JF959 How Your Mortgage Lender Thinks
You may wonder what a mortgage lender is thinking before you give them a call asking for a loan. They want to know how much Capital you have saved, what you own, and what property you were looking to buy… They also want some skin in the game on your end. This episode tells you everything you need to understand about your local mortgage lender and basic requirements.
Best Ever Tweet:
Stephanie Weeks Real Estate Background:
– Owner of The Weeks Team
– Mortgage Financial Services
– Mortgage lender for more than 13 years
– Closed thousands of loans totaling hundreds of millions of dollars in volume
– Named top 1% of loan officers in the nation – Mortgage Peace
– Based in New Orleans, Louisiana
– Say hi to her at http://weeksteam.com/
– Best Ever Book: The Go Giver by Bob Burg
Click here for a summary of Stephanie’s Best Ever advice: http://bit.ly/2osCmfT
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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff.
With us today – Stephanie Weeks. How are you doing, Stephanie?
Stephanie Weeks: I’m great, how are you today?
Joe Fairless: I’m doing well, and nice to have you on the show. A little bit about Stephanie – she is the owner of the Weeks Team, a mortgage financial services company. She’s a mortgage lender with more than 13 years experience, closed thousands of loans totaling hundreds of millions of dollars in volume, and based in New Orleans, Louisiana, the location of my bachelor party about this time next month, so looking forward to that. Stephanie, with that being said, do you wanna give the Best Ever listeners a little bit more about your background and your focus?
Stephanie Weeks: Sure. As you mentioned, I’ve been in lending for over 13 years, and actually kind of fell into this because my original plan was to be a medical malpractice attorney, so my path went along everything that would follow that, up until going into law school, which I decided in April (when I was supposed to go in August) that something changed, so I needed to have a backup plan… And I hadn’t had a backup plan, but what I did have was I had already bought in full several houses, because my husband and I bought our first house when we were 18 years old. At that point, we were on house four or five, and I called my lender and I said, “Hey, how do you like your job? Tell me about it, and what it entails”, because I told my husband, I said “Oh my gosh, I don’t have a plan B… What in the world am I gonna do?” He said, “Well, anytime any friends or family wanna buy or finance anything, they call you, you get your calculator out and you start running numbers and advise them, so why don’t you just go get paid to do that?” And the rest is history.
Joe Fairless: So that was 13 years ago?
Stephanie Weeks: Yes.
Joe Fairless: Okay, now what type of loans do you specialize in?
Stephanie Weeks: Residential mortgage loans.
Joe Fairless: And do you work with investors?
Stephanie Weeks: I do, absolutely.
Joe Fairless: What are some of the unique aspects of working with an investor that you’ve come across?
Stephanie Weeks: Well, a lot of the lending institutions, when it comes to investment property, they have a little bit higher fees that they charge. They also typically want to put it with some kind of balloon note; they will typically amortize it over a short period with an elevated rate. Well, for my investors I have products from as little as 15% down for a single family investment property, with a 30-year fixed term, without elevated expenses and without a balloon and without a pre-payment penalty, and I also have the option to have 20% down, 25% down, or of course more if they would like to do that. And I can help those investors with single-family one-unit, two-unit, three-unit or four-unit.
Joe Fairless: Let’s go with the 15% down, 30-year fixed on a four-family… What are you looking for from the borrower?
Stephanie Weeks: On the four-family, the minimum on the four-unit is 25% down. The 15% only applies to the single family.
Joe Fairless: Alright, let’s do the single-family then. 15%, 30-year, single family… What do they need to have in order to qualify?
Stephanie Weeks: Well, they’re gonna need to have enough money verified for the down payment, as well as the closing cost, as well as the prepaid items. We’re also gonna wanna see what we call “reserves in the bank”, or savings. How much money is left after closing, to where if those tenants didn’t pay, how many months can you cover that before you default? So we’re looking for a little bit of savings.
The amount of savings depends on the total client profile. We’re looking for good credit…
Joe Fairless: As far as the amount of savings as the total credit profile – you mean credit score? Or are you looking at something else, like things within the credit score as far as maybe debt-to-income, or something like that?
