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Monthly income and combined housing-expense information: This is designed as a chart to list our customers' income and expenses, and brokers generally gloss over this quickly. That is not a good idea. After all, here is where the rubber meets the road about borrowers' spendable income and lifestyle. Take your time and dig in.
Fields in the "monthly income" section address base income, overtime, bonuses, commissions, dividends and more. We are really talking about borrowers' overall financial wealth.
Many brokers simply go through this segment with questions that garner single-word responses, and they miss a real opportunity. By only asking for "numbers and sources," we elicit little or no emotion. If you delve into the sources of income and how borrowers view their financial stability, however, you will find out a lot more about their income and emotions.
Questions such as these can go a long way in building a buy-in:
"How do you feel about your current financial stability?"
"If I could reduce your payments and your taxes as part of this loan, providing additional income at tax time, would that excite you?"
"If I can pull out equity to invest that could increase your investment income, would that improve your overall wealth picture?"
Next, in the "housing expense" section, we ask about the first mortgage payment, other financing, hazard insurance and more. Not exactly emotional or conversational questions.
If you look closely, though, you will see important questions that are missing. Why not ask these additional questions?
"What ongoing maintenance costs do you incur?"
"What improvements have you done, plan to do and would really like to do to the property?"
These costs require cash that brokers can include in the loan if there are ongoing, correctable issues with borrowers' property.
If borrowers already have a mortgage, ask about its rate, as well. Why not ask: "How do you feel about the current mortgage debt and payments you are managing right now?" Be prepared to explain if your loan is better.
In most cases, these customers will respond that their current loan is "too much," leading to an opportunity to solve a financial problem. The key is to get borrowers to acknowledge the problem and to create a buy-in to your solutions.
Assets and liabilities: Also designed as a chart, this portion of the form addresses customers' wealth, possessions, debt and expenses.
The assets section asks about the components that comprise customers' wealth picture, including bank accounts, stocks and bonds, life-insurance net value, real estate, retirement funds, net worth from businesses owned, automobiles, and "other assets." This is where we really get a chance to learn significant aspects of their portfolio, including:
Customers' current wealth portfolio;
Whether their wealth is primarily vested in equity or liquid assets;
How their real estate fits within their wealth portfolio; and
Why they may want to convert their equity into cash to supplement and build their overall wealth picture.
Here are some questions that will create opportunity:
"Having gone through these different components of your assets and overall wealth portfolio, in which areas do you have the most concern?"
"Let's look at college funds. Have you established one for your children?"
"Did you realize that your liquid assets, those you have cash access to today, comprise XX percent of your portfolio -- while your equity assets, which are in equity only and have no current cash value, make up XX percent?"
"What if I could show you how to convert your home's equity into cash to increase your liquid assets to a greater value?"
"What if I could show you how to convert your equity into college funding?"
In the liabilities section, we ask about creditors, alimony, child support, separate maintenance payments and job-related expenses. These provide significant information that will affect borrowers' ability to afford a loan.
Discuss all creditors and debt, from mortgages and credit cards to personal loans, student loans, co-sign loans, leases and business loans. You may uncover additional debt and liabilities that you never knew about, which could affect loan approval.
Remember, the more you ask, the more you know. And the better your relationship with your borrowers will be.
Dale Vermillion is a prominent industry speaker and founder and CEO of Vermillion Consulting Inc., a consulting and training firm that helps brokers, loan officers and sales management improve their sales performance and productivity. He is also founder of Mortgage Professionals Providing Hope (MPPH), a nonprofit organization created to aid children and families in impoverished rural India.
To learn more about Vermillion Consulting or MPPH, visit www.dalevermillion.com or www.mpph.org, or call (888) VCI-EDGE (824-3343).
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