By George Pressley, Senior Mortgage Loan Consultant, Integrity First Mutual Mortgage

Mortgage lending has become a very complicated and confusing process, especially over the last several years. A good loan officer will make every attempt to ensure that their customer, the borrower, understands the details of the transaction. But does this always happen? Do they always tell the full truth, the whole truth?

Even a loan officer with the best of intentions may withhold a complete explanation, possibly due to ignorance, inexperience, or impatience. That is why it’s best to arm yourself with some details to ask your loan officer. Here are a few areas that may not be on the top of a loan officer’s list of information to divulge to every customer:

Analyzing an Interest Rate Buy Down

Getting a below-market rate through a buy down, a mortgage subsidy that lowers interest rates in the early years of the loan, may sound attractive, but what is the real cost? To determine if a buy down is financially feasible, first figure out the principal and interest payment without the buy down fee (par price). Then determine the principal and interest with the buy down fee and subtract it from the former to arrive at your potential monthly savings. Lastly, the buy down fee is divided by the monthly savings to estimate how many months you will need to retain ownership just to recoup the cost of the discount. If you plan to retain ownership, at least past the break even point, then the better choice is to buy the interest rate down.

Lender Overrides

Presently, most loans are underwritten with computerized software. Some lenders will accept the underwriting results regardless of shortcomings, such as low credit scores or high debt ratios, but almost all lenders have qualifying criteria that supersede or supplement the computerized results. Although you may not be aware of overrides, be persistent in questioning your loan officer if you believe you may have high debt ratios or low credit scores.

Influence on the Decision

The outcome of your loan decision may be directly dependent on the advocacy capacities of your loan officer. Often an organized, thoughtful, and persuasive discussion by your loan officer will change a loan rejection into a loan approval. Generally speaking, loan officers who are employed by banks and credit unions tend to have less influence. Similarly, lenders with an in-house underwriter may have a challenge opposing unfavorable credit decisions. Independent mortgage brokers most often have more flexibility because they are considered to be a customer of the lender. They also have the option, if the results they are after cannot be achieved at a given lender, of moving the loan package to one that may provide a better outcome.

Hopefully this overview will be helpful when you apply for your next mortgage loan.

George Pressley has more than three decades of experience, consisting of 15 years as a real estate agent and 22 years as a loan officer. His specialties are low- and zero-down payment conventional, FHA, VA, and USDA loans for first-time homebuyers and the self-employed—even for those with low credit scores and high debt ratios. Pressley is a senior mortgage loan consultant at Integrity First Mutual Mortgage in Everett and a contributing writer to HomeMatters, a consumer publication of the Master Builders Association of King and Snohomish Counties.