"The customer is always right." That's what most most consumers believe, because it's mostly true. A company that doesn't honor its customers is likely to lose them. That's certainly thecase in mortgage lending.
But sometimes the customer is not "always right." There are habits that can cause your mortgage lender to cancel your loan and force you to start over with a someone new.
Don't be "that guy"
While most lenders love their customers and strive to provide the best possible experience, not every home loan client is welcomed with open arms. Some of these folks are pretty toxic, actually. The behaviors that can cause a lender to cancel your mortgage application come in three categories:
- Uncooperative
- Unethical
- Unprofitable
You don't want to be that toxic person, because it's not just a pain for your lender. It's inconvenient and potentially costly for you as well. Here are some examples of behaviors that can get you bounced from a lender's office.
Ignoring mortgage documentation requests
Probably the most common reason for firing a client is lack of cooperation. There are some things a lender can't do for a client, no matter how high its level of service is. The client has to meet the underwriter halfway or the deal stays on ice.
And some borrowers don't realize that there is only one reason a lender asks them for documents or explanations -- because the information is absolutely required to close the loan.
"If you're in the mortgage business long enough," says Craig Berry, branch manager at Acopia Home Loans, "You've likely given a client or two permission to kindly seek financing elsewhere -- aka, you've had to fire them."
"One reason for letting them go is when they want to challenge you on every request. Although some folks may want to buy a home, they don't want to jump through any 'unnecessary' hoops to make this happen.
"For example, there have been times when homebuyers have excellent credit, or perhaps 'enough in the bank to just pay cash' (as they will be quick to tell you). And as a result, the buyers feels strongly about not needing to provide various asset documentation."
Related: How to Steer Clear of Mortgage Fraud
Many experienced homebuyers don't understand that mortgage reform brought a lot of new documentation requirements that lenders must adhere to -- or face strict penalties. And the "bank statement" requirement means all pages, all lines, period.
Craig Berry says, "I've had more than one buyer who wanted to fight over providing bank statements. When they finally decided they wanted the house badly enough, they sent their statements. However, they also decided to take a magic marker to their account numbers, or even mark out some of the items on their statement that they felt 'isn't anyone else's business.' Some buyers will resist you on every request they deem unreasonable or unnecessary."
Understand that a lender will never ask for something that the law or the program you have chosen doesn't require. No one needs the extra work and no one likes alienating a client. So if you want the loan, you must supply the information. There may be more than one way of getting it, however, so ask your loan professional if you're stuck.
Other examples of non-cooperation include "forgetting" to provide a check for the appraisal or skipping appointments with your lender or title company. And abusive behavior to lending staff is beyond uncooperative and won't be tolerated by most offices.
Ethical concerns can cancel your mortgage application
"What do you want my income to be?"
Unethical behavior is (thankfully) less common, but it does occur. And it can send most lenders running for the hills, because going along with a "harmless" little fib can cost lenders their licenses.
Mortgage underwriters are trained to look for red flags, and so are loan officers. Note that none of these automatically means fraud, but they could. And they do trigger requests for more documentation and/or information. Here's a partial list, courtesy of Freddie Mac:
- Unorthodox down payment sources: for instance repayment of a loan, sale of personal property, certain gifts
- Applicant is buying a second home near his or her residence, and it's not in a resort area
- Applicants is downsizing but keeping current, bigger home as a "rental"
- Commute from the new home to work is unrealistic
- PO box is only address for employer
- Applicant's education does not correspond with employment
- Applicant's income does not match employment
- Employment income does not match tax returns or bank statements
Related: How to Get Approved for a Mortgage Today
Most fraud by borrowers is what the FBI calls "fraud for property." The applicant is not trying to steal money, but is trying to obtain a mortgage he or she does not qualify to get. For instance, not disclosing that the property will be a "fix and flip" or rental.
"If you're in this business long enough," explains Craig Berry, "you've probably had a buyer who wanted to purchase an investment property. The problem comes into play when the buyers decide they want to buy the investment property, but they want the interest rate and terms that come with a primary residence.
When their true intentions inevitably surface, I've had to let them know the potential consequences for both of us and then cut them loose."
Mortgage lenders cancel loans for high-cost clients
Then, there's the client a lender can't afford to keep. Consider that no lender has unlimited resources. Suppose that you are a mortgage lender, and you can provide a high level of service and good deals to your clients while working on five loans at one time.
You already have three clients who have completed their applications and received approvals from your underwriting software. They all provided the requested income and asset documents and are in track to close smoothly, barring any unexpected events. This means you can safely bring in two more clients and keep everyone happy.
Related: How to Shop for a Mortgage Today
But the next client is different. He comes in empty-handed but wanting a mortgage preapproval letter because his real estate agent won't work with him until he gets one. You take his loan application, submit it to automated underwriting, and give him a list of needed documents to complete his approval. He promises to get you what you need but reminds you that he is "still shopping around" for a lender.
Every day, he calls you to ask what mortgage rates are, and to remind you that he is not committed. He tells you about another lender's advertised rate that's 1/8th of one percent lower, and doesn't listen when you explain that advertised rates don't apply to most people and change without notice. He complains endlessly about government fees, title insurance costs and other things over which you have no control.
He ignores your requests for the documents you need.
He calls you at night and on weekends with the same questions, but does not return your calls for information. Your loan processor stops contacting your client to ask for documents after he replies with abusive language and hangs up on her. You realize that this one client, who will likely never close, is taking as much time and energy as three normal clients.
You tell him that his application will be withdrawn because he is not moving forward, send the required Adverse Action or Incomplete Application letter and close out his file with a sigh of relief.
Make it easy on yourself when applying for a mortgage
The best way to make a mortgage experience easy on yourself is to make it easy on your lender.
- Compare mortgage rates and terms before applying
- Be prepared to supply proof of income and assets when you apply
- Get preapproved for your mortgage before shopping for a home
- Don't push back if you don't have what a lender needs. Instead, ask if there is an alternative, or ask for your lender's help without being nasty
- Try to contact your lender during regular business hours unless it's a true emergency
- Feel free to ask questions about anything you don't understand
- Disclose all relevant information, even items that you fear may hurt your qualification; let your mortgage pro deal with potential complications
Your lender wants you to succeed. Just remember that you're on the same team, and no one should need to fire anyone.
