Home Loan Officer’s Experience Is Key

In a changing environment such as today’s mortgage world, a loan applicant must partner with a loan officer that knows home loan guidelines BETTER than the underwriter that will eventually review their file.  Anyone applying for a new Arizona home loan needs to look at the loan officer they choose as not only a trusted adviser but as the path to loan approval.  Now, no loan officer can make someone “approvable” however they can access an applicants situation and see if they fit within current/ever-changing mortgage guidelines.  An experienced, knowledgeable loan officer is a major asset to anyone impacted by the mortgage being applied for.

I understand this may seem like a self-indulgent and self promoting post as I am talking about the “me’s” (aka loan officers) of the world.  Self promoting as it may seem, this a very important topic to discuss as many home loan applicants are not aware of what goes on “behind the curtain.”

Know What You Know

For me, it all started when I was 5 years old.  My Dad was a big believer in confidence and instilling a know what you know type mentality in me.  On my first day of school I distinctly remember my him telling me that just because the teacher says something does not make it so.  If you disagree with the teacher it is okay to raise your hand and speak.  The merit of that lesson has carried through the years (just a few of them) to my career in the mortgage industry.  Today I raise my hand to ask about home loan guidelines and the teacher has become the underwriter.

You see, it is my job (and every other loan officer’s job) to know their mortgage guidelines backward, forward and upside down.  We are technicians and need know our craft better than anyone – including an underwriter.   After-all, the loan officer  has a personal connection and  sense of duty to each client.  While some people may argue this next statement, underwriters really are human and they too are not perfect.  I truly believe my company has the best underwriting staff in the home loan industry.  Our underwriters are available to the loan officer and always willing to talk through difficult scenarios to find solutions.  However, there are times when an underwriter misses a guideline change or misinterprets an existing rule.  That is when the loan officer needs to step in, step up and help their client.

Example of When To Question an Underwriter

Just this past week I encountered a situation where an underwriter suspended a file I had submitted for final loan approval (which is essentially the same as a loan denial).  The buyer was using a down payment assistance program known as “Home in 5.”  The Home in 5 program gives buyer’s grant money for down payment and or closing costs however Home in 5 sets a maximum income limit of $90k per year meaning that if someone earns over $90k per year they may not use the program.  As with all things mortgage today, the devil is in the details.  Many down payment assistance programs are concerned with household income – income of everyone equal to or over 18 years of age in the household not just the person/people on the loan.  Home in 5 is different.  They have a very specific/unique guideline that states:

– Use 1003 (aka – loan application) income for qualifying
– Maximum annual income is $90k for all household sizes

In short, these Home in 5 guidelines state that regardless of how many people are in the household, the borrower or borrowers that are actually on the application (household income does not matter) cannot have a total income that exceeds $90k per year.  Below is the email correspondence between myself, the underwriter, the underwriter’s boss and the head of our down payment assistance department (all 3 of these people are outstanding and the best at what they do).  However, you will see that each stated that my client’s did not qualify for the Home in 5 grant money because we are required to use household income to measure whether or not a borrower exceeds the $90k limit.   At the end of the chain, you will see what the right answer was.

Me to Underwriter after seeing loan suspense:

The Home in 5 guidelines do NOT require that we measure household income.  They only require application income (please see attached).   They do mention household size however they are just stating that the max application income is $90k for all household sizes.  Can you please check this out.  Thank you!

Underwriter reply to my email adding and addressing her boss:

Boss, could you answer a question for me since you are the down payment assistance guru. The program states that the household size income cannot exceed $90,000.  

My interpretation is that we need to verify the income for all adults, including the borrower that is in the house, over 18 but not on the application in this case.  This is typical of bond / DPA programs.  Is that your interpretation as well?

Underwriter’s boss’s reply to Underwriter and I:

Anyone living in the house age 18 and over with income must be counted in the calculation.

Me replying to Underwriter’s boss and Underwriter:

Please show me where it says this.  The Home in 5 guidelines state clearly that they use application income NOT household income.  

Underwriter’s reply to my email adding her boss’s boss and down payment assistance program manager:

This loan is the Arizona’s Maricopa County bond loan – “Home in 5.”  We used the borrower’s income to qualify, but I asked that we verify income for the individual that will not be on the loan (husband of borrower) and that BOTH cannot exceed $90,000 (i.e. household income).

Jeremy’s interpretation is we do not have to include the husband’s income in the limit since he’s not on the loan.

Could you please confirm what your interpretation is?

Reply from down payment assistance department manager:

The household income can’t exceed $90,000 and this does include borrower’s income whether he is on the loan or not.

Me replying to the down payment assistance manager:

Where does it say this?  The Home in 5 guides do not say that at all. 

Down payment assistance manager’s reply to me:

Attached is the link to the guidelines…please see the bottom of page 6.

Me replying to the down payment assistance manager:

It says “Use 1003 (loan application) Qualifying Income” not household income.  It says for all household sizes the income cannot exceed $90k it does NOT say use household income.  I already sent these guidelines over to you in our initial emails.  These guides are simply stating that if there are 2 people in the house or 50 people the person on the 1003 (loan application) cannot have income over $90k.  They (Home in 5 guidelines) are just stating the application income cannot go over $90k regardless of household size.   The guides do not say to use household income like USDA etc…

Can you show me  where it says “use household income” and where the “use 1003 qualifying income” is negated?

Down payment assistance manager’s reply to me:

I am aware of what it states in using the qualifying income but the household income can’t exceed $90,000.  If it exceeds this amount, the loan would be ineligible for purchase because it would not be compliance approved by E-Housing.

Me replying to down payment assistance manager:

Thank you sir.  I am going to consult directly with E-Housing as this does not sound right nor does it match what their printed guides state and I will follow-up with you with confirmation from E-Housing (entity that manages Home in 5 guidelines).

Down payment assistance manager replying to me:

I just called E-Housing for you Jeremy.  In speaking with E-Housing on this, they are only looking at the borrower’s income and not the borrower who is not on the loan.  You were correct and are now good to go (in other words – loan was now approved).

Persistence + Knowledge Make All the Difference

As you can see from the communication above I do not give up on what is in my clients best interest AND it sometimes takes a lot of back and forth however confidently knowing guidelines is critical for any Arizona loan officer assisting a family with a new home loan.  In this case, had I not pursued this, my clients would have missed out on several thousands of dollars in grant funds.

Now, let me say this – I do NOT envy mortgage underwriters.  They have a very serious and challenging job.  In fact, I cannot even begin to accurately describe the gravity and difficulty of an underwriters job in today’s home loan environment.  Also, as I mentioned above, I believe we have the BEST underwriters and underwriting system in the industry.  As a result, I was able to have open dialogue with the folks that make the final loan approval decision and in the end do what was right for my client.

Please let me know how I can help you find a program that fits you!

By Jeremy House
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