Mortgage Wisdom

We're all in this together

The last year, and especially the last few months, has proven to be very tough for those people in the real estate and mortgage industries.  Our clients have also suffered as mortgage underwriting guidelines have tightened making it harder for lots of good people to get loans that were, until recently, readily available.  With declining home values throughout the country and a record number of A.R.M. resets scheduled to occur over the next couple of years, the mortgage industry in particular will face unprecedented challenges.  Of course, things are not necessarily any better for real estate professionals as they are often at the mercy of tight underwriting guidelines as well as the public perception that when it comes to buying real estate, it is better to wait than to act now.

With this in mind, it perplexes me that people in our industries want to stand alone and act as if they don't need the help of every available resource.  As a Mortgage Planner, I rely on financial news from many different sources.  I also welcome the ideas of the various mortgage loan officers I know to get their take on a wide variety of issues.  Furthermore, I seek out the views of Realtors relative to their perspectives on the housing market and the strategies they are using in today's challenging market.  I want as much information as I can get my hands on because I believe that will help me provide the best service to my clients.  In the end, their success is paramount because that means I have succeeded.

As the title of this article says, we are all in this together.  I think the way for us to come out of these tough times is by using each other as a resource.  By sharing strategies and knowledge, we can help each other succeed.  The people you have relied on over the years may or may not be a great resource; however, it certainly doesn't hurt to increase your resources and give yourself every competitive advantage available.  The more knowledge and strategies for success that you can offer your clients, the more likely you are to earn their business. 

Now is a great time to buy real estate.  It may be a great time a year from now as well (20 years from now buying real estate 10 years from now will probably be a great deal).  What we know is that there are lots of great deals to be had now and there probably will be for a little while.  Why not help our clients take advantage of these opportunities both for purchasing move-up homes as well as investment properties?  By doing this, we position our clients for great financial success down the road and we set ourselves appart from the average sales people out to make a buck.  If potential homebuyers meet with qualified mortgage professionals (preferrably a good Mortgage Planner) before starting the home-buying process, they can become educated relative to the entire process and they will know from the start if they qualify for a mortgage as well as the amount.  This is especially important in states like Nevada, Minnesota and Colorado who have all recently implemented new laws regarding Stated-Income loans.

Mortgage Planning: what should you really expect?

An increasing number of loan officers are putting the title of "Mortgage Planner" on their business card.  These loan officers are hoping to differentiate themselves from the people in the industry who merely fill in the blanks on a loan application and ask the client what flavor of mortgage they want.  However, if you are a Realtor or client and the loan officer you are dealing with professes to be a mortgage planner, what should you expect from that person?

As a veteran of the mortgage industry for over 12 years, I developed the leading financial analysis software in the mortgage industry - The Wealthbuilder Financial Analysis System, and I also am the author of the book Think BIG, Succeed BIG.  I studied accounting in college and have a 4-year degree from a major university; I was also Series 7 licensed for Fidelity Investments.  Furthermore, I study the financial markets throughout the day and I attend seminars and take other continuing education courses to try to be the best I can be for my clients and referral sources.  I say this so that you can understand where I am coming from relative to the elements I think a mortgage planner should have.

First of all, I think a Mortgage Planner should have a solid financial background either from a formal education or from working in related industries.  I believe it is important for a true Mortgage Planner to understand a wide variety of financial concepts and to be able to analyze various outside-the-box investment opportunities.

Secondly, I believe a Mortgage Planner should have a very good understanding of the various mortgages available that are designed to assist clients with their investment strategies such as the wide variety of Pay Option ARM mortgages.  You would be surprised how few loan officers truly understand this loan.

I also believe a Mortgage Planner should have a solid understanding of all the tax-related issues relative to mortgages and real estate such as acquisition indebtedness, 1031 exchanges, and the 2-in-5 rule for instance.

In addition to have this background and knowledge, a good Mortgage Planner should also have tools to help clients understand concepts, strategies and analyize their specific financial situation.  We have a PowerPoint presentation that we developed to help people understand a wide variety of concepts and strategies and, of course, we use The Wealthbuilder Financial Analysis System to help our clients gain a solid understanding of various types of mortgages including the Pay Option ARM and all of its variants as well as the client's financial picture as it relates to their retirement goals.

Finally, a good Mortgage Planner should have a team of financial professionals to help with the various aspects of a complete financial plan to give the client the best chance for success.  This team should consist of top people in their respective fields such as CPAs who have a strong understanding of real estate investing, estate planning attorneys who can assist with living trusts and LLCs, life insurance agents, financial planners (not necessarily those who sell stocks and mutual funds), and Realtors who understand real estate investment strategies and what makes a good investment property.

If you are dealing with a loan officer who professes to be a Mortgage Planner and they don't meet the criteria set forth above, I would question the integrity of their title and look for a true Mortgage Planner who does meet the above criteria.  We are licensed in 38 states and are working toward becoming 50-state licensed in the near future.  For more information and resources, feel free to check out www.TheWunderliTeam.com.  If you are a loan officer and are interested in learning more about The Wealthbuilder Financial Analysis System, go to www.mortgageloantools.com.

