Realtors: What To Look For In A Lender
DAK Mortgage (NMLS #1922428)
Creative Financing Solutions for Residential & Commercial Mortgages | Turning Bank Turndowns into Success Stories
If you’re involved in real estate sales – whether at the agent or broker level – you know how much you rely on mortgage industry professionals to get buyers approved so you can close deals. According to the?2022 Home Buyers and Sellers Generational Trends Report, 87% of all home buyers rely on financing to successfully complete their home purchase.
Every veteran agent has been there: You work hard to market a property, show the property, prequalify the buyer as best you can, present the offer, handle the negotiations, and draw up the purchase contract – only to lose the deal because the borrower can’t get financing approved on time.
Why do buyers get rejected? Here are the leading causes of rejected mortgage applications, according to the same report:
Meanwhile, even among those who are successful in buying a home, 30% of buyers found that the process was more difficult than they had anticipated. Much of that is due to onerous bank underwriting processes, with their seemingly unending documentation requests and delays, which frustrate buyers, sellers, and agents alike.
Have you had a buyer get turned down for a mortgage? You’re not out of the game.?Click here to give your buyer a plan of action.
Prevent lost deals before they happen
Then there are the invisible lost deals: The deals that don’t even come up on your radar as possible because potential buyers are intimidated by the process or underestimate their ability to get a mortgage.
Sometimes, buyers have had mortgage applications rejected before, and are hesitant to go through the frustrating process again.
Just as not all real estate salespersons and brokerages are created equal, neither are mortgage lenders and brokers. In fact, there are big differences between them.
Often, the problem isn’t the borrower: The problem is that the borrower got matched with the wrong lender.
Bank, non-bank lender, or broker?
The first level of difference is institutional. When a deal is on the line, who do Realtors? want handling the mortgage? A traditional bank, a non-bank lender, or a mortgage broker who can take the deal to multiple lenders?
When real estate research firm Inman surveyed more than a thousand Realtors on this very question, a solid plurality said they preferred to refer business to mortgage brokers.
It’s easy to see why.
Traditional bank lenders
Traditional banks do a good job with very traditional borrowers. The ones with regular jobs, easily verifiable income, good credit, who are buying middle-class two-to-three-bedroom single-family residences, duplexes, triplexes and quads, and who aren’t spending too much. The banks can sell those mortgages to Fannie and Freddie and be done with them. And they don’t have to get too creative.
But traditional banks are terrible at serving homebuyers and investors that don’t fall into this narrow segment of the borrower spectrum. Millions of Americans (and millions of foreign nationals, as well!) are terribly underserved by the traditional conventional mortgage market and the banks that dominate the industry. These underserved borrowers include:
Traditional bank lenders also have a very limited inventory of loan types and programs. Their loan officers are employees, not directors. And they have little flexibility to design a program that suits the needs of the borrower.
Non-bank lenders
Non-bank lenders include lenders that don’t quickly sell mortgages to Fannie Mae and Freddie Mac but who plan to hold them for their own portfolio. These “portfolio lenders” have much more flexibility to set their own underwriting criteria and design their own loan products.
As a Realtor, if you happen to know the perfect non-bank lender whose loan criteria perfectly matches your client’s situation to refer them to, you have a much better chance of getting the deal approved.
But real estate agents have plenty to do. You don’t have time to become an expert, and remain an expert, on every lender’s constantly evolving lending criteria and loan programs.
Mortgage broker advantages
That’s why more Realtors refer buyers to mortgage brokers than to either traditional banks or to non-bank direct lenders. The mortgage broker that has ongoing relationships with dozens or hundreds of possible lenders is simply in a much better position to help the borrower choose a “best-fit” lender, craft the application, submit supporting documents, and get the deal funded.
The fact is that out of the top reasons for rejected mortgage applications listed above, and for many others, many of these rejections could have been avoided, borrowers approved, and deals closed simply by referring the buyer to a better lender or loan broker.
