Q: I am a mortgage broker in Ohio, and I enjoy your weekly column in the Columbus Dispatch. Would you please consider informing borrowers that not all loans are created equal? Just because your neighbor got 4.25 percent does not mean that you will qualify for or get 4.25 percent on your loan.
Many factors go into the pricing of a loan, including the loan type, loan amount, credit score, loan-to-value ratio (LTV), and where you live and if that location has been determined to be a declining market), etc.
Your readers should know that maybe their neighbor paid points to get a great rate. Just because a borrower pays their bills and has a good credit score doesn’t necessarily mean you’ll obtaining great financing.
Also I think it may be helpful if you could discuss the loan process becoming more stringent and underwriting becoming more and more particular, and lenders taking much longer to complete loans – it is no longer an easy process.
This job is very difficult these days and I think your column is extremely helpful to the public. I think sometimes people believe they know everything and their expectations are extremely high – all because they read something on the Internet.
I can’t tell you how many people call me because they see somewhere that interest rates are at 3 percent, and therefore they decide they deserve a loan with a 3 percent interest rate that should close in three days!
A: Thanks for taking the time to write and educate your fellow readers. The most important point you’ve made is that the loan underwriting process has become much more difficult and borrowers who look great on paper may not survive today’s underwriting process – either because their homes don’t appraise out in value, or their financials aren’t truly as strong as they first appear.
In addition, you are correct, the process overall is more cumbersome and taking more time. Lenders seem to be reviewing document more carefully and requesting additional information all the time.
My favorite point you made is that even though your neighbor got a great interest rate you won’t really know how he or she got to that rate unless you look at all the fees paid and whether there were points attached to the loan.
The shorthand way the world discusses interest rates and mortgages sometimes doesn’t hold up under closer examination. Thanks for the reminder and the explanation.