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   ARTICLE   |   From Scotsman Guide Residential Edition   |   December 2007

What You 1003 is What You Get

Each section of a universal loan application is an eye into your customer’s life

What You 1003 is What You Get

To succeed at selling, you must build more than just relationships. You need “realationships.”

The key to building realationships is time. You must slow down and spend more time with your qualified borrowers — especially during the application process.

When used properly, the 1003 universal residential loan application can be our most effective tool for developing business around realationships with borrowers.

The key is getting to know your borrowers personally. Every reason your customers have for borrowing is personal. They want to improve their lives through this purchase.

To get personal, you must know your customers and ask detailed questions during the 1003 stage of the loan process.

The 1003 was designed as an informational tool, not a relational tool. It is meant to gather data to qualify borrowers, not to quantify their needs, and as a closed-ended-question interview, not an open-ended-question conversation.

The key to leveraging this is to convert the 1003 into a conversational tool. We can do this by boiling the more than 130 closed questions and fields on the application into open-ended questions that can deliver all the information you need about your customers.

The 1003 has six major sections, each of which can be used to create fruitful conversations with potential borrowers. Here’s a look at how each section can enhance your relationships and realationships.

Section I

Type of mortgage and terms of loan: This section determines the right product and term for the borrowers’ needs.

In addition to asking questions about the type of mortgage, loan amount and amortization, try these:

  • “Let me ask you a few key questions about your goals to help you establish the best type of loan for your personal situation.”

  • “How long do you plan to stay in your home?” This will determine borrowers’ preferences for fixed-rate and -term products or the viability of an adjustable-rate product.

  • “At what age would you ideally like to own your home free and clear, if at all?” This can give you an idea of a targeted term.

These questions establish professionalism and long-term thinking from the start, which can separate you from your competition.

Section II

Property information and purpose of loan: When looking at what borrowers need and want, it is often wise to ask them these questions:

  • “What is your initial purpose for this loan?” 
  • “How about your long-term purpose for this loan?”
  • “What are you ultimately trying to achieve through your loan?”

Section III

Borrower information: People borrow money to help themselves and their families achieve greater financial happiness. Keep this in mind when you ask for the borrower’s name, co-borrower’s name and dependents.

Who are we really talking about here? It’s our customers, their spouses or family members, and their children. In other words, this question illustrates how your customers are borrowing with the goal of improving their family’s lives.

We cannot take the most-important people in our customers’ lives and reduce them to “co-borrowers and dependents.” You might as well refer to them as the “co-habitants” and “tax deductions.”

By asking about “dependents,” all you will get is a number — no names, no information and no emotion. Next time, approach this section with these conversation-starters:

  • “Tell me who makes up your family.”
  • “What are your financial goals for your family?”
  • “Tell me about hobbies and interests you have for your family that would require money to achieve.”

This gives people a chance to talk about what matters to them, and it gives you a chance to gain their loyalty.

The 1003 also asks for the number of years in school. Once again, the 1003 takes a major part of our customers’ lives — their education — and boils it down to a number, such as 12, 14 or 16.

College alumni often love to talk about their schooling, their team, their accomplishments and their plans for their children’s college education. So instead of asking for the “years schooled,” say:

  • “Tell me about your educational background”; and
  • “What are your future educational plans and needs for yourself, your spouse and your children?”

Section IV

Employment information: On average, we spend one-third of our life at work. This is an important, emotional topic for most of us. In many cases, our job is how we primarily define ourselves.

The 1003, however, addresses this with fields for “years on the job,” “position title” and “type of business.”

Work not only is something customers often like to talk about, but it also is something that affects their financial goals, ability to borrow and credit. Therefore, approach this section with these lines:

  • “Tell me about your career (or profession).”
  • “Tell me what you do for a living.”

Again, this creates the open dialogue we seek.

Section V

Monthly income and combined housing-expense information: Designed as a chart to list our customers’ income and expenses, 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 blatant 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 buy-in to your solutions.

Section VI

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.


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