10 questions to ask your Loan Officer when applying for a mortgage

This post was first published on Quora on October 9th, 2015: http://qr.ae/RPSsK3

About me. I’m a Product/Mortgage Expert at Blend Labs helping to build delightful end-to-end software empowering banks to become better mortgage lenders. Formerly, I was a top 10 mortgage originator at Wells Fargo and worked at Bank of America and Goldman Sachs.

So here is my advice:

Shop for a Great Loan Officer – Not just rates:

Homeownership is a deeply rewarding experience.  Needless to say, applying for a mortgage loan is one of the most important financial decisions a consumer will undertake in his or her lifetime. Yet, did you know that according to the Consumer Financial Protection Bureau, less than half of consumers actually shop around for a mortgage?  This means that most consumers are not doing enough research to compare their options.  The best advice I can give you when applying for a mortgage loan is that you need to find the best loan officer at a reputable lender who is willing to provide you with the level of service you require.

Rather than shopping for a mortgage loan purely based off of the lowest advertised rates and/or fees, I recommend shopping for the right loan officer first. I believe in building a lifelong relationship with a loan officer who will help you and your current or future family members with your current and future transactions.

Yes, even with mortgage lending the focus should be on the long-term since most of us will need a mortgage for a home purchase or refinance 6-10 times during our lifetime.  This loan officer will understand your unique financial situation and remember important details and will not need to ask you to start the loan process from scratch every time you need a new loan.  And since most lenders will match on published rates and fees – and major lenders such as Wells Fargo, Bank of America and Chase publish their rates on their websites – it is not hard to sanity-check your loan officer’s quotes early on and negate price differentials.

At Blend, we have the privilege of regularly interviewing top-producing loan officers from various lenders as part of our ongoing user feedback sessions for our mortgage origination software.  Although we ask them a wide range of questions in our interviews, we’ve found that it’s most important to ask these questions when identifying the right loan officer to work with:

Question 1: How many transactions do you work on per month, per year?

Logic: Completed transactions are similar to upvotes or likes. The more transactions the loan officer is working on or has closed, the more likely that the loan officer is experienced and has a solid track record of working successfully with customers since happy customers = more referrals and more referrals = more closed loans.  (1-2 loans a month is considered normal; anything over 10 is considered a lot of loans.) Conversely, if a loan officer is working on more than 20 or 30 loans per month you want to better understand the level of service you will receive on your loan.

Question 2: What is your Net Promoter Score?

Logic: As in the tech space, the Net Promoter Score is used by many lenders to track their loan officers’ performance on every closed loan transaction.  As opposed to a few testimonials and online reviews, this score is more representative of the level of service you will receive.  This is because we haven’t met one loan officer who has told us that they provide poor service, so having an objective measure like NPS will help you make a better decision. A loan officer with a very weak score of less than 50 – meaning less than 50% of consumers would recommend the loan officer to a friend – should be a sign that you need to run, not just walk, away. A low score could be a sign of issues that consumers have identified that you may want to know prior to selecting the loan officer: 1) closing delays 2) not responsive to phone calls or emails 3) lack of transparency into the process and 4) other negative experiences.

Question 3: What is your experience working with consumers similar to myself?

Logic: There is a saying that every loan is unique.  That is absolutely true.  If you are a software engineer working at a startup and receiving annual bonuses and incentive stock options, you want to know that the loan officer has experience working with consumers with a similar profile to your own.  What you don’t want is to go into a whole dissertation on the stability of your startup and continuance of your income and what is an incentive stock option.  If your loan officer doesn’t already know how to structure transactions for software engineers, you don’t want your loan to be the test file.

Question 4: Tell me why you chose this profession?

Logic: Passion is important.  We’ve found that passionate professionals seem to care more about their customers and look out for their best interests. As an example, we spent some time today with a top producing loan officer who is on track to do over a $100M in loans this year and his manager.  We could tell right away that they were dedicated to delivering the best consumer experience possible by the questions and feedback they gave us on making the mortgage process as seamless and user-friendly as possible.  Whether over the phone or in person, it is not hard to identify loan officers who are passionate and will go the extra mile to deliver a compelling experience to consumers.

Question 5: Can you explain your process and turn-times for working with applicants to get my loan from application to approval?

Logic: The worst thing to do when applying for a mortgage loan is assume that the process should work a certain way without understanding and setting the right expectations. Every lender and loan officer has different processes and turn-times so it is a good idea to understand this upfront.  Your loan officer should be able to explain the mortgage process concisely and clearly so that you can be sure that he or she understands how to help you navigate the process and is not a newbie.  If it takes 2 weeks for an underwriter to review your loan file, that would be good to know upfront so you are writing your purchase contract with enough time for closing on your loan.  Similarly, if your loan officer is only in charge of the initial sale and will not oversee your loan from start to finish you have to assess your comfort level with that arrangement.

Question 6:  How do I keep track of the status of my loan and at what milestones will I receive updates?

Logic: Communication is key.  For many of us, applying for a mortgage loan will be extremely stressful.  Getting regular updates during a 30-day mortgage process will allow you to tackle the process on step at a time and track your progress.  Loan officers can get so overwhelmed in their day-to-day work internally that they forget to provide key updates to their customers; especially if they are working on a lot of files.  Updates like your loan has been suspended for further documentation should be provided to you immediately and not when the loan officer feels like notifying you.  A few lenders have online portals for consumers to track the status of their loan since they realize that updating customers on status is not prioritized enough in the industry.

Question 7: What is your track-record of on-time mortgage closings?

Logic: One loan officer confided in us that he has not closed a loan on time for the last 4 months. This means that none of his customers were able to make their closing dates on their home purchase. Therefore, a track-record of closing on time is paramount; especially when you have a high stakes home purchase and can be held liable for a breach of contract by the seller for not closing on time.

Question 8: What do you think my chances of loan approval are?

Logic: If the loan officer doesn’t think your loan will be approved, you need to search for a different lender or understand what you need to change in your financial situation to get your loan approved.  Most experienced loan officers can tell you if your loan will be approved before an underwriter formally reviews your loan file. They know what their institution can approve and what can’t be approved.  If there is something that you are worried about on your file, it is best to disclose your concern with your lender upfront to allow full transparency.  Your loan officer will usually use an automated decision engine to see if your loan can be approved at point of sale even if he or she is not sure or can call an underwriter to get an opinion on a lending rule or guideline upfront.

Question 9: What city and state is your processing center and underwriting center located at?

Logic:  Every loan needs to be sent to a processor and underwriter to be worked as part of the loan process.  When given a choice, it is better to have local processing and underwriting (or at least within the same time zone).  If processing or underwriting is not local, you want to know what hours you can contact the appropriate person for questions and how this might impact how your loan closing and when someone will work on your file during the day in case you need to submit additional items.

Question 10: Is there anything that we have not discussed, that I should be aware of?

Logic: No matter how thorough you are, applying for a mortgage loan is complex. By asking this question, you will uncover some known unknowns and perhaps some unknown unknowns as well.  Things like “Will I get a discount for setting my account up for auto-pay or opening a bank account.” Lastly, you will discover things that are material that your loan officer feels that you should be aware of whether positive or negative.