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!