Assets

Assets may be the easiest thing to figure out about a loan.  You either have them or you don't.  Assets are more important for purchases than refinances because, for purchases, you have to show the money you can put for a down payment and to cover closing costs.  However, sometimes for a refinance you will have to show assets or "reserves", if you are doing a cash-out refinance or if you are paying money towards your refinance.  Some lenders, us included, will not pre-approve you unless you can show enough for a down payment and the loan's closing costs.  

Assets can be in many forms, but the most common are bank accounts (both savings and checking), stock accounts, and retirement accounts.  One key thing to know is what funds are considered "liquid".  Liquid funds are funds that can be accessed quickly and easily with no penalty or delay.  Generally, all checking and savings accounts are considered liquid funds, and if any cash or retirement accounts have cash options, those can be considered liquid as well.

Now if funds are not liquid and they are held in a stock or retirement account, the lender will take a haircut on those available funds to protect their interests.  Usually, that haircut is 70%, so if you show $10,000 in a retirement account, the lender will consider that as $7,000 in available funds.  So if you are looking to show a lender as much in assets as possible, it's smart to make everything liquid ahead of time so that no haircut is applied.

One thing to note also about assets is any large deposit and routine withdrawal.  Any large deposits made on the asset statements submitted have to be sourced.  This does not include being paid by your employer, however.  And any large funds are considered to be 50% or more of your household's monthly income.  So if your household makes $10,000 per month, any deposits of $5,000 or greater into an account you are using have to be sourced.  That's why, if you are receiving funds from a friend or relative, have them send it to you at least 2 months in advance, or have them send it to escrow as gift funds.  Escrow would then apply those funds to your down payment and closing costs.  Also, if you have any routine withdrawals, the lender will make note of this and may inquire about them, especially if it looks like you are paying someone else, which they have to make sure is not something court-ordered, such as alimony or child support.

If you can just use common sense and follow what I've said above, you can avoid a lot of unnecessary conditions in regard to your mortgage loan.  If not, you could end up having to provide your broker/lender a lot of documentation, which could lead to having to reach out to your bank or financial institution, which as we all know is never fun.  

Up Front Documentation

 Part of the process of setting up a loan for a client as a Loan Specialist is going through documentation.  At our company, we pre-underwrite files, meaning we basically do our own version of underwriting a file to see what a client qualifies for.  It's like a rough draft of the underwriting process.  And as a part of that process, we request documentation up front so that we can properly pre-underwrite the file.  

For standard W-2 employed borrowers, we request their most recent 30 days of pay stubs, their last two years of W-2's, their last two bank statements from any account they wish to use, and their driver's license (to verify they are who they are).  

For self-employed borrowers, instead of W-2's and pay stubs, we request their most recent two years of tax returns.  During the COVID-19 pandemic, our main lender had an overlay requiring a year-to-date profit and loss statement as well because self-employed businesses were hit hard, but that has since been lifted.  

Some clients require additional documentation.  For clients that already have at least one mortgage, we request a most recent mortgage statement.  For clients that collect rental income, we request tax returns from them to verify the income, or if the property was newly purchased, a lease agreement.  For clients that own a property free and clear, we request their insurance declarations page.  Property taxes generally can be found online.

Of the standard documentation, there are a few things to look for when going through the documents.  Here's what to look for on each:

Pay stub(s) - Borrower's information, employer's information, start and end dates, pay date, pay rate, year-to-date earnings, taxes taken out.  

W-2's - Borrower's name and address, employer's name and address, year, borrower's SSN (or last 4), all necessary boxes shown and filled.

Bank statements - Borrower's name and address, account number, institution's name and address, account balance, list of transactions, all pages included

Tax returns - Borrower's name and SSN, all necessary schedules included, pertinent information entered correctly (rental income, self-employed income).

Mortgage statement - Borrower's name and property address, interest rate, amounts for principal, interest, and escrow (if necessary), next payment due date, next payment amount

Lease agreement - Borrower's name or their property management company's name, date and terms of lease, rent amount, signed by both parties

That's the basics for those, although there are other things we may look for on those documents depending on the borrower's situation.

