Do you wanna hear something not a lot of folks know about me?
I used to be a front-end personal banker at a national bank.
Yep, I was the guy who sat in the desk and took loan applications and tried to get you to refinance your house. Man, I hated that job. Really, it was awful.
So much sales pressure, so many hours of staring at the clock. So many reminders that I should be out investing my money, rather than working for it.
However, my job did give me some inside information about how the loan process works. Want to know what I found out? Loans were like a gun safe. They could be opened with the right code. Every time.
I titled this post with the word “guaranteed” NOT because I believe you will always be able to get a loan approved, but because I wanted to demonstrate that the lending process is not a mystery. It’s a lock that can be opened with a code. If you enter the right code, you WILL get your loan approved.
Can you enter that code today? Maybe, maybe not.
Unlike the code to a gun safe, this code is not something I can simply tell you; it’s something you need to have. But I do know that IF you enter it right, if you have what it takes, you are going to get approved. Whether you are looking to buy your first home, purchase an investment property, refinance a current loan, or something totally different, this post will give you the tools you need to crack that code and hear a resounding “yes” from the banker, every time.
Understanding How a Loan Works
Before getting into the details of just how to get your loan approved, let’s talk about the basics. How does a loan even work?
Obviously, there are a lot of different kinds of loans and lenders. There are conventional banks, mortgage brokers, portfolio lenders, hard money lenders, private lenders, and more. Each is going to have their own system. However, let me make a few quick points about the loan process: Typically, the person who you are talking with is just a salesperson (like I was). Here’s the secret that makes the entire loan-procuring process 10x easier: They are not the ones ultimately responsible for saying “yes” or “no” to your loan.
When you go into a bank and sit down with the banker, most likely they are simply there to collect your information and be the contact person for you. The real decision-maker is in the “underwriter.” The underwriter is an individual trained to look at all the puzzle pieces that the salesperson gives them and approve or deny a loan based on facts. The underwriter knows all the rules, laws, and regulations and can make an informed decision. However, while the underwriter has all the power, the underwriter is usually not very creative and definitely not emotionally involved (purposefully). Therefore, to get a loan approved, you must accomplish two things:
- Convince the front end sales guy about the worthiness of you and your loan
- Get the front end guy to convince the back end underwriter about the worthiness of you and your loan
I find that #1, convincing the front end guy, is always easy. They are very quick to say, “Yeah, no problem. We can do that.” I ran across this about a dozen times when trying to refinance my recent 5-plex. Over and over, I heard it: “Yeah, Brandon, no problem. We can do that loan for you, no problem!” Then six weeks go by, and I get that fateful call, “Hey Brandon, this is [insert sales banker’s name here], and it actually looks like we can’t do that loan. You see, our bank will only [insert excuse here].”
I don’t blame the banker, as I used to be one. I had one whole week of training, and I was sent out onto the sales floor to secure multi-million dollar loans. In fact, I was paid commission on loan APPLICATIONS in addition to loan closings. In other words, as a front-end banker, it was in my best interest to get someone to apply for a loan whether or not I thought they could actually get approved. That wasn’t my job; that was the job of the underwriter. I was just collecting leads and acting as “the middle man.”
However, while the banker is not the one ultimately responsible for approving your loan, they are the first (and perhaps most important) person to focus your efforts on. Let’s talk about that.
The Banker’s Role in Getting Your Loan Approved
Let me tell you a quick story about myself — not to pat myself on the back, but to illustrate this point. When I worked at this bank, I was able to close twice as many deals as the other banker who worked there. Twice as many.
We both had the same number of leads, the same number of applications, using the same underwriters. But I was able to do twice as much.
It’s the same reason I am able to buy twice as much real estate as many for almost no money down: Because I was creative. You see, most people don’t punch the code in right the first time when trying to get a loan approved; there is something wrong with it. A boring banker or underwriter will simply say, “No, sorry” and hang up the phone. But I was different. Instead of saying, “I can’t get this loan approved, ” I always asked myself “How can I get this loan approved?” See the shift in thinking?
Now, I didn’t do anything unethical or illegal to get these loans pushed through. Sometimes it was as simple as paying off a small credit card first or changing the loan type. My point is: When you start looking for a loan, look for a creative banker. You want someone who is not simply going to say “yes” or “no” like a computer, but someone who is going to fight to get your loan approved.
Perhaps the best way to find this, at least when looking to get a loan on a piece of property, is to ask some real estate agents who their preferred lender is. In my town, 9/10 agents will all say the same person. Find this person – that’s your first step in getting your loan approved.
Now, even the best, most creative banker is not going to think of everything. This is why it’s ultimately UP TO YOU to make sure your loan gets approved. No, you didn’t just misread that. Once you finish this post, you’ll have no excuse to simply “apply and pray” for loans. You’ll be able to know, or at least have a very good indication, of whether your loan is going to be approved or denied. No matter how good your banker is, they still can’t turn a pig into a pancake. It must pencil out for the underwriter. To make sure it does, let’s talk about how an underwriter thinks…
Understanding How an Underwriter Thinks
Let me tell you a little industry secret: lenders need you more than you need them.
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