Warning… this blog is thought provoking, but is only for the weary sole that can outlast and read 1,500 words. But it’s worth your time…. Just my .02.
Today was an interesting day. My Google Alerts told me that someone mentioned me in a post. The title was "Mortgage Professional or Used Car Salesman? Why it pays to know the difference."
In order to get an idea where I am going with this, you first need to read this blog. I need a quick fix !! Please pass me that 4.5% rate over here now !! (hint-I was trying to make a specific point, but was accused of not showing the value of money - again, my post was not about the value of money, but why lowering rates could hurt our economy. Secondly, I even stated this in my post. But that was failed to be recognized.)
picture from istockphoto
And before I continue, let me make this statement. "I am not god, nor am I perfect, but I do consider myself to be damn good" Opinions are fine. Debates are fine and I think are healthy. But telling people to do one thing because someone else wrote something that they don't agree with?? And make it sound like it's the gospel? And when it's very misleading and missing facts? That's where I do get upset and wonder why we are in such a financial mess. Wondering if some advice by some so-called professionals are lacking truth and true value. But again, this is just my opinion. But I did a quick survey on what I am about to talk about. Out of 26 people that I talked to today, only one disagreed with my point of view in regards to what questions that a loan officer should ask the consumer.
Now, many of us that hear used car salesman, we think of a sleezy type of a sales person. The first sentence in this specific blog was this..... Please read below.
Wow, that sounds like harsh advice, doesn't it? Well people, the very first question that I ask all of my clients is just that. "What payment are you comfortable with...." Yes, I will admit this and I am damn proud that I actually care about my clients. Other loan officers that try and sell against me, usually it's about rate. But many of those same loan officers lack knowledge, the service is just average, and they aren't usually good thinking outside the box. Again, just my opinion, but after being in this business for over 16 years. Maybe you should read : payment vs rate - Then this person went on to say this.....
HHhmmmm... interesting explanation. My take? How can you compare shopping for a car vs buying a home? Besides, I actually know some very professional, successful, and excellent car sales people. I know some people that never went to college, that not only went on to have very successful careers, but they were very savvy, great at what they did, and extremely smart. But it's easy to label people that we really don't know much about. And the last statement? First off, define best deal. I think virtually impossible. To me, best deal would be something that didn't cost me a penny. What about you? Secondly in this person's statement, "the difference between what you can qualify for and what you are willing to pay equals big profit"??? Says who... In my opinion, this is a very loose statement.
My quick fix.... getting that low rate will get me off the fence... As stated before, I didn't address the value of money or the value of obtaining lower rates, because that wasn't my point in this blog. My main point, I think lower rates could hurt us in the long term. Quick explanation..... refinancing people doesn't add real money into our weak economy. If I saved a client $150 a month, they might want to go to a nice restaurant once a month. If I lower their payment on a purchase? Many people aren't great savers, they will find a way to spend it. Maybe want a few new outfits. This person even made a comment about taking the extra money and paying down your mortgage principal. Sorry, but in most cases, I disagree with that advice. You should talk to a true financial planner and look at your options. My advice, find out vehicles that will allow you to invest your savings at a higher percentage than that of what you are currently paying on your mortgage. Besides, think about this... if you run into a real emergency, you just can't go to your house in 24 to 72 hours and get your money back. You would have to sell your home or refinance, that is even if you could refinance now. But if your money is another investment, in most cases, you could take that money out in a quick, timely manner.
This is very interesting..... there is no reason to ask my question in the beginning of the interview. Wow... then when is the reason??? 15 minutes later? What is the first question? The one person that I found who disagreed with me and actually agreed with this person? I asked them what their first question is. They stated something like... "I want to know what you want to do" ... "what you are trying to accomplish." I am sorry, but even as a loan officer, I don't truly understand the question. If I was a consumer, I would even be more confused. Here are Jeff Belonger's basic questions asked when speaking to a potential client.
Now, what is all the fuss? Why am I so hung up on the statements made above? Let me try and paint a picture for you.
Jeff Belonger - "Mr. Borrower, what payment are you most comfortable with."
Mr. Borrower - " I don't really want to go over $1,000... but if I had to push it, I would not go over $1,100." You as the borrower, wouldn't you know these better than anyone, right? I know how I spend my money... I know my expenses and how I live.
Now... I will be the loan officer that approves you for the largest mortgage... and disregards payment in a certain sense.
Average loan officer - "Mr. Borrower, do you know that I can actually approve your for $1,500 a month? Do you understand that can get you a $300,000 home and not the $250,000 home that your payment would get you?"
Mr. Borrower - "interesting, I'll talk it over with the wife. We have seen some homes that cost $300,000 and we really would like that. Maybe we can make it work."
Here is my issue with this and why I truly feel that this was a small part of the reasons to the mortgage meltdown. We gave mortgages to people that were qualified by quidelines, but that many consumers should have not bought higher in price. There are many costs that aren't factored into the equation when buying a home. Which are :
- higher taxes
- new home - buying new appliances. buying curtains or window accessories.
- maybe a large item that breaks down?
- credit - we are creatures of habit and use credit that we can get now, and worry about paying it back later. If we get ahead of ourselves, we get way behind. It happens and happens more now than ever before. Ever hear about the phrase, "living pay check to pay check?" I would bet that this is about 50% of all Americans.
- there are many other issues to add here, but you should get the picture
Summary : If we give people many options, show them bigger and better, and let them think about it... many will take that risk now and go for it. Talking themselves into it. We as professionals need to remind them of what payment that they are comfortable with. We need to understand their goals, current and future. We need to educate them and make them think the whole process out. But without asking them the first question, "what payment are you comfortable with" ..... aren't we bypassing most of the problems that could arise due to the examples that I gave above?
I will say this, the person that attacked me in a certain sense, did give some good input on how to look at rates and the value of money. But to make a bold statement that we should not ask about payment, at least as the first question? Then I ask you loan officer... Then I ask you America... what should be the very first question that I should be asking the consumer? Please list them in your comments. I will admit this, my first 5 years in the business, I did ask how much of a house they wanted as my first question. But after I educated myself, taught myself reasoning, and understood that with that question, we were giving a rope to the borrower to possibly hang themselves. I get blasted because we need to find out what a client wants. But wait, aren't we the experts? And we are asking the borrower to tell us a home price, but we need to factor in taxes and homeowners insurance? Don't we know that some programs and or rates could have pricing hits that the consumer doesn't know about? And that rates do make a difference in payment? So, I ask again, smart loan officer, what should be the very first question?
Beth Forbes writes a basic post about what you can afford.... How much can you really afford?
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