As a first time home buyer going through the pre-approval process there are at least 10 Red Flags To Look Out For When Working With a Mortgage Lender in today’s real estate market. In this episode, we discuss what to look out for when having conversations with lenders just to make sure you’re not putting yourself in a bad situation to help you become The Educated HomeBuyer.
Connect with me 👇 Jeb Smith (huntington beach Realtor/orange county real estate) DRE 01407449 Coldwell Banker Realty ➡I N S T A G R A M ➳ https://www.instagram.com/jebsmith ➡Y O U T U B E ➳https://www.youtube.com/c/JebSmith
Connect with me 👇 Josh Lewis (Huntington Beach Certified Mortgage Expert) DRE 01209148 Buywise Mortgage M:714-916-5727 E: email@example.com ➡I N S T A G R A M ➳ https://www.instagram.com/borrowsmartjosh ➡Y O U T U B E ➳https://www.youtube.com/c/buywiseborrowsmart
✅ – Want to get connected with us or to a local expert in your market, please reach out at http://www.theeducatedhomebuyer.com/expert
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Show Notes Below:
[00:00:00] Jeb Smith – Huntington Beach Realtor: All right.
The pre-approval process is probably the most important part of buying a home because not only does it tell you how much you can qualify for, it also tells you if you can even qualify at all, Josh. So I wanna take some time here and talk about red flags to look for. With regards to financing, with regards to going through the preapproval process, you often have people calling you because, they had a conversation with another lender and it didn’t go through for one reason or another, and you’re seeing some similarities some commonalities, if you will, with regards to, what happens during that process.
So I thought it would be helpful to take some. And help educate potential home buyers on things to look for in that process.
[00:00:59] Josh Lewis – California Certified Mortgage Consultant: A Absolutely. Jeb, we have this conversation probably once or twice a month. I go come over and tell you, You’re not gonna believe what I just heard from a borrower.
Cuz we get calls, people that are 1, 2, 3 weeks into the process and they want help cuz things aren’t going the way they’re supposed to. And you hear their story and there’s just common things that we end up hearing that they were told by their loan officers. So we’ve talked before on this show.
Both realtors and mortgage professionals, we use the term loosely. There aren’t large barriers to entry and there’s the potential to make a large income. So with that, it is truly both sides of the aisle are an 80 20 business where 20% of the people are good and quality professionals, and at least 80% of the people you should steer clear of.
So what we’re gonna walk through today is what are some of the things that should start. Tripping I ideas in your mind that this doesn’t add up. And I will say this by thinking like for me, having done this for 26 years, when I hear these things, it just automatically triggers these ideas in my mind that doesn’t sound right.
We are not on the right path. But I also understand when you hear that as a consumer that does alone for the first time in their life, that does alone every seven years. Every 10 years, you want to believe this person’s nice. They’re taking the time to talk to you, they’re being friendly. You want to believe what they’re telling you.
All of these things we’re gonna, we’re gonna tell you they can be innocuous, but when you start hearing 2, 3, 4 of these things add up in the process, the biggest thing that I wanna say to everyone is just trust your instincts. If things aren’t making sense or you are not getting a good feeling, That’s a clear sign that you should at least get a second opinion.
With that, Jeb, we’ve identified about 10 things here and you may see some things differently on your side cuz you have lots of conversation with loan officers or see preapproval packages from loan officers coming over on your listings and get to talk to them throughout the process as you’re getting updates and statuses on where they are in the transaction.
If you have anything to add, let us know. What you see from the realtor’s perspective. No, and you
[00:03:00] Jeb Smith – Huntington Beach Realtor: said something, a moment about second opinions and I think it’s important to note that it’s okay to have a conversation with a Josh or with a referral maybe that you got from a friend, and then also have a conversation with another lender to verify the information that you were given, to get a second quote to see if what you are given is competitive with regards to not only the rate, but the fees.
And just to make sure that i’s are dotted, t’s are crossed if you’re questioning something on your side. That doesn’t necessarily mean that what they’re telling you is inaccurate, but at the same time it doesn’t necessarily mean what they’re telling you is accurate as well. So having multiple conversations with lenders, can help you, navigate some of these things.
But what Josh is gonna do here is more talk about the obvious things that he sees on his side and what, you as a consumer, someone looking to get a loan should be questioning if you’re. Any of these red flags that, that we’re going to talk about today when you hear these red flags or see these red flags it’s, a stop in the process and, maybe go deeper on that question or start reaching out for another option and talking to another lender.
So Josh, so yeah let’s talk about number one. Preapproval versus Prequal. With, without getting documents, like what does
[00:04:18] Josh Lewis – California Certified Mortgage Consultant: I’m shocked that this ever happens, but I talk to people and they’re like, Eh, you know, we wanted to get a second opinion, or, things weren’t kind of going well with the first lender.
