"Hey Andre...what are interest rates today?"
If you're in the lending business, this is what we hear...all day long.
To be fair, that's the question I asked lenders before becoming a mortgage loan officer.
I get it.
So, should loan officers answer that question by blurting out 6.21%, 5.97%, 4.367%
Or, should loan officers start by asking questions about the borrower's goals and continue the conversation with a consultative approach? 🎯
For the majority of our borrowers, interest rates are the only thing they know. Low=Good. High=Bad. Buy High, Sell Low. No, wait. That's my investment strategy...nevermind.
This article is not about sales tactics or strategies but a non-scientific look into what most borrowers CARE about.
My conclusion at the end could be wrong, but it wouldn't be the first time. "Right, honey?" (wife in the background: "Right!")
First off, there are borrowers who are math nerds and will question every line item on a Loan Estimate (LE) / Closing Disclosure (CD). I respect that. It's their money. It's wise to understand the charges & fees on an LE/CD.
What I’ve found borrowers care about most is: ✅ CASH FROM BORROWER.
Cash From Borrower is my main point.
Borrowers have $xx,xxx amount of money in their bank account.
After looking at the Cash From Borrower line item, reality sets in:
"We don't have enough $ to buy this house!"
"We won't have any money left over for repairs, upgrades, or new furniture!"
"We can only eat Top Ramen after we buy this house!"
To which I say to my borrower, "Yeah, but look at that sweet interest rate!" -Never 😆
Now, before any of you say, "yeah Andre, you can structure the loan so that Cash From Borrower can be rolled into the loan amount, minimizing or eliminating cash out of pocket" or "the Realtor can negotiate Seller concessions reducing or eliminating closing costs and/or Cash To Close/Cash From Borrower, Down Payment Assistance (DPA) programs"...yada...yada...yada. You're right! This is a Voce article not a 101 Class on structuring mortgage deals.
Again, my main point is interest rates are not the "primary concern" for borrowers but how much their bank account will be drained in obtaining their loan.
What empirical proof do I have? None. It's based on vibes bro'. We can agree to disagree.
Truth be told, the inspiration for this subject came from a CEO of a yuge mortgage company addressing this very issue. He was traveling recently and when conversations eventually led to "What do you do for a living?", he asked them what they cared about most when getting a loan.
Their response? How much is this gonna cost me?
In my experience, I have to agree.
What was their #2 concern?
Take a guess and tune in next week for my sophomoric article on this topic.