Today I wanted to talk about one of my favorite types of clients - The Rate-Shopper. Hey, I get it, I’m a consumer too. When I go buy a car, I look online to ensure I’m getting a decent deal. However, at some point, trying to find the “best deal” ends up being counter-productive and tends to lead me away from the “other” things that matter. Customer service, maintenance packages, quality of the service department at a specific location and ease of the completing the purchase are all things that SHOULD be considered when buying a car.
Unfortunately, in our compare-everything, commoditized world – consumers forget that there are some processes, like buying a home, where there is a lot more at stake than just the “rate”.
So, let’s talk about the rate - When I do lose a client due to rate, it’s usually because of a 0.25% difference (clients rarely care about 0.125% and any two lenders are rarely part by more than 0.25%). Contrary to popular belief, no one really has any idea why B of A, or Quicken, Akron Ohio Federal Credit Union or any other financial institution happens to have a lower rate on any given day than other lenders. Maybe, on a certain day, business is slow, so B of A drops their rates to try to attract more business.
Whatever the reason, 0.25% on a $540,000 fixed mortgage (currently my average loan amount) equates to about $78 a months. What I frequently hear is that $78 per month x 360 months is $28,080. Sorry Scott, I don’t care how highly recommended you come and how much work you’ve done up front, $28K is $28K. Ok, fine, assuming you, the consumer is not falling prey to some type of bait-and-switch sales pitch (which is often the case), then go ahead and go with the other lender.
HOWEVER, keep in mind… that the average American is completely incorrect about his assumptions about how long he will be in a house. Although 95% of mortgage applications in America are for a 30 year fixed, just over 90% of Americans will NOT have their current mortgage 10 years from today. The average American, EVEN with rates as low as they’ve been for the last decade, has historically only kept his mortgage for 6.7 years – about 80 months. Upgrading, down-sizing, refinancing, foreclosure, paying off a home in full, distressed sell – 90% of our clients will not have their house for more than 10 years. They definitely won’t have their same mortgage. Now all of the sudden, that $28K is really $78 per month x 80 months = $6,240. Still, $6K is a lot of money. However, it’s probably not enough money to start the loan process over on day one of escrow with an unknown lender. Remember, the lender taking that rate-shopper call does not have all the borrowers information (credit score, scenario, underwriting approval and source of down payment – all things that can affect the rate).
Cautionary Tale #1 - Recently, I had a client ditch me on the day we opened escrow due to a 0.25% difference in rate. Mind you, the client lived out of the state and one of the reasons the listing agent accepted the offer was because he had a high level of trust in my ability to close the deal. The client went with a lender whose name rhymes with Mel’s Cargo. Here are the problems he encountered.
1) An out of area appraiser was assigned to the property and appraised the property low. Borrower had to bring in tens of thousands of dollars in extra cash to bridge the gap of the appraisal deficiency. 2) Lender required Earthquake insurance. This was insurance the client didn’t intend to purchase and will now cost him an extra $1,200 per year that he didn’t plan on spending. 3) The day escrow was supposed to close, the client found out that the appraisal had just been reviewed (something that happens at Movement Mortgage within 24 hours of receipt of the appraisal), and the bank was requiring several thousand dollars of repairs and follow-up inspections prior to the close of escrow. All and all, to save $94 a month with that “lower” rate – this client is parting with an extra $40,000 in the first year of home ownership that he wasn’t planning to spend.
Cautionary tale #2 – My team is good. REALLY good. From my loan officer assistants, to our processors, to our underwriters; our team knows how to structure a deal. While still staying within the guidelines of Fannie Mae and Freddie Mac – our team has become experts over the last 14 years of packaging loans for self-employed buyers and those who work in the entertainment industry.
Recently, I had a client ditch me for a broker who was promising a rate, on an investment purchase, of 0.375% lower. At a savings of $237 a months – I TOLD the client to ditch me and go with the other guy as long as he had the rate lock in writing.
Fortunately for me, and unfortunately for the borrower, I got this deal back two weeks later. Turns out the appraisal came in low AND, more importantly, the other lender had miss-structured the deal. In order to have the buyer qualify for the loan – which I already had approved – the other lender required the borrower to “pay” himself an extra $100,000 from his business account to his personal account. The transfer of these monies resulted in roughly $30,000 of payroll tax. Payroll tax that could have been partially avoided had the borrower stuck with our original approval here at Movement Mortgage. To save $237 in tax-deductible interest payments, the client paid roughly $30K in income tax he didn’t need to.
The team just closed on this Spanish style home with an amazing view in Eagle Rock.