I said, And you talked to ’em. They say they’ve written offers, and he said, Okay. So you didn’t have a preapproval letter? Oh, no, we had a preapproval letter. I’m like, You just told me you didn’t complete the application or provide any documentation. Well, yeah. The person we were talking to went through everything on the.
So if you go back to episode four here, the podcast, we go deep on what’s the difference between a preapproval and a prequalification. It would be nice to think that in a five minute interview that I can ask you, how much do you make? What do you think your credit score is? How much do you have in the bank?
Who do you owe and can tell you with certainty that you can. That you can be approved [00:05:00] for the loan that you want. It’s just more complex than that. What I can say is borrowers never know what their actual qualifying income is. You may know what you make per hour or what you made on your W2 last year.
Underwriters calculate income very specifically. Credit scores you may have Credit Karma and Credit Karma, usually overstates credit scores. There’s so many moving pieces that without getting a complete loan application and all of your supporting documentation, it would be foolish for me to send to a realtor a letter stating that I know you can be approved and we can close this loan in 21 to 30 days.
It is an essential part of the process, and if someone wants to make it easy on. Skip that. It’s a red flag. You need that information to be able to authoritatively say that the person qualifies for
[00:05:46] Jeb Smith – Huntington Beach Realtor: the loan. Well, I’ll play devil’s advocate on that for a moment, Josh, and say that most people, when they have that conversation, they want it to be a quick process.
Most people don’t wanna spend. 10, 15 minutes going over a loan application, gathering a bunch of documents, uploading them to a website or however the process goes going in to see you personally. If that’s what they choose to do. Most people just want the easy button, right? They want to, just give you some information over the phone and you say, Yeah, you’re good to go.
And like you said, you started the episode and you mentioned people want to believe in, in, that someone is, Giving them accurate information. So if I just give you a couple numbers and you say, Jeb, you’re good to go. I’m good with that. Right. I’m happy you’re a professional. I’m a buyer.
I’ve heard what I need to hear. I’m ready to go. But what you’re saying is you gotta go a little bit deeper.
[00:06:31] Josh Lewis – California Certified Mortgage Consultant: A Absolutely. Even as simple as you say, Hey Jeb, I think everything sounds good. You’re salaried. You make $250,000 a year. Send me your last W two and your last pay stub. Gets us about halfway there, but I don’t know about your funds in the bank.
You could have had a large deposit that requires explanation, could be unusable. Funds could be totally usable. There are solutions to everything, but there are reasons why we need to ask for that upfront. And if you’re dealing with a loan officer that isn’t comfortable telling you what is required to make the process smooth later on down the line, our work, you as a borrower and me as a loan officer.
Front loaded. We’re doing that really 80% of the work before you get out and even see properties so that we know you’re fully pre-approved and a secondary piece of this and that we covered back in episode four. You would be shocked and amazed how many people that I talk to that they have a pre-approval letter, but they don’t know what is the absolute max that they qualify.
What is the monthly payment and how much the cash to close is? It really amazes me how many loan officer say, Hey, Jeb, great news. I got you qualified for $550,000. Here’s your letter. They don’t know what that monthly payment looks like, including taxes, insurance, hoa, anything else required, and they don’t know how much money they’re gonna be required to bring in at closing.
So it is very important that you do your work on the front end with the lender and that you have all that information and that they. Authoritative, accurate, honest, preapproval letter that they know that you’re gonna be able to close escrow in a timely manner with hopefully no bumps. There’s always things that can come up in the process, but it should be identified through that preapproval process.
And that’s why it’s very important to do it up front before you’re getting a full preapproval letter. Now, a moment
[00:08:13] Jeb Smith – Huntington Beach Realtor: ago, you mentioned some things that you’re not getting in the process, monthly payment, some of these things. So shouldn’t some of that information come in the form of a disclosure or some sort of statement that you’re receiving?
Like after having a conversation with you outside of a preapproval letter, should I be receiving something? With regards to, you being able to, obviously you’ve already filled out something if I’m able to pull your credit or what have you, but there should be a disclosure package or something that goes out.
[00:08:35] Josh Lewis – California Certified Mortgage Consultant:
It’s a great question and there’s, Let’s go through it because number two, red flag is delaying your disclosures. When does the lender need to make the disclosures to you? They have 72 hours after receiving six pieces of information. This acronym is aliens, so it just helps us remember what are all the triggering factors that mean that we have to disclose?
We have to have a property address, we have to have a loan. We have to have your income. We have to have an estimated value for the property. We need the names of the borrowers and the social security numbers. So let’s look at what do we have. Basically the first time you and I talk, I know what your names are.
Once you’ve done the application, I have your social security number and what you think your income is, what are the things that we don’t have? Looking at a purchase. We don’t know the property address cuz we haven’t identified a property, we don’t know the loan amount cuz you might go higher or lower than what you initially think.
