MORTGAGE SHOPPING

“It's a question of trust.”

So you want to buy a house do you? Most of my time in the industry was spent refinancing sub, or non prime clients. The information contained in the following article is applicable for both refinancing and purchases; prime or non prime.

While there are many tips one can give to someone shopping for a mortgage, there is one that most people will agree on. Trust. You have to find someone you can trust. While that seems simple enough it is not an easy thing to do; trusting a complete stranger. If in writing this article I can get you to focus on the individual rather than the company, then I can call this a success. Does that mean it makes no difference what company you work with? Not at all, but a bad loan officer can virtually guarantee your loan getting turned down no matter how great the company he works for is.

Some people will only feel comfortable working with a local broker who they can drop in on during the processing of their loan. Others don't feel that is important as long as they can pick up a phone and call their Mortgage consultant.

I began my tenure in the financial services industry as a stockbroker and for the longest time it amazed me that I could pick up the phone, talk to someone three thousand miles away, and they would open an account and drop fifty thousand dollars for an investment idea. Many times this happened on the first call. I believe in that instance, you have a person who trusts the system and believes in how it works. Most do not think it odd to do business with a voice in not only a different state, but at times in a different country. As a financial advisor (Stockbroker) I had clients through out the United States as well as numerous client is Australia, India, and the Netherlands. I had clients for years that I never once met in person. But then that is not such a stretch for that industry. Rather it was the excepted way of doing business.

You'll find I am spending a great deal of time on the subject of trust because it is so vital. After this issue is settled, pretty much everything else falls into place and your loan will probably get done by the first person you decide to work with.

Larger lenders like to tout their name as being the name you can trust, while smaller lenders will tout their loan officers as the ones to trust. While there are good companies and there are bad ones, the onus of getting your loan closed lies on the shoulders of your loan officer. He is the one that will make your loan painless and easy, or a long drawn out battle.

He is the one who puts together the loan. If he does a less than satisfactory job structuring your loan it will get turned down by the underwriters at the get go. However, his buddy in the cubicle next to you could have taken that same deal, re structured it, and guess what? Your loan gets done. Now how does that work?

Let me give you an example. John, your loan officer by default; he just happened to pick up the phone when you called, is reviewing your documents. Maybe it is nearing dinner time, he has been at the office all day, is hungry and tired. But, he desperately needs the loan, so he is gonna work late again. Hi is also distracted knowing that he will be in the dog house at home again for another late nighter.

John has decided to use twelve months back statements in lieu of W-2's and check stubs. He decides correctly to go this route because your W-2's do not show enough income as his wife works for cash 'under the table'. John has decided that if he were to add up all the deposits going into the account and divide by twelve months, he can show enough income to qualify. By using bank statements he will get the same rate as a traditional full doc loan.

What John failed to catch is a number of fees taken out of their bank due to insufficient funds. He does the straight calculation, enters your income in the correct field in the loan application and hits send. He then puts the physical documents into an envelope to be overnighted to his underwriters. He goes home earlier than expected tonight. The missus should be happy.

The next day John logs onto the computer and finds his loan is turned down already. What could have gone wrong? The NSF's on his clients statements tell the underwriter that the Johnsons are not able to keep up with their financial obligations despite what the deposits add up to on their bank statements. Had John not been in such a hurry he would have seen that and used a stated income, or no doc program. He goes back to the under writer with the idea of a stated deal but is quickly shut down. Once an underwriter has seen any income documentation he/she cannot turn a blind eye to it and do any other program. John's clients will have to use their W-2's and hope that their debt ratios will not be too high.

You need to get a guy in your corner that you can trust to do the loan right, from start to finish. The above example has little to do with the company or the guidelines, and everything to do with the loan officer and his job performance.

Bottom line, a lender is only as good and the loan officer is who by chance has picked up your call. I good, diligent loan officer, will excel with the giants of the industry just as he will at the mom and pop shop down the street because he has intimate knowledge of how things work. I have worked at three different Lending Institutions, and while rates and guidelines will vary, you play the game much the same way.

The English speaking man who plays chess in San Francisco will play the game much in the same way as the Spanish speaking guy in Peru.

In my next installment I will go over the other the other things you will not want to over look on your mortgage shopping spree.