Mortgage Myth Busters: Mortgage 101 in New Jersey – Getting to know the borrower

Mortgage 101 in New Jersey – Getting to know the borrower

Getting borrowers to know the common basics of mortgages are like baby steps

Mortgage 101 in New Jersey – Getting to know the borrower’s wants and needs

In today’s delicate world of mortgages in New Jersey and any where else, getting a mortgage not only takes understanding, but patience. I am still finding many loan officers trying to fit that round peg into that square hole. Let me explain….

I currently have a client whose realtor got him to talk to her loan officer. This loan officer has my borrower pre-qualifed for about $35,000 more than I do. How can there be such a difference?

Before I get into the differences, let’s try and establish a pattern of questions that should be talked about, when a loan officer interviews a borrower.

 

  • What mortgage payment in New Jersey would you feel comfortable with, to include your property taxes and homeowners insurance. Please give me an honest and realistic amount that you would not want to exceed.
  • Secondly, what areas would you prefer to live in. This is very important, because it comes down to the different property tax amounts. Depending on why you would want to live in that town or neighborhood, would help determine your monthly mortgage payment because of the property taxes.
  • My next question would be the type of property that you would want to purchase. Whether it would be a single family dwelling, a townhouse, a condo, etc. This helps me determine your payment as well, because there could be association dues or PUD fees based on the type of property and location.

In my opinion, I consider these 3 questions to be the most important that should be asked in the beginning, besides their name, credit scores, credit history, and income information. I actually get to those sets of questions next.

 

So, with that addressed now, let’s get back to my story.

My borrower wants to live in one of two places, because one of his main focuses is to be in a good school system. Keep in mind, they have 1 child at 8, another at 1, and one on the way. How do I know all of this? I got to know my borrower.

Now, the areas that they are interested in, the property taxes run about $6,000 a year on $180,000 properties. This other loan officer has them pre-qualified at $200,000, but using property taxes of $5,200. To be realistic, if buying a $200,000 home, the property taxes average around $7,000 a year. As you can see, this could become a huge issue for the borrower when shopping for a home in their respective areas, to later find out that they don’t qualify based on higher taxes. But it gets better.

In my very first question, I asked what mortgage payment that he would feel comfortable with. If I used the $200,000 property, even at the unrealistic property taxes of $5,200, he would be about $117 over his comfort zone regarding the mortgage payment. With the correct property taxes, not only does he not qualify for a mortgage, but his monthly nut would now be about $267 more than what he would be comfortable with.

 

Conclusion : In my 18+ years in the mortgage business, even after the government tightening down on loan officers with their licensing requirements since the beginning of 2011, I keep seeing these basics get over-looked more than they should.  It shouldn’t be about who can pass a test, even though the test itself is only about 30% mortgages directly. But about asking the proper questions and preparing the borrower.

I have a borrower right now who has a 617 credit score and that their current loan officer is telling them that they need a 620. Once they get that 620, they can close. Settlement was suppose to be June 30th and he keeps saying it will be soon. yet when I reviewed their current credit, it doesn’t mean the credit guidelines. I wrote about this example that happens more than it should. Please read - Your credit score is more than just a number -

Hey, it’s a dog-eat-dog world out there. I know it’s easy to trust someone when they say such words as : “trust me”, “no problem”, I promise”, “I guarantee”, etc.  Who do you trust?  Get to know your loan officer, listen to how they talk, and how confident they sound. Not just the sales words that one might use. I call these words The Red Flags of mortgages.   If you listen close enough, you can sometimes hear someone contradict themselves. Just food for thought.

 

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Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

Comment balloon 27 commentsJeff Belonger • July 13 2011 07:01PM

Comments

 

As mentioned, this happens any where, not just in New Jersey. I get phones calls and e-mails from borrowers all over the United States, and I hear of the many problems. It starts with the loan officer properly asking the right questions upfront... and getting into the details quickly, such as where the borrower wants to live, to better determine the correct property taxes.  #justsayin

 

Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) over 9 years ago

Jeff, I enjoyed reading your blog.  Good info! Looking forward to your next post!

Posted by Denise Scalvino, Real Estate Sales Associate Cell: 609-709-6678 (Referral Group Incorporated) over 9 years ago

Yup!

Bill

Posted by William J. Archambault, Jr. (The Real Estate Investment Institute ) over 9 years ago

Jeff, depending on what assumptions a loan officer puts in or having different accepted debt/income ratios can account for the difference of what they approve.

Posted by Gary Woltal, Assoc. Broker Realtor SFR Dallas Ft. Worth (Keller Williams Realty) over 9 years ago

Thanks Bro! I run into borrowers claiming to be pre-qualified for mroe than I estimated every day. Inevitably I hear back about a disaster of a deal where they can not close some weeks later.

Thank you again for posting this information. It is very important to work with a well qualified loan officer.