And we don’t have an estimated value. So I am not required to give you a loan estimate. So people go, Whoa, you’re not supposed to give me numbers. I absolutely am. What you’ll find is that most loan officers will send you a fee worksheet that will show you all of the things that we just talked.
What’s the cash to close? What’s the monthly payment? And preferably they’re giving that to you in a format where there’s a comparison of multiple options. I didn’t list here, but to me a red flag would be a loan officer telling you, Here’s what you qualify for. You qualify for an [00:10:00] FHA loan. And they don’t even show you a conventional loan or saying, Hey, you don’t want fha, you want to go conventional.
We should show you the side by side comparison. Cause I always. Numbers never lie. So we wanna show you the side by side numbers. So if I’ve concluded that FHA is the best option for you, you can see why and ask questions based off of that comparison. So when I say a red flag is delaying disclosures, it’s more once those six pieces of information are in.
I try to get disclosures in your hands within 24 hours. Why? Because that is a period where you have uncertainty in your mind. You just gave me certainty. Hey, here’s the property address. Here’s what I want to put down. Here’s the estimated value of that property, so I know all the things I need to know.
To get you an accurate quote, right? The only delay or hold up on a purchase is we are generally gonna get third party fees, escrow title, recording things of that sort from escrow when they review the contract and put together the initial settlement statement. So most escrow companies will get us that within, a business day.
So if I get a contract before noon, I’m gonna reach out to them by the end of the. They’re gonna get me those numbers and I will have the full set of disclosures out to you that day. So two separate things. Very early in the process, you should have the pre-approval process. You should have a written comparison of two to three loan options that you qualify for.
We don’t wanna bombard you with 10 different options. We’re gonna narrow the field down to the ones that are gonna get you in with the lowest payment and least cash to close, or the cash to close that most closely fits what you have available. Couple different point and fee options. What I see all the time is people calling and they’re asking, it was someone who had watched the YouTube show, the Live, and they had reached out to me, they’re in the Bay Area, and they said, I’m talking to two different lenders and I’ve got really good numbers from ’em.
I said, Okay, can you send over the loan estimate? Well, I don’t have it. When did you get under contract? We were under contract three days ago. Okay. Well when did you get the contract to the lender? I sent it to them that day. By law you’re supposed to have your disclosures today and you should be able to see that loan estimate and compare one to the other.
And strangely in that situation the realtor. Was one of the loan officers that he was talking to, that’s a red flag. I can’t do Jeb’s job as well as he can. He can’t do my job as well as I can, even though neither one of ’em are rocket science. If you’re not doing it full time, you can’t do it. Well, , I’m saying you’re not bright Jeb.
But in, in looking at that, the other one, Was a lender who was giving him a number. I’m like, If he can do that number, don’t talk to me, don’t talk to the realtor. That number is amazing. I said, I have some doubts cuz I’m looking here and I generally know what’s available, but I don’t want to call bullshit on someone without giving them the opportunity to send you a locked loan estimate.
I said, So what you need to do is call ’em and say, Those terms are awesome. Lock my loan and send me over a loan. What do you know? Magically the guy didn’t qualify for that and he gets to bait and switch and is told, Oh, here’s what we can do, which is worse than what his realtor was offering him, which was also not what she was telling him those terms were, but this gets real simple.
In both of those situations, both of those lenders owed him a loan estimate and the loan. Would, detail that exactly of what he’s looking at in, in terms of all that. And we’ve talked about before, once you get to the loan estimate, you are only in comparing loans. You’re only looking at box A.
The box A items are the things that the lender controls. Other things are basically dictated by the terms of the contract. So if I said you a fee work sheet or a loan comparison, I’m going to highlight the things that will be included in box. Or that there’s nothing that would be included in box A so that when we come to the loan estimate, we have a point of reference to go back and say, Okay, Jeb remember when I showed you the loan comparisons and I told you there was gonna be $1,200 in box A?
Here’s box A, there’s the $1,200, so we know that we’re on the same page. So in general, once you have all of those things within 24 hours, you should have your loan estimate. 48 would be the far end. 72 is the legal requirement. But as closer to the front end, as we can realistically get, the better off it is.
[00:14:00] Jeb Smith – Huntington Beach Realtor: that obligate me to use you in the process, Josh? So if you give me this information, you send out disclosures. I now I almost feel like I’m committed, right? Because I’ve invested time sending you documentation. You’ve sent me disclosures. We’re kind of here, but I’m not real sure if I wanna use you.
Do I have that option of going a different direction? Am I obligated? Because I feel like people almost feel like they’re tied in, and that’s part of. What could be considered a red flag to some extent, and I think we’ll probably talk about that here in just a moment, but how does
[00:14:31] Josh Lewis – California Certified Mortgage Consultant: that work out?
