For the Answers You Need, Go Beyond Automated Underwriting

Some unthinking loan reps just plug your financial information into their computer AU system (automated underwriting) and provide an easy answer. Loan reps who follow a quick and simple approach not only fail to explore all choices, they slight you in a more seriously deficient way. Their “one size fits all” mindset ignores contextual data that explicitly reviews where you are now, where you would like to go, and the best way to get there.Never accept anAU-generated response, until you answer questions such as the following:

• What are your goals to build wealth?


• How do your household expenses differ (positively or negatively)
  from the affordability assumptions imbedded in the AU computer
  software?


• Do you spend, save, and invest to achieve your life priorities?


• How long do you plan to own the property?


• How can you improve your credit scores?


• How can you improve your qualifying ratios?


• What percent of your wealth should you hold in property?


• What types of real estate financing (other than those offered by the
  lender you’re talking with) might best promote your goals for cost
  savings or wealth building?


• What types of real estate financing (other than those offered by the
  lender you’re talking with) might best enhance your affordability?


• What type of property (fixer, foreclosure, duplex, fourplex, single-
  family house, condo, apartment building, commercial, and so on)
  might advance you toward your financial goals?


• How much would a larger down payment save you?


• Should you use a fixed-rate or an adjustable rate mortgage (ARM)?
  Given your situation, what are the risks and opportunities of each?
  Which choice offers the best trade-off of risk and return (quickest
  buildup of property equity)?

Although savvy loan reps can help you answer life-planning questions, the majority will not. The majority lack time, knowledge, and incentive to 4JWPR045-01 JWPR045-Eldred September 4, 2007 13:33 Char Count= 0 AFFORDABILITY DEPENDS ON YOU—NOT A LENDER guide you. Loan reps are like car salesmen. They encourage you to buy product(s) they are selling. Would you expect unbiased auto advice from the sales agent at the Honda dealer? No? Then why would you expect unbiased advice from the loan (sales) rep at the Old Faithful Mortgage Company?

Recall the theme of Mortgage Secrets: First, take measure of yourself. Learn your choices. Arrange your property purchase and financing decisions to advance your life goals. A majority of borrowers err because they attempt to minimize their monthly payment rather than maximize their wealth.

Most lenders compare income to monthly payments, but you need more depth, more vision. Decide for yourself: Should you buy more (or less) property than an AU system suggests? Should you borrow more (or less) than this lender’s guidelines recommend?