Making the Most of Purchase-money Loans When Working as a Loan Officer in the Mortgage Industry

With interest rates rising rapidly, it is more important than ever to make the most of every loan. As refinances begin to dry up and you begin to deal more with purchases, you will undoubtedly encounter new roadblocks and hurdles on the way to the closing table. It’s a fact–purchase loans are far more time consuming and stressful than their refinance counterparts.

Borrowers are emotional, erratic, demanding, panicky, unsure, deliriously happy or sad and a whole host of many other emotions. In their minds, they’ve picked out the carpeting and wallpaper and have mentally already moved in! Geesh! Try dealing with a person who thinks they’re the landlord and they don’t even have the keys yet!!!

Keeping this in mind, here are some tips when dealing with purchase loans. These come from my years of experience and many number of loans (I’ve lost count.)…

1. Don’t show your hand too early (meaning the interest rate you can offer). Explain to the borrower that it is up to them when they decide to actually “lock-in” the interest rate. If they press you for an actual rate, tell them what today’s rate is you can offer, and that you will watch the interest rates for them. If they drop, you will call them at the first moment. What you really want to do here is knock the borrower off their “rate” short-sightedness. Say something like, “Well, as you know, the interest rates change every day. With purchase loans, time is critical. What we can do is get the process started, so that you don’t lose the house, and when the interest rates get to a point you feel comfortable with, we can lock it in for you. We will be working hand-in-hand through the entire process. Now, how do you spell your last name?”.

2. Explain the difference between a pre-qualification and a commitment letter. Borrowers think just because they have been pre-qualified somewhere, that it guarantees them the loan. This isn’t the case. As you know, the underwriter has the final say. If the property does not appraise for the correct value, the borrowers’ situation changes, or the seller pulls out, the deal is dead. These are things entirely out of your control. What I tell borrowers, is that we are going to go one step further than a simple pre-qual letter. We want to give them an advantage with their loan, and get them a full commitment letter from a lender as soon as possible. This lessons the chance of them getting their expectations set too high and not getting the loan in the end.

3. Phone the real estate agents early on and explain you are in control of the process. Call them BEFORE they call you. You want to show that YOU are in control—NOT them. Doing this, puts you at a higher level and they will respect you for it. Believe me.

4. Set expectations with the borrower upfront. Explain the entire loan process from start to end. First-time homebuyers just simply don’t know. Emphasize to them, if they have any questions, to call you first—NOT the realtor.

5. Make it known that you are the point of contact for all parties involved in the transaction. This includes the seller and buyer agent, appraiser, lawyer, title companies, etc. Usually, the realtor thinks they are in control for the whole process, but remember the sale is mostly out of their hands after the purchase and sales contract is signed. Then it is entirely up to you—the loan officer—to succeed! By being the “driver” in the process, you can minimize any confusion or crossed signals that may arise.

6. If you get a sales call from a borrower looking to purchase a home, ask if they have already been pre-qualified elsewhere. Most of the time they have been and are simply shopping around for the lowest rate. (In other words, go back to rule number one above… don’t show your hand too early). If the borrower shops behind the other loan officer, they will certainly do it to you too.

7. Explain to the borrower whether you are acting as a direct lender
or broker. Each has pluses and minuses. Explain what you are and the role you play. Sell yourself. For example, you can say “As a lender, we have direct control of the process, we make the final decision and can tell you upfront whether you qualify.” or “As a broker, if you get denied by a lender, we can easily shop you to another lender, saving you time and effort. This will help you ensure you get the house you want and not jeopardize the process”. Sell your advantages…don’t mention your weaknesses.

8. Factor in all payments for the borrower, including the full principal, interest, taxes and insurance and be certain that the borrower is well aware of these entire costs upfront. If they can’t afford the house, you want to know as soon as possible. Or you’ll be left with nothing!!! I always say, it’s best early on to kill ‘em or keep ‘em. Don’t let timewasters run away with your income.

9. Watch critical dates, especially rate lock expirations and underwriting turn-times. Be well aware of the “commitment letter” date as stated in the purchase and sales contract on the property. Oftentimes, borrowers wait until far too late in the process before deciding to move ahead and these contract deadlines can be impossible to meet. Get an extension on this ASAP with the seller’s agent on the property.

10. Finesse your way through the process. Don’t lie. Only tell each individual party involved in the process what they need to know. Don’t share too much information…it creates confusion. And don’t tell someone something unless you are absolutely certain. It always comes back to bite you in the rear!

11. Stop the shopping. Make the borrower understand that once they decide to move ahead with the process, they risk losing the home, if they decide to leave you. Another broker/lender will be unable to meet the tight deadlines in the contract. They have to make a decision and stick to it.

12. Stop the shopping—part two. If the borrower is qualifying for a home based on a special program that your company is offering, tell them the criteria upfront. Not every loan officer has what you can offer. In other words, you have a specialized program and are making an “exception” just for them. Not all rates are created equal. The other “competitors” for the loan may not have all the correct information upfront, to be able to properly quote them an accurate interest rate. Let me emphasize that again—an ACCURATE INTEREST RATE. Educate the borrower on this, show them you’ve done your homework, and are quoting accurately. Ask qualifying questions that others don’t.

By keeping these tips in mind, it should make your next purchase loan go a lot smoother.