You’re not obligated at any point until you sign your loan documents. So you could apply with six different lenders, sign six different loan estimates and initial disclosures and get all the way to closing and only sign one set of loan docs. That’s not cool. You shouldn’t do it. You need to be making that decision early in the process.
But to your point, Jeb, absolutely. Some of what loan officers do is let’s get the borrower to do as much work as possible and drag it [00:15:00] on so that they feel like I’ve already invested this much time, effort, and energy. I don’t wanna switch. I don’t wanna feel like I’ve wasted their time. I don’t wanna start over and do it with another lender.
There’s actually a gentleman who’s now on the real estate side, but he wrote a book on sales and he talked about how he learned sales at Rocket Mortgage. And what they would do is when they got someone to call in or when they got someone on the phone, they would attempt to keep them on the phone for at least 45 minutes.
The longer the better complete the loan application because they want them to think that’s what’s required with every lender so that they don’t wanna make that investment with anyone else. So no, you are not locked in and obligated. But it also is a tactic that certain people use to try and lock you in to them by not giving you all the information you need and dragging out that process.
[00:15:45] Jeb Smith – Huntington Beach Realtor: story here. About a week ago, a client of mine’s buying a house cash or not a client of mine. I’m selling a house and the buyer is buying it cash. They call and say, Hey, listen my client would like to get a loan. We’re about 10 days out from closing. My client would like to get a loan if possible.
Is your client cool with it? We’ll keep the timeframe the. So on and so forth. And we say, Sure, if it’s closing on time, not really a big deal, you can go get a loan or, I think they were gonna pull a home equity line or do something to get the money. So talking to the lender, appraiser calls me, the appraiser goes out, does the appraisal on the property.
All is good. Timeline’s still good with the lender. We’re happy to move forward. Well, the next day I get a call from the appraiser again and he says, Hey, listen, I just received the same exact order on the same. From a different mortgage company. I guess they’re switching lenders or switching mortgage companies.
And so for me, I’m like, Hmm, that’s interesting. So I call the agent and and what’s happening here? Are you guys switching lenders? I talked to your lender yesterday. Everything’s fine. He said, No, my, my buyer just called because interest rates were high with this, with the lender that they were gonna choose to go with initially.
So they called to get a second quote, and when they called to get a second quote that lender went ahead and ordered an appraisal immediately on that file, almost to lock ’em in. And so anyway, it was a red flag for them. They ended up backing outta the contract either way and doing a cash offer.
So they ended up purchasing cash, didn’t get a loan at. But that’s essentially what you’re talking about there. They had one conversation with this lender and the lender’s trying to order the appraisal, five minutes after getting off the phone to have this, deal locked in, if you will.
[00:17:17] Josh Lewis – California Certified Mortgage Consultant: A absolutely and certain lenders will do that with a credit report, also say there’s a cost for us to pull that credit report, so I just need your credit card. So again, you get some credit card, you spend some time with them, it’s locking you in. Do not do that until you have enough information to make an educated decision.
Do you need a loan estimate? No. Do you need written figures that include all third party fees? Absolutely. And if someone can’t give you that, probably the number one. Thing that I hear is variations on, well, the loan’s not approved. I need to know that the loan’s approved before we know what the terms are gonna be.
Well, we can’t lock until you have the loan approval, so we’re gonna go through a couple of these later in the show. But if someone’s telling you they can’t give you an accurate estimate, I can give you an accurate estimate. Right now we do a pre-qual on the phone. I can give you an accurate estimate.
The thing I’m gonna say is this is worthless. If you’re not actually approved for this loan, if you get approved for this loan, this is what the terms are going to.
[00:18:13] Jeb Smith – Huntington Beach Realtor: So you just brought up something, so let’s actually talk about that. Let’s talk about the idea of someone quoting a rate prior to actually having any of the documentation.
I call you Josh. I don’t get let you run my credit. You don’t see my debt to income ratio. You really don’t know how much money I’m putting down, but you’re quoting me a rate. And then you also talked about the idea of locking a rate, how that process works. So I think that’s two things we can cover real quick that are serious red flags that happen quite often.
[00:18:40] Josh Lewis – California Certified Mortgage Consultant: Absolutely. As a rule, I will not quote you terms accurate terms, like specific terms until we have the complete pre-approval package. Probably the best example I can give you is the person that calls and says, Oh, I’ve got a seven 50 credit. And again, that’s Credit Karma when we see it at seven 10.
The difference between the rate on a seven 10 and a seven 50 is not huge, but it’s substantial. And once I’ve told you a number, you have that number in your head. That’s my interest rate. I’m going to get that. Furthermore, I’m not in a position to be able to lock that because I don’t have the loan application.
I don’t know your social, I don’t have all the third party information and I. Five, six pieces of information over you. The phone, over the phone with you and lock that loan. But I do need some commitment from you cuz all of our lenders and investors that buy close loans from us, they pull, measure us on pull through rates.
