Why We Chose Not to Go Back to Our Old Lender
Just over one year ago my wife and I purchased a new home. We had more than the minimum required down payment, both had good credit scores and decent income, yet the process turned out to be very stressful.
Before we even went looking for a home we started looking for a lender in our area. Our real estate agent pointed us in the direction of a local credit union in Austin, Texas, with whom she had some prior experience. We went ahead and contacted them, along with our regular bank and another credit union. Of the three, the credit union our agent recommended had the lowest overall fees and interest rate, so we went with them. I won't mention the name of the institution, but in order to become a member one had to be state employee or work for a local university. All one had to do to circumvent this rule was to make a donation to that university and open an account with at least $5 in it. We did that, and after we submitted our financial information, were told by the credit union's loan officer verbally that we were pre-approved for a home loan.
We finally found our "dream home" and the seller was happy to find out that we'd been pre-approved for a loan. Although we didn't yet have an official notice of our pre-approval from the credit union, the loan officer was a close friend of our real estate agent and assured the seller (who was also a real estate agent), that we were more than qualified and that our loan officer would be working on getting our letter to us on Monday morning.
Because we live in an area with a very tight real estate market and were afraid of losing the home, we entered into a contract over the weekend by E-signing the required documents. There would be a 21 day window for final loan approval, then afterwards there could be no backing out of the contract, except in the case that the home didn't pass inspection or have survey or title issues. I was a bit uncomfortable doing this, and I reached out again to the loan officer at his home. He assured me that he'd looked at our assets, income and credit score and all that he had to do was literally hit "print" and he'd have our pre-approval letter out to us first thing Monday morning.
The Nightmare Begins
Monday morning came and went, and despite my repeated calls, no pre-approval letter was provided. We began to get emails requesting more information about my employment (I'm self employed), and my wife's work history. She had returned to her employer of 8 years after taking a year off to start a home business, which I now helped run. Apparently the time off was of concern to some "bean counter" somewhere who was analyzing our qualifications, and we were required to submit several documents showing the how, why and when that she originally left her job.
This apparently worked and we received our official (conditional) pre-approval letter by the end of the week. The seller was pleased to get the letter and all seemed to be on track. However, as we neared the end of the 21 day window a couple of other questions were asked. We had to provide tax returns for each of the last 5 years that I'd been self employed and detail exactly where my side of the income equation came from. As I work multiple jobs, this proved to be a challenge. Also, our tax preparer happened to be out of town, and we needed some additional records. The loan officer again assured us that everything was still on track and things "looked great" and it was just a formality. While waiting for these records, we accidentally went over the 21 day window and entered into a hard contract.
What happened of the next few days was quite stressful. It was our own fault for not watching the deadline more carefully and we should have backed out of the contract.
The next few days felt like months, as we struggled to come up with more documents and prove self employment income. We ultimately qualified for the loan, but were still answering questions and having to come up with more documents right up until the point that we were sitting in the title company's office, waiting to sign closing documents.
As bad as this was, it could have been even more of a nightmare if we had been on the hook for several hundred thousand dollars and had no means of coming up with it. The seller could have sued us for breach of contract, cost to relist and other damages.
It was our fault ultimately, yet we felt very let down by the credit union's loan officer, who had outright lied to us. So, when a year had gone by and interest rates had dropped, we chose not to go back to our original lender.
Looking For a New Lender
For our refinancing we decided to look online this time. We eventually settled on the online mortgage broker Better.com. Their fees and interest rates were highly competitive and we decided to fill out an application online. Other online mortgage companies include Lendingtree, Amerisave, Loandepot, Lower.com and Getsmart.
The process began with the usual credit check, filling out an application, followed by uploading pay stubs and other documents. After we got past the first stages of the process we were assigned a loan officer, who corresponded with us by email.
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All of the uploading of documents and signing of forms was conducted though our account page on their website. I had some reservations about uploading sensitive documents to a company with only an online presence, but after some internet research we concluded it was a reputable operation.
For the process of refinancing your home with an online mortgage broker to go smoothly, I recommend having a document scanner. Luckily our printer had one, so when it came time to upload things such as copies of our driver's license, it came in very handy.
We received regular updates via email and through our account page on the progress of the loan. When we were finally ready to close on the loan, the online mortgage company had a mobile notary come to our house with the documents. All that we had to do was present proper ID and sign the papers.
The Bottom Line
Compared to our original financing experience, refinancing our mortgage through an online mortgage broker ended up being one of the smoothest transactions we've ever had. Because our loan was so recent, they waived the appraisal fee, saving us over $500. Our total fees for the refinancing were almost half of those charged for our original mortgage. Even with all the chaos caused by the pandemic, our loan officer was quick to respond to every email. In our case, using an online mortgage broker to refinance our home proved to be a very good choice.
The most time consuming process of our refinancing experience honestly was signing all the paper copies of documents with the mobile notary. This took almost one hour, which is probably a bit more time than we spent on uploading financial documents, etc.
Do Your Homework
When getting a loan from any lender, whether it's a local bank or an online mortgage broker, make sure that you take a close look at all of the fine print so that you don't pay more than you should. Beware of those lenders or mortgage brokers offering interest rates that are far lower than anyone else. Often you'll have to pay "points" or a percentage of the loan in order to get this lower interest rate. The online mortgage broker that we chose to use listed several different interest rates for a 30 year refinancing loan on their website. It was not in our best interest to pay points and we chose the option with a higher interest rate for a lower amount of closing costs.
Before choosing any online mortgage broker though, make sure that you do you due diligence and find out how long the company has been in operation and what their customer reviews look like. You don't want to be uploading tax returns, social security numbers, etc., to a company that may not be reputable.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2021 Nolen Hart
Peggy Woods from Houston, Texas on January 09, 2021:
It sounds like your second time went much more smoothly than the first. Congratulations on getting a better deal on your refinancing. Your advice to make sure that the company is legitimate and has a good track record is wise.