Stephanie Weeks: It’s pretty much everything. We’re gonna look at the down payment, the cash reserves, the credit score, the utilization of credit, the jobs history, rental experience, being a landlord experience – those different types of things, along with debt-to-income ratio and a number of other things as well. So we kind of look at everything. For one client I might need three months reserves, which means three of those new mortgage payments in the bank, after closing.
For some clients, depending upon the number of properties they own, that might be 12 months that we need.
Joe Fairless: The more properties, the more monthly reserves?
Stephanie Weeks: Yes, because we’re looking to see what if something terrible happens and all the properties are vacant. How many months of those payments can you make before you actually default, as an investor?
Joe Fairless: Alright, let’s use a single-family example. What would be some deal breakers for you, that you’ve come across before and you said, “Sorry, can’t work with you”?
Stephanie Weeks: Well, there are some people that would like to start investing in properties, but they don’t have at least the 15% down. Or maybe they have the 15% down, they also own their own primary residence, but they have absolutely zero savings. That would definitely be a deal breaker, because they’re not in a position to pull from somewhere before having to default if the renters up and leave.
Joe Fairless: Okay. How about some general guidelines, like “Hey, if you want to be assured of getting approved for a single family, 15% down, 30-year mortgage – here are the specific things you need”, getting really specific as far as the savings in the bank… And you can use a hypothetical example – say you’re buying a $100,000 property.
Stephanie Weeks: Okay, so a hypothetical example would be if you have good or excellent credit…
Joe Fairless: Which is…
Stephanie Weeks: The average is about a 680. I define good as 700 and above, and I define excellent as 740 or above.
Joe Fairless: Okay, so 700 and above credit.
Stephanie Weeks: Let’s say a good credit and above, say, have at least 15% down, we’re looking for good job stability – that means typically that you’re on your job for at least two years in the same field’ we’re looking for that so that can be verified.
Joe Fairless: Can that be an entrepreneur who’s been entrepreneuring for two years in the same field, for example real estate?
Stephanie Weeks: Absolutely, as long as it’s verifiable income and it’s not just cash money, or something… But absolutely, 100% yeah. And then have, let’s say if you’re buying a $100,000 property, and let’s say if you have another mortgage on your primary house – let’s say that’s $1,500… Let’s say then you’re buying an investment property, and that monthly payment is gonna be $1,000 dollars. We’re now up to $2,500/month in mortgage expenses in that instance.
So in addition to your down payment, closing costs and pre-paid items as well, we’re gonna typically – and sometimes there’s exceptions to the rules – be looking for at least three months reserves on those two properties, which in that particular case would be about $7,500 that’s still left, that you have access to liquid, that you can pull from if you need to make those payments.
Joe Fairless: As far as any other qualifications or things that would disqualify someone… For example, do they have to have experience as a landlord?
Stephanie Weeks: Not necessarily. Sometimes they do, but not necessarily in every instance. You do not have to have that experience as a landlord. Some deal breakers would be late payments on any bills within the last 12 months, or especially late payments on any mortgages in the past 12 months. And let me say that we define late payment as more than 30 days late, not if you were due on the 10th and you paid it on the 20th. We define late as 30 days or more.
So those would be some things that would be a deal breaker. Again, not having any savings, being short on the cash to close – that would be a deal breaker – having too tight of a debt-to-income ratio, that could be a deal breaker…
Joe Fairless: What’s the ratio you look for?
Stephanie Weeks: Typically we wanna see an overall debt ratio of 45% or less in this instance. Always less is a good thing, but typically no more than 45% on this scenario.
Joe Fairless: And can you explain the debt-to-income ratio?
Stephanie Weeks: Absolutely. With debt-to-income ratio we look at two things: we look at the housing ratio, and we look at the overall debt-to-income ratio. For the housing ratio, that is what is that monthly payment in a percentage, related to your monthly income? So what percentage is your housing ratio? As an example, if you make $1,000/month, you have a $300 housing payment, that is a 30% ratio. Does that make sense?