We get better terms if we have higher pull through rates. So we’re not just locking loans willy-nilly. We need some information from you to get it accurate. Doesn’t mean that I won’t give you a rate, but I’m going to tell you. A range of interest rates based off of this fico, this loan to value. And where we’re at right now, once we have the complete package and we’re in a position to lock, I will send you certain and definite figures that we’re able to lock.
The other one that I hear, which is just nuts, is people telling me I say can you send me your loan estimate? Okay, yeah, I’ll send it over. They get the loan estimate and it says that it’s not locked. There’s a box on there that [00:20:00] tells you is it locked or not locked, and if it’s locked through what date, And you say, This isn’t locked, so why did they even send you this loan estimate?
It’s worthless. Everything can change in box A based off of the not being locked. And they’ll say, Well, I talked to my guy and he said we can’t lock until we have the loan approval, or we can’t lock until the file has gone through underwriting. And you’re like, I don’t wanna say that’s completely crazy because at certain times there have been certain investors, but a regular loan, fha, va, U S D A, Fannie Mae, Freddie Mac, that we can send at any number of 50 places, those can be locked.
As soon as we have a loan application. We don’t even actually have to be that far into the transaction. We don’t even have to have a property. Most lenders will allow you to lock, rate and shop for a loan. So again, someone gathering all this information and trying to get you further into the transaction.
Oftentimes what I find, and it’s been a very bad strategy this year, is they’ve offered you an amazing rate and they’re not gonna make much if any money at that. And they’re hoping that rates improve in the next three, four, or five days, and then now they’re gonna send you the locked del e and go, Cool, we got it.
If not, you’re 10 days into a transaction, you have a loan approval, you’ve paid for an appraisal, and with that, you feel locked in and you’re unlikely to change or move away from that lender. Other than a few jumbo lenders, non QM lenders, weird one off, like less than two 3% of lenders have a program where they’re not going to allow you to lock at any point in the process that you want once you’ve identified property.
So those are two big things that you wanna look at. Jeb the next one is one of my favorite ones. This is a red flag. Either you are dealing with someone that has no idea what they’re talking about, or they are deathly afraid of you talking to other lenders that’s warning you. Don’t let anyone else pull your credit.
Hey, when I pull your credit, don’t let anyone else do it. That’ll be an inquiry and it’ll have a negative impact on your credit scores. We’ll post the link here in the show notes to an article from the cfpb, the Consumer Financial Protection Bureau. That states clearly that you have 45 days to shop for a mortgage.
When I pull your mortgage, when any other, when I pull your credit, when any other mortgage company pulls your credit, it’s identified as a mortgage inquiry. All mortgage inquiries within a 45 day window are treated as a single inquiry, and that’s because the government feels it is important for you to be able to shop for the best terms.
So anyone telling you otherwise is either incredibly ignorant or very scared that you’re gonna talk to someone else. I’m gonna be,
[00:22:27] Jeb Smith – Huntington Beach Realtor: again, play devil’s advocate and. Most people, I think are ill-informed, misinformed with how that process works. I’m gonna say that most people are good people and not doing it intentionally, and just really have no idea that you have that 45 day window.
So being nice here, right? But understand you do when you’re shopping for loans, you have that 45 days. But more importantly, Josh, while you’re talking about that, I’m gonna just kind of make a side note here and. If you’re going through that process, and you’re comparing lenders, do it on the same day.
Preferably in the same, you know, hour. If you can have these conversations and quote rates, and get rates quoted and fees quoted to you. Because what happens is, for example the day that we’re recording this, the Fed is going to likely raise the Fed funds rate today. Now, while that doesn’t have a direct impact on interest rates, It creates volatility in the market and that volatility can make rates change.
So if you get a quote, at 10 30 this morning versus 1130 today, there’s a really good chance that the interest rate may vary. It may be higher, it may be lower. So although you have 45 days to get multiple quotes, Do it a little bit quicker, get it in the same day, get it within the same couple of hours, just so that you know what you’re getting is actually comparable to what you’re being quoted.
And because it’s really easy for someone to beat rates and fees and terms when things have improved significantly from when you got the quote from somebody else. And that’s actually something I, it’s gonna actually bring us to another point, Josh, how about somebody that’s offer.
Terms that are significantly better. You quote me a rate just hypothetically six and a half percent. I call Joe down the street, and Joe offers me four and a half percent. Is that realistic? Is that something that I should be jumping up and down for? Is that a red flag to say, Whoa why is there such a big difference in the numbers?
[00:24:09] Josh Lewis – California Certified Mortgage Consultant: red flag to proceed with caution. I would never say that there aren’t loan programs out there that are unique and specific. There’s a program here in, in Los Angeles County that only specific properties are eligible for. They’re doing 30 year fixed rates under 4%. That’s insanity. They are doing it.