Often we warn clients that their CPA and our underwriter have completely different jobs. The CPA is trying to write off as many expenses as possible to minimize the client’s taxes. By contrast, our underwriter is trying to add money back to the client’s income for the purpose of qualifying and has to remove deductions from the income. As you can imagine, having a lot of deductions can really reduce the client’s usable income, and thus the approved loan limit. This was the case with the buyers of this home. Due to tax write offs, our clients would normally have had to put 25% down to close the loan. However, thanks to recent guideline changes, we only need to use paystubs instead of tax returns when a client is a W2 earner. Because of this new change, our clients only needed to put 10% down, which allowed them to direct the additional funds towards upgrades.
We had the pleasure of working with Courtney Poulos from ACME Real Estate. She was there every step of the way to keep everyone on track throughout the escrow process. If you are looking for an agent in Northeast Los Angeles, the team highly recommends Courtney.
If you are a W2 employee and have tax write-offs, call Scott Groves @ 818-679-5188 or apply online at www.LendLA.com
The team just closed on this beautiful craftsman in Highland Park.
We tell all of our clients that we can close fast as long as they get us all of the required documentation upfront. Once again we had a client that did just that and we were able to get them fully approved upfront. Before you say, “well you do that with everyone, why is this a big deal” the reason is that we were able to get this done with a jumbo loan.
Jumbo loans are typically trickier loans because of the added guidelines and overlays that are attached to it. Because of this most lenders close a jumbo loan between 30 and 45 days. We were not only able to fully approve the file upfront so that the offer was written with no loan contingency, but we were also able to close this loan in 11 days. You heard that right! We were able to close a jumbo loan in only 11 days. Here at the Groves Lending Team, loan turn times like this are the new norm for us, but as always we did have some help by an amazing buyers agent.
Blake Hood from Atwater’s favorite realtor team Kurt and Courtney was instrumental throughout this process. He was able to keep his client focused the entire time and more importantly was able to snap the listing agent out of shock when he heard we were closing in only 11 days. If you are looking for a phenomenal agent to work with, the team highly recommends Blake.
If you have any questions regarding jumbo loans and which might be the best for you, call Scott Groves @ 818-679-5188 or apply online at www.LendLA.com
The team just closed escrow on this Highland Park refinance for which the team did the original loan for two years ago. It is amazing what can happen in two years, especially in a neighborhood like Highland Park. Because of rising home values, our borrowers were able to do a cash-out refinance for a large remodel and still have more than enough equity to avoid mortgage insurance.
This was a win-win for our clients: funds for a remodel, a lower interest rate and no mortgage insurance.
If you are planning a remodel, or just need cash, call Scott Groves @ 818-679-5188 or apply online at www.LendLA.com and see if a cash out refinance will work for you.
The team just closed on this Highland Park condo.
We always feel fortunate to help first-time homebuyers achieve their goal of homeownership. Our borrower was able to provide us with all of the required documentation upfront and all underwriting conditions within an hour. When the offer was made, our borrower was completely approved so he knew the absolute maximum sales price so he could offer without any hesitation. And thanks to the agent’s help we were able to get the condo approved before the initial offer was even made. It is a great feeling to be able to tell a first time buyer that the loan and the condo complex is 100% approved, and that as long as inspections come back positive, the unit is his. This is the reason why we love our job so much.
We and our client were extremely lucky to work with the one and only Adam Bray-Ali. Adam was able to get us everything we needed super-fast. He was also responsive and reassuring throughout the process, making the overall experience for our client amazingly easy. The team highly recommends Adam for all of your real estate needs.
If you are a first time homebuyer and want to have an advantage over everyone else, call Scott Groves @ 818-679-5188 or apply online at www.LendLA.com
The team just closed on this adorable home in North Hollywood.
As with many of our loans, this one closed in less than 30 days. It shows that when a borrower provides us with all of the required documentation up front, we can get a loan funded very fast.
If you want a stress free escrow that is lightning fast, call Scott Groves @ 818-679-5188 or apply online at www.LendLA.com
The team closed on this condo in Los Feliz.
We have successfully funded several deals in this complex; the reason we are the go-to lender is our condo pre-approval process. As you know, when it comes to condos, if any information when it comes to the HOA, most lenders (especially the big banks) will deny the loan. With our amazing condo pre-approval process, when buyers find a condo they wish to write an offer on, the agent only needs to provide three pieces of information to us: We need the name of the complex, and the contract person’s name and phone number. That’s it. From this information, we will know if the complex you are writing on is approvable. Once a condo is approvable—whether this particular buyer goes into escrow or not — the complex is added to our list of approvable condos. Having everything pre-approved allows us to either go into a new escrow on a complex that is new to us and know it’s approved , or allows for the next escrow on the building to move even faster and more smoothly.
