Lender Lies Revealed!
Updated: Dec 17, 2018
This is a little something I like to call "Liar, Liar, Lender on Fire".
I’ve never seen a home sale close without at least a few moments of flat out hatred toward the lender. Zip. Zero. None.
And rightfully so. This is the most emotional purchase of your life. It’s flat out degrading to have someone judge you solely on your income, taxes paid and employment status. It’s even worse to work so hard to get a home and have someone take advantage of you when you’re venerable i.e. in escrow on your dream home. You’re basically a sitting duck to lenders as your emotionally and financially committed to this home and they can take it away in an instant.
That brings us to the first lesson of the day: Don’t go tell every Tom, Dick and Harry that you “bought a home!” until you actually have bought the home. Getting an accepted off is hardly buying a home. Just as getting a Pre-qualification is a long long way from getting a loan approval. See below.
Loan Pre-qualification: given out like candy.
Loan Approval: Costs more money than quoted in pre-qual, a little higher rate and your very own blood.
Loan Funding: Costs your first-born child and $20,000 in loan processing fees.
Enter the first smiling face-The Mortgage Broker.
The guy who sells you on the loan but doesn’t have a darn thing to do with actually funding it. He’s the YES man. He can do it all for 3% flat. His entire job is to get you to submit your personal information to the company that pays him. He reels you in and gets you to feel stuck. As the clock ticks on your escrow, ( and he’s already run your credit ) 9 times out of 10 you will not get the loan he initially promised you. It’s a bait and switch and it’s not okay. “Well if you want this to close we’re going to have to switch you to conventional 6% because you’re self-employed” ( he knew you were ) or “you don’t have enough reserves” ( you have him your bank statements ) or the real truth, he just makes more if you switch. NOT OKAY. I’m a NO on this guy.
Enter-the Loan Processor. No one really knows what this guy does but he’s your life line. I picture one small dorky man sitting in a room with files and paperwork piled to the ceiling. A very overwhelmed little man crunching numbers or processing all of these loans. He’s the detail guy. He always asking you for more docs. More and more and more docs. I don’t love him because he’s mysterious about what he does. In reality, the processing is actually just a computer program checklist that probably does this “process” in 5 seconds flat. Yet this man makes it seem like THE HARDEST thing in the entire world. I don’t like being told anything but the truth, the whole truth and nothing but the truth and hence I’m not a fan.
Meet your next nightmare-the Loan Underwriter. Again, what is he writing? These terms have got to go. The is the guy who basically verifies you’ve gone through all the steps ( super sketch as to what these steps are ) and wants to be pretty sure you’re going to pay this loan back. This guy sucks because he’s the slowest little snail of them all. What is he doing all the time? What does he do for 29 days? Why doesn’t he not really speak until day 30? I don’t really get him so for me he’s a no.
Funny little mortgage terms that I’d like to put into question:
“It’s in underwriting.” Where exactly is that located? Can I go there?
Where does it go from, “Oh yes I can definitely do this, you’re well qualified” to “No one is going to be able to fund this loan.” Like where does this drastic difference occur?
“pushed through” Interesting. Are you literally pushing it? Why doesn’t it take so long to push papers?
“Direct Lender”…So, are you the actual owner of the bank?
I have a little story that will make you as mad as it made me. Mr. and Mrs. Buyer were pre-qualified and so they put in their offer. They got the home and went into escrow. The Mortgage Broker told the couple they were a home run. He said this every day for 10 days each time that Mr. and Mrs. Buyer called in to ask what more they could do. Well, on day 11 the mortgage broker said they needed to pay for their appraisal. Hmmmmm Mrs. Buyer thought. We are doing a VA mortgage so the VA pays for that. The Broker told her she had to pay for it and the VA would reimburse her at closing. Okay-maybe. SO, she did it. THEN she called Mr. Processor who told her she was applying for a conventional loan because she didn’t qualify for a VA loan. Interesting that the man who described himself and the broker’s “right hand man” could have an entirely different story than the broker and furthermore, applying for a very different loan that what the pre-qualification had written on it. SCAM #1.
SCAM #2. The standard loan contingency removal period is 21 days. That means most buyers have 21 days to get out of the home purchase due to their loan not going through. Once this contingency is removed, the Buyer is contractually OBLIGATED to pay the home price, whether the loan funds OR NOT. Lenders will try to eat that time up to make you feel stuck. This is not okay. What are they doing those first two weeks? From what I can tell, not much. I once sold a new home and the lender called me 5 days before closing to ask if it was zoned as a detached condo or a Single-Family Home. This is like day 1 stuff. I was very shocked. But you know what? Even though it was CLEAR he didn’t even glance at the file until just 5 days were on the clock, it closed ON TIME! Ever since then I’ve been sure that banks can fund loans as quickly as they feel like. If they risk leaving buyers homeless with their entire lives’ belongings in a moving truck-they will. They have zero urgency in a very urgent situation. Some of the more honest lenders will tell you to expect to be late. Give yourself a week’s leeway. Be realistic they say. Realistic. They really open up a can of worms when they say that one. I can go all sorts of ways with that comment. But I digress.
