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We’re Not in Kansas Anymore Toto

Douglas Hart

By Douglas Hart

Remember the good old days when buying a home was easy? No one needed to know about mortgage guidelines or products because if you had a pulse and a social security number, then there was more than likely a loan product for you, and allowed 100 percent financing. Everyone was a potential buyer! It was so loose, that someone could get denied financing for a Blu-ray player at Best Buy, but immediately go get preapproved for a $500,000 mortgage. With “Stated Income & Stated Assets” it seems the only thing you were not allowed to “state” was a credit score; but who needed to when you get 100 percent financing with a 500 FICO score? The effects of this almost collapsed our entire economy in 2008.

One positive response to this was MLO licensing requirements implemented in 2010 with federal and state tests, background checks, fingerprints, ongoing education, and credit report showing fiscal responsibility that a loan officer needed to complete and pass to represent a home buyer in the process. This ensured a qualified representative handling the mortgage who was also accountable to NMLS who regulates their license.

Another major change was obviously to underwriting guidelines and what mortgage lenders needed to consider an applicant “qualified” to buy a home. Many people found 2008-2010 a hard adjustment period during this reconfiguration of lending practices. Understand that the loan officer is the biggest fan of easy approvals and fast closings, but given the current climate of underwriting practice, everything must be complete, correct and verified. One should expect to be very happy when the loan process is finally over, as the result is rewarding, but not simple.

I tell most of my clients that buying a home is like going to the dentist. There is rarely pleasant trip to the dentist. Plainly put, some dentists can make the experience less uncomfortable than others, but the amount of treatment the individual needs is another determining factor in the amount of discomfort there will be. Some people believe that the more money, assets, and properties they have, the easier the loan process should be, but it’s quite the opposite. More qualified can sometimes mean more documentation will be required. The less sources of income and assets and liabilities to document, the easier the file is to close. In this case, “less is more.”

Here are some great recommendations in taking preventative steps with clients to avoid a rocky finish in your mortgage transaction. These are the most overlooked items that people do not consider:

Transferring money between accounts – This calls for a paper trail in which one transfer can call for three additional documents.

New credit accounts during the loan process – Even if there is a $0.00 balance on a new credit card that was obtained to save 20 percent upon a purchase, it will require a credit supplement and the underwriter to revisit the file which can take two to three days. Depending on the account balance and payment, it could cause a denial.

Make sure closing funds come from the account the lender has already sourced and accounted for – Too many times I’ve seen clients take the closing funds from accounts that the lender has not sourced and verified. This comes at the absolute worst time in the transaction when there are moving trucks in driveways.

Follow loan officers instructions – Please let your lender direct your clients in the mortgage process. Buyers want the easy answer and there are a bunch of very accommodating agents out there that freely give advice to clients making things easier. This only causes more work and stress for the clients in the end.

Be strategic about the title company you choose – Fees are an obvious thing to consider, but buyer and seller agents don’t need the relationship nearly as much as the lender does. If the lender’s funding department and title have worked together on several transactions, there’s harmony and predictability when it matters most.

Wire closing funds to title prior to signing final closing documents – Many title companies will hold funds on cashier checks for 24-48 hours which will cause a delayed funding.

So even though it’s not as easy as it used to be, it is now a greater reward to own a home. Remember that the purchase process is a team sport. Agent, lender and title company should be a cohesive unit and all work together. Finding the right referral partners to work with can make or break the success you have as an agent, and oft en agents look for what they get from a referral partner to help them with their business. The best business tool a referral partner can give an agent is a client that had a wonderful experience! Regardless of where the client comes from, we all know referrals will always be your bread and butter in this industry. A satisfied client is not enough these days. We should always aim for something more than just satisfied.

Douglas Hart, a branch manager for Land Home Financial Services has 24 years of mortgage business experience. A top producer at every company he has worked, he was awarded Presidents Club Top 10 producers in the nation for Land Home Financial Services in 2015. He is passionate about assisting both loan officers as well as his real estate partners in achieving a higher level of success in their business. Having knowledge and experience with many strategies that have been proven successful, he only got there by experiencing and finding out what doesn’t work. He believes transparency is the most important aspect in his business for both agents and clients.