We worked with John-David Forsyth on the buyers’ side and Micah Campbell on the listing side. Both agents were integral in helping our escrow to move smoothly from start to finish. If you want to buy in Hollywood and its surrounding areas, our team highly recommends John-David. If you are looking to sell in Los Feliz and its surrounding area, the team also highly recommends Mica.
If you have any questions about condo financing or our condo pre-approval service, you can reach Scott Groves @ 818-679-5188 or apply online at www.LendLA.com
I want to talk about commitment. We all know that in personal relationships there is a different level of commitment when you’re dating someone versus when you’re married. That is why the dating versus married analogy is quickly becoming my favorite to use with new buyers. Feel free to borrower it
Let me expand on how I explain this to new buyers.
We are flirting when… we first start talking. In the initial phone interview or email interaction we are getting to know each other. Hopefully you were introduced to me by a trusted advisor. Discussing long term financial plans, loan options, rates, terms, down payment, employment and how to structure the deal is the flirtation stage of the loan process. Our relationship is just starting. As a buyer, you can flirt with as many loan officers as you like. In fact, I encourage it. Get all your flirting out of the way now. Flirt with your cousin’s-friend’s-brother’s-ex-roommate who is a mortgage-broker in Temecula. Flirt with the loan officer at your Credit Union. Have an online romance with quicken.com or other Internet lenders. PLEASE, I want you to know you are picking the right partner… flirt with as many loan officers as possible.
HOWEVER, we are dating when… we start to work on your loan approval. On your side, providing paperwork, filling out applications and tracking down financial statements is hard work. On our side, thanks to Movement Mortgage’s UP-FRONT process and FULLY underwritten approvals, we are putting in a LOT more work than other suitors. Yes, you are still welcome to look around and flirt, but this relationship is definitely going somewhere. You should be ready to get serious at this point and avoid the sales pitch of any other flirt.
We are engaged when… you start making offers. At this point in the relationship, you are making an offer that has certain contractual obligations to the seller about what type of financing timelines you can meet. As the lender, I am making a personal and professional commitment to you, your agent and the seller of the property that I can take care of you and close this deal. I’m putting my reputation on the line to help you get this offer accepted. Yes, like any engagement, you can call it off if it’s absolutely not the right long-term fit, but the invited guests (the seller and the listing agent) are going to have a bad taste in their mouth. Remember, these are people you have to work with for the next 30 days. Re-shuffling the wedding seating chart can lead to lots of problems and hurt feelings.
We are married when… the offer gets accepted. Congratulations, we are married, in escrow and are committed to closing this deal together. Yes, at times the grass may appear greener on the other side. There may even be a better looking spouse out there somewhere (probably on the Internet); however, we both know that we are going to work hard for each other to ensure the best possible outcome and a successful close of escrow. Does divorce happen, do client sometimes change lenders mid escrow? Yes, it happens. However, there better be a good reason and an understanding that there may be negative financial consequences to getting divorced.
If you’re not happy in the marriage, call me and we will figure it out together Scott Groves @ 818-679-5188 or apply online at www.LendLA.com
The team just closed on this beautiful condo in Manhattan Beach.
Our clients had two lenders tell them that they could close, but due to the way they structured the loans, the loans were declined. By the time we received the call, the clients were completely defeated and hoping for a miracle.
Thankfully for them, we here at the Groves Lending Team think outside the box. By changing the way the loan was structured, we were able to get it approved, and ultimately get our clients into their new home. It’s always great to help people buy their home, but it is even better to save a deal from another lender.
A big thank you to the buyer’s agent Jeffrey Peldon, for sending his clients over to us and allowing us to deliver when others couldn’t. If you are looking for an agent on the Westside of LA, the team highly recommends Jeffrey Peldon.
If your lender is not performing, call Scott Groves @ 818-679-5188 or apply online at www.LendLA.com
The team just closed on this refinance in Woodland Hills.
We were able not only to get rid of the mortgage insurance from the existing loan, but we were also able to save our clients over $600 a month on their mortgage payment. I am sure you are thinking any lender can get rid of mortgage insurance and save a client money. Well that may be true, but not every lender can close in under 30 days. Especially when one of the co-borrowers is working on a project in Alaska. With our refined process, we were able to get the loan docs out super-fast and sent up to Alaska for signing and notary.
Can your lender close a loan fast and be able to work with a co-borrower in the last frontier? If not call Scott Groves @ 818-679-5188 or apply online at www.LendLA.com
Scott Groves | Your Trusted Lender
Groves Lending Team
A Los Angeles based lending team specializing in conventional and FHA purchase mortgages. The Groves Lending team can manage the entire loan process providing clients with efficiency and accuracy.
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