Loyalty, An Archaic Term in Lending

Loyalty, An Archaic Term in Lending


I work with more Buyers who are unable to qualify for financing on their next home purchase. Typically, the scenario is set up this way; I show them a few houses, then we find the house they can’t live without, the house is within their budget and all that is needed before an offer is made is a pre-qualification letter from “their” bank. More and more frequently, a couple or individual returns to me disappointed and discouraged. The bank that they have sent all their business to for years is now telling them that the loan they are applying for is going to be rejected.

What is the most common problem? Is it their debt to income ratio? Bad credit? Falsified income? No. The most common problem is something the banks and lending institutions are not telling my clients. While loyalty is still a heralded characteristic for any individual, it is no longer in the vocabulary of those who lend money. What banks and lenders fail to tell you is that they do not want all of your business. Sure, they want your checking and savings account, but they want as little debt, and thusly liability, on any one individual as possible. In the wake of the recent Mortgage Lending Crisis, banks are tightening up their policies on debts and liabilities. As a result, my clients are being the ones affected.

What is my advice? I am telling all of my clients that they should be as loyal to their bank as their bank is to them. Do not hesitate to get a quote from a handful of banks. There is money to lend; you just have to know where to find it. Local banks are often limited by their assets. While there is appeal to keep your money local, there is only so much your local bank can do. Secondary market lenders have money to lend; however their requirements to obtain that money are far stricter than that of local banks. Let each bank that you talk to know that they are not the only lender you are seeing; that may help insure that you are getting the best rate or lowest closing costs. Collect information on everything that they offer. Do your research to ensure you understand one of the biggest purchases of your life. Ask someone for advice if you are confused or have questions (try to seek an independent third party; remember, if someone has something to sell you, they have an agenda). Do not make a decision without understanding the pros and cons of each option. Knowledge is power; that has never been truer than in this situation.



This article was written by Michael Stanger, Realtor® with SBG Real Property Professionals, LLC. He is also a licensed Associate Appraiser and has experience as a Property Manager and Project Manager. Over the past few years, Stanger has proven to be one of the most aggressive, young representatives in the real estate field in Western Kentucky.