I know realtors who have closed four or five deals on it, and when I’m talking to them, I say, I get it. If your listing is in that area and someone’s aware of that program, they’re going that direction. If not, we have a spectacular program as well. So what I like to say is, if you’re getting a generic loan, Fannie Mae, Freddie Mac, FHA, V A U S D A, no one should have a significantly better number than anyone else.
It is more common that you would find someone with a significantly worse number, a half percent higher than what two or three other people can quote you. Reputable lenders should be in a. Fairly narrow [00:25:00] range, unless you are talking about that program that I was telling you about. It’s a cra, a Community Reinvestment Act program that’s a bank.
So they are incentivized to lend in the communities where they have branches. So they’re making it like a no brainer that if you’re in an area where they have a branch that you would wanna get a loan from them. We also have portfolio lenders. You know, Jeb, one of. The majority of my business for the last three or four months has all been on a portfolio loan program.
We send them all to one investor because they are a depository institution. They’re not selling to Fannie or Freddie, even though they follow Fanny Freddie guidelines and they’re about a half percent below the market. So someone could look at that and call bs, and I totally get it if a client calls me, which I get this all the time, well, I talked to another lender.
He said, There’s no way you can do that. I said, Cool. Call my bluff on it. He’s told you that’s a great number. Tell me that we can move forward and in 24 hours, I’m gonna have a locked blown estimate for you that is committing me to delivering that loan to you at those terms. So if someone is offering much better terms, they should be able to explain to you why.
And if it’s a generic loan program, it probably is bs, but I wouldn’t guarantee it. And you’re going to want to get a locked blown estimate as quickly as possible. You absolutely don’t let this drag on 3, 4, 5, 6 days, order an appraisal, then get your loan estimate and find out, yeah, it was bs and they’re not able to offer something much better than the market.
You just want to get that locked and get a locked blown estimate in your hands as soon as possible. And with that
[00:26:24] Jeb Smith – Huntington Beach Realtor: said, if you want to talk to Josh, want to talk to a. In your area, you can be outta state, you can be in any state in the us. Happy to refer you to somebody. There’s a link in the description below that’ll get you connected to somebody and good chance that they have these programs, like Josh mentioned, that are better than some of the other lenders out there, the banks and some of these other lenders that you might be shopping.
So, do yourself a favor. Check that link. Get a comparison just to make sure that you are in good hands. Now, Josh, when you’re having a conversation with a lender, you know, you often say, That you should be making sure that the person that you’re working with is an expert, right? Checking you know their NMLS number by going to a website, seeing how long they’ve been in the business, make sure they actually know what they’re talking about because we both know.
There’s people, a lot of people get in the business when it’s really good and truly don’t understand the business. And oftentimes that leads to misdirection questions that aren’t answered correctly. And then sometimes not answering the questions at all. So, if you call. Or if I call you, I’m a buyer and you can’t answer my questions directly is that a red flag or is it sometimes, Hey, Josh might not know my answer.
He might need to get some more information and get back to me. Is that normal?
[00:27:38] Josh Lewis – California Certified Mortgage Consultant: That’s a super easy one. Jeb. I am an expert and there are lots of things that I don’t know, probably once or twice a week I have to tell a client, Hey, that is an amazing question, or that is an interesting question. It doesn’t come up very often.
Let me check with a couple of my underwriters and I’m gonna circle back with you and get you the right answer. That is answering your question authoritatively, even though I don’t have the answer. And then I, it’s incumbent upon me to circle back two hours later, four hours later and go, Cool. Here’s the answer to this.
The vast majority of things that are gonna come up in our conversation, 95% of things, you’re gonna ask questions, and I’m gonna have clear direct answers based off of experience, and we’re gonna go through that. So if you’re not getting that, there’s two types of people and the more common one is just like you.
Inexperienced people new to the business, and they’re afraid to say, I don’t know, let me get the answer. So they’re gonna do one of two things. They’ll either evade the question and talk around it, or they’ll give you an answer and you’re going, That doesn’t, doesn’t sound right. That doesn’t make sense. So this one is kind of a gray area where you have to trust your gut if you feel like the person you’re talking to doesn’t.
Authoritatively, know the answers or they’re evading your questions. Trust your gut and at a minimum, get a second opinion to make sure that you’re on the same page. What I can say is most of the times when I talk to a client who’s got a bad feeling, that someone’s not answering their questions, not giving them honest and accurate answers.
They’re right when we go through it and say, Well, what was the question? What are we looking at? What did they tell you? They’re like, Okay, well that’s not right, or that’s not accurate and go through it with them. So it’s just one of those areas where it’s hard to say whether the person you’re dealing with is going to get you a good deal or not.
But if you’re getting a feeling like they’re not able to get you the answers you need and give you the confidence that you need to move forward, definitely at a minimum get a second opinion so you can see if someone else can give you that confidence.
