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].
