Perfectly Packaged Presentation, It’s the Difference!

How many times have you chosen to to buy something based on the way that it was presented? How many times have you turned away from buying something because it was disgusting looking?

Bear with me for a moment: You have just went out to your favorite restaurant and had the meal of your life. There is a little left over so you get a to go box. You bring home the meal and what do you put it into:

a) Tightly sealed ziploc container

b) Plastic wrap

Yes, that is correct you generally will put it into the tightly sealed ziploc container. The reason that would do this is simple. We want to do the very best to preserve the integrity of the food so that we may eat it another day.

One more quick example: Imagine that you are shipping an ancient vase to your relative across the country. Are you going to

a) throw it in a box

b) Tightly wrap in bubble wrap and put it in a box with styrofoam peanuts to protect it.

You may be beginning to wonder what any of this has to do with loans. The answer may not come as a surprise either. Perfectly Packaged Presentation, It’s the Difference between whether or not your loan will be Approved.

The biggest item that separates one Loan Officer from the next is their ability to package a loan. A loan that is packaged and presented well can fly right through the system. It will make the experience seem seamless.  I qoute from a previous customer “I’m still amazed how easy the whole process was.” This qoute had very little to do with me and a ton to do with the customer being so well prepared.  It was also because all of the legwork was done up front. This customer currently owned a home with little to no equity and was buying a new home. Anyone that is in the industry will tell you that this is more difficult than it sounds. It came down to the “Motivation” of a client to buy a new home. In this case there was recently a new job acquired and both were commuting. The location of the new home was closer to the new job. We prepared a letter explaining this in full detail so that when the underwirter received the file there was little left to explain. There were a few other caveats to this file but as the customer said, “it was rather easy.”

Underwirting - When you are preparing a package to go to the wholesaler to be underwritten it is simply not enough to throw the basics of the file together and hope to send the rest after the approval. Loan Officers rush and are rushed to get to certain stages of a transaction and will often times submit a package before it is ready. This is disastrous. The result is an underwriter that will have to look at the file more than once. Taking an underwriter out of rhythm and given them less than your best will lead to a denial.

Let’s put this into perspective and ask ourselves the following questions: 1) Can I or should I make a life changing decision without all the facts? 2)When given only part of a story and it smells like fish am I likely to say yes? 3) If I open up a package and everything falls to the floor and it is not in a clear concise order am I likely to be excited to proceed with the rest of the file? 4) If I was asked out on a date and my date arrived to the house with a stained white shirt with holes, pants no belt and two different shoes would I be excited to go to dinner?

All of these questions are designed to encourage you to say no. The same thing that an Underwirter is going to do when they look at a file that is incomplete.

Underwriters are human and they are in the job because they like to help homeowners obtain financing. Beleive it or not they are simply there to take the package that we deliver with an approval and verify the supporting documentation has been provided. When a file is in doubt or may contain a few nuances it is the job of the Loan Officer to tell the story as to why this file should be a go. Give them all the detail of the file in a clear concise manner. Tell a story that makes the Underwriter sympathetic or even empathetic to the situation. They do want to approve files.

Loan Officers are separated by this ability to package and present. You can make a name for your self that is of high quality or of poor quality. We all have equal access to the money you desire to buy a home. However, it is in the relationships and more importantly in the packaging of the loan that makes your experience. I have closed several loans that were declined elsewhere over the years. Many times I was asked what was my trick. The trick is in the packaging. The trick is in the Presentation. It’s the difference between the approval and the denial.

Your Mortgage: Liability or Asset?

There are many schools of thought that will argue the above question until the end of time. There are those that believe that we should never pay off a mortgage because we need the tax benefits. There are others that believe that we need to pay off the Mortgage as fast as we possibly can. Owe No one would be their credo.

Whether you are the former or the latter you have your reasons and you are entitled to them. I think that for the public to form their own opinion on the subject, it would be wise to first define Asset and Liability.

*Asset – any item of economic value owned by an individual or corporation, especially that which could be converted to cash. Another definition is an item of valued owned.

This can be very tricky to many but think about a car real quick. Who has the pink slip if there is a loan on the car? The answer is not you! It is the banks asset and your liability. As for a mortgage, if you owe the bank then the Real Estate Market will determine if you can convert that to cash or not. Only when you own the home free and clear do you have the control of cash conversion. (ASSET)

*Liability – An obligation that legally binds an individual or company to settle a debt.  Also, one that acts as a disadvantage.

Basically the definition states Binding, Debt, and Disadvantage. All words that seem to have a negative connotation to them when we are talking about becoming wealthy.

Dave Ramsey, accomplished author that has written the bestseller The Total Money Makeover, A proven plan for financial fitness; talks about the mortgage in his book. He states that there are two myths 1) it is wise to keep a mortgage to get the tax deduction and 2) It is wise to borrow all I can from my mortgage because of great rates and then I can invest it.

While I believe that there is never a completely correct answer Dave Ramsey raises a few good points. If you pay mortgage interest in the year and you are in a 33% tax bracket then having a mortgage saves you 33 cents on the dollar. If you did not have a mortgage you could have saved the whole dollar and given Uncle Sam 33 cents at the end of the year. You do the math. 

Would you rather pay the IRS because you have no debt or save some of what you would pay the IRS because you have a mortgage. Your Choice.

Second I do not think that it is bad to borrow from your home if you reduce the term of the loan. For Example. If you take out 50K to do some remodel and you have had your mortgage for 6 years out of thirty then get a twenty year when you take out the money. Do not start back at 30 years as it will set you way back.

Another thing to consider is that to get a 30 year and pay extra to pay it off in fifteen is not as good and cost more than getting a fifteen year fixed mortgage period. (This is a whole other blog topic).

In conclusion, your mortgage by definition is a liability until you have the deed to the property. Until you own the home free and clear your mortgage is a liability with some benefits that other liabilities don’t have. If you are looking to accumulate wealth in your lifetime then I would think it to be wise to consider how to pay off your mortgage. The mortgage is a necessary liability to home ownership. Learning to structure the liability is the key. Do not buy a property that stretches your debt to income to the max. Your mortgage payment should be no more than 28-31% of your gross monthly income. Also, I think that it is important to see what your other obligations you have and evaluate if paying them off first would help.

I beleive that it is important to have a plan, know where you want to go and consult professionals to help you get there.  As most of this is simply an opinion shared by some and not others it is simply one point of view. It is merely illustration.

*The definitions were taken from investorwords.com and Merriam Webster on-line.