We do on occasion get documents that don't work.  The most common reasons for documents the clients submit not working are that they are the wrong document (tax transcript instead of a W-2, summary statement instead of an official bank statement, mortgage interest statement instead of a mortgage statement), or that they submitted a document that is missing a page, or that they submitted a document with information not visible or legible (if they took a picture of their document, this is fairly common).

As a Loan Specialist, I basically have to get documentation that will work for the underwriters.  I can't use illegible images or screenshots that the lender would not accept.  I also have to ensure each document we receive is in .PDF format, and if for some reason it comes in as a different format, finding a way to convert it to .PDF.  

Dealing with documentation is one of my favorite parts of the job, as I enjoy dealing with Adobe Acrobat and working with files, moving them around from one place to another.  My least favorite part is when a client is clearly struggling to get us the proper document, whether it be because they're not technologically savvy or because they don't have the means to get the documents to us.  

But all in all, it's towards the easier end of all the tasks and responsiblities I have as a Loan Specialist, and there's rarely a difficult challenge.  Generally it's fairly easy to determine if the lender will accept a certain document or not, especially once you have the experience and you've seen what they've accepted and what they've rejected.

Calculating Income

What all of the loan officers that I work with would agree upon is my biggest job is calculating income.  It's my job as the Loan Specialist to calculate each client's income accurately.  Anyone who is good at math like me should be able to calculate a client's income.  

Fortunately, I have the use of Fannie Mae's income calculator through one of our lender's.  All I need to calculate income is a client's recent pay stub and their W-2(s) if they were with their current employer last year and possibly the previous year as well.  

But any underwriter or Loan Specialist worth their grain of salt can calculate income by hand; at least they can calculate salaried or hourly income by hand.  There are two kinds of common salaried employment that require a bit of math to figure out, and those are two times a month salaried (also called semi-monthly salaried) and bi-weekly salaried.  Two times a month salaried employees get paid twice every month, typically on the first or last day and the 15th day (or so).  Bi-weekly salaried employees get paid every two weeks.  Because months cannot be divided equally into number of weeks, these differ slightly.  

To calculate a borrower's two times a month salaried income, take the amount they are paid twice a month and multiply it by two.  It's that simple.  You could also multiply by 24 to see their annual salary.  

To calculate a borrower's bi-weekly salaried income, you multiply the amount they are paid every two weeks by 26, because they get paid (roughly) 26 times per year, since there are roughly 52 weeks in a year.  You then divide by 12 to get their monthly income.  

To calculate hourly employees, you first have to figure out the amount of hours they work.  Hopefully it's close to 40 hours/week.  The problem with fluctuating hours is that a borrower must have at least a 12 month history of this in order to use their income, because otherwise the lender looks at it as unstable income.  Anyway, you take their usual hours worked (say, 40) and multiply by their hourly rate.  Some borrowers show multiple hourly rates, so the underwriter will always go with the lower rate.  Then you multiply by 52 to get how much they make each year, and divide by 12 to get their monthly amount.  If a borrower shows fluctuating hours, it's usually best to go conservative and calculate with their lowest amount of hours shown on a pay stub.

Besides those mentioned above, there's also self-employed income.  Depending on the complexity of the self-employed income, this is a lot harder to calculate by hand.  Fortunately, that's why Fannie Mae came out with their income calculator.  A couple things I've learned are that if the borrower shows declining income, the lender will go with only the most recent year's calculation, since averaging the prior year would raise it.  If a borrower shows increasing income, the lender will either go with the calculation for the most recent year or the last two years averaged.  This depends on the AUS results.  The AUS... well that's for another post.

Calculating income can be high pressure and stressful.  If you do it wrong and you give a client too much, you could blow up their deal and cause them to lose out on a home and possibly even lose out on thousands of dollars in earnest money they put down.  But if you can build the experience, rely upon tools and references at your disposal, it's really not too hard or bad.  

Pulling Credit

 One of the tasks of a Loan Specialist is to pull credit, which I will dive into in this post.  Pulling someone's credit gives you an entire look as to how well they repay their loans, whether they be credit cards, auto loans, student loans, mortgages, or other types of loans.  Anytime you have to give your social security number and you receive money, goods (home or automobile, generally) or a service, you get a loan put on your credit profile.  I'm going to talk about what a loan specialist should look out for, some helpful tips, and anything else I've learned from my experience being a loan specialist.

