refi, you don’t usually have do or die deadlines to meet, so delays may not have dire consequences.

If you are contemplating a move, please give me a call or send a text to 202-549-5167 and I’d be glad to meet with you, either in person or on Zoom to help you get started.  And stay safe out there!