Joe Fairless: Yup.
Stephanie Weeks: And then we also look at the overall debt-to-income ratio. We look at all the debts that you have, we look at minimum payments, we also include the new proposed mortgage or any existing mortgages, and then we take that and consider a ratio in relation to your monthly income – that’s your overall debt-to-income ratio.
Joe Fairless: Very helpful, and I know that we hear those terms often, but sometimes it’s just good to clarify or just get a refresher, and thanks for walking through that scenario.
Let’s talk about a challenge that you have — or actually, let’s talk about a way that you’ve optimized your business… How long have you had the Weeks Team?
Stephanie Weeks: The Weeks Team works at Mortgage Financial Services, so I run the Weeks Team, but I don’t own Mortgage Financial Services. I’ve been having the official team, if you will, for probably about four or five years now… Where I realized that as the industry changed and as it became more difficult and more complicated shall I say, that it started to take a lot more of my time to put a file together, and that in order to still be able to put the files together while delivering the same customer experience that I wanna deliver to each customer, I had to start leveraging myself with people that were the same or better than me at what I do.
Joe Fairless: Being a mortgage lender, to me – and please educate me – there’s a specific skill set that needs to be present, and that’s someone who’s very good at underwriting, and also good with people to bring in the business… So bring in the business, good with people, good with underwriting, you’ve gotta know your numbers… And I know with building a team – at least my own personal experience – I wanna bring in people who have complementary strengths. So I’m good at some stuff and I’m not good at others, so I wanna bring in people who complement me for the areas I’m not good at. But with the mortgage lender, I wouldn’t think – and this is where I need to be educated – that there’s a lot of skills that would be lacking or that you wouldn’t be able to be very good at to scale… So do you complement your team with people who have similar skill sets as you, because it is a people person thing and an underwriting thing, or do you bring people in who have different skill sets than you?
Stephanie Weeks: Actually, I want someone who has similarities with me, but then also complements some places that I lack. That’s how I structure my team. So it’s a little bit of both really, it’s not someone completely opposite or someone exactly the same. And you mentioned skill set in underwriting and know your numbers – I’m very excited that for the second year in a row I’ve been named in the top 1% of mortgage lenders in the nation. But honestly, my daughter asked me about a week ago, “Mom, how many other loan officers are there?” and I actually had no idea.
This morning I jumped on Facebook, and someone that I know across the country that also made the top 1%, she posted that she read that there are actually 136,000 loan officers. 136,000, so I made the top 1%, which is pretty exciting. But what’s important is that I take my job so seriously, and I treat people’s money better than I would even treat my own money. What you need to look for in a loan officer is a skill set of someone who 1) you feel like you trust, 2) who has your best interest at heart, 3) who’s gonna advise you of your whole entire overall situation, not just say “Sure, you want this loan type – here you go”, but “Hey, you want this? This is great, but here’s some other food for thought and how that might help you in your five-year plan.”
You want someone who cares about every single detail, because if I don’t spend the extra time to actually get quotes for all these different services that go along with a loan, so that I can tell the client “This is what your payment is and this is what you’ll bring to closing or less”, and be able to guarantee that… You have to have a lot of detail, a lot of diligence, a lot of care to be able to do that, versus just guess some numbers and then it be wrong. You’re affecting someone’s livelihood and their life when they’re investing in properties.
The other thing I would say – and the last thing, because I’m getting long-winded on you – is this is what is so important, it’s that there are many times when my team gets a loan that’s been denied by someone else, and so they’re calling us to salvage it and try to keep that close day. There are times when that loan was never a loan, and for 30-45 days you had all these people’s lives affected, because someone didn’t do their job in the beginning and that was never a loan.