Think Outside the Financial Box

When you talk about investing, most people think of traditional investments such as stocks, bonds, and mutual funds.  While these all have their place, there is a whole world of opportunities available to those who spend the time to find investment alternatives that offer high rates of return (15% or more) with relative safety. 

Investing in real estate with the right kind of loan can provide a great return on investment along with safety.  Other types of investments to consider are real estate development projects, hard money lending, start-up businesses and franchises, and other opportunities that provide the potential for a high rate of return as well as a level of comfort that the investment will perform to your expectations.

It is important to research the opportunity at hand and consider all of the variables and how they may effect, positively or negatively, the outcome.  Be prepared to be in a given investment longer than what is promised; hence, if you are told the time frame is five years, be prepared for six or seven.  You should also consider the possibility that your initial investment may not be enough; management may ask for additional investment funds.  This isn't necessarily good or bad, just something you need to consider when contemplating various opportunities.

Investing in a wide variety of things that all provide a good opportunity for high returns is a great way to diversify; diversification by putting money in money markets, CDs, bonds, etc. is far too conservative to develop any substantial wealth along the lines of what will likely be needed for a comfortable retirement.  Warren Buffet advocates choosing investments that offer the potential for high returns and he stresses the importance of due diligence.  In other words, test drive the car before you buy it.

Perhaps the most important thing is to understand that there is no time like the present to start investing.  If you are already investing, you need to consider the very real possibility that what you are doing is probably not enough considering that at least 2/3s of Americans are underfunded for retirement.  With this in mind, you need to consider all of your options relative to where you can get more money to invest, and, once you have the money, what you will invest in.  Home equity is a great resource for many people if you access it properly and use it for investment purposes only (some debt consolidation may make sense).  Before you take the equity out of your home, you should know what you are going to do with it.  Finally, just knowing where to invest isn't enough; you need an exit strategy as well.

A good Mortgage Planner will be able to help you with all of these things.  Additionally, a Mortgage Planner can refer you to other financial professionals to make sure that your finances are handled properly from tax considerations to protection from liability to asset growth.

Ideas to WOW your clients

If you have spoken with me or had the opportunity to read any of my articles from the Scotsman Guide you know that I am a passionate advocate for differentiating yourself to your clients by doing things the normal loan officer doesn't do.  My main point of differentiation is to help clients understand wealth-creation strategies and teach them to build wealth and become financially independent. 

Offering great service should just be the norm.  However, there are some great things you can do that don't cost a lot but will go along way with most clients.  I have what I call Page 5 of the 1003 where I collect all of the names and contact information of their financial professionals such as their real estate agent, CPA, estate planning attorney, financial planner and insurance advisor.  I also collect personal information such as favorite movie, musician, candy bar, etc.  This allows me to better market myself to them in the future. 

Year-end tax-planning tip:   If you really want to hit a home run, mail a copy of the HUD-1 settlement statement to all of the clients who used you to do a mortgage.  This is a great value-added service and one more opportunity to earn more referrals.

If you are using any mortgage planning tools and teaching home-equity management concepts, it is a good idea to meet with your clients once a year just to help keep them on track and remind them about the long-term goals and the strategies they are employing to achieve their goals.  If you aren't taking advantage of the value-added opportunities you could be providing your clients through mortgage planning services, you may want to check out www.mortgageloantools.com to see the most advanced software available to teach people about the Option ARM, real estate investing, time-value of money, and many other incredibly valuable things.  If you use this software with your clients they will know how much money they will have at retirement based on what they are doing right now and how much money they will need based on inflation.  Learn these strategies, use these strategies, and profit from these strategies; your clients will thank you for it.

Teach Your Clients Well

A mortgage loan usually is the largest transaction in our clients’ financial lives. With that in mind, it also usually is one of the scariest.

 To put clients at ease, we as mortgage professionals should teach them every good and bad aspect of the loan process. By doing so, we prove ourselves as trustworthy, position ourselves as experts, incorporate other professionals into our circle and let our clients know how it benefits all parties to send referrals our way.

Building trust

 By explaining the loan process and the challenges with clients’ situations, we establish competence in their eyes. With this open line of communication, we help build trust with our clients. For them, this is what can separate us from other loan officers.

 Furthermore, we build loyalty throughout this process, which usually translates into more referrals. Clients are much more likely to do business with people they like and to whom they are loyal. It is important, however, to handle clients’ trust with kid gloves. Once we have earned their trust, we should do everything to maintain it. Stressing the importance of honest, ethical business practices in our communication as well as through our actions will cultivate lasting relationships that will assure repeat business as well as referrals.

Becoming the expert 

 Our clients are thirsting for our information, and we can quench that thirst by providing them with reports and consultations. By answering clients’ questions, we go a step beyond gaining their trust and also become their experts.