[00:29:24] Jeb Smith – Huntington Beach Realtor: Got it. So this one’s a little bit different than other things that we’ve talked about, but you know, oftentimes Buyers are coming to the table and questioning fees or maybe sometimes they’re short on fees, want fees adjusted.
What if the lender is saying that they’re going to give you a credit towards those fees and doing it outside of escrow or telling you that the fee that’s on the worksheet isn’t accurate, You know it’s going to adjust, or I’m gonna give you money to, to change that fee. If you get what I’m.
[00:29:52] Josh Lewis – California Certified Mortgage Consultant: Absolutely. So from a consumer perspective, we have two systems in the United States. After 2008, the banking lobby went to [00:30:00] Washington DC and said, Mortgage brokers screwed everything up. They’re the entire reason why we had this problem with housing. So you need to ha have them have a set of rules and we’ll have a set of rules.
If the lender closes in their own name, even if they’re gonna sell the loan, they can credit you anything through escrow. They don’t have to have a set amount that they’re going to make per loan. On the broker side, a broker has to set their compensation and they can’t give you credits that deviate from that.
Because if Jeb and I both walk in and we’re identical borrowers and Jeb ends up. One and a quarter total points, and I end up paying one and a half while I was discriminated against. So that extra credit they can’t do through escrow. So a lot of times brokers are saying here’s what our comp is. I agree I can match that person’s price, but I’m gonna have to give you $1,500 after closing.
- In the real world, like ethically, there’s nothing wrong with that. They’re doing what every other business in the world is, which is matching a competitor’s price. In the real world, we’re not allowed, Brokers are not allowed to do that through closing, so they may very well be intending to do it, but I have also seen situations where someone says yeah, I can match that person’s terms and they’re not even in the ballpark and they’re go, I’m gonna cut you a check after closing and then they disappear.
Actually, I should have saved it in a better place because I lost track of it. There was a lady who lost her license about six months ago, cuz she was doing that with all of her clients. Okay. Yeah. I realize it says you’re gonna pay $14,000 for your loan. I’m gonna cut you a check for $10,000 after.
Never did it. That’s nice. So that’s not common. It’s more common that it’s someone on the broker side trying to match pricing. Technically they’re not supposed to do it. It’s just something, if you’re seeing any of the other red flags that are making you uncomfortable, that could be a tipping point.
Like at the end of the day, it’s one of my frustrations. We should all operate under the same guidelines. I have the majority of my loans, we close in our name and sell them, so we. 30 different lenders, so we can still shop like a broker does for the best terms. But because we’re the lender, we can credit anything through closing.
A true broker who’s not a correspondent lender, gonna sell that closed loan, doesn’t have that freedom. So it’s not saying that they’re doing anything wrong or a bad person. It can be another red flag to look for in the transaction.
[00:32:10] Jeb Smith – Huntington Beach Realtor: And this is one of my favorites actually. It’s the idea of omitting information or falsifying information on a loan application.
[00:32:18] Josh Lewis – California Certified Mortgage Consultant: is that a legal. It’s highly illegal. And asking you to do it is super illegal, but it’s, this is why it’s important. We now e-sign almost all of our disclosures. So when you sign your loan application, most people don’t even look at it. They just go and they go, Yeah, that’s my name, That’s my social, that’s my date of birth.
Sign. Look through and just make sure everything is accurate there. What I will say. I got in the business in 1996 and people would tell me, Dude, you should have been around here in the 1970s. You could go over And they didn’t have good technology, but they were like, We would print up a pay stub or a W2 and that’s all you sent to the lender with a loan application, and they would approve it.
Well, in 1996, like the more common stuff is here in Southern California, we have a lot of people who don’t have legal residency, and it was very easy to go get a driver’s license and a social security card on any street corner. There wasn’t a good and easy way for lenders to check that. Now there is.
It’s gonna say when that social security number was issued, so long way of saying in 25 years of doing this, like every one of those things gets closed and the biggest loop that got closed is about two years ago we got a new loan application for the first time in 20. Yeah, something plus years, and it asks very specific questions so that you can’t be vague or evade answers that a lender needs to know.
It asks things like, is there gonna be any other liens against this property that we should be aware of? Are you borrowing any funds for closing? Do you have an ownership interest in this company that you work for? So in this day and age, if the loan application is completed honestly and accurately, it is very d.
To commit fraud. Doesn’t mean people don’t try, but anyone suggesting that obviously would be a big red flag for you.
[00:34:00] Jeb Smith – Huntington Beach Realtor: No, no. Good stuff. Now, this is one of the things that I would say the biggest breakdown in communication from me as a real estate agent dealing with lenders on the other side. And I know it’s often the lender trying to appease me as the realtor trying to make, themselves look good, get their offers accepted, but that.
