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.

The 8 stages to homeownership. An illustrative guide for buyers

Stage 1 – Pre-approval – The pre-approval process is a time that you meet with your Loan Officer and talk through the financial side of the purchase. The loan officer will take an application and gather all of your documentation required for pre-approval. This documentation includes but may not be limited to the following: Last Two Years Tax Returns, current pay-stubs covering 30 days (W-2), last two years W-2’s, two month’s bank statements all pages and all accounts, most recent statement for 401K, money market, cd’s, stock, mutual funds and the like. Other items can include mortgage statements, homeowner’s insurance declaration page, bankruptcy papers, divorce papers, lease agreements and more. The more detailed you are with your documentation the more accurate the pre-approval will be. Loan Officers review the documentation, check credit, verify income and run your scenario through our automated engine to receive an automated approval. The automated approval assesses risk and cross references secondary market guidelines to determine your borrowing capability. The accuracy of the information inputted into the system is everything. The automated approval will give you a list of items that you will have to provide to obtain funding of your loan in the end.

Stage 2 – The House Hunt – After you are pre-approved by your Loan Officer they will issue a pre-approval letter to you and your Realtor. As far as the lending side of things you are on a hiatus. Your loan cannot be locked until you have found a property. We lock the collateral not the borrower. During the house hunt your loan officer will keep you up to date on any guideline changes, industry news, and rate movement. They will also be in communication with your Real Estate agent to make sure that your team is all on the same page. When you find a home that you like you will place an offer and wait for the response. There may be counter offers and you may have to write more than one offer before you have an offer accepted. Your Real Estate agent will guide you through this process and provide great advice on how to approach the house hunt.

Stage 3 – Offer Accepted – Now that the offer is accepted and you are in contract to buy the home. There are several things that will occur during this stage. The first few days will be a flurry. In my practice I like to meet with you again and obtain updated information if the hunt has taken a few months. Along with gathering updated information we will go over current rates and pricing, fees, and determine if we want to lock now or hold off. At this point a check for the appraisal is collected and the appraisal is ordered, preliminary title reports are requested, and I request a copy of the fully executed contract. (Please note every loan officer will approach this differently and certain loans such as VA have different appraisal processes.) Gathering the information above from the Title Company and the BANKS can sometimes be a process. The title companies on the Bank owned properties are located all over the place. I have worked with one in Philadelphia. At the same time Your Real estate agent and you will be ordering inspections such as home and termite if you choose too. It is highly recommended and your Real Estate agent will talk you through this. Once the documents above are gathered the loan package will be submitted to our wholesaler of choice to be underwritten.

Stage 4- Underwriting – Once we have chosen the wholesaler that will provide you the money to buy your home we submit the loan package that we have created to be underwritten. The cleaner the package we submit the smoother the process. This is why I am so through upfront and ask you to provide all the information and all pages of everything. The reason that there is an underwriting process although you were already approved through our engine is that we have to have a human check to make sure that the data that we entered in the computer is supported by our documentation. They are checking income, assets, credit depth, appraisal, title reports and contracts for accuracy, missing signatures, appropriate calculation and use of income such as overtime. This underwriter will be overly thorough in today’s market environment so this process will take time. The time varies depending on who we choose to work with and their current volume of business. One thing that will delay the underwriting process is incomplete files. Again, this is why it is important to work with a Loan Officer that can package a clean file for underwriting and important for you to provide everything they ask for to the best of your ability. This stage can be as quick as 48hours and some wholesalers are running 20+days. If the wholesaler is quick it can because they are well staffed, the rates are not that great, they specialize in few products or if they are slow it could mean all the same. The goal of this process is to get a conditional loan approval from our underwriter.

Stage 5 – Loan Approval and Conditions – Once the underwriter has approved the loan they will issue a conditional loan approval. There are conditions that are labeled prior to documents and there are prior to funding conditions. Many of the conditions are behind the scenes and should not be a requirement of you as the borrower. If you are through upfront with documentation there should be minimal conditions at this stage. Some examples of typical prior to document conditions include updated pay-stub, appraiser to provide more data, estimated closing statement, W-2 or letters to explain items that may need clarifying. Some example of prior to fund conditions may include insurance or 4506T results. The conditions I have given as examples are not the only conditions that may occur they are meant for example only. At this point our job is to quickly gather the conditions and submit them back to the underwriter to be satisfied. This process, like underwriting, varies on the time to complete. The quicker we get back the conditions necessary the quicker we move to the next step. Once the underwriter has cleared the conditions we move to the next stage loan documents.

Stage 6 – Loan Documents – When the Underwriter clears the prior to loan document conditions we are able to order your loan documents to be signed. Loan Officers fill out a request for loan documents and submit this to the wholesaler. The wholesaler has a department that works specifically on preparing loan documents to send to the title company. Again, this is a process and every wholesaler will vary on the time that it takes to get the loan documents sent out. In the electronic era that we live in the loan documents are most commonly sent via e-mail. Once the title company receives the loan documents they will prepare the estimated settlement statement and send to your loan officer to review. The settlement statement reflects the costs, loan amounts, down payment requirements and any deposits you have already made as good faith. The Loan officer will review this statement to make sure that it is in-line with the good faith estimate and what you discussed with your loan officer originally. There are a few items that are pro-rated so the numbers will very slightly. Once the settlement statement is reviewed for accuracy either the title company or the loan officer or a combination will schedule a time for you to sign. The signing will take place at the title company, at your home with a notary or at an alternate location that is convenient to all parties. The signing of the loan documents is where you agree to the terms of the loan. You will in front of a notary acknowledge this agreement. Once the signing is complete the title company will overnight the signed package back to the wholesaler for the next stage.

Stage 7 – Funding – Once the wholesaler receives the returned package from the title company they will review the package for completeness. This again is a process that varies from institution to institution. Once the file is reviewed they will issue a funding checklist with any outstanding conditions to be satisfied. There should be very few conditions if any at this stage that require you as a borrower to do something. Between your loan officer and the title company all conditions will get completed. That does not mean that you will never have any conditions required of you. There are cases that you will have to provide additional documentation. This is a rare case as all of it should have been handled prior to documents. Once the funder has cleared all the conditions they will fund your purchase. This is the process of sending a wire of the funds from the loan to the title company to be combined with your down payment to complete the purchase. Once the wire is received the escrow officer will release the file to be recorded in the county of the purchase. Now for the last stageJ

Stage 8 – Recording – The purchase transaction is recorded with the county recorded so that you are officially the homeowner on record. Congratulations you have made it through all eight stages of the home ownership process.

 

* These stages do not represent the process for every loan officer or lending institution. They constitute the process I have learned as a Mortgage Broker and through my time in the industry. You may use them as a general guide to help better understand the stages that you may encounter when buying a home. This is for illustration and not intended to be the ultimate guide to home-ownership.