People are always looking for the “best deal” that they can get. As a mindful consumer, I can appreciate that. I very often try to incorporate the consumer (i.e., mortgage applicants) perspective when I discuss financial options and weigh scenarios with my clients. At this time of year, I thought it would be appropriate to highlight circumstances and situations where people might not have the same viewpoint as I have when it comes to authentic mortgage solutions.
The Wise Son
I was recently working with a client who was aggressively looking to buy a house before the summer season. They had an initial pre-approval from a large commercial bank, but their attorney advised that they speak with me as a “local lender” to make sure they would obtain the financing they needed promptly. We had several lengthy conversations, all of which usually ended in the same way; “I am happy to give you the business if you are the best offer on the table.”
When the deadline came to make a decision, he came to me with what seemed to be the best offer – which was from the other bank. The “scheme,” I mean, offer, was simple. He was told to apply for a higher loan amount than what was wanted or needed so that he qualified for the specialty rates his bank was offering that moment. Although it would thereby require mortgage insurance, he was told after six months of extra payments, and a one-time fee to reduce the loan balance, the PMI would be removed. I don’t have the length to go through the full analysis, but needless to say, despite the creative structure, it turned out to be a more costly proposal. Fortunately, for this particular client, he was wise enough to evaluate the full breakdown, and the numbers were simply more favorable with us.
The Wicked Son
I will award the “wicked son” title to the members of my industry (not my company) who still practice “bait and switch” tactics to lure credulous customers. I was speaking to a client who was looking to obtain the maximum financing possible to complete the construction of his home. While the request was simple enough, and something that any competent lender could provide, this particular client only had a few months of consistent self-employment income. He was already turned down by two banks, and I was able to offer him an alternative, but not for quite as much money as he wanted.
He found someone that could get him the dollar amount he needed. The loan officer actually came “highly recommended” from a friend. He explained his situation precisely as he had to me, and this person convincingly told him the income would not be an issue, and that he can easily get ten percent more financing, for a lower rate than I had presented to him. I wished him well and told him to grab-the-deal assuming he was confident the offer was legitimate. Fast forward two weeks later, the loan officer changed direction and told him the deal wasn’t possible, but offered him a loan over 2% higher than initially promised. What does the Haggadah suggest we do to people like this?
The Simple Son
Just because people are passive, does not mean that they should get the “raw end of a deal.” In my experiences with many mortgage applicants – most, get their information from online, or a friend - but don’t truly understand the fundamentals of mortgage financing. I have dealt with lawyers, businessmen, real estate professionals, accountants and so many other industry professionals who are “top” in their field – who simply lack the mortgage competence when it comes to their own mortgage. I think it’s quite natural not to understand the nuances of mortgage financing unless you are an industry expert. I simply make it my business to guide all my clients in the most efficient and financially feasible way even when they don’t know what to ask, or what to anticipate.
The Silent Son
I recently completed several transactions for clients who were longstanding friends and acquaintances of mine. Each acted in almost a similar manner, in that they were “silent” throughout the transaction when it came to the mortgage-end of things. They signed what I told them to sign, they provided what I told them to provide, and they listened to what I told them to take heed of. What might seem to be a simple transaction was actually the most challenging for me, because I work twice as hard for the friends and clients who fully trust me or don’t know what to ask. As the saying goes, “Trust takes years to build, seconds to break, and forever to repair.” Silence is truly golden … when you work with someone you trust. Shout out to my wonderful parents who are visiting for Pesach!
By Shmuel Shayowitz
Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Approved Funding is a mortgage company offering competitive interest rates as well as specialty niche programs on all types of Residential and Commercial properties. Shmuel has over 20 years of industry experience including licenses and certifications as certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. He can be reached via email at [email protected]