Not being able to give a clear timeline of loan approval, when they’ll have certain things, when the buyer can release potential contingencies because they’ve got everything that they need. It’s often, well, it’s gonna be this time, or it should be this time, and then we get to that time.
And it’s not that it’s, continued to be delayed. Often that can lead to frustration on my side. It can, it can lead to emotion on the buyer side. So, Josh, a red flag, I mean, is that a red flag or is that normal in the business Where a lender can’t give actual, accurate timelines.
I think a lot of
[00:34:55] Josh Lewis – California Certified Mortgage Consultant: people are afraid to honestly answer that question, like, Well, [00:35:00] they’re not gonna like the answer. What I find is that most real estate professionals can deal with what the truth is. If you tell ’em up front and stick with it, they can also deal with. Things changing as long as there’s a valid reason for it, and you can explain that to them.
So most of our transaction right now, we’re asking for at least 10 days for contingencies. And what I find is the realtors will say, Well, okay, let’s put in 14 and if we can release ’em sooner than that, great. They don’t want stress and they don’t want their seller coming to them. Hey, it’s been 10 days where?
But what I always tell them, here’s what we are going to do. You get me a, an executed contract today, we’re gonna order the appraisal today, currently in southern California, dense area, lots of appraisers. We’re gonna get that thing back in seven days. So if you’re at 10 to 14 days on your contingencies, no problem.
I’m going to reach out to escrow today. I’m gonna get the third party fees today, hopefully tomorrow morning. Worst case, we’ll have disclosures out to the borrower tomorrow soon as those disclosures. We can submit to underwriting. So within 48 hours, we’re gonna be in line for underwriting. Most of our lenders are anywhere from 24 to 72 hours in underwriting.
So in seven days, we’re going to have your loan approval. In seven days, we’re going to have your appraisal. So we ask for 10, gives us a little bit of wiggle room. And if anything happens in that 5, 6, 7 days, that gets delayed. For example, I had one last month, the apprais. Didn’t schedule the appraisal till day five.
So of course that guy is gonna need a little bit of time to do the report. So the report came in a day late, but we explained to them, Hey, you weren’t able to get him into the property until Wednesday. It was actually due Thursday. We got it Friday. Can everyone deal with that? Absolutely. But. If someone can’t give you those timelines, it can mean they’re not super experienced.
They’re not doing a lot of business, so they don’t know what timelines they’re gonna be able to hit. A lot of people are just not super organized and not on top of it, and they don’t want to commit to what it looks like. I have a refinance that we are opening this morning and. The borrower was following with me.
Where are we at? What do you mean? I said, Well, is exactly what I told you yesterday. We’re gonna open escrow entitle today. We’ll probably have the escrow instructions in the prelim tomorrow or Friday. We’re going to get the appraisal ordered today, and we’re gonna have it submitted by the time we get your disclosures back, which we’ll have them out today.
So if you sign them we’ll submit on Thursday, which means we have loan approval Tuesday, Wednesday of next week. They should be able to give you that timeline. They should be able to explain to you, okay, once we have the approval, what does that. Well, it means we’re probably gonna have a few conditions.
You and I are gonna have a conversation. I’m gonna ask you for those things and I’m gonna ask you to get them as quickly as possible. Once I have those items back from you, anything from escrow titled the appraiser. Once I have those items back, I’m going to go ahead and clear that with the underwriter.
We’re gonna get your closing disclosure out. Once your closing disclosure goes out, we have to wait 72 hours for you to sign your loan documents. That being able to have that conversation of where you’re at in the process and what to expect. For us, every time we communicate with the borrower, realtor, here’s what happened, here’s what that means.
Here’s what comes next. Someone should be able to always confidently give you those answers. There’s this real estate. Transactions are big transactions. It’s a big debt. There’s enough stress in it that if someone. Keep you advised of where you’re at and what comes next, and explain to you the intricacies of the transaction that you don’t deal with on a daily basis.
You need to be working with someone that does, and it takes me back, Jeb. We’re talking about shopping for a rate, getting quotes on the same day. The people that I find are calling me in a panic two, three weeks into a transaction are often the ones that I talk to and. Well, this guy gave me a lower quote.
I said, Well, okay, cool. Did he give you the confidence that everything was gonna go exactly the way it was expected to go? I may not be the cheapest lender on the planet, but I know we’re pretty darn close to it. So I would never say, no one can beat our quotes, but no one’s going to beat our pricing with a combination of knowledge, experience, expertise, and an engineered process that’s gonna get you where you want to go without stress.
To put a bow on that. Wherever you are in the country, please make sure you’re getting a competitive quote. But go with the person that you feel has the greatest level of knowledge and expertise is gonna handhold you through this process.
[00:39:01] Jeb Smith – Huntington Beach Realtor: I think in short just make sure you’re working with an expert and if you need one of those, there’s a link in the description below.
For now, we appreciate your listening. Talk to you soon. Adios.
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