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   ARTICLE   |   From Scotsman Guide Residential Edition   |   April 2018

Anticipate Borrowers’ Questions

Be prepared with good answers to win clients’ trust

r_2018-04_raz_spot.jpgBuying a house can be scary, especially as a first-time homebuyer. Individuals looking for mortgages are often apprehensive about the process.

When people approach mortgage originators, they will have a variety of questions that any reputable mortgage professional should be able to answer. There also are questions that originators should ask borrowers before they start throwing out loan options. The more that mortgage originators know about borrowers and their needs, the better prepared they will be in assisting borrowers with their financing.

There are some major questions about the homebuying process, in particular, that a borrower is likely to ask. Mortgage originators should be ready to address these queries promptly, to their clients’ satisfaction, if they hope to secure their business.

Following are some common questions borrowers may ask and the answers you can provide to instill confidence in your knowledge of the market.

Process and costs

What paperwork will I need to provide? Proof of income and assets for the borrower (two years of W2 tax forms or paystubs), two years of tax returns, personal identification and information about a prospective homebuyer’s credit history are all important documents that need to be given to the mortgage originator. Borrowers also may need to provide information about the property, their present and proposed housing expenses and their reasons for seeking the mortgage loan.

How can I speed up the loan-approval process? There may not be many ways for borrowers to speed up the process, but there are things they should avoid if they don’t want to slow the process down. Changing jobs before closing on a home loan, for example, is not a good idea because the loan approval is based on the income information the borrower provided on the initial application.

Also, major spending on new things for the home can wait. If the lender sees the borrower spending big money, they may decide against approving the loan at all. That will really slow down the process. Providing all of the correct paperwork, being aware of their credit score and what can affect it, and honestly answering questions also will make the process go much smoother for borrowers.

If originators can make the loan process go as smoothly as possible for borrowers, they can expect plenty of referrals in the future. 

Are there any extra costs I should know about? It is important for originators to be honest with borrowers, if they expect borrowers to be honest with them. This means being upfront about any extra costs. There are plenty of fees that prospective homebuyers will overlook, so it’s up to the originator to make sure they understand the fees.

If the borrowers only provide a small downpayment for the mortgage, they may be required to purchase private mortgage insurance. There also is likely to be fees for originating the loan, homeowners insurance, title insurance, escrow, document preparation, credit reports, property taxes, appraisals and closing costs.

Money down and rates

What is the downpayment requirement? Lenders may prefer 20 percent downpayments but there are other options for borrowers. The benefits to putting 20 percent down on a home purchase, however, include lower upfront fees, lower ongoing fees, more equity in the home and lower monthly payments.

Some government-backed loan programs require much less than 20 percent, but borrowers should be reminded of the various fees that come along with those loans. It is possible, for example, to purchase a home with only 3 percent down through loan programs sponsored by Fannie Mae and Freddie Mac.

The Federal Housing Administration (FHA) is a government-backed loan program that offers low-downpayment mortgages (as low as 3.5 percent) for first-time homebuyers. There also are a variety of low-downpayment loan programs — some allowing 0 percent down — available for designated rural areas through the U.S. Department of Agriculture and for veterans through the Department of Veterans Affairs.

It is likely that a borrower will seek information about low-downpayment programs such as FHA-backed loans, and it’s the originator’s job to explain what the pros and cons are of such loans and to be up to date on what is available through these programs. Again, the originator can provide better answers by asking questions and understanding where the borrower is coming from. Only then will the originator be able to offer the perfect loan to the borrower.

What is the difference between a fixed rate and an adjustable rate? There are multiple factors that determine the interest rate. These factors include the term of the mortgage loan, the amount that is being borrowed, the credit score of the borrower and the type of mortgage loan (fixed rate or adjustable rate). It is important to go over each of these factors with borrowers so they not only know how much they will be paying, but also why they are paying it.

The mortgage originator should explain to the borrower that although a fixed-rate mortgage ensures the interest rate won’t vary over the life of the loan, it also can mean more money is due in terms of closing costs. Also, fixed-rate mortgages generally cannot be customized for each individual borrower because they are virtually identical from lender to lender.

Adjustable-rate mortgages (ARMs) are generally more flexible in terms of structure, and the rates are lower in the beginning than fixed-rate mortgages. After a set period, however, the rate can change, depending on market conditions. Borrowers should know if their ARMs have a cap on how high the interest can go.

A guiding hand

Who can help me throughout this process? The borrower should be helped through the mortgage-approval process by the originator, who should answer any questions borrowers have and help them to understand every step of the process, so they don’t get overwhelmed.

There are multiple people involved in a mortgage review, including the real estate agent, the originator, the underwriter, the escrow officer, the title company, etc. From a first-time homebuyer’s standpoint, it can be very daunting.

Every person has a separate role and the borrower should not have to contact each person involved when they have a question or concern. Instead, they should go through the originator, so there is no miscommunication. If borrowers feel overwhelmed, and that remains unaddressed, they are likely to not only take their business elsewhere, but also will warn others not to work with you.

•  •  •

If originators can make the loan process go as smoothly as possible for borrowers, they can expect plenty of referrals in the future. Referrals are the life blood of the industry.

This business may seem like it only revolves around numbers and dollar signs, but it is important to remember that mortgage originators work with people who have emotions and feelings that need to be taken into consideration. When it comes to the job of being a mortgage originator, quality should always take priority over quantity.


 


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