Mortgage Approval Process
By Gina Dostler
Marc Bui, a savvy and seasoned loan officer, started as a simple loan processor and now runs his own mortgage company. In 2007 when the real estate market began to sour, he was forced to shut his company and learned the heartaches of being responsible for so many people. Now working for imortgage, he only has two assistants and processors. He thoroughly loves his job, helping people in their quest for homeownership. He offers honest opinions and sound advice.
Q: Mortgage rates are sliding up again. Why is this not a reason to worry?
A: Yes, it’s true, rates have increased 1 full percent over the past 30 days. In reaction to this, some people have actually put a hold on their home search due to the increase. But putting it into the right perspective, historically, rates have averaged around 7.5 to 8 percent. Yet today you can still get a loan for under 5%, which is still really great.
Q: Where do you see rates at in the fall?
A: Of course nobody has a crystal ball to see the future. But in my opinion, they have room to increase another ¼ percent. They won’t retract. Yet an increase in the rates can be a good thing, providing a better scenario for home-buyers.
Q: What kind of scenario?
A: The increase in rates can push the economy a little more in the right direction. It definitely creates a huge sense of urgency amongst both the seller and buyer. With the interest rates so low, people looking for a home in the past years found sellers getting a bit greedy with their asking price and have seen an amazing appreciation in property prices, up to 24%. The now increasing interest rate will slow down the appreciation and make it more feasible for the prospective home-buyer and ease up on the seller’s price.
Q: Getting a quick approval process helps when interest rates are on the rise. What do you suggest?
A: The key to moving through the whole process smoothly and quickly is being able to dissect the paperwork and locate potential problems. There are a few key areas that can slow down a deal and it’s wise to search out these hotspots and work through them before starting the loan process. Sitting down with the client in a pre-approval process can save headaches down the line.
Q: Name some of the hotspots.
A: Credit reports and tax returns are a couple. Some lenders just focus on the credit score, where really a review of the entire credit report is necessary to get the full picture of the person’s approval rating. The tax return needs to be thoroughly examined instead of just relying on pay stubs. Items that tend to be overlooked are 2106 expenses (un-reimbursed employee expenses) and can reduce a portion of income. Things like that are deal killers.
Q: How far down the rabbit hole does one go?
A: As far as one has to. Reviewing rental properties, under Schedule E Supplemental Income and Loss can reveal a nice income from a property but may actually be overshadowed with expenses that offset that income. Bank statements need scrutiny. Funds must be “sourced and seasoned.” Sourced meaning lenders need to verify where the large deposit came from and seasoned means having the funds established. Need to verify the money with a paper trail. No “under the mattress” money. It’s a process to safeguard against money laundering and keep the loan process moving in the right direction.
Q: You seem to take your clients under your wing.
A: We consider it a buyer’s consultation and pre-approval process where we get to know our clients very well. It’s hard not to since we ask for so many documents up front. But the more upfront information we receive, the smoother the entire process. And every client we serve we make sure to cross reference their loan package with the program guidelines making sure they meet all criteria. We are very thorough in our examination.
Q: What about those who don’t even make it through the pre-approvals?
A: We really want to help people become homeowners. When a client doesn’t qualify for a loan, we help coach them to re-qualify down the line. We help them with credit scores and teach them how to reduce their debt ratio by showing them a road map on how to pay off a particular bill.
Q: How does one know a good lender?
A: Find out how long a lender has been in the business. Six months to a year is still a bit wet under the ears. I tell people all the time it’s not rocket science; it’s more than rocket science. There are so many moving components to processing a loan. Guidelines change, sometimes every month. Banks can change internal guidelines. There are so many hands touching a particular file, there are so many variables that affect the efficiency in closing. You need someone who has been in the game for awhile and understands the plays and passes that continually go on.
Marc Bui: Senior Loan Officer
1301 Dove Street, Suite 101
Newport Beach, CA 92660