Before pulling a client's credit, you should have their expressed written/electronic or verbal consent before doing so.  Just because they fill out an application and provide their SSN does not mean they consent to the broker/lender pulling their credit.  Some loan application servers and portals ask the borrower automatically if they consent to the broker pulling their credit, which when they do, generates a mini document stating they consent to a credit check.  That alone is good enough as proof that the borrower gave their consent, so long as there is one for each borrower on the loan.  

When pulling a client's credit, their basic information must be entered into the credit agency's system.  Different credit agencies will require different information, but all should require the client's legal first and last name, social security number, and date of birth.  Some will also require the client's address history, like the one we use.  Some may also require the subject property's address.  All of this information should be entered accurately and carefully, especially the spelling of the client's name and the entry of their SSN.  

In today's modern age, the credit pull should not take long.  At our agency, it takes ten seconds, give or take a few seconds.  The credit results should then appear.  Mortgage lenders use three credit bureaus to see a client's credit profile: Transunion, Experian, and Equifax.  They will each come up with a unique score, but should all find the same debts and loan history on the client's credit profile.  The lender will use the median of the three scores for the borrower's FICO score.  If there are multiple borrowers, they use the lowest of everyone's median scores.  

Something that may happen is a borrower's credit may show up frozen or locked.  Freezing or locking credit helps prevent someone from using your SSN to obtain a new debt.  Depending on the lender and how many of the three scores are frozen, the client may have to unfreeze/unlock some or all of their credit scores.  Some lenders require all three to be unfrozen/unlocked, some require two, and there are even some that require just one.  But all of them require at least one to be unfrozen or unlocked.  The client would then simply have to be reached out to to unfreeze or unlock their credit.  If they locked or froze their own credit, they should know how to unlock or unfreeze it.

A client's list of debts should appear on their credit profile.  Obviously, fewer is generally better, but it's more important to have lower balances than fewer open debts.  But both affect your score.  Any missed payments should also show up.  Generally, missed payments themselves don't disqualify someone from being able to obtain a mortgage loan, unless their primary mortgage (say, the one they're refinancing) had a missed recent payment.  

There are three main types of debts that will show up on someone's credit profile, although they are just the most common.  They are revolving charge accounts, installment loans, and mortgage loans.  Revolving charge accounts are just credit cards that you can zero the balance on, charge a payment to, and keep paying off.  Installment loans are loans that once they get paid off, disappear and no longer have to be repaid, but a record of them will still remain in your credit history.  The most common installment loans are auto and student loans, but you can also obtain loans for most large purchases including other vehicles, furniture, or remodeling.  Auto leases technically are installment loans, but usually get a different designation because they don't disappear off credit once fully paid off--generally, you have to close your account with the leasing auto company.  And of course, there are mortgage loans, any loan acquired from a lender or bank for purchase of real estate or property.  They function a lot like installment loans that just need to get paid off.  

Basically, there's not too much to teach about credit profiles.  It's more something you learn with experience.  It helps to review the lending agencies (Fannie Mae and Freddie Mac) guidelines regarding credit.  Often times, people with solid income histories and people who can get you any document you need tend to have great credit profiles.  

The Loan Specialist Blog

 Welcome to the Loan Specialist blog!  My name is Brian, and I will be blogging about my experiences and knowledge of being a Loan Specialist.  In this first post, I'll delve into what a Loan Specialist is, what they do, and why more brokers should hire for this position.  

So what is a Loan Specialist?  A Loan Specialist is an assistant to a mortgage broker/loan officer who assists them with setting up loan files.  The loan specialist compiles client documents, pulls credit, submits the loan file to the lender, sets up the loan file with accurate information, and determines if the client(s) qualify, generally by running some sort of Automated Underwriting System, or AUS for short.  

Generally, a loan officer does this themselves.  That's why they are sometimes also called loan originators.  But technically, a loan specialist is a loan originator.  Having a loan specialist allows the loan officer(s) to focus more on sales and client relations.  They don't have to do the busy work of assembling the file, documents and pulling credit.  That's where the loan specialist comes in.

