Home Loan Archives - Page 12 of 24

Calm Before the Storm

Written by on November 5, 2018. Posted in Home Loan. Leave a Comment

In light of recent events, I was really going back and forth on whether I should use this title for this week’s edition of Priority Pulse, but I believe once you’ve read it, you’ll agree the title is fitting. Are we good?

Recently, an agent came to me with a very young borrower who wanted to buy a new house. Before I could ask the usual questions about income, credit, etc., the agent told me that they had tried another lender who told them she couldn’t qualify the borrower for the amount needed to purchase the house based solely on his income. We quickly determined that he regularly works overtime, and he gets quite a good amount of it each week, but he’s only been at his current employer for 14 months; his previous employer didn’t give him any overtime. We need two years of employment during which the borrower receives overtime to be able to count it, right? (That’s where the first lender stopped.) Actually, that’s not the way the FHA rule is written regarding overtime –it actually leaves it up to the underwriter to determine if overtime can be counted.

When I called the agent back to let her know I was reasonably confident we could qualify her client to purchase the house without having to add another borrower to the mix, she was ready (and I definitely applaud this) to write the offer at that very moment. Fortunately, though, I was able to keep her on the line and explain the matter regarding overtime. Further, I recommended that before writing an offer, we should submit a full file to the underwriter for approval. This way, if we get the approval, we’re aces; if the overtime is the sticking point, we can still work on finding ways to get it approved or adding another borrower without the clock ticking on a contract. She agreed.

A few days later, I had the privilege of calling the agent back and letting her know she was now able –nay, expected –to do the happy dance: the underwriter, in her discretion, counted the overtime so the borrower has more than enough income to qualify, and the agent needs to do her thing. Even though the days between when I first explained the strategy to the agent and when I had her release the hounds and get the house were filled with text messages with funny images displaying her desire for everything to happen yesterday, we maintained a calm –a calm that could be maintained because we knew that whatever came out of our submission to the underwriter, we still had options, and we hadn’t put ourselves against the clock. Further, we brought the agent into our “war room” meeting so she didn’t see any need to put us up against the clock either. A storm is now being unleashed: a storm of excitement for a very young man to buy his first home: the American Dream! Come on, if you’re not hearing patriotic music in your head or shedding a small tear of happiness for this guy, I don’t know who you are!

Tomorrow (Tuesday, November 6th) will be the culmination of a lot of building uncertainty for us all, regardless of our political stripe, but it will also be the beginning of new uncertainties. Today is the calm before the storm. Whether the results of tomorrow cause hyperventilation from panic or excitement, please remember the words of Paul Harvey: “In times like these, it helps to recall that there have always been times like these.”

Flooded with Knowledge

Written by on October 29, 2018. Posted in Home Loan. Leave a Comment

This week’s topic is taken from an experience one of our newer loan originators recently had, and I thought it might be useful to some of you. Many of you will probably say, “I already knew all that,” but I’m hoping that some of you will walk away feeling enlightened and educated. (Some may say that last sentence is my passive-aggressive challenge to get everyone to read this article to the very end. No comment.)

So, here’s the deal: after the borrowers were approved, made their offer, and the house went under contract, the underwriter came back to us and indicated that the home was in a flood plain so flood insurance was required. Here’s the reason I mentioned that the loan originator was of the less-than-veteran status: when qualifying the borrowers, he did not take the possibility of a flood insurance requirement into account so the debt-to-income ratios were dangerously close to being out of whack. Someone sneezing on the loan application or looking at it wrong could have sent it over the edge. When he was discussing this with some of the other loan originators in the office, each one sort of smiled and told him that the area in which this house was located almost always required flood insurance. Lesson learned by the rookie.

When the flood insurance requirement was mentioned to the seller’s agent, she acted like the deal was dead by making a comment that it would be next to impossible for the borrowers to get a flood insurance policy both in a timely manner and at an affordable price. The loan originator had already done his homework and informed the seller’s agent that the existing policy held by the current home owners could be transferred to the new buyers. She laughed and said that she’d been selling homes in that area for over twenty years, and she knew that wasn’t possible. Our loan originator wasn’t deterred, and he called the buyers’ agent to give him an update on the loan’s progress.

The buyers’ agent and our loan originator, after discussing all of this, agreed that it was odd that the listing agent would act this way. If she KNEW that getting flood insurance was difficult and expensive in an area KNOWN for requiring flood insurance, wouldn’t it be in her best interest to address that elephant in the room at the very beginning? Sure, it might turn off some buyers, but if she’s so confident in her knowledge of the area and what it required, she wouldn’t have to waste here time going under contract and waiting for the underwriter to be the bearer of bad tidings.

