Series – Modify or Refinance? Finding a Lender

If you are working with a loan modification, obviously you are working with your original lender and any 2nd or 3rd place holders as well.  But what if the lien holders can’t all play ball with you?  You have the option to try a refinance, pay off all the existing loans and start again.

Part one of finding a lender is identifying who has money to lend.  BAB (Big Arsed Bank) may be under a federal stress ultimatum, trying to raise capitalization.  They may not be willing to issue a loan.  STM (Small to Medium) bank may have extended itself far enough that it has nothing to lend.  Private funds may or may not be lending.  And so on.  Call the office and ask whether they are currently doing loans for Single Family Housing (or whatever type of loan you are seeking).   

Part 2 – find a loan officer or broker.  I have a friend in the mortgage business, Jim, whose name I give to every potential client of mine.  He is a man of character, integrity and many years in the business.  I like the way he works because he will not lead anyone down the garden path, only to jab them with the rose thorn at the end.

On a recent closing, Jim and I “talked through” my client’s loan.  The client was getting his loan somewhere else, on the recommendation of a co-worker.  My friend correctly identified well in advance, the problems my client was getting set up for.  Sure enough, even after they had signed closing docs, the lender said, “wait a minute ……” and there were 2 days of additional wrangling before everyone was happy.

Fitting you into a loan is a skill, but it is also a sales job.  The person receiving your loan application wants to make sure you stay with them because just as easily as you could change your mind from a Toyota to a Kia, you can change lenders.  There is a skill to keeping the carrot dangling until you sign the closing papers and the loan officer picks up his or her check.  Some soundbites which you should keep in mind are:

  • If it seems too good to be true, it probably is.
  • “The underwriter might need a few adjustments” means the loan will not be approved as is, but at the last minute, with a higher interest rate or more down, it might be.  Swerve clear at the beginning.
  • “Normally we couldn’t approve [this FICO score, your debt/income ratio, the LTV], but I think we can do it for you.”  No, they can’t.  You will have to leap hurdles down the road.

The bottom line is, beware of what is being said to keep you on track with your loan officer.  You are making a huge decision in purchasing a home, and the bank is taking a huge risk in lending you the money.  Your loan officer should be helpful and communicative while still being lucid about how the process will or will not go.

Note – if you have a reputable lender tell you they do not foresee you being able to obtain a loan, take it as a word from on high.  Fix whatever problem needs fixing before you apply again because taking your problem to a “used lemon salesman” will only result in you being shoehorned into a loan product you shouldn’t have.

If you want a referral for the mortgage guy, here’s his website

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