Loan applications are approaching record levels and refinance activity is near historic peaks. Appraisers are working in overdrive, along with pretty much everyone else in the financing industry including attorneys, title insurance agents and surveyors. Oh, and loan officers, too.

When rates drop as much as they have in recent weeks, people who were once out of the lending business often come back in to make some quick bucks before rates rise once again and applications fall. This in-and-out process presents a challenge: How can you be sure that the loan officer on the other end of the phone knows which way is up? Are you getting a rookie or a pro?

The best approach is probably to ask a few questions and see how your loan candidate stacks up.

What Is The APR For This Loan?

Most veteran lenders have been asked this question so many times they've got an accurate response which literally rolls off their tongue. If your loan officer stammers or, worse, tries to tell you that the "annual percentage rate" or APR is meaningless, go elsewhere. APRs can be figured with a financial calculator or a computer. Either way, a good loan officer will explain the APR and provide you with the correct number.

What Is The "Par" Price For This Loan?

The "par" price for a loan is the interest rate without points, say 7 percent and 0 points. You can often get a lower rate by paying points or you might prefer a higher rate but lower closing costs. The idea is to see which option makes the most sense for you.

What Are My Closing Costs?

Good loan officers have closing costs memorized. Title insurance rates are typically provided to loan companies for a quick quote. If your loan officer gives you broad ranges of costs such as "Oh, your costs will be between $1,500 to $2,500" then I'd dial a few more lenders. You can bet your costs will be on the upper end of the food chain.

What About Fees?

Be wary of claims by loan officers that "I might be able to get that waived for you" when examining fees. Lenders or brokers have some control over their own fees, but if you get promises of reduced fees for non-lender services get it in writing. Remember, also, that HUD feels consumers should pay no more than actual costs for services such as appraisals and couriers.

How Long Have You Been In The Business?

Unlike real estate brokerage, where both brokers and salespeople are licensed and must pass state-mandated classes and tests, the situation is different with loan officers. Requirements for loans officers vary extensively. Most states, according to CampusMBA.com, have no requirements to enter or stay in the field.

If licensing is not a sure measure, how do you know if the loan officer you're dealing with is up-to-date and knows pretty much everything that needs to be known about the mortgage process?

We usually assume that experience counts, so why not ask how long the loan officer has been around?

Another approach works like this: Speak with those who have recently financed or refinanced and with local real estate brokers.

Those who have just been in the market for a loan can tell you what they liked or didn't like. As to real estate professionals, they continually work with lenders and know who delivers promised rates and packages -- and who doesn't.

Check state regulatory agencies to see if the lender has been the subject of disciplinary actions. And, of course, ask if the Better Business Bureau has experience with the lender, either pro or con. The issue here is not whether someone was the subject of a complaint, but how the complaint was handled and whether the number of complaints is reasonable relative to the size of the firm -- a big lender might reasonably have more complaints than a smaller one simply because it deals with more people.

Just because someone hasn't been in the business for very long shouldn't automatically disqualify them as a potential loan officer. We all start at some point, don't we? The key to using someone new in the business is not whether they instantly know all the answers to all your questions, but whether they will find the information for you need and deliver promised loans.

Also, going back into an industry when opportunities are good may make a lot of sense. Again, the question for consumers is whether the loan officer can deliver promised mortgages, rates, and terms.

We all want good rates with low fees, goals shared by experienced and reliable loan officers. Locate the right loan officer and you'll likely find that the mortgage process is as easy as falling off a log... instead of being hit by one.

For more articles by David Reed, please press here.

Published: November 2, 2001

Use of this article without permission is a violation of federal copyright laws.

, a veteran Mortgage Banker, successful Real Estate Consultant and author of Your Guide to VA Loans, Mortgages 101: Quick Answers to Over 250 Critical Questions About Your Home Loan, Who Says You Can't Buy a Home!, and Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You, is a former columnist and Contributing Editor with San Diego-based Mortgage Originator Magazine. Reed is President of CD Reed Mortgage Bankers, Austin, TX and is a Past President of the Austin Mortgage Bankers Association.