And then the other half the time, the loan is perfectly fine but it wasn’t done the right way. So the best way to think about getting yourself a mortgage loan is it’s just like hiring an attorney. The lender is the judge and the jury, and they’re gonna tell you whether you’re approved or denied. But basically, your file is your file. It’s all in how your attorney puts it together versus someone else. In this instance, as your loan officer, I’m your attorney. So if someone puts your file together one way, versus the way that I put it together and present it, I might win your loan, versus your loan just got denied by someone else. So I’m bringing everything that I learned in the legal field, and I realize [unintelligible [00:16:56].17] Oh my gosh, I’m doing exactly what I thought I would do, but just in a different capacity, because I am analyzing a situation, I am advising a client, I am finding what’s best for them, I’m putting their whole entire case together to present it so that I win slam dunk, 100% of the time.
I’m extremely proud to say that my team, of every single loan that we submitted to underwriting in 2016, we did not have one loan denial.
Joe Fairless: Wow.
Stephanie Weeks: Not one, and that is ridiculously strong.
Joe Fairless: Has that happened in years prior for you, or was last year the culmination of what you’ve been up to in kind of refining the process?
Stephanie Weeks: In 2015 we had two loans denied, and in 2014 we had one. So it’s been between one and two, but last year [unintelligible [00:17:54].07] And you know what the difference was? We got a little more firm in the beginning, because the two loans that were denied in 2015, honestly they did not follow our direction, our instruction, and we just went along with it trying to still fix when they weren’t listening. But ultimately they got their own loans denied.
Now we’ve just gotten firmer in that. “Hey, look, you can call Joe Blow down the street and he’s gonna tell you this is gonna be fast and easy, and I need nothing from you” and you’re gonna have 15 stops, you’re gonna be frustrated, your numbers are not gonna be your numbers, and lucky if you go to closing and if you get there on time. But me, I’m gonna be upfront, honest and say “It’s a little bit of work because I need all this stuff, but trust me, because I’m gonna get you there, and realize that some of the things I ask you for may not even seem logical in the real world, but they’re logical in mortgage lending.”
Joe Fairless: Stephanie, based on your experience as a mortgage lender, what is your best advice ever for real estate investors?
Stephanie Weeks: Well, that’s a super tough one.
Joe Fairless: You knew it was coming, though…
Stephanie Weeks: Right, I guess so… Honestly, if you’re paying cash, I don’t have any advice; that’s amazing. But if you do need to get a mortgage loan, the absolute best advice – because if you’re investing in properties, then that’s your business, that’s part of your livelihood… And time is money. And wasting money on appraisals and inspection is also a waste of money, so my biggest advice is that if you’re an investor and you are gonna have mortgages when you’re purchasing these properties, you team up with the best mortgage lender that you can find, that is going to do everything they need to do to get you to that finish line. So don’t take that decision lightly.
Joe Fairless: What are the top three questions that a Best Ever listener should ask their prospective mortgage lender?
Stephanie Weeks: This sounds kind of a joke, but it’s kind of funny and kind of true… For me and my team, we actually review guidelines on almost a daily basis, because on almost a daily basis guidelines are changing. We actually get the guidelines printed out; every few months we get the updates, and those books fall apart, because we are in them. We are learning how everything works, how it has to be done, how it puts us all together. So one of the questions I say as a joke is when you’re talking to a loan officer, ask him when’s the last time they read the guideline book… And it’s kind of mean for me to say it, but I still think it’s funny – you should see their face, or hear them stutter, because unfortunately most loan officers have never picked up a guideline book. That’s frustrating to me.
Joe Fairless: If I asked you that question, what would your answer be?
Stephanie Weeks: Yesterday.
Joe Fairless: You read the guideline book yesterday?
Stephanie Weeks: Not the whole book, but the updates.
Joe Fairless: Right, interesting.
Stephanie Weeks: There’s updates almost on a daily basis. I read two different full updates yesterday.
Joe Fairless: What’s the second question?
Stephanie Weeks: The second question would be ask them what kind of added value they bring. This one example, if someone asked me “Okay, Stephanie, what kind of added value do you bring?”, I would say, “Well, number one, the mortgage industry is broken, and I wanted to change that, so I wrote the book on mortgages. The second thing is I’m gonna treat your money like it’s mine. The third thing is I’m gonna advise you on your overall situation based on a five-year plan that you tell me that you have, your goals for closing costs, cash out of pocket, monthly payment… I am going to shop the title companies for you to get you a good deal, I am going to shop your hallmark insurance for you to get you a good deal… I don’t care what title or what insurance company you choose; I have zero benefit of doing that, other than giving another added value to my customer, to have them look at quotes and make a decision, to make sure that your numbers are accurate and they’re the best that they could possibly be.
