Choosing Your Mortgage Professional

June 20, 2009
By Brian Short, CMC, CRMS, GMA
“Shopping for a Mortgage Professional is much like shopping for a medical doctor or an attorney. Choosing your medical or legal care based on “who is the cheapest” may not really be the best strategy. You want you choose a professional who is trained, certified, experienced and has a good reputation.” 
Often times, this is my response to those asking for me to give them a detailed list of all their closing costs if they select me and my company to provide the financing for their upcoming home purchase or refinance of their current home.
I have heard of real estate industry partners telling their customers that choosing a mortgage professional is as simple as getting a “Good Faith Estimate” and comparing the costs contained on those documents.  This sets up the borrower to work with the “best liar”, too early in the 30-60 day process of finding a home, rather than getting the most professional financing help to get the deal closed correctly.
How can this be?  Aren’t all “Good Faith Estimates” accurate?  Aren’t all mortgage professionals the same?  Aren’t all mortgage companies the same? 
The truth is: the numbers on the “Good Faith Estimate” given too early in the process are RARELY CORRECT!  You see, the numbers on that document are affected by one or more of the following 13 variables below:

-> Sales pricegood-faith-estimate

-> Appraised value

-> Loan amount

-> Borrower’s employment status and history

-> Credit scores and payment history

-> Amount and source of down-payment

-> Date of closing

-> Immigration or citizenship status of the borrower

-> The housing type and location (Single family dwelling, Duplex, Condo, Townhouse, PUD, suburban, rural, urban, etc.)

-> The county where the home is located

-> Mortgage Interest Rate

-> The Term (length) of the Loan

-> The Title Company being used to close the loan

I have worked for several mortgage companies during my mortgage career and even owned my own company for 5 years. I know that some “loan guys” will “low-ball” the initial estimate, only to pull out the “surprise” at the closing table when your options for making any changes are very limited.  Of the 21 separate line-item fees on the “Good Faith Estimate” I give to my borrowers when they sign their loan application forms and disclosures, only one of those fees is the same for every loan and is not dependent on any of the variables listed above.

Mortgage interest rates change daily (sometime, even more often!). I could simply print off a “Good Faith Estimate” with made up numbers as some customers request (as other “loan guys” may do) but it will not be accurate because of all of these variables I have mentioned.  That process of collecting “Good Faith Estimates” prior to having all of the above variables identified will very time-consuming and wasted effort by the borrower and “loan guys” passing out worthless forms with inaccurate numbers.

My goal is to take the worry and uncertainty out of the process of originating, processing, underwriting and closing the loan.  I help guide my borrowers through their negotiations with their seller by providing honest numbers as they become available rather than simply making up numbers to get “my hook set”.

I have been in the business for over 11 years and nearly 100% of my business comes from referral and repeat business. A businessman can not build that kind of business by being a con-man, cheating others or participating in the bait-and-switch tactics that have riddled this industry for years.

This helps my my borrowers understand how I have built my business and how I provide a level of confidence and professionalism which will make my borrower’s Real Estate purchase a very smooth and cost effective transaction over the next.

So, you ask, how should I select the Mortgage Professional to close my loan for me?  I’m glad you asked.  Allow me to give you a few guidelines for starters:

1. Choose a Mortgage Professional who is EXPERIENCED.  Was he selling shoes or washing cars last week and then some buddy of his talked him into “trying out the mortgage business”?  Does he really know what he’s doing?  Has he been originating mortgage for 5-10 years?  Does he do this full-time or this just a hobby or part-time gig? 

NAMBCertified2. Choose a Mortgage Professional who is CERTIFIED.  Has proven to anyone that he knows the laws, the process, the programs and theory and mechanics behind the mortgage industry.  Has he taken courses and exams to measure his competency?  Is his certification a national designation? Is his certification from a professional association who can objectively measure and monitor his expertise or from some mail-order outfit looking to make few bucks?

3. Choose a Mortgage Professional with a GOOD REPUTATION.  Is your selection a true professional who is respected and well-known in his industry.  Who knows him and what kind of work he does?  Who has ever closed a loan with him?  Who can speak for his level of trustworthiness, honesty and attention to detail?  What do you know of his character and personality?

4. Choose a Mortgage Professional who is a PROFESSIONAL.  Does your choice know the market, the industry, the community, the history, the trends and your desires?  Is he a member of his professional association?  Has he been awarded and recognized by his peers and fellow business associates for his contribution to the industry and community?

During the month that your loan is supposed to close it is the most important transaction in your Mortgage Professional’s office.  “Getting it cheap” doesn’t mean much when your “loan guy” drops the ball and makes a mess of the whole deal simply because  he has “never seen anything like this before.”  That stack of bogus “Good Faith Estimates” collected 30-60 days prior to your closing will mean very little when you find out that returning phone calls, diligently following up on underwriting conditions, and working long hours to insure that all of the bases are covered on your deal are not his priority or part of his work ethic.

Paper is cheap, and ink toner to print fictitious loan estimates is even cheaper.  Experience, Certification, a Good Reputation and Professionalism are priceless life-long attributes and qualities you want in your Mortgage Professional.  Leave the spreading of such worthless papers to those lying, low-balling, bait-n-switching, short-termers who do not deserve to work with someone like you who, understandably, expect it to get done right the first time.


