Real Estate Financing and Investing/Follow Up the Loan Process
Both the lender and the buyer could use your support while the loan is being processed. But what responsibilities do you and the lender have toward each other and to the buyer? Communication with all parties and paying attention to details can speed up the transaction -- and that commission check.
Contact with the Lender
It makes sense to maintain contact with the lender to see how things are coming along. It`s helpful, though, to know just whom you should contact. Usually a loan processor and a loan officer handle the loan. There`s a difference between the two, though in smaller loan departments that person might be one and the same. The loan officer prequalifies the buyer, selects the loan most appropriate for the buyer, and is your main contact person.
The processor takes all the needed documentation (employment verification, account numbers of bank accounts, credit report, tax forms, and so on) and packages the loan so that it meets the requirements of the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). The processor obtains the lender`s stacking order and also orders the appraisal and title report.
The loan then goes to the loan officer, who`ll keep you abreast of new developments regarding the transaction and let you know whether there`s anything you can do to assist in the process. The loan is subsequently sent to the underwriter or a loan committee or both for review and final approval.
It`s a process of check and double-check.
How often should you check in with the loan officer? That probably depends on your relationship. Communication is crucial between the real estate professional and the lender. Communication lines should be open during the follow-up.
Inform the buyer
What about contact with the buyers? Salespeople should let buyers know what they can do to expedite the loan process: "If verifications get hung up somewhere, a buyer might have better luck calling and working his way through the system."
What else can a real estate professional do to help the process along? Check for earnest money funds, inform buyers about homeowner`s insurance, and order a profile of the property. A salesperson can help out with the appraisal as well by obtaining comparables for the appraiser. The availability of appraisals of like-kind property makes the appraiser`s job easier. However, Some appraisers want the help of a real estate professional but others don`t, so it`s a good idea to check with the appraiser involved.
Loan Rejection or Acceptance
If a loan is rejected, there is some recourse for a real estate professional. You can try to help identify the problem (poor credit and employment problems, for instance) and be realistic and supportive. When a buyer's loan is rejected, you might want to tell the buyer, "This particular loan company rejected the loan. But there's latitude within the Fannie Mae and Freddie Mac rules and regulations. Even though one company disapproved the loan, it doesn't mean another won`t approve you. It`s a race to the finish line, and just because we stumbled, it doesn't mean we should give up. When a loan is accepted, you should let buyers know about closing costs before closing.
Communication is of utmost importance during the follow-up process. Your role as communicator and facilitator is more important than ever. You`ll increase your professionalism and your reputation with lenders and buyers alike by being thorough and accurate.
Table 1. TYPES OF MORTGAGE LOANS
a. Conventional 30-year mortgage
|Fixed monthly payments for 30 years provide certainty of principal interest payments||Higher initial rates than adjustables|
|b. Conventional 15- or 20-year mortgage||Lower rate than 30-year fixed; faster equity buildup and quicker payoff of loan||Higher monthly payments|
|c. FHA, VA fixed-rate mortgages (30-year and 15-year)||Low down-payment requirements and fully assumable with no pre-payment penalties||May require substantial points; may have application red tape and delays|
|d. "Balloon" loans (3-10 year terms)||May carry discount rates and other favorable terms, particularly when the home seller provides the loan||At the end of the 3 to 10 year term, the entire remaining balance is due in a lump sum or "balloon" payment, forcing the borrower to find new financing|