The other thing that I would say is my added value is, again, [unintelligible [00:21:52].07] so we always have two licensed people that work just about every file just to make sure that we bounce ideas off each other, have a second set of eyes, which is huge.
Those are some of the things – and there’s more, but those are some of the things I would say are my added value, and they definitely wanna ask that question of a potential loan officer, and see how they answer that.
Joe Fairless: And the third question?
Stephanie Weeks: The third question would be “How many families did you help last year? How many closings did you have?” – however you want to word that that’s most appropriate for you. Because according to the last stats that I read last year (and I haven’t found newer ones), the average loan officer closes 1.4 loans/month. Well. let me leave you with this question: if the guidelines are changing on almost a daily basis with updates, and there are a pretty decent number of programs that are out there and available, and you’re closing less than 2 loans a month as a loan officer, how are you going to be the best in your field? How do you know how to put that file together? How do you know how to get that approval? How do you have the experience to know how to work around the problem if you haven’t done it enough times?
Joe Fairless: It makes sense, I love it. Those are phenomenal questions, those three right there, and then how you talked about how you would respond – really valuable. Thank you for that. Are you ready for the Best Ever Lightning Round?
Stephanie Weeks: Thank you. Okay, I guess… I’m nervous.
Joe Fairless: Let’s do it! First though, a quick work from our Best Ever partners.
Joe Fairless: Stephanie, what’s the best ever book you’ve read?
Stephanie Weeks: I would say the list is so long, it’s ridiculous, honestly… But I would say top of my mind is The Go-Giver.
Joe Fairless: By Bob Burg. Best Ever listeners, you can listen to my interview with Bob… Just search his name at the BestEverShow.com, and his episode will pop up. I can’t find it right now on Google, but Bob Burg – he’s been on the show a couple times, actually… Great guy. What’s the best ever way you like to give back?
Stephanie Weeks: My heart is really with the deaf community, so I serve on the board at the local Deaf Action Center, and I try to give money for every loan that I close to that center. That’s one of the things. I do several things, but that’s really where my heart truly is.
Joe Fairless: What is the best place the Best Ever listeners can get in touch with you?
Stephanie Weeks: You can go to my website at WeeksTeam.com. You can check out The Weeks Team on Facebook, or you can call our office, which is 985 300 LOAN.
Joe Fairless: Are you lending, or do you have programs for every state?
Stephanie Weeks: Not every state… I am licensed in multiple states. Right now I am in Louisiana and Texas. I’m also licensed in several other states, but waiting for the company to get licensed in those states. It should be within the next few weeks I’ll also be in Mississippi, and then within the next couple months I’ll also be in Florida as well.
I’m personally licensed in Louisiana, Mississippi, Alabama, Texas, Georgia and Florida, but the way that it works with the regulations is the company has to be licensed there, as well. We’re working on getting them added to all the states that I’m in.
Joe Fairless: Stephanie, this was an important conversation for the Best Ever listeners who are looking for residential loans, one to four-family, and want to know how to qualify for 15% down, 30-year fixed mortgage, as well as what three questions to ask a mortgage lender. One, “When was the last time you read the guideline book?” and then wait for the awkward pause, two, “What kind of added value do you bring?” and three, “How many customers did you have last year?”
You went through the benchmarks for each of those three, which is important. So we know what a good answer is, an average answer is, a poor answer is, and an outstanding answer is.
Thanks so much for being on the show, I hope you have a best ever day, Stephanie, and we’ll talk to you soon.
Stephanie Weeks: Thank you so much, thank you for having me, and don’t forget too that you can check out my book, Mortgage Peace, at amazon.com.
Joe Fairless: Oh, sweet. We’ll include that in the show notes.
Stephanie Weeks: Thank you so much.