Divorce the House, too?!

November 12, 2008

bighouse1Earlier this week I spoke to a prospective borrower who wanted to refinance his house after an unusually long and drawn-out divorce which was finalized in July of this year.  He kept the house and she was awarded $25,000 in cash from the “equity” in the house which, I was told, appraised at more than $920,000 one year ago!  He “only” owed about $830,000 on his house, so “on paper” this looked like a pretty “fair” arrangement. 

The only problem with this “$25K-worth-of-equity-to-the-ex” scenario was that his house is now only reported to be worth about $780,000 on an online home valuation website, or about $50K less than what they collectively owe this house with 5 bathrooms which they bought 7 years ago for only $600,000.  His quandary was only further complicated by the fact that he has had a couple of recent business failures and had only just started another new business 3-4 months ago in a very fickle industry.  No wife, no income, no business and a house that is pulling him under financially – that he is stuck with!  This sounds like another country music song in the making!  Hold on….. I’ve got it!  “My Home is a Man-Wrecker!” (You heard it here first!)

Last month I attended a legislative work-session in Nashville with a couple of key state legislators capitoland leaders from the housing industry (mortgage brokers, mortgage bankers, home inspectors, appraisers, and Realtors) to meet with an Obama-Harvard-Law-School-classmate-yearbook-toting-attorney-turned-Realtor-from-Illinois who was asking for feedback from several of us in the state regarding this very dilemna – couples (especially women, I assume) being wrecked by their houses after their divorce was finalized.  (Yes!  She REALLY carried in her yearbook and she was on the same page as the new Prez!) 

obamaWe were told that too many “newly-single, fresh-starts” tried to hold on to a house which was beyond their means and were emotionally unable to swallow the idea of ditching the “loser” and also having to move, at the same time.  The desire to keep the kids in the same school, the dog in the same yard and the satellite dish on the same roof tended to outweigh the conventional wisdom that, in most cases, one less income (even with some child support coming in) can not usually keep up with the same sized house payment.  We heard that the problem is that the remaining spouse is usually given 2-3 years to refinance or sell the house and maybe split some equity or to hand over the 401K to the departing spouse in trade for the equity to be realized by the remaining spouse at some time in the future.  (Sounds like a great deal, huh?!)

Whoa!  How ’bout that for a series of gut-wrenching assumptions in world which has turned topsy-turvey during the last 2 1/2 years!  House appreciation, job security, stock market stability, and credit profile integrity.   All of these can be uncontrollable variables which will either make it possible or impossible to ever get the departing spouse off of the mortgage – regardless of whether he or she “quit claims” (takes their name off of the house title work) their ownership interest to the remaining spouse.  This is a formula for certain financial ruin.  Why was it when a young couple stood before “God and in-laws” and promisedwedding-vows1 “til death do us part” that we thought they meant each other rather than the half-million-dollar house they think they should hold on to even when the judge orders them to split it all and move on.  (Surely, he didn’t REALLY mean to get rid of the house!)

The Obama classmate was advocating new Tennessee laws to require divorcing couples to get “free” mortgage approvals, home inspections, appraisals, and title searches to protect the remaining spouse from future calamity because of unexpected deterioration of the house, liens against title, over inflated assumptions of value and the inability to qualify for a mortgage – any of which would ruin the hope of making the decision to keep the house a good one.  (That 401K or IRA is sounding better and better, even in this market!)

We didn’t all agree about which law would be best or even if new laws were necessary at this point.  We all agreed that this was a big risk and all that parties needed to be informed of the dangers of keeping a house after a divorce.  We just didn’t agree about what could be done and how much legislation should be piled on an already very litigious process where attorneys and judges are already deeply involved in the personal “affairs” (no pun intended!) of two disappointed adults who thought they could beat the odds and make it through the long haul – with their combined accumulated wealth intact to the end.

It seems to me that couples should usually get rid of the house – especially if there is still a mortgage on the property.  Cleaning up that kind of mess is never as easy as one might think and could often take longer than most second marriages last!  However, in this period of declining home values, limited credit options and an unstable employment market – buy and selling houses has almost come to a stand-still in some markets.  This will cause housing markets to be flooded with inventory and homes to stay on the market longer and longer – bringing down the sales prices of homes which “must sell” to make way for a final divorce decree and marital dissolution agreement.  Years of accumulated equity in the family home may be sacrificed and never regained if a home is sold – no matter what.  This causes the houses in the surrounding neighborhood to also depreciate in value and should remind all readers that a marriage failure does really hurt the WHOLE community in MANY ways.

sleeping_couple-231x192In my 10 years of working with home buyers from all walks of life I seldom see one who comes out any better after a divorce.  The truth is – we’re all a bunch of rascals and we all blow it, from time to time.  Maybe this slow-down in the housing market will give some angry couples the opportunity to “cool down” and think through the consequences of throwing a marriage away while they wait for their house to sell.  Maybe they’ll realize that for the sake of their kids, their parents, and their own integrity that they promised “for better or for worse, for richer, for poorer, in sickness and in health” – not to the house but that one on the other side of their “sleep number” mattress.