Shopping around for better rates

[Kevin Oh]

I am in the process of buying a property. I have used a lender in the past and wanted to shop around to see who can give me the best rates. I got pre-approved by my previous lender and by another lender. My previous lender was not happy that I was shopping around. The new lender gave me a better interest rate and lower monthly payment by a few dollars. I want to keep a good relationship with my previous lender but if I do not go with him, the relationship is broken. What should I do?

[Steve K.]

I’ve had several investor clients go with a new (to me)/ unproven lender because of a slightly lower rate promise only to get burned by that lender (closing costs were higher, appraisal costs much higher and appraisal was a nightmare, main point of contact gave us the clear to close as we passed our financing contingency then just before closing someone from the underwriting department we previously didn’t know existed said we need a few more days and seller didn’t agree because they had a higher backup offer, jeopardizing the earnest money and losing the property, etc). There is a lot more to it than the rate. Look at all the differences in both rate and terms but most important in my opinion is their track record in customer service and meeting deadlines and closing. The worst lenders I have dealt with are the ones with underwriters in one time zone and origination department in another, branch manager in another that don’t communicate well with each other and end up over-promising while not being able to deliver. If you have a good relationship with a lender who has a track record of great customer service and hitting all deadlines, even better if they have a good local reputation with the listing agents in the market that you do business in, then that’s worth more than the promise of a slightly lower rate from an untested lender IMO.