Have you ever wondered what a mortgage broker does with a client’s application and supporting documents? In simple terms, the broker submits that collection of information to lenders in hopes of securing a mortgage. The process is known in the industry as ‘packaging’ a mortgage.
Mortgages have to be packaged because brokers are not lenders. They are individuals tasked with the responsibility of matching lenders with buyers. A broker looks at an extensive list of criteria on both sides of the table to create a good match. Then the broker has to gather information from the borrower and pass it along to the lender. The packaging is all about presenting that information in just the right way.
Knowing What Lenders Want
All mortgage applications are reviewed by loan officers and underwriters, who eventually make the call. These individuals are trained to look for particular things. They are trained to seek out specific data that can be analyzed to determine whether or not a mortgage is worthwhile. Mortgage brokers know this.
The advantage of working with a mortgage broker is that he or she knows how to emphasize positive data and downplay data that might hurt a loan application. This is part of the packaging process. The broker knows what lenders want to see in an application. He or she also knows what they do not want to see. A broker cannot provide false information, but he/she can emphasize the positives to increase the likelihood of a positive result.
We can explain this in a bit more detail with an example. Let us say you are a self-employed contractor working with a mortgage broker recommended by friends. During your initial meeting, you notice that this mortgage broker notes your self-employment income and the documentation you have to support it. His knowledge of the mortgage application process could become invaluable here.
Lenders are less trusting of self-employed applicants because their income is harder to document. Your broker knows this. He/she is likely to recommend you produce several years of business records along with tax records and any other information that can support your income claims. The more documentation you can produce, the better your chances of getting a mortgage.
Making Your Case to Lenders
Income documentation is just one of the things brokers have to concern themselves with. They also have to look at things like credit score, current debt limits, income-to-loan ratios, and so forth. They leave no stone unturned in the quest to package a mortgage application properly. The whole point is to make your case to lenders.
What do we mean by this? A mortgage broker works to convince lenders that you deserve a mortgage. It is their job to make the case that you are a good risk, not default and that lenders will make money by loaning. That is what packaging is all about.
If it helps, think of it in terms of applying for a job. You can have a stellar job history along with an impeccable educational record and still not get a job simply because you don’t know how to package yourself. You put in application after application only to be denied. Finally, an employment consultant tells you why you are having trouble: you’re not giving potential employers the most important information they need to know about you.
So what do you do? You repackage all of your information in a CV that shows potential employers why they should hire you. Now you start getting interviews and offers. You have not changed as a potential employee, but you have changed the way you present yourself. Mortgage brokers do the same thing when packaging mortgage applications.
They Know the System
The realities of mortgage packaging explain why so many experts recommend using mortgage brokers instead of going directly to lenders. The truth is that mortgage brokers know the system better than anyone else. They actually know it better than loan officers and underwriters.
Loan officers and underwriters have plenty of knowledge within their own sphere of influence, but they lack knowledge of other lenders and other markets. An independent mortgage broker knows it all. A good broker with years of experience has come up against just about every hurdle the industry can throw at him/her.
He or she has dealt with lenders willing to embrace just about every applicant who comes along. Likewise, he/she has dealt with very picky lenders who scrutinize even the smallest of details. He/she has worked with banks, building societies, and online private lenders.
Thoroughly knowing the system is what allows mortgage brokers to package applications properly. For those 62+ your mortgage broker will work with a lender to deliver your application to the right HECM underwriter. Knowing the system tells them what information to ask for, how to compile that information, and how to present it to lenders in such a way as to make the client’s case. That’s how the reverse mortgage system works, and that’s why obtaining a mortgage through a broker is almost always the best option.