  Think about a time when you may have needed an expert — such as a doctor, mechanic or electrician — for a special service. In our dealings with them, they often convince us that their services are unique. Our clients also should have a feeling of dependence on us as experts in the mortgage field.

 If we, as loan officers, don’t do things to set ourselves apart as experts, we are virtually inviting our clients to see what else is out there. No loan officer likes to be shopped around or have a client negotiate fees. We also shouldn’t take for granted that our clients know everything about mortgages that we do.

Joining forces

 We can create an image of professionalism and credibility by using reports, specialized software and PowerPoint presentations. Teaming with other professionals also can add measurable substance to our presentations.

 By partnering with financial planners, insurance agents or real estate agents, we not only provide clients with more-comprehensive education, but we also introduce them to other relevant financial professionals. It is one thing to educate clients on the best ways to manage their debt through home mortgages. It is another to expose them to other experts who can ratify our strategies.

 On the other hand, we also could be providing these other financial professionals with leads. They will see us as a source of business and return the favor with referrals

from their client base. Meanwhile, we now help our clients view us as the most-comprehensive and educated mortgage professionals around and increase the possibility that they will refer their friends and family to us.

Coaxing referrals

 As we educate our clients about the loan process, we need to educate them about giving us referrals. They should know how important they are to our business as well as to our ability to provide the best service. We also can offer incentives to referral sources such as reduced origination or fee discounts. By doing this, we are showing our appreciation for the referrals — and we probably aren’t paying as much as we would for marketing and advertising

 If you look at your business from your client’s perspective, you can see why someone chooses your business. You also see why someone would refer business to you. There has to be a compelling reason far beyond the canned “We give great service.” The service should be excellent, but it should not be what differentiates you from your competitors. We all should strive to give great service.

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 There are many other ways to offer clients something compelling. We can invest in our business by producing free reports or give clients books to increase their knowledge. If this does not work, though, we need to adjust our paradigm until virtually every client with whom we meet has a strong desire to do business with us, regardless of our fees.

 It is incredibly important to educate clients and be completely honest in all dealings. This not only will help close more deals without being “shopped,” but it also will help us earn more referrals.

Adding value by adding to your clients bottom line

What does your client really know about managing money?  Do they understand about the Rule of 72 or the time-value of money?  For most people, social security is going to provide much of a quality of life for retirement.  Additionally, those who are investing in 401Ks and IRAs typically don't have a knowledge of how much they are going to have at their ideal retirement age or how much they are going to need.  Furthermore, they don't know what they are going to need in income.  Those of us who claim to be mortgage professionals have the advantage of seeing a client's complete financial picture and operate as their financial quarterback.  Read More.

Commodity vs. Specialty

Why should anybody use you to help them with their loan over any other loan officer?  If you say it's because you have better service, lower rates, or lower fees, you have given them absolutely no legitimate reason to use you.  Every loan officer says that, except me.  I never claim to have the lowest fees.  If you do sell your services based on lower rates, you are not maximizing the fee you make per borrower.  Of course if you aren't adding any value, there is no justification in being able to charge a premium.  So what real, tangible specialty / expertise do you offer your client that will differentiate you from your competition?   Learn more about how you can earn higher fees per transaction, get more referrals, and build a mortgage business over time that will keep your clients coming back and referring all of their friends and family.  Contact me to learn more about how you can create a systematice mortgage origination business that will allow you to earn higher fees per client and have a steadier stream of business.

Choose a niche to make more money!!

If the wares you are pedaling are low rates and fast service, you need to think about a couple of things:  1) every other loan officer is going to promise the same thing - do you think any of them are out there extolling how slow they are and how high their rates are?, 2) you better be able to deliver on that promise because you have nothing else to fall back on, and 3) if you really are providing lower rates than nearly every other loan officer, you are limiting your income.

Differentiating yourself by becoming an expert in a given niche such as clients who have had recent bankruptcies or clients who can't verify their income or have low credit scores.  There are a number of great ways to set yourself appart.  You don't necessarily limit your market because as you prove yourself, you can let your referral partners know you do all types of loans for all types of clients.  Check out this incredible tool to help differentiate yourself from every other loan officer.

I have chosen a niche that is particularly fulfilling and provides my clients with the opportunity to create fabulous wealth and retire with a great lifestyle.  It is important to remember that the people who make the most money in a given field are the ones who are at the top of their game.  Becoming an expert and continually setting yourself appart will take more time and effort in certain areas, but as you establish yourself as such, you will spend less time and money marketing and you will make more money.  Read about my time-tested strategies to create incredible wealth.

Are You Old School?

Conventional mortgage wisdom was to get the lowest fixed rate mortgage you could find so that you could pay your house off.  However, times have changed and that may not be the best thing to do.  In fact, there are many choices that would provide a much better opportunity for creating wealth and preparing for retirement.  Where you do fall in this spectrum?  What are you advising your clients to do?  My education and research have yielded some great ideas on how to build wealth and for a great way to present these to clients check this out.