If you are looking for a firm step-by-step process to help you get your purchase loans to the table faster, please…please…please…take a minute to read about my Sink or Swim Loan Closing System at http://www.loanclosingsystem.com

And, as always, best of luck in your business. This is STILL a wonderful industry to be in! Stop being discouraged and go get ‘em!!! I know it’s tougher out there, but you can do it!

How to Buy a Bank Owned Home with VA or FHA Secured Financing

Many bank owned homes do not list VA or FHA financing as possible loan options they are willing to consider when reviewing an offer. For many home buyers, these are the only types of financing available to them. Home buyer’s looking to purchase a home with a minimal down payment, or less than perfect credit, rely on the Federal Housing Authority (FHA) or the Department of Veterans Affairs (VA) to guarantee their loans. In addition to the buyer’s credit worthiness, in order to guarantee a loan, the FHA and VA require the property to fit certain standards of livability. For the FHA, some of these requirements include, but are not limited to, adequate heating for every room, roof with at least 2 years of life remaining, electrical panel in good working order, adequate water and power service to the property, no obvious pest and dry rot problems, no major water drainage issues, and any access to the crawlspace be properly protected from rodents. The requirements for VA financing are similar, however, the VA appraiser is much more thorough with their review of the home. As a result of these property requirements many homes that are bank owned will not be eligible for a VA or FHA guaranteed loan without many upgrades. The banks would prefer to sell the home AS IS, to a buyer using conventional financing or paying in cash. This is why the banks tend to sell their homes for less than market value. Many of the homes require repairs, and the pool of buyers is less than a typical home. The bank will sell a home in a few days, for tens of thousands of dollars less than it would typically sell the same home for, in good condition, with a larger pool of buyers.

So how does a VA or FHA home buyer get the bank to review their offer when they do not list VA or FHA as an option? One option is to make the offer along with a request to fix the issues that would stop the home from being FHA or VA eligible. This requires a working knowledge of the lending requirements. A good source for this information would be the VA and FHA websites, your loan officer and your real estate agent.

Here’s one way this situation would play out: You are a VA buyer, and the house you would like to make an offer on has a major roof leak and 3 windows are broken. The banks inspection of the home revealed these issues as well and therefore VA financing was not provided as an option. After reviewing the guidelines online, consulting with your lender and real estate agent you decide to make your offer subject to; the bank repairing the roof, any damage resulting from the leak, and the 3 broken windows to be replaced with new vinyl windows. Presenting the offer to the bank in this manner addresses upfront the known issues and the solutions to the problem. The longer the home has been on the market, and the less repairs needed, the more likely this type of offer will be accepted. Banks, their listing agents, and asset managers have many resources for making most types of repairs. They would just prefer not to.

We are currently experiencing a market that has excessive inventory, stringent financing guidelines, tough competition on the best deals and a lot of uncertainty. It pays to be patient and creative. If you want to take advantage of the best bank owned deals, take time to understand your lender’s property requirements and understand that the longer the home sits, the more leverage you’ll have to get the bank to accept your offer.

How to Get a Mortgage Refinance Online

Prior to scouting out mortgage refinance loans, any potential borrowers should first review their current mortgage
note. The first thing that you need to look for is a prepayment clause. Most home loans include some form of prepayment penalties for paying your home loans off early. Homeowners that have a first and second mortgage could also end up being slapped with steep prepayment penalties; which would go a long way towards negating the savings that would be obtained through refinancing.

Many mortgage refinance financial lenders tend to prey upon the idea of utilizing the equity that has been built up in your home in order to pay off your credit cards. Others will actually just combine this with some sort of a cash-out pitch. While this at first may seem tempting, it is not actually the best idea. Even though the home refinance loan rates may end up being lower, and you very well may end up with some extra money each month, over the long run you are going to be paying more in terms of interest charges because you are paying the refinance home back over such a long period of time (most people get a mortgage refinance with a 30 year term).

Besides that, even after you are able to free up that additional money each month using a mortgage refinance, it does not really provide you with much good unless you are going to put it into some sort of savings account. Otherwise you are still going to be just living from paycheck to paycheck. Also, if you end up getting another outstanding credit card balance, you will find yourself utilizing your house as collateral against the home refinance, and that rarely ends in a good way.

A home mortgage refinance can actually turn out to be a good idea, though. The key for this is to use some smarts when you go about the mortgage refinance process so that you are in fact doing it to actually save some money. This way you will be able to keep more of your own hard earned finances, and less of it ends up going towards the interest. The main rule of thumb when getting a home refinance loan is to do it only when the going rate is at least half a point lower than the interest rate you currently have.

This way the fees and costs that end up being associated with the paperwork and redoing the home refinance loan is worth the cost. Also, make absolutely certain that you are getting yourself a fixed rate. If your current loan happens to have a fixed rate and is even more than whole point higher than a new variable rate for example, it can mean really bad news when the interest rates end up going up.

Should I Refinance my Mortgage?

Instead of just getting a home refinance on a 30 year loan, you should be trying to get yourself a 15 year mortgage instead. This is a simply amazing way for you to save some thousands of dollars in interest. The monthly payments on your mortgage refinance may increase by $50-$150, but in the long run you are going to be saving a ton of money. That is quite a bit of money that you can utilize in retirement as another example, instead of allowing it to go to the bank for some extra years. Plus, most financial lenders will offer lower rates for home refinance loans that have a shorter time period attached to them.