Good mortgage broker will find the right loan
When deciding to buy a home you have seemingly a million decisions to make, and one of the most important ones is to find a source for your mortgage. Many people start out by calling their bank, and for some that is adequate, but not always.
Banks do offer competitive rates, and if you are a long and valued customer may cut some of the red tape for you. But keep in mind that a 30-year mortgage is a bit different to qualify for than a car loan or an installment loan. Most long-term mortgages are eventually sold in the secondary capital market, and thus must be made under what sometimes seem rather rigid guidelines. Thus suddenly your friendly neighborhood banker may not be so casual about just putting the money at your disposal like he did last time you needed $25,000 to consolidate your credit cards.
In some instances this almost gets to be comical, as in the time a client got approved for a $50,000 unsecured loan with a bank in Denver without so much as sending over a paystub or a tax return. She called them up to inquire about a fully secured second mortgage in the amount of $30,000 on a home she wanted to buy, and they wanted her life history, tax returns and a mountain of other paperwork.
Now logic might say that such intrusive inquiries would be better suited for the unsecured loan but often the opposite is true. The banks keep the higher-rate unsecured loans in house, while they sell the lower, long-term fixed rate loans. When a lender sells a mortgage, he has a degree of liability if certain industry standards are not followed, and if the buyer of the loan suffers a loss the original lender can be liable.
So, if your financial situation does not fit the pattern of a person who appears to borrow money for the fun of signing all that paperwork, you might need some guidance from someone who deals with lenders’ requirements for a living. In my experience that is a very high percentage of the people in the world.
What a mortgage broker does is represent numerous mortgage lenders. These include insurance companies, brokerage houses, and companies that do nothing but raise money in the bond markets to lend out as mortgages.
All these companies have different approval parameters and types of loans they like to do. Some only do strait-laced, owner-occupied single-family home loans to salaried people. Others will do darn near any type of loan even to people in the middle of foreclosure or bankruptcy given the price is right. And there is about everything in between. There is a great deal of competition between these companies and while there are some loans that just can’t be made under any circumstances, there are often many options out there for most borrowers.
However, most of these companies do not deal direct with the public, and to try and check out even a few of the ones that do can take hours and hours. This is where a professional independent mortgage broker comes in. Brokers spend their days understanding and evaluating loan programs offered and keeping up with the ever-changing guidelines of companies offering mortgage loans. The mortgage brokers often have access to a wider range of options than any bank might or any single one of their lenders. Thus if you don’t quite fit one set of requirements a broker can quickly check other companies for you.
A broker can also look out for pitfalls for you and avoid situations where you may get unnecessarily turned down. They can also help emphasize the strong points about your loan application to those who make the final approval decisions and possibly point out mistakes that were made that caused your application to be unjustly denied and get it reconsidered.
And as in many types of business, personal relationships will often tip the scales. If a loan is borderline for approval, the final decision may lie in accommodating the broker in recognition of a long and trusted business relationship. There really is a great deal of finesse often with even the most qualified of borrowers.
One of the fun things about working in the Vail Valley is that occasionally I get some world-famous celebrities or well-known billionaires for clients. Often these people have poor credit histories in terms of multiple late payments. This is often due to the fact that they are constantly traveling on business or pleasure and they just aren’t home when the bills arrive.
One underwriter called me one day and noted she had just seen my client on the Today show, but couldn’t approve the loan due to the client’s credit history. I had half been expecting the decision, but had hoped for the best. Within hours I had the loan resubmitted to another lender that was a bit more impressed with my client’s last name than they were worried about his credit report and we got the deal done.
When selecting a broker one thing to look out for is one who gives you too many quick and pat answers. Go with a broker who asks probing questions about your job history, income, credit and source of downpayment. Even if you’d prefer not to answer some of these questions, they are issues that will have to be discussed at some point. Brokers that tell you only what you want to hear are, in my experience, not very good brokers. It takes a lot of knowledge, understanding and depth to make a loan application work, and it is often the seemingly inconsequential that will stop a loan approval in its tracks.
Right now for example I am working on a refinance for a client who thought he would be smart and call his current lender (who I had set him up with a few years ago) and ask about a refinance. The client gave the lender too much information in regards to his fairly low taxable income and the lender turned him down. I called the lender up, proposed putting our mutual client under one of their non-income verified loan programs, and we are getting it done.
A broker who is willing to ferret out potential problems and face them squarely up front will have a better chance of dealing with the problems in a positive way than someone who puts off the sometimes-painful until it is too late.
And a word about finding your own loan over the internet ” a lot of people do, but understand how these operations often work. They have phone banks of people answering calls and taking “mini-applications” over the phone. They work on sheer numbers and are recognized in the industry as having less than a 30 percent close rate of loans they initially “approve.” Now 30 percent is a profitable percentage when you are talking thousands of loan applicants, for the people on the closing end. But what about the 70 percent of the people who thought they were approved and didn’t get their loan and are facing a closing deadline on their dream home? A good “bricks-and-mortar” mortgage broker needs to have a 90 to 95 percent close rate to even be respected in the industry.
Chris Neuswanger can be reached at Macro Financial Group in Avon at 970-748-0342. He welcomes mortgage related questions from readers.