I cannot say this again so I’ll go all caps here. CROSS QUALIFY and then CROSS QUALIFY again. You’re a smart buyer and you expect these lender lies to happen. You can fight back so that you do not get stuck relying on one lender for the biggest financial commitment of your life. There lenders have numerous loans they are working on, why should you rely solely on them when they aren’t relying solely on you?
REAL: If you run your credit with numerous lenders for the same thing ( buying a home ) within 45 days, it DOES NOT affect your score.
Cross Qualify defined: Sending the same set of documents into more than one lender. It’s called your “package” and you need to get it organized. Put it all in one file on your desktop and it’ll be just as easy to send it to 5 lenders than it will be to send it to 15. Tell them all that they are the only one you’re applying with. This is after all the wild wild west. Ask for rates and loan fees from each and then tell them to get to work. When one doesn’t stack up against the rest, say STOP PROCESS. You’ve got 14 more after all you savvy buyer you. There’s no better feeling in the world than when a lender tries to scare a buyer by telling them there’s no way someone else can close in time now and the buyer says actually I cross qualified with this other lender and they have a better rate and have been working this loan the entire time. BAM. YOU WIN.
I’ve talked about it before but it’s worth recommending again to watch The Big Short.
In this movie, you’ll get to look at that one handsome actor that I can’t name right now but also, you’ll see how much banks do not care. They honestly don’t. Think about it. If they are going to literally triple owner’s monthly payments and then kicking them out of their homes 30 days later, they don’t give a you-know-what if your loan closes on a convenient day for you. Get ahead of it. NOT by being ‘realistic’ and costing yourself numerous late fees or hotel rooms or storage fees. And you know what? I don’t even think you should have to keep your current place for an extra few days while you pay your new mortgage just to be ‘realistic’. You need to get ahead of it by MAKING the loan people do their job from day 1. Day 1 the time starts ticking and you start your calls. Put these people on speed dial. Get them in the morning because most lenders work on east coast time and you don’t want to give them the excuse to be “out for the day”. Call them first thing in the morning every morning for 30 days. Where are you at in the process? What can I get to you today? Ask, Ask, Ask. See the previous post about being The World’ Most Annoying Buyer =). Lots of annoying tips in there.
To close I’d like to say I’m unapologetic for the way I feel about lenders. I am so not sorry. Please don’t email me saying you’re the one that’s different. I reference another movie here “He’s Just Not That Into You” when Sally tells Susie that she knows this girl who knows this girl that slept with a guy on the first date and he married her. YOU ARE NOT THE ANOMALY.
I do recommend three or more lenders ( hey RESPA I see you ) and I like them because they will tell me no. I can call them ( or better yet text – can I get an amen? ) and they can tell me in 5 minutes if they can do it or not. I like that in a lender. Tell it to me straight so I can stay ahead of it. If a client just plain doesn’t qualify for a $1.5 million-dollar home, then they can tell me how to get them there. This is what I like. That long game style instead of throw the client away if they aren’t perfect. We’re all human after all and I absolutely INSIST the lenders I refer treat my clients with the UPMOST respect. If a lender makes them feel poor, they are dead to me. No one deserves to feel bad about themselves. NO ONE.
To the Buyer’s, I’d like to say you have a better shot at avoiding SOME of these common frustrations if you get as direct as humanly possible to the actual bank who is funding your loan. The less people that stand between you and your money, the less people there are to hold you up and flat out annoy you. Go to your actual bank that you have banked with for years because you have some sort of validation with them. The best loans I’ve seen are buyers who are member of credit unions or USAA because you have history with them and they also don’t want to lose you as a member.
Getting a mortgage is like giving birth. Once you see that beautiful baby ( or home ) you are literally so happy that you forget how terrible the labor ( or escrow ) was and you never share it with anyone. I read somewhere that the body actually secretes an amnesia type hormone to recover the body. Why else would someone have more than one kid, right? I kinda feel like it must be similar with home-buying, although I for one have PTSD from a few sales.
I’m sharing this so that you can avoid the stress because there’s nothing worse than stress for your health. I always say expect the best put prepare for the worst. This is a business for the lender and if they were emotionally involved and spastic over each buyer, they wouldn’t have longevity in the job. Treat it like your business too and you win. You’re not going to be their best friend. If they aren’t preforming, tell them so - just like you’d tell anyone else in the work force. If you need to fire them, do it. You’re never too late. Even if your escrow needs to be 10 days longer, it’s better to do that than pay more month every month for the rest of your 30-year fixed life.
So, get as close the bank as you can, trust no one and make it your life goal to buy homes in cash.
Until next time, may all your loans fully fund. God willing- ON TIME.