Posted by Chris "The Loan Ranger" McBrearty, NMLS 274079, FHA, VA, USDA, Loan Officer and Educator (Fairway Independent Mortgage, DBO/CRMLA #41DBO-78367, NMLS #2289) over 9 years ago

 

DENISE... .  thanks for the compliment. Don't hesitate to read a lot of my stuff over at The FHA Expert. ps.. I haven't been posting as much as I use to... a little burn out.

BILL... .  such strong defining words... ;o)

GARY.... . yes, the difference can be very different. But what he did was use my same taxes on the lower property purchase, when common sense should have said.. hhhmmm... higher price, higher taxes... but my main point was that the loan officer needs to pin point an area / location so they can use the appropriate taxes.

CHRIS.... .  hey, it's not saying like I am the best or the only good loan officer... but you see it also... It's scary and such. I had a loan officer at Wells a few years ago approve my borrower in Florida.. well, I got her after she read a blog post of mine... but I was like 20k less in pre-qualifying her.. this guy was using overtime when he shouldn't have. He had only been on his new job for 6 months and in the same industry for like 18 months. What is that, "shit in and shit out?"  He showed her the automated approval... and it took me like 3 days, 3 different times, to explain what would happen. ANyone can input anything to get an automated approval. In any case, thanks for the support on this topic that bugs the hell out of me. thanks

 

Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) over 9 years ago

I like the way you work.  Wish you were here in Texas.  Keep up the good work.

Posted by Angelia Garcia (Pure Realtors) over 9 years ago

I have a few lenders in my area that work the same way... and so do I for that matter.  I typically spend a couple of hours with clients before we start looking at homes.

Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) over 9 years ago

Jeff: Great post! You point out that common sense and listening skills are vitally important .. and getting even more so in this market. Two things sadly lacking in too many. Getting a mortgage these days is increasingly individualized and personalized. You showcase this with a perfect example ...

Gene

Posted by Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi, 708.921.6331 - 40+ yrs experience (NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656) over 9 years ago

Though I never claim to be a mortgage expert, these tips will sirely help me - fortunately, my lender is pretty sharp...and you are little too far, Jeff, for my area...or else...

Posted by Praful Thakkar, Andover, MA: Andover Luxury Homes For Sale (LAER Realty Partners) over 9 years ago

Jeff

Glad to see this was featured - I was going to suggest.

There are lots of mortgage officers who need to read this and take it to heart. It's not unlike in our end of the business - you reall y have to get to know the buyer/seller, ask the right questions, and not promise what you cannot deliver nor lead people astray.

Jeff

Posted by Jeff Dowler, CRS, The Southern California Relocation Dude (eXp Realty of California, Inc.) over 9 years ago

Jeff, wow. I truly never put two and two together to get to this! Great points and great post. I am going to have a discussion or two with the local Mtg. officers. Great point!

Posted by Deb Brooks (Brooks Prime Properties Wichita Falls Texas) over 9 years ago

Belonger - Good piece, my man.  No arguments from my end.

And get licensed in Texas ;)

Posted by Jason Sardi, Your Agent for Life (Auto & Home & Life Insurance throughout North Carolina) over 9 years ago

Informative post that re-enforced my awareness. Your questions get to the heart of the matter and ultimately provide a valuable service to the buyers/borrowers. Good job.

Posted by George Bennett, Inactive Principal Broker, GRI (Inactive) over 9 years ago

 

ANGELIA.... I can hop on my jet and be there in 6 hours... lol

JOAN... . glad to hear... it's good to hear that not all loan officers do bad.  ;o)

GENE... . common sense and listening skills?  What are those?  lol  Yea, it's amazing and not sure about you, but I am hearing more complaints now than I did a year ago. And I preached this, that the new licensing laws were not going to help, but possibly hurt. I had my reasons and wow, it's becoming more true now. Overall, thanks for the polite compliment and kind words.

PRAFUL... . I have done a few loans in MA before the licensing laws changed... and I did a few for Katerina Gasset in Florida prior to these changes, proving that distance shouldn't matter. Actually, the 2 that I closed for Katerina were after two loan officers from Florida dropped the ball on two different loans. But seriously, glad to hear that you have a sharp lender... and that some of these tips will help. thanks

JEFF... . I was actually shocked that it was, but now looking back, I am glad... thanks Besides, it's not even the over promising, but more so, not asking the right questions, which seems to lead to more problems.

DEB... . love your new pic. Question, you never put what two and two together? And I would love to talk on the phone or if you could come back to comment after speaking to some of your loan officers. I would love to hear what they had to say, especially after reading this. thanks and thanks for the compliment.

JASON... . no arguments? darn, ... lol  Seriously, thanks and thanks for the kind words. And I still owe you a follow up call. Talk soon..

GEORGE.... .thanks, I am glad it helped some. And I see many that don't ask those questions at first and think it's about a quick pre-qual to the max loan amount or purchase price.

