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.
Earlier this week, I took two of our children to the pediatrician for a throat culture. While we were in the room waiting for the nurse to arrive, one of my children jumped on the scale to weigh themselves. As I am sure most people are familiar with, the scale is one where there is a bigger weight on the bottom level, and a smaller on top which is adjusted until the scale is perfectly balanced to determine the exact weight. It was fun to see my daughter try to figure out if the outcome would be the same if the bigger weight on the bottom was shifted lower, and the top higher. As we all know, the result is always the same.
Most people equate the loan process to that of getting a root-canal, or worse. People think it is an intrusive procedure, with unrelenting demands for additional paperwork and rigid rules. Granted, the mortgage application process is extremely delicate, and there are predefined policies and procedures that help streamline loan approvals – but there are certainly ways to make the process less frightening and even ‘tip the scales’ in your favor if you are coached properly.
Like the physician scale, mortgage banking is a matter of balance, and knowing which levers to fine-tune as needed. Sometimes it’s the big weight in one area that needs to be moved drastically, before the other weight could be tweaked to make the scale balance. The thing to realize about most mortgage programs is that there is a predefined equilibrium. There is a uniform standard on what is needed based on the program parameters for each loan application. In some cases however, similar to the balancing scale, you might be able to compensate for a deficit in one area, by having a surplus in another.
As an example, I was recently having a discussion with a prospective client who bluntly told me that she cringes every time she sees something on the news about low mortgage rates. She knows that because of her poor credit, she is unable to take advantage of a refinance to lower her payments. We began discussing the nature of her credit blemishes and I insisted on allowing her to let me run her credit. Okay, she got me! It wasn’t pretty. At the same time, it wasn’t the catastrophe that she made it seem to be. She told me a few of the other factors that I needed to calculate, including what she thought her house was worth – and the analysis began! Fast-forward two weeks later we were able to approve the loan and give her reasonably aggressive mortgage rates in spite of her credit! In her case, we were able to offset the poor credit with the vast equity that she had in her home, and prevent it from hurting the rate offering.
In another situation, I was referred a client who was purchasing an investment property but was not able to get pre-qualified for as much as he needed to make an offer on a house he wanted. Granted, with non-owner occupied mortgages, the eligibility is a little more restrictive, but I was up for the challenge. I couldn’t do much to adjust his income, his credit score, or the amount of financing he was seeking. However, after a little more discussions, I uncovered significant funds that he had in reserves that we could document. With the inclusion of these extra reserves as a compensating factor, I was able to stretch his qualification ratios higher to allow him to qualify for a larger loan. It’s all about the coaching and guidance to know which adjustments can be used to compensate for one another.
At this time of year, I am sure most thoughts and concentration are on the upcoming day of judgement. We do not know the proper weight and worth for the deeds that we do, but we hope and pray that our labors and efforts to tip the scales in our favor are answered positively. Best wishes to everyone for a healthy, happy, safe, and prosperous year to come.
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