Resident's Guide to Buying a Home and Using the Doctor's Loan
Securing the Best Loan
Now that the most nerve-racking portion of the process is complete, it is time for the wheeling and dealing. As described above, you should have completed the pre-approval process before signing your contract. Now you want to try to get the best loan possible. At the time of writing this, the doctor's loan is still available from several institutions. I will review this type of loan below, but at this point recognize that this is by far your best option, trust me. In my opinion, the following is the best strategy. Call the lender that you were first pre-approved with, and ask them for a document called a good faith estimate. This is basically the most accurate estimate of your loan including the interest rate, fees and any additional points. Then speak to another lender (or another person at a different location of the same lender) and simply ask if they are able to beat what you have been quoted on a previous good faith estimate. Nine times out of ten you they will be able to beat that good faith estimate and either provide a very similar loan with less points or a lower percentage rate. Do not be satisfied with a verbal confirmation; ask them to email you a good faith estimate that proves it. Now, you can choose to take the deal on the loan they offer, or better yet, take the new good faith estimate back to the original lender. I would say something like this, "I have really enjoyed working with you and hope we can continue to do so. However, I was quoted a better opportunity than you provided. Can you beat this?" It is ok to be aggressive and take advantage of the position that the lenders are in. They earn a commission off of every loan they close, so they would rather beat a competitor than lose out on a commission check, even if it is smaller than normal. All lenders have a discretionary fund into which they can dip in order to beat a competitor, so do not believe otherwise.
Earlier I mentioned that you could even do this process within the same bank. These lenders are so greedy that they will try to beat people from their same company. For example, I knew that I wanted to work with Bank of America so I pitted a lender in New York against a lender from North Carolina. I simply took any identifying information off of the good faith estimates and completed the process I mentioned above. They knew they were competing against another lender from the same company, but they didn't know who and they didn't care either.
It is very important to recognize that this process must be completed within the same day, so start early. Interest rates change daily if not several times a day. The lender will repeatedly remind you of this and that is why it is great to have the good faith estimate as documentation. If you received a good faith estimate one day and ask a competing lender to beat it the next day they will give you the old "apples to oranges analogy."
Once you get the best loan secured, simply tell that lender that you want to lock in the rate that you have been quoted. Therefore, you want to start this process on a day when you are ready to lock in a rate and proceed with the loan process. Keep an ear out for any news that might suggest that there will be a rate increase or decrease, which might force you to act sooner or later. In my case, I was aware that the Federal Reserve board planned to make a rate cut in a few weeks so I waited to start the process and got a significantly better rate. Keep in mind that the lender may need a copy of your singed contract in order to lock in the rate, so also have it prepared and ready to email or fax out.
Written by: Randon T. Hall & Ben Rosenbaum, Copyright © 2008