One of the biggest aspects to the loan specialist position is assessing and calculating income.  This requires someone with very good attention to detail and someone good with numbers.  Fortunately, there are income calculators available at a lot of lenders, so the math part isn't quite as important.  What is almost more important is knowing what can and cannot work.  For example, someone who was out of work for a few years and is about to start an hourly position likely wouldn't be able to use their income.  

My boss hired for the Loan Specialist position so that, as I said earlier, he and other loan officers could focus more on sales.  This allows them to focus on making quality Bombombs (video emails) and have meetings whenever they need.  Also, hiring someone who only focuses on creating loan files ensures more accurate loans.  If an LO has to create a loan file while simultaneously focusing on sales and meetings, they are far more likely to make an error which could sabotage a deal.  

I'm honestly surprised that the position of Loan Specialist is not more widely known or used.  I'm sure some brokers consider it to be a waste of a position/money, because unless they are constantly getting loan files to work on or can assign them other busy work, it may not be the best use of company money.  But to any loan broker that wants to ensure accuracy of files, I highly recommend they hire for a loan specialist.  Someone who, like me, is good with numbers and can remember rules and guidelines.  

Year by year, jobs gain and drop in popularity based on need in the current economy.  I think the position of loan specialist is going to be a job on the rise.  I think more and more brokers will hire for them.  I know there are a lot of people out there, like me, who aren't the best at communicating with people, but are good at following rules and guidelines and have attention to detail.  So I believe there are people that would be willing and able to fill those positions should more brokers start hiring for them.  I hope anyone that may read this possibly considers it for a position, because it's one that (should) pay well enough and allows someone to work a normal 9-5 with regular weekends and holidays off.  

Trying to Work During this Coronavirus Pandemic

COVID-19, commonly known as the Coronavirus, has affected basically every business out there.  While most are slower than normal (or having to close), there are grocery and retail stores that are seeing insane crowds every day.  I count my lucky stars that I no longer work in the grocery industry.  Our company, however, is implementing measures to try to keep us and the company itself safe.

We are working from home on occasion during this pandemic.  We have done full days at home, we've gone back to full days in the office, and now we're doing half days.  Half of the office works from home in the morning and in the office in the afternoon, and the other half of the office works in the office in the morning and at home in the afternoon.  I fall into the former category in working in the office in the afternoon.  I think I would actually prefer the other option; get the office work out of the way, get home, and it's a seamless transition from working at home to relaxing at home.

Unfortunately, our bosses have had to implement a cost-cutting strategy that is going to hurt the employees financially for the time being.  They're postponing a portion of our salaries to get by while our business is slow.  Fortunately, I have built up a savings account I could survive off for a bit, but if this goes on for an extended length of time, I might have to do something about it. 

I really feel for all of the families who live paycheck to paycheck and those paychecks are now either reduced or no longer coming.  As I type this, hundreds and hundreds of restaurants and bars are having to close.  I have heard of some CEO's taking a paycut so they can continue to pay their employees, and I got to say, those are the real MVP's. 

My thought is we have to slow and basically stop the spread of COVID-19, and then once that happens, we have to get everyone better.  If everyone infected or sick stays at home, normal activities, events, and business can resume once the spread of the disease stops.  Hopefully that is sooner rather than later.

If this gets bad enough, this could be one of the most single devastating things to happen to not just the economy, but to western civilization.  The disease is really only fatal to the elderly or people with underlying health issues, but the hit so many businesses and industries will absorb may take years and years to recover from.  Some smaller businesses may be forced to close forever because the financial hit will be too much to recover from. 

Let's hope this goes away soon, and we can go back to our normal lives.

Life Hacks

In my years on earth I have learned about and come up with some what are called "life hacks".  They're unconventional ways of accomplishing things or making your life easier, that you perhaps normally wouldn't think about.  I'm going to share my favorite life hacks I've learned about in my life.