The existing flood insurance policy WAS transferable to the buyers at the same premium rate that the sellers were paying per month, so everyone lived happily ever after. It was an educational experience all around: (1) the rookie loan originator learned to research the area better to anticipate costs; (2) the sellers’ agent learned that flood insurance was transferable, which kept it affordable; and (3) YOU learned that whenever a client of yours buys a house in a flood plain, they should keep the flood insurance current at all times because when they go to sell, that home is more attractive to buyers because the flood policy can be transferred at the same premium rate. If you already knew #3, good on you. If you didn’t, though, I’m glad you made it to the end. Have a great week!

Preaching to the Choir

Written by on October 22, 2018. Posted in Home Loan. Leave a Comment

Whatever you like to do in your spare time (keep it legal), I would like to recommend that you carve out a little time to read a book called All Marketers Tell Stories by Seth Godin. You’ll enjoy it, I promise, but if you don’t, send a letter to Mr. Godin instead of sending one to me.

From the book jacket, we read, “All marketers tell stories. And if they do it right, we believe them. We believe that wine tastes better in a $20 glass than a $1 glass. We believe that an $80,000 Porsche Cayenne is vastly superior to a $36,000 VW Touareg, even if it is virtually the same car. We believe that $225 Pumas will make our feet feel better – and look cooler – than $20 no names . . . and believing it makes it true.”

No major “aha” moment in that piece, right, but it did make me think of our industry. As real estate and mortgage professionals, we do this to some extent all the time – and there’s nothing wrong with that. For example, an agent is showing a home that has breathtaking views to her client and notices that he has that same look in his eye that a young man gets when he’s fallen in love (or lust). The agent knows it’s time to seal the deal on the house, but the client asks one last question in something akin to a hormone-infused stupor: “How are the schools in the area?”

If the local schools were notorious for churning out criminals, meth heads, and homicidal maniacs all the while breaking records for the lowest graduation rates in the state four years in a row, an ethical agent wouldn’t evade the truth and just tell a fluffy story. However, if the schools were just average, she’s not going to say, “Meh, they’re average.” She’s going to tell a wonderful (true) story about how three of her friends graduated from the local high school and went on to have very productive lives,and the client’s going to believe her because he WANTS it to be true. He really couldn’t care less that the agent’s friends, alumni of the local high school, are productive members of society.

Mr. Godin goes on to say that to be a successful marketer, confine your efforts to those people who share your world view (his words) rather than trying to convert people over to your way of thinking. The moment I read that little piece of advice, the words “preaching to the choir” immediately popped into my head, but it made sense. In our industry, many of us spend time, energy, and money on trying to convince people living in apartments that they’ll be better off if they gave notice to their landlords and bought a house. We have the numbers to PROVE how wise a move that would be, right? However, Seth (I feel I’m on a first-name basis with him now) tells us that we should leave the converting up to our customers and keep marketing to the people who are already singing our tune. He adds that when someone is already converted to our world view (usually through the efforts of a friend), they’ll embrace our stories and buy what we have to sell; buyer’s remorse doesn’t exist.

Whether you’re reading this while sipping wine from a $20 glass or a $1 mug, this much is true: this one little tweak to our marketing can make a huge difference. We may not save enough money to trade in our Touaregfor a Cayenne (or buy a Touaregfor that matter), but we’ll look and feel cooler regardless of the shoes we’re wearing.

Happily Ever After

Written by on October 15, 2018. Posted in Home Loan. Leave a Comment

Most weeks, I try to share an insight or a tip I recently came across or an epiphany I had that I believe might help you in your business. This week’s edition is about something I already knew (and I would hope you did, too), but I believe it’s worth mentioning again.

A few weeks back, I was attending one of my closings with a very nice married couple (I attend all my closings, not just the ones with nice married couples) when we got through about half the mile-high stack of paperwork for the buyers to sign when the husband asked if he could take a quick break to use the restroom. Upon his return, he picked up his pen to continue with the signing, and just as the escrow officer was about to hand him and his wife the next document to sign, he apologized for the break and went on to explain that he had gone to the bathroom to compose himself.

He had become overcome with emotion and wept tears of joy because this is the first house he and his wife of 30 years had been able to purchase. A little over a year ago, they quit their jobs in California without any prospect of jobs here in Arizona, packed up everything they owned into a U-Haul truck, and made the move. “We lived in California for almost 30 years, and we could never afford to buy a house,” he explained, “but in just fourteen months of living here, and we’re moving into a house WE OWN!” Before the escrow officer and I started to get misty eyed, the wife hit us with another shot right in the feels.

