Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
No matter where you apply for your mortgage, every single loan applicant will complete what is called a “Uniform Residential Loan Application” (“URLA”). This mortgage application template, also known as a “1003” (which is the Fannie Mae reference number), is the universal form used by nearly all mortgage lenders in the United States.
While the URLA application is decades old, what never ceases to get old is how poorly new loan applications are being handled across the industry. The result of defectively completed applications has unequivocally led to more delays with the loan process, higher rates and fees, and more chance of a loan being denied.
With technology playing a critical role in the mortgage process these days, many lenders and brokers are front-loading the application process and having applicants complete this information on their own. This means that consumers are now not only bearing the burden of a complicated application submission process, they are also responsible for gauging what they should and shouldn’t include on their loan application. From my experiences, almost 50% of the loans denied by other lenders could have been prevented if someone took the time to make sure the application was correctly handled from the start.
I recently experienced several examples of just how costly this uniform application process can be when there is no one to oversee the details of how an application is submitted. My recent examples pale in comparison to the countless occurrences that are rampant across the industry. I write this article in an attempt to help people understand, regardless of where they go for a mortgage, just how critical this first step is.
The first case was where someone I was speaking to was quoted a considerably lower rate than what I could give her. If the rate and fees were only fractionally lower, I might not have noticed. I would have encouraged them to pursue the other offer and wished her the best of luck. The rate and fees were too low and didn’t make sense, given the circumstances. Often, when something is too good to be true, it probably doesn’t make sense. In this case, my suspicions proved to be warranted.
I noticed that the other lender’s loan was not taking into consideration the fact that this loan request was for a two-unit home, which requires a higher rate and added closing fees. The client realized that when they were completing the application for the other lender online there was no option to identify what type of property this was. The other lender assumed, wrongly, that this was a single-family home. If not for my vigilance, this issue might not have been discovered until a lot of time and money was spent, and perhaps it might have been too late to abandon the loan process at that point to go elsewhere.
Another case that recently happened was experienced by two of my now clients. They both went back to their existing lenders for their refinance options. (I have written in the past how going to your current loan servicer is often not the best option for a refinance.) One was an online mortgage company, and the other was a regional bank. In both instances, they completed some necessary information online, and the automated process began from there instantly, and quickly.
The rate that they were getting seemed very competitive and was very much in line with what they were hearing from others and seeing online. They were weeks into the process when they finally realized that the new mortgage amount (how much they were borrowing) was considerably larger than what they currently owed on their mortgage.
It took days (if not longer) to get someone on the phone to adequately explain to the applicants why the new mortgage balance was so high. The loan officers explained that in order to get these “below market rates” (mind you, they were not “below” market) they needed to add several discount points that were tacked on to the loan. In both cases, these clients were able to come to us for a mortgage and we were able to give them lower rates without all the excess fees.
I have often written about how some “PMI” versus “No PMI” offers are not adequately considered before a mortgage applicant moves forward with a mortgage request. Sometimes even with a higher interest rate, the fact that there is no extra PMI payment would make the total overall mortgage payment lower than by merely getting a “lower rate” with the PMI.
Again, careful and personalized attention is needed to determine which is the most optimal case given the home, the applicant, and market rates for interest and PMI. Don’t let a “lazy loan officer” put you in a bad deal just because they don’t, or can’t, determine which option suits you better.
While we at Approved Funding embrace technology to help with our initial loan submissions, we manually complete the loan process and work hand-in-hand with each of our clients to maximize the best rates and terms for their needs. At any rate, pun intended, the “best deal” is not always the best option for your specific situation and personal needs. You should always work with someone who cares about your overall financial wellbeing more than they care about merely completing a loan application.
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