How to defrost a car quickly: Don't you hate in the winter when your car frosts up/freezes over and you either have to leave even earlier so you can sit in your car while it warms up, or (if you weren't prepared) be late to work because you had to wait for your car to defrost?  Well, I have found a solution.  In the winter time or whenever in your area the temperatures get near or below freezing, check to see if the temperature is freezing in the morning.  If so, right before you leave, get a large cup of lukewarm water (maybe even a bucket).  Not hot, because that could crack your windshield.  Think warm pool water, or room temperature water.  Take the cup and set it down somewhere while you start your car, start the defroster, and turn on your windshield wipers to a slow intermittent setting (once every 5-10 seconds).  Dump the cup of water on your windshield and windows.  It will clear up your windows in no time.  If it's really cold out, you'll want the wipers going so the water doesn't freeze on your windshield.  This hack has saved me so much time in the mornings, and the gas it saves is well worth the cost of the water from the tap.  Although I will say that this doesn't always completely work, but a scraper is good for getting whatever  the lukewarm water doesn't.

How to get a key ring open: This one is fairly common knowledge, but just in case you don't know it, I'm going to share it.  If you have a staple remover (those ones with the sharp teeth), those are good at holding key rings open to get on and off key chains or keys off key rings.  Much easier than ruining or hurting your fingernails.  Just move it along the ring as you add or remove keys/keychains.

Chill a beverage (or beverages) fast: When you want a hydrating beverage, but it's not cold, there is a way to chill it fairly fast.  The way I've done is to get a paper towel soaking wet (but not dripping) and wrap it around your drink.  Stick it in the freezer for 10-15 minutes (but if it's carbonated or glass, don't forget about it!)  You should have a fairly chilly beverage in that time.  For ice cold, I think it takes 20-25 minutes.  If you need to chill multiple beverages fast, say for a party, get a bucket and fill it with water and ice cubes.  Add salt, which reduces the freezing point of water.  Then add the beverages, and they should chill in no time.

How to have cold water all day: Speaking of having cold beverages, if you're someone that drinks a lot of water and can use a water bottle at work, the night before fill it up roughly 1/3 of the way with water and lay it on its side in the freezer overnight.  The next day, fill it up with water.  You're basically guaranteed to have cold water all day, as that ice will do the trick.  The key is to not fill it up so much that the ice blocks the opening at the top of the water bottle.  So you could fill it up halfway or even a bit more, depending on how fast you'll be drinking the water, if you'll be refilling it, and how long you want the ice to last.

Increase ketchup capacity for ketchup cups: Whenever you're at a fast food place or a sporting event, and you get ketchup for your fries and you use one of those little paper cups, it never seems like enough (if you're someone that uses a liberal amount like I do, anyway).  If you turn them inside out, they will hold a lot more.  Carefully fold and bend it so it's stable, and it should have a much wider opening and hold more.

How to keep track of cables: If you're like me and you have a lot of electronics, this life hack can really help.  If you have a computer station or a TV/video game set up, use bread clips on the ends of the power cords when you plug them into a surge protector/zip strip.  You can either color code them or you can use a small felt tip marker and write what device it's for on the bread clip.  This is very handy for if you have to move or replace a device, and you don't know which cord to unplug.  Bread clips fit very well on electrical cords and can tell you instantly what the cord is used to power.

Organize cables/wires without tangling: One first-world problem a lot of us have is tangled cables and wires.  One notable example would be for earphones.  I wind them up in multiple loops and then use a binder clip to keep the loop together.  You can also use a hair clip.  If you have a large enough binder or hair clip, you can use it on larger cables or cords.

Two uses for scotch tape: Obviously scotch tape is good for wrapping gifts, taping paper together, etc., but it has a couple life hack uses you might not have heard of.  One is to remove slivers.  If you ever get a sliver that is very small and fine and too hard to grab with any tweezers you have, roll some tape into a loop with the sticky part facing out and press it against the area where the sliver(s) are.  As a kid, I once touched the bark of a tree that put tons of tiny slivers into my finger, so my mom used this trick to get the majority of them out.  It doesn't always work, but it's pretty quick and fairly painless.  The other way to use scotch tape is as a lint roller.  Maybe you noticed a bunch of lint on an outfit you were going to wear, but either don't have a lint roller or misplaced it.  Grab a loop of scotch tape, maybe make it several connected loops (you can run the tape around the length of your four fingers) and press it against your clothes.  It should pick up lint pretty well!

That's all I have for now, but if I think of anymore, I'll be sure to add them here!