Close more deals by matching your borrower to the best programMike Boggianoloan to value ratios, re-qualifications, inflated closing costs, tax returns Pairing your commercial borrower with the best program to suit his needs has a direct effect on whether the deal actually closes. Brokers who take the time to educate themselves on the loan programs available will be the best prepared to make a sensible match between borrower and program. By asking the right questions and listening carefully to the borrower's answers, you can use a consultative approach to align the borrower's situation with the most appropriate program. Once you've sold a borrower on the right program and explained why it's best, the process is likely to move along more smoothly, not just because of your improved attitude, but also because you've already done the legwork to align the borrower's goals and financial scenario with the proper loan. This month's column answers one very important question with a multifaceted answer: How can I close more deals by finding the best loan program for my borrower? Being familiar with lender options is an important foundation for having an in-depth discussion that helps you determine what works best for the borrower based on his intentions and financial situation. Personalize the borrower's scenario. First, understand your borrower's needs. Does he intend to use the mortgage for a purchase, cash-out or refinance? How long does he intend to keep the property? The answers to questions such as these will help you determine which terms are most beneficial and, ultimately, will assist in a smooth process for you and the borrower. Rate programs and loan to value ratios (LTVs) are important considerations, which will be based on individual scenarios. For example, in the case of an owner-occupied purchase where the borrower is planning to stay in the property for a long period of time, a fixed-rate loan with a long term or an interest-only program will give the buyer a smaller principal and interest (P&I) payment. Conversely, an adjustable rate program may be more suitable for property investors. Educate on rate. Take the focus off of rate, and look instead at the big-picture scenario. Consumers are typically focused on the lowest rate because the assumption is that the lower the rate, the lower the payment. However, this is not always the case. Keep in mind that in order to truly compare rates, the all-in costs of the loan must be considered. All-in costs include the costs of factors such as annual audited financial statements, tax returns, structural reports, inflated closing costs and lost opportunity costs of re-qualifying. For example, when balloons reach the maturity date, borrowers are often required to re-qualify for the loan. Re-qualifications are costly to the borrower in many ways: a new appraisal, audited financial statements and tax returns are all needed again. In addition, the borrower could end up with higher rates, depending upon current market conditions. Finally, underwriting can be more stringent with lower-rate programs, terms may not be as favorable and DTI may not be permitted to qualify the borrower and property. Generally speaking, if a borrower amortizes a loan over a longer period of time, such as a 30-year term, the P&I payment will be lower than if he had selected a program with a slightly lower rate amortized for 15 years. Explaining the all-in cost over the life of the loan to your borrower via a written side-by-side mathematical analysis can help to solidify the concept. Some lenders provide tools for this type of demonstration. The underlying tone of the above suggestions is that it is important to educate your borrowers so that they can understand why a particular program is a match for them. When you are perceived as a knowledgeable professional, acting in the best interest of the customer and providing value in your role as a broker, borrowers will feel more comfortable doing business with you. Naturally, you will close more deals, provide better customer service and reap the benefits of repeat business and referrals. Mike Boggiano is senior vice president, national sales manager for Silver Hill Financial LLC. He may be reached by phone at (877) 676-1562 or e-mail [email protected].