Ten Questions To Ask a Mortgage Lender
When working with a new mortgage lending company as a mortgage broker in Ontario, you may have many questions to ensure that you can provide your client with the best service possible.
At New Haven Mortgage Corporation, we understand this, and whether you are a new or experienced broker, it is important to ask a mortgage lender some background questions when you are going to work with them on a deal.
This article will go over ten essential questions a mortgage broker should ask a mortgage lender. These questions will indicate whether the lending company is the right choice.
1. How many years has the company been in business?
Experience is key. As a broker, you may be inquiring with many lending companies to choose the best one to help your client. In the mortgage industry, both quality and quantity are important factors to consider. Lenders with more than 20 years of experience have typically dealt with many more situations than a lender with three years of experience. This is especially important to keep in mind when dealing with a client you think may have some difficulties obtaining a loan. A lender with more experience will have a broader view of possibilities to help your client out as much as possible.
Furthermore, do not be afraid to ask questions about other areas of the business as well. This means asking about the company’s departments, including processing, administration, and renewals policies. Remember, you are looking to build a relationship with a reliable equity lender. Therefore, the company should have borrower and broker retention within all departments with efficient and professional procedures.
2. What is your niche?
Some mortgage companies will focus on general services, while others focus on a niche market. For example, at New Haven, we are “true equity lenders,” which means we look at your client’s property’s quality, not the client themselves (such as credit score or employment).
Looking for lenders who have a niche is important because this means they are more knowledgeable in other areas instead of just having a general overview. Think of it as going to a specialist for a sports injury instead of a general practitioner. The specialist has gained more experience in their specific work area and will be well-equipped to get you quickly back on your feet.
3. What geographic locations do you service?
This question may seem obvious to ask, but sometimes a mortgage lender may not be upfront with where they will lend in their initial consultation with you. For example, they may only service Toronto or the Greater Toronto Area when you have a deal in Ottawa. Therefore, this question should be one of the first things you should ask to save time.
4. Do you lend in rural locations?
Some lenders may lend in rural areas in Ontario, but not all. Other lenders may also lend in rural locations but have certain restrictions depending on the population size. Make sure you ask your lender the parameters in which they lend.
5. What is your maximum loan to value (LTV)?
Private lenders can have varying LTVs for 1st, 2nd, and 3rd mortgages. Therefore, when determining LTV, you should be asking about location, property type, value or purchase price, condition, and marketability before submitting the deal.
6. What are your minimum and maximum mortgage amounts?
You should know your lender’s minimum and maximum mortgage amounts. Some lenders will lend as small as $25,000 mortgage loans, whereas other lender’s minimum could be $100,000. This also goes for larger amounts. Always inquire about the lender’s maximum loan, and for the $1,000,000+ mortgage loans, make sure the lender does not do a “scale back” on the LTV.
7. Do you allow brokers to look at your provisions?
A mortgage lender should provide brokers and agents a copy of provisions without hesitation. It’s essential to ‘know your lender‘ through transparency and fairness.
A deeper dive into a lender’s provisions is highly recommended. While some lenders may charge low rates and fees, they could potentially entrap your borrower when paying out at the end of their term. You can avoid this easily by reviewing the provisions thoroughly and asking further questions such as “what happens if my borrower’s mortgage payment goes NSF”? Or “what happens at renewal”?
8. Do you offer open mortgages?
Some brokers will have a specific plan in mind for their client, so they may know that they could get the borrower working with a B lender or institutional lender in three to six months. Thus, they will not want a 3-month penalty charged to end the term early. This is one of many reasons why a borrower would require an open mortgage.
Your lender must be flexible to help the broker navigate the borrower’s best interest when searching for the right mortgage.
9. How does your pricing work?
Knowing what your lender rates and fees are is a crucial part of the broker-lender relationship. It is also a trust factor between you and your borrower. For example, you could be quoted one rate and or fee, and then suddenly, the pricing changes after the deal is submitted. This is commonly known as a “bait and switch” tactic.
New Haven continues to provide our brokers with a fixed matrix. This allows the broker to quote the borrower before submitting the deal confidently. It avoids wasted time and especially embarrassment to the broker.
10. What happens at maturity?
There are a few things that can happen at maturity. Some lenders may not renew or have higher renewal fees, so ask upfront. At New Haven, our renewal fees are fully transparent in our commitment, so there are no surprises at maturity.
There you have it! These questions should get you comfortable with a prospective mortgage lender. A lender that provides transparency and works toward helping your borrowers progress to eventually bank or trust financing. It’s a win-win-win for everyone.
To inquire about any deals you may have, get in touch with New Haven today, and one of our Business Development Representatives will be happy to help.