I have a referral partner Norman who owns a pool design and construction company here in Riverside County, CA. Norman refers me an average of 2 to 3 clients a week. Most of these clients have gone to direct lenders and have been told by the loan officer that their loan has been denied. In the most recent case the reason given was they’re 2 years out of bankruptcy, the most common reason stated is their credit score prevents them from qualifying for the loan.
Those of us in the business whether loan officer or mortgage broker (yes, folks there is a difference), know that with the right circumstances just about any credit score can get you the home loan you need.
Its late Sunday afternoon when I receive a phone call from one of Normans’ clients wanting to know if I can help them out. They would like to take $55,000 of the equity in their home to have a pool designed and built before the blistering summer heat hits. The client tells me they’ve been to three direct lenders who have declined their loan because their bankruptcy was discharged 2 years ago. I’m thinking to myself, two years that’s great I can get financing for people one day out of bankruptcy.
I proceed to take the loan application, determine the exact needs and time frame in which we’re going to close the loan, about thirty minutes worth of work and conversation. After I’ve completed the loan application and pull their credit report I see the exact reason they’ve been declined by three other lenders. Their debt to income ratio is at 65 percent, a little high but not a deal killer. Currently the clients are at a 55 percent loan to value on their home, which gives me another 25 percent to play with. Not a problem the home is valued at $500,000 they owe $275,000 which gives me roughly $225,000 to play with. Now I’m frantically punching the numbers on the calculator attempting to determine if the client can carry the monthly payment if I can pay off the $35,000 in revolving debt that’s killing the deal.
When you add everything together we come up with a $365,000 1st, $275,000 to pay off the current loan, $35,000 to pay off the credit cards and $55,000 to design and put in their pool. Ok folks I have myself a deal, I even get the client to agree to a credit counseling class so that they can learn to better manage and budget their income.
At the end of our conversation the client asks why I was able to get them a loan, when three other lenders turned them down. I explained that I can’t guarantee they’ll get the loan; however, everything looks good on paper now it’s a matter of an underwriter looking at and approving the loan. We should have a definite answer Monday.
My question to the other loan originators here is when you can’t place a loan do you tell the person why or do you simply lay it off on the credit score? Shouldn’t we be educating our clients while at the same time telling them the truth?
Are you about results or just throwing everything against the wall to see what sticks and whatever sticks is what you’ll work?
Category: Real Estate