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   ARTICLE   |   From Scotsman Guide Residential Edition   |   March 2017

Answering the Tough Questions

Originators must be prepared to handle the challenging queries from borrowers

Mortgage loan originators, or MLOs, often get asked about the state of the market. Borrowers want to know if it is a good time to buy a home or where the market is going. The toughest questions to answer are those that hit closest to home. These are the questions that force MLOs to defend their abilities or the strength of their companies.

A prospective borrower may ask: “How is your company different from other mortgage companies?” Answering this question can be tricky, because often what the borrower really wants to know is, “Are you the right choice to handle my loan?” The goal here is to reassure borrowers that they are making the right choice. Originators must show prospects that they are capable of understanding, appreciating and working through any situation, regardless of its complexity.

Responding to this question requires knowledge, experience and creativity. While every borrower’s situation is unique, the solutions to their issues exist within a limited universe of possibilities. After listening to the borrower’s story, any decent MLO should be able to come up with creative solutions designed to solve that borrower’s issues.

This involves communicating with, instead of just responding to, the borrower. Customer service is of key importance to borrowers and should always be a top priority for successful MLOs.

Rate question

The most common question MLOs face is: “What interest rate can I get on my loan?” This is a landmine because any MLO who quotes a rate without having any information on the borrower will most likely say anything to get a borrower in the door.

Professional MLOs will explain to prospective borrowers that it is virtually impossible to quote a rate without information about the borrowers’ income, debt load and credit rating. Without enough information to determine the borrowers’ financial status, the MLO cannot quote a rate because rates are dependent on loan programs and the lender’s underlying guidelines.

Instead of answering this question, use it as a spring-board to ask the borrowers about their loan needs and credit history. Explain to borrowers that without knowing what specific loan will best meet their need and whether or not they meet the criteria for those products, there is no way to determine if they will qualify for a specific rate.

Buy or refi questions

After the rate question, the two most common questions that borrowers ask are: “How much can I afford to spend on a home?” and “When does it make sense to refinance my mortgage?”

The answer to the affordability question is quite different for each person. In general, homebuyers can determine the amount of money they can afford to spend on a home by looking at their debt-to-income ratio. One common rule of thumb is that an individual’s monthly housing payment should not be more than 31 percent of that individual’s gross monthly income. So, borrowers who earn $5,000 per month — an annual salary of $60,000 — should not spend more than $1,550 on their mortgage payment.

To answer the refinance question, tell borrowers that as with all big decisions, the decision to refinance has to make sense and, in this case, should make more than cents. In short, this should be a decision that results in a financial gain for the homeowner, whether that means lower payments from a lower interest rate, or a shorter loan term to save the borrower money on interest paid, or the chance to change from a rising adjustable rate to a low fixed rate.

When faced with either of these questions, make sure to tell prospective borrowers that to determine what financing is right for them, they must sit down and talk to an experienced mortgage professional who can lay out scenarios, determine estimated costs and provide them with enough information to make the best decision for themselves. In short, turn the question into an opportunity to get them in the door.

Crisis question

One final question that MLOs still face is: “How can I trust mortgage professionals after what happened during the housing crisis?” Answering this question requires factual knowledge and education. Veterans in the industry and those just starting out all must educate themselves on the causes of the crisis. Study articles, books and other media to become an expert about the crisis. This knowledge can instill a sense of confidence in borrowers that the originator they have chosen is an expert on the topic.

The best way to answer this question is to acknowledge that the subprime mortgage crisis was truly a dark time for the country when people lost faith in the government, in the banks and in one another. Follow this answer with a statement that brings hope and a sense of calm to these borrowers.

Discuss the lessons learned and the safeguards now in place to prevent future crises and to protect borrowers. Assure them that most mortgage professionals play by the  rules and are happy the rules are there to weed out the bad apples.

Borrowers are motivated to work with MLOs who respond with sincerity and an obvious knowledge of the issues because those originators have represented themselves as human beings who not only lived through the crisis, but emerged as experts who can guide borrowers fairly through the loan process.

•  •  •

These are just a few of the possible questions an MLO might face over the course of a typical day. As with any business situation, MLOs should focus on respect, common courtesy and confidence when communicating with prospective borrowers. This will provide the best interactions and, hopefully, mutually beneficial results.


 
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