Yanni Raz is CEO of HML Investments and has been a hard-money lender for more than 10 years. Raz was a real estate
broker for five years before he partnered with a group of
investors from California and began assisting real estate
investors in financing commercial and residential projects.
He writes about real estate financing for magazines, blogs
and other online news outlets. Reach Raz at (818) 308-4443
Anticipate Borrowers’ Questions
Be prepared with good answers to win clients’ trust
By Yanni Raz
Buying a house can be scary, especially as a first-time homebuyer. Individuals look- ing for mortgages are often apprehensive about the process.
When people approach mortgage originators,
they will have a variety of questions that any reputable mortgage professional should be able to answer.
There also are questions that originators should ask
borrowers before they start throwing out loan options.
The more that mortgage originators know about borrowers and their needs, the better prepared they will
be in assisting borrowers with their financing.
There are some major questions about the homebuying process, in particular, that a borrower is likely to
ask. Mortgage originators should be ready to address
these queries promptly, to their clients’ satisfaction, if
they hope to secure their business.
Following are some common questions borrowers
may ask and the answers you can provide to instill confidence in your knowledge of the market.
Process and costs
What paperwork will I need to provide? Proof of
income and assets for the borrower (two years of
W2 tax forms or paystubs), two years of tax returns,
personal identification and information about a prospective homebuyer’s credit history are all important
documents that need to be given to the mortgage
originator. Borrowers also may need to provide information about the property, their present and proposed housing expenses and their reasons for seeking
the mortgage loan.
How can I speed up the loan-approval process?
There may not be many ways for borrowers to speed
up the process, but there are things they should avoid
if they don’t want to slow the process down. Changing jobs before closing on a home loan, for example, is
not a good idea because the loan approval is based on
the income information the borrower provided on the
Also, major spending on new things for the home
can wait. If the lender sees the borrower spending big
money, they may decide against approving the loan at
all. That will really slow down the process. Providing all
of the correct paperwork, being aware of their credit
score and what can affect it, and honestly answering questions also will make the process go much
smoother for borrowers.
Are there any extra costs I should know about?
It is important for originators to be honest with borrowers, if they expect borrowers to be honest with
them. This means being upfront about any extra costs.
There are plenty of fees that prospective homebuyers
will overlook, so it’s up to the originator to make sure
they understand the fees.
If the borrowers only provide a small downpayment
for the mortgage, they may be required to purchase
private mortgage insurance. There also is likely to be
fees for originating the loan, homeowners insurance,
title insurance, escrow, document preparation, credit
reports, property taxes, appraisals and closing costs.
Money down and rates
What is the downpayment requirement? Lenders
may prefer 20 percent downpayments but there are
other options for borrowers. The benefits to putting 20
percent down on a home purchase, however, include
lower upfront fees, lower ongoing fees, more equity in
the home and lower monthly payments.
Some government-backed loan programs require
much less than 20 percent, but borrowers should be
reminded of the various fees that come along with
those loans. It is possible, for example, to purchase
a home with only 3 percent down through loan programs sponsored by Fannie Mae and Freddie Mac.
The Federal Housing Administration (FHA) is a
government-backed loan program that offers low-downpayment mortgages (as low as 3. 5 percent) for
first-time homebuyers. There also are a variety of
low-downpayment loan programs — some allowing
0 percent down — available for designated rural areas
through the U.S. Department of Agriculture and for
veterans through the Department of Veterans Affairs.
It is likely that a borrower will seek information
about low-downpayment programs such as FHA-backed loans, and it’s the originator’s job to explain
what the pros and cons are of such loans and to
be up to date on what is available through these
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