 

Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) over 9 years ago
There are some good links in your posts. On an iPad in the AM, the links give iPad readers a couple more posts to read over the ten limit.
Posted by Cheryl Ritchie, Southern Maryland 301-980-7566 (RE/MAX Leading Edge www.GoldenResults.com) over 9 years ago

Thank you for the post. Buyers should talk to an experienced lender . Whenever I receive  buyer pre approvals for my listings from lenders known to me I feel comfortable and am extra careful when it is from someone I do not know.

Posted by Gita Bantwal, REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel (RE/MAX Centre Realtors) over 9 years ago

Jeff, I like the way you work with numbers. Besides, owning a home always means extra amount of money for maintenance, both planned and unexpected. How will buyers deal with that financially if they are already on a stretch with the mortgage and taxes? 

Posted by Anna Tolstoy (Coldwell Banker Residential Brokerage) over 9 years ago

I ranted about this a month ago!  The loan officer figured the couple qualified, but did not take into account the $8,000 per year tax on the home.  Figuring all this in is essential, particularly when dealing with discounted short sales or REO's.  Excellent points. 

Posted by Laura Giannotta, Your Realtor Down the Shore! (Keller Williams Realty - Atlantic Shore ) over 9 years ago

Jeff that first interview is so important.  My quess is the other loan officer did a short phone interveiw.

Posted by Shay Campbell, Raleigh, NC (Universal American Mortgage Company) over 9 years ago

Great Post, Jeff.The recurring theme is honesty with facts & common sense. Unfortunately, human nature often ignores both when presented with "a better deal". Of course when the problems show up, it's anyone else's fault...
Thanks for sharing. Bruce

Posted by Bruce Kunz, REALTOR®, Brick & Howell NJ Homes for Sale (C21 Solid Gold Realty, Brick, NJ, 732-920-2100) over 9 years ago

I like this subject, but not enough to grasp all the mechanics of it. that is why I have a trusty loan officer on my team....This stuff has to be known and then implemented...good post and thank you

Posted by Richie Alan Naggar, agent & author (people first...then business Ran Right Realty ) over 9 years ago

This is all so true!  I see it every day in my work too.  Great post!

Posted by Peggy Wilson, Michigan Mortgage Pro (Huron Valley Financial, Inc.) over 9 years ago

Jeff, your three questions are right on target. If you don't ask those questions, I'm sure the underwriter will want to know the impact of the answers. Thanks.

Posted by Michael Setunsky, Your Commercial Real Estate Link to Northern VA over 9 years ago

 

CHERYL... . not sure about that, because I don't have an ipad.. but I am glad this was useful. thanks

GITA... . the mysterious question would be.. define experienced or good... I have gone up against some realtors very good loan officers, and was not impressed on how they educated the borrower.  #justsayin   thanks for your feedback.

ANNA.... .  I love numbers, helping people, and educating. You are correct, there is more to this puzzle than I mention, such as having assets left over when buying a home. I wrote : When is it a good time to buy a house?  And here is one where I get into the assets and emergency funds : How much of a payment can I afford?  Thanks

LAURA,,, , that just makes me go crazy, hence why I wrote about this when I got off the phone with my friend. I want him to send this to his realtor, to see what she says. To me, property taxes is common sense, but I see so many screw up on this..  thanks and thanks for the polite compliment.

SHAY... .  I think it's extremely important.... and short interview or not, I hear many loan officers.. and I just cringe when they don't go over what I consider to be the important basics.  thanks

BRUCE.... .  forget about the honesty part... how about just common sense ?? I see so many that just don't have that part then. With different property values or different areas, comes different property taxes. Loan officers need to focus on this...  and yes, I have seen, when the problems pop up, it's everyone else's fault.. lol  But sooo sad.. and thanks for the polite compliment.

RICHIE... .  I love this subject, because i think it's one that sets me apart from so many. And that is great that you have a good loan officer. And thanks for the compliment...

PEGGY... .  good to hear that others see this also.. not good that it happens more than it should. Thanks for the compliment.

MICHAEL... . forget about the underwriter.. lol   I don't see how this could work for the borrower if these questions aren't asked... especially the different areas that they would be interested in. I always focus on this and the property taxes. A borrower might give me 3 totally different areas to where property taxes could differ by $1,000 a year. I need to excplain this to them and to show them the differences.... thanks for your feedback.

 

Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) over 9 years ago

Jeff I am just catching up on some blog reads, been busy and off AR lately.   My husband and I were just having a discussion tonight about taking good care of your clients and how its different now that compensation has changed everyone offers the same so it boils down to how that client is treated not necessarily the consumer shopping for the lowest rate.  Taking time and answering questions are just good customer service

Posted by Marilyn Boudreaux, Lake Charles LA Century 21 Realtor (Marilyn Boudreaux, Century 21 Bono Realty) over 9 years ago

Most excellent questions indeed.  That first one is one that we tell our Buyers to concentrate on when speaking with their Lender.  Great stuff.

Posted by Robert and Lisa Hammerstein -201-315-8618, Bergen County NJ Real Estate (Christie's International Real Estate ) about 9 years ago

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