About twelve years ago, they had gone to a new development to look at houses, and she had fallen in love with one design that had a turret like one found on a castle. She told her husband that when they are able to buy their first house, she wanted it to look like a castle. Fast forward to 2018: when they were working with their agent to find them a home here in Arizona, they never mentioned this to him as one of the criteria for their ideal home. They had made a full-price offer on one house that had been on the market for about four months, but the seller was . . . strange, to say the least, and ultimately refused their offer. A few days after resuming their search, their agent called and told them he found a house that he thought they would really like. When they pulled up to the property to meet with the agent, the house had a turret. It was her castle!

There are many reasons we all got into the real estate/mortgage business, but they all have a common thread: money. There’s nothing wrong with that. Nothing at all. Unless you’re independently wealthy because you bought Apple stock back in 1985 or you have an enormous trust fund, you have to have a means to get money to pay your bills and support yourself. That’s a cold, hard fact.

However, if money is the ONLY reason you began and remain in the real estate world, that can only sustain you for so long. It’s experiences like the one I just shared that give meaning to the reason we take phone calls at 11:45 pm on a Thursday and drive all over creation to get documents signed. Of course, the paycheck is a means to an end, but unless you enjoy the journey, it’s not going to be a very happy ending.

The Kids Are Alright

Written by on October 8, 2018. Posted in Home Loan. Leave a Comment

Someone much wiser than I – which, let’s be honest, is a fairly large group that might have trouble finding a meeting space big enough to get together – once shared this little nugget with me: “Seek first to understand, then to be understood.” As mortgage and real estate professionals, we’re required to take a gajillion hours of classes and then take a crazy confusing test JUST to get our licenses, so it’s natural to think we know a lot right out of the gate and that the world is just waiting for us to share it with them – and that feeling of being omniscient only grows over time. (I’ll pause here if that last sentence made you laugh and caused you to shoot milk or another beverage through your nose and onto your keyboard.)

The cold hard truth, really, is that someone with absolutely no experience in our industry could run circles around a 20-year veteran if she follows my friend’s advice and the veteran relies solely on his expertise. Paperwork, forms, negotiation, the art of the deal: all of these things can be learned along the way (and fine tuned and improved, of course, over time), but understanding the client, her needs, her goals, and her viewpoint HAS TO take place BEFORE anything moves forward. Failing to do so or expecting to learn it along the way will only lengthen the process far more than necessary and waste a lot of time.

With that said, I have to make a confession: until I read a recent article from NerdWallet, an online financial consulting company, I thought Millennials (as a homebuyinggroup) were just a bunch of whiners living in their parents basement waiting for an inheritance. Obviously, I didn’t seek to understand; I just thought everyone understood and shared my viewpoint.

For the sake of reference, Millennials are those folks who were born between 1981 and 1997: 21-37 year olds. Here are some of the items the smart ones over at NerdWalletshared in their article that caused me to look at this group of 66 million people a little differently:

•Median age for first-time homebuyers in 2015 was 31 years old as compared to 30.6 in 1970-74

•Two-thirds of these folks haven’t even reached that homebuyingage of 31, and 22% are under 25

•Millennials are renting for a median of six years before buying as compared to five years in 1980

•Millennials are expected to form 20 million new households by 2025

Also, to add further to my understanding, Fannie Mae conducted a survey among Millennials and found that more than a majority had a positive outlook about purchasing a home; two-thirds of the respondents felt it was a good time to buy even after the housing market collapse. Looks like these young folks DO want to purchase a home!

Lastly, Fannie Mae’s survey found that one of the biggest factors keeping Millennials from buying a home is perception, not reality. When the surveyors dug into the answers of “renting is a more affordable option” and “cannot obtain a mortgage”, they found that these answers were largely based on the belief that a 20% down payment is required and a 750+ credit score is the low bar. (Some of you may be shooting milk through your nose again. I’ll wait.) Reality is more like 3-5% and a credit score of 600+, generally speaking.

There’s a giant wave of Millennials coming, and they obviously need to be educated. Are you ready? If you want to make yourself even more invaluable to this huge bloc of future homebuyers, offer to teach them how to drive a car with a clutch.

Category: Home Loan

Calm Before the Storm

Flooded with Knowledge

Preaching to the Choir

Happily Ever After

The Kids Are Alright