February 21, 2024

Why Do Deals Fail? Many Homebuyers Don’t Understand the Process

Issues Facing OriginatorsMortgage Solutions

In mortgage lending, almost nothing is more frustrating than working hard on applications that ultimately get rejected — especially when the problems result from simple errors and homebuyer misunderstandings.

At a time when it’s so important to close every eligible loan, here’s what many mortgage originators are doing to ensure a smoother loan process, especially when it comes to underwriting.

  1. Educate your borrowers. It shouldn’t be necessary, but tell every prospective homebuyer to avoid taking on additional debt. Remind your clients that 31% of rejected mortgage applications are due to a poor debt-to-income ratio — including applicants who would have been approved if they had not bought a boat before closing.

  2. Set expectations clearly. In a stressful time, borrowers may feel they’re being asked for the same information and paperwork repeatedly. Explain early and often that reverification is a part of verification. Ask your applicant to respond to every request as quickly as possible with up-to-date documents.

  3. Help homebuyers understand the entire process. Arch MI’s Roadmap to Homeownership presentation provides a comprehensive overview, checklists and resources to help new homebuyers learn what to expect at each stage of the homebuying process.  

You should also look for ways to improve the process in-house. Consider these simple steps:

  1. Submit a cover letter to Underwriting with your loan. It’s not often required, but in the spirit of good communication, send your underwriter an overview on your company’s letterhead with your contact details and the best times to reach you. In a few sentences, describe the loan itself (purchase, refinance, etc.), the borrower names, credit scores and, if relevant, any special details such as a self-employed applicant. At the end, add your brief comment on why you think the loan should be approved.
  2. Keep up to date on loan program guidelines. Refresh your knowledge of the guidelines. It’s tempting to skip this step, especially when volume increases, but avoiding misunderstandings helps assure a smoother mortgage process — and gain referrals from your borrowers.

    Build your skills with complimentary Arch MI training courses, including live and on-demand webinars focusing on recent regulatory changes and business development courses ranging from Business Tax Returns 101 and more advanced courses covering partnerships, S Corporations and other business structures.

    If you have guideline questions, call your Arch MI Account Manager or submit questions to the experts at ASK Arch MI to receive an answer in less than an hour. Ask Arch MI is available for any MI-related questions you might have, and there’s no limit to how often you can use this complimentary resource.
  3. Document the pain points after the loan closes. Many LOs use checklists throughout the loan process. It’s important to stay up to date since guidelines, policies and regulations change often. Zeroing in on any current issues that caused delays can be important in avoiding a future repeat.

If you’ve developed tips and tricks to make your loan process smoother, we would love to hear about those techniques and how you developed them. Email us and let us know if we can share your advice in a future edition of the Insights Blog.