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Success with Subprime
by Brian
Sacks
Do you have a question for Mr. Sacks? E-mail
it to brian@loanofficersuccess.com.
Click here
for more articles by Mr. Sacks.
How to Work with Buyers who have had a Bankruptcy or Other
Credit Issues
(Last in a series of four articles)
Click here to see the previous installment of this series.
Asking the right questions is what makes the difference between success and failure
in the mortgage-loan business. If you ask the wrong questions, you will get incorrect or partial answers. As a
result, a loan application based on that information might be rejected by underwriters.
Have you ever heard the saying, "Buyers are liars"? It's based on the
frustration of loan officers and real estate professionals who ask questions, get answers, and acting on those
answers end up with failed loan applications and deals that don't go through. But probably 99% of the time the
buyer is telling the truth! It's just that we're not asking the right questions.
Believe it or not, in all the years I've been a loan officer, I've never had a loan application that I've processed
rejected by underwriters. I've processed more than 4,500 applications and closed half a billion dollars worth of
mortgage loans in the past 16 years. Am I some kind of genius? No, not at all. I just know what questions to ask
and how to ask them.
Let me give you an example:
A couple came to me for a loan that would have cost them $1,700 a month. They
had been living in their own home in a city neighborhood and now wanted to buy a new home in a neighboring county.
They had also been to three or four lenders and had been turned down by all of them.
Why had they been turned down? Well, for starters, they had been late with
their $1,000 mortgage payment every month for the past 11 months. They had also been late with their car payments,
and all of their credit cards were past due. Their credit score was low, really l-o-w!
So, what did I say to them? No, I didn't tell them to get lost. I asked them
the following question: "Why would giving you a loan with a $1,700 monthly payment be better than letting
you stay in your current home paying $1,000 a month?" And they answered me. They said that the reason they
were behind in their payments was because the wife, who had been a shock-trauma nurse, had switched jobs because
she was "burned out."
She ended up working as a teacher at a lower salary. Also, they had had one
four-year-old in day care and a five-year-old in a private kindergarten because they didn't feel that the city
schools were a good place for their children. The combined childcare and private-school tuition came to $1,500
a month. They figured that moving to the county would enable them to put both their children – now a kindergartner
and a first grader – in what they knew to be good public schools, thus freeing up $1,500 a month; plenty to make
the extra $700 a month in housing payments.
Also, the husband, who was the manager of a restaurant, had just received a
raise, and the wife decided that teaching was more stressful than working as a shock-trauma nurse and had just
returned to nursing at a higher salary. I asked for – and got – verification of everything they told me, and I
gave them a loan. They have handled the mortgage successfully. Because I asked the right question, I was able to
determine that this couple was indeed a good risk, they got their new house, and their realtor and I got their
business.
When you ask an applicant a question, how you ask it is as important as what you ask. Here are some examples:
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Question as often asked
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Better way to get accurate information
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"How well do you pay your rent?"
(Problem: Many people feel that if they haven't been evicted, everything is fine.) |
"Have you ever incurred late charges on your rent?" |
"How much do you pay on your MasterCard or Visa?"
(Problem: They may not even be paying the minimum.) |
"What is your minimum monthly payment on your MasterCard or Visa? That is the
figure we need; however, many people pay more to reduce their balance." |
"How much do you earn?"
(Problem: A portion of the income might come from overtime, which might not be "stable.") |
"Are you paid a salary or hourly wage?"
If the person is paid hourly: "How many hours a week do you work (minimum)?" |
"How much money do you have to work with?"
(Problem: Some of that money – for example, a loan – might not be usable for a down payment.) |
"How much money do you have available for a down payment and settlement, and
where are those funds currently?" |
Click here
for more articles by Mr. Sacks.
Visit Brian Sacks's web site at www.loanofficersuccess.com.
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