Is debt-to-income ratio a concern? There are lenders out there who are willing to write higher debt levels or are more open-minded about how to verify income.
For example, we work with lenders who have “no ratio” programs. These are ideal for self-employed borrowers, independent contractors, and others with unconventional, foreign-sourced, or difficult-to-verify incomes.
Unlike traditional bank lenders, who have to hew to Fannie Mae and Freddie Mac requirements, these non-bank lenders have the freedom to approve mortgages even without tax returns, tax transcripts, or proof of employment at all. And mortgage brokers have the advantage of being able to match the buyer’s situation with dozens of possible lenders.
Access to dozens of loan programs
Most lenders, bank or non-bank, only have a few loan programs under one roof. That’s another reason mortgage brokers have the advantage. Brokers have an incentive to follow many different lenders and stay current on the latest loan programs – both traditional and exotic.
An experienced mortgage broker’s value is in being able to match buyers with the very best loan program for their specific situation.
So you can be confident your borrower has the strongest possible chance of financing approval.
Speed is critical
According to research from Inman.com, speed was the number one factor that determines whether agents refer a given lender to a client.?Six out of ten agents Inman surveyed rank speed as the most important single factor?in referring a lender to their clients.
The average home sale takes nearly two months to close – again, mostly due to delays in getting financing approved and funded. But experienced real estate pros know: Things happen. Even to the most eager buyers and sellers. Every day that closing is delayed simply extends the window of uncertainty, and increases the chance that something can go wrong:
The problem is that traditional income verification and bank underwriting is extremely slow and time consuming.
That’s why many non-bank lenders engage in asset-based lending or employ alternate underwriting strategies that can lead to much faster approval and funding. A mortgage broker that knows when speed is critical can help your buyer find a lender who can?close fast. So you can get the sale closed before “life happens,” and costs you the deal.
It’s all about “who you know”
Veteran Realtors know that real estate is a people business. The more people you know – whether buyers, sellers, or influencers – the better your chances of success. When you have a vast network of qualified potential buyers and sellers, you bring a lot of value to your clients.
The experienced mortgage broker who has a relationship with dozens of potential lenders – each with different loan programs and risk tolerance – brings similar value to real estate agents and brokers. The more lenders they know, the better the chance they can help you find the right match – and get your buyer approved.
Ability to handle previous turndowns
Even if you have a frustrated buyer who’s been rejected before, all isn’t lost. Your mortgage referral partner should have the capacity to help your buyers “bounce back” from a bank rejection.
At DAK Mortgage, bank turndowns are our specialty. Many times, we’re able to work with borrowers who’ve been turned down by traditional mortgage lenders by matching them up with non-bank lenders and niche lenders who have lending criteria that better matches their specific situation – no matter how unusual.
Sometimes the interest rate is a little higher. But that’s usually not the most critical issue.?Here’s how to work with these borrowers, and help them buy the homes they need.
In other words, we help Realtors save their deals – and deliver value to your buyers and sellers, alike.
Conclusion
Don’t lose any more deals to inflexible banks who can’t work with your clients.
Bank lenders are notoriously picky. And as a real estate agent or broker, you’ve got your hands full matching buyers and sellers. It’s not feasible for you to also become an expert on dozens or hundreds of niche non-bank lenders and all their various lending programs.
Most don’t advertise to Realtors, and don’t make their specific programs or overlays public. Instead, they work through their own networks of mortgage brokers and rely on brokers to match them with qualified borrowers.
That’s where we come in. At DAK Mortgage, we specialize in connecting unusual, challenging, or hard-to-place borrowers with the best possible lenders. We have a vast network of lenders willing to engage in some creative financing or creative underwriting – all to get your buyer approved, so you can close the deal and move on to your next listing or client.
Do you have a buyer in mind who needs a little special attention? Or a property in mind that doesn’t qualify for conventional financing? Or are you just frustrated in general with good buyers getting turned down for financing??Contact us today, and let us help your buyer get to “yes.”