Saturday, September 19, 2009

Finding the right mortgage company

Just as important as finding the right general contractor, is finding the right company to underwrite your construction loan and mortgage. The two major path to in this process is to either work directly with a bank or a broker.

Benefits of working with a mortgage broker is that the individual will do most of the legwork for you. Your mortgage broker should be able to find the best rate and terms based on basic parameters you gave to him/her. The key is to find the right mortgage broker. Mortgage brokers, like financial advisers, have different incentives to sell different products to their customers.  Not all the products they sell are right for every customer. You want to find the mortgage adviser that is looking out for your best interest, and looking to build long term relationships vs. short term gain. Like finding a contractor, this usually applies to individuals who have been in the business for an extended period of time.  Tenure in the business is usually a good indicator as those out for short term profits usually do not last.  One disadvantage with working with a mortgage broker is many times you will not know where your mortgage loan will be serviced.

Depending on your experience with various banks, you will quickly see not all banks are the same. Some banks have much better customer service than others, and some are just better run.  From my experience, large corporations like CHASE have so many separate departments and functions that many times "the right hand does not know what the left hand is doing".  This can cause severe headache for the consumer when the bank makes a mistake, or when you call their customer service to resolve an issue.  This is the same with hiring a general contractor, small individual firms tend to only have one point of contact, and that point of contact usually has the power right then to resolve the issue, vs. having to be transferred to various departments and supervisors.  Working with the right adviser can also help greatly in this process.

If you work directly with individual banks, you can hand select the best banks based on referrals and your own experience.  With the additional work, the benefits include being able to solicit rates from many Credit Unions that usually do not show up in a mortgage broker's portfolio.  You can also be certain that there will be a much lower chance your outstanding loan will be resold to a firm you dislike.  The disadvantage being there will be significantly more work on your side as you will have to shop around yourself and interact directly with the representatives of various banks.

End of the day, the path you choose is just as unique to the individual as the type of construction loan/mortgage you may end up with.

If you live in the San Francisco Bay Area, here is a great recommendation for a General Contractor:
Home Builder, Home Improvement, New Home Builders, and Custom Homes.

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