How Do You Manage Clients' Unrealistic Loan Approval Expectations?
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How Do You Manage Clients' Unrealistic Loan Approval Expectations?
We asked mortgage brokers and loan officers to share their experiences navigating unrealistic client expectations in the mortgage industry. From identifying challenges upfront to offering realistic options, discover six valuable insights from these experts on handling this common scenario.
- Identify Challenges Upfront
- Set Proper Expectations
- Provide Alternative Solutions
- Explain the Loan Process
- Stay True to Yourself
- Offer Realistic Options
Identify Challenges Upfront
Managing a client's unrealistic expectations regarding loan approval can be challenging at times, as many factors could impact their mortgage ability. Some of the most common challenges borrowers face are related to:
- Low credit scores
- Outstanding collections or missed payments
- Past consumer proposal or bankruptcy
- High debt servicing from loans, credit cards, and/or lines of credit
- How they declare income if self-employed
- Not enough saved for down payment and closing costs
- Verifiable income is too low due to short employment tenure
- Separated without a separation agreement in place
There can be other challenges, and through the initial discovery call, we seek to find out as much as we can about past or current financial struggles and challenges, employment history, down payment, and family make-up so we can be upfront in our discussion about how any of these may affect mortgage approval. Sometimes, a client does not believe a piece of information is relevant to what we are doing, and then it comes to light later on, not realizing how much stress and trouble it can cause them. It is always best if we can be out in front of something that will pose a challenge so we can deal with it right away rather than trying to backpedal and save the approval.
Set Proper Expectations
I see a lot of clients with unrealistic expectations when deciding to purchase a home. Whether it's that advertised low rate, the no-down-payment, or no closing costs, all of these items come with an asterisk or small print. The best way to handle clients with unrealistic expectations is to have a deep dive into their finances and set proper expectations up front. For example, no down payment does not mean you will not have to bring any money to the table. There are closing costs, appraisal fees, and inspection fees that must be paid out-of-pocket. I coach my clients from the initial conversation on what their responsibilities are to ensure they understand realistic expectations. By doing this, I have found that you have better-informed clients who make smarter decisions during the home purchasing process.
Provide Alternative Solutions
The truth is, managing clients' expectations is one of the most difficult parts of being a mortgage expert because, apart from the fact that most clients generally do not have a sound understanding of the mortgage processes, there is also the fact that most people have strong emotional attachments to their needs of securing a mortgage. Hence, they are prone to having unrealistic expectations.
However, here is a particular instance when I had to manage a client's unrealistic expectations regarding their mortgage loan approval. About a month ago, one of my clients, who had a short credit history and a high debt-to-income ratio, was looking to secure a 30-year fixed-rate loan at 5.83%. Considering the fact that this percentage is significantly lower than the average competitive 30-year fixed rate, this expectation is simply unrealistic. This is also in addition to the fact that her short credit history and high debt-to-income ratio give her nothing to bargain with.
One way I was able to effectively manage this situation was to first of all explain the situation to her, making sure to point out the reasons she would be unable to get the rates she was looking for and telling her what was obtainable in her situation, making sure to do this empathetically. Also, because in my experience, I have learned that the best way to handle these situations is to provide clients with alternatives to choose from, I recommended alternative solutions for her to explore. This way, it is easier to guarantee that she wouldn't feel boxed into a corner without a choice.
Explain the Loan Process
The single most unrealistic yet recurring expectation regarding loan approval I have experienced with my clients as a mortgage expert is finding clients who expect to have their loans approved within 24 hours. Honestly, for these clients, the toughest part of my job is helping them see how the processes involved in securing a mortgage loan are not the same as getting a personal loan from loan apps and being able to explain this to them in a manner they wouldn't find offensive.
The truth is, explaining this to clients is even more daunting when they know that their credit score is not just impressive but also exceeds the requirement. In fact, one time I had a client who felt that his loan approval was delayed because of his race, insisting we wouldn't give him a loan despite his perfect credit score and worthy debt-to-income ratio. He also went on to demand his loan be approved immediately; otherwise, he would take his business elsewhere.
However, it took me acknowledging his frustrations and validating his feelings to be able to calm him down enough for him to listen while I explained the processes and stages involved in getting a loan approved and how race had nothing to do with whether or not he qualified for a mortgage loan. Also, in order to ensure that he knew our business was interested in keeping his business and serving him in the best way we can, I personally followed up on him as a client during the period it took to process his loan.
Stay True to Yourself
In today's world, it seems there are more of these than there used to be. Clients expect the best possible rate and the best possible service, and when they get it, sometimes they still may go with a competitor for reasons other than what they mentioned were the most important things to them.
First of all, the way a mortgage professional handles this is first: do your best, make sure you are available, and that you communicate in a timely manner. If they decide to go elsewhere, don't beat yourself up about it. Keep doing what you do. Self-reflect, and if you feel you are good, then don't deviate. Maybe use a different tactic, but stay true to yourself. I can't tell you how many clients that I lost came back to me because the person they went with didn't deliver. It's a marathon, not a race.
Offer Realistic Options
As a mortgage broker, I once had a client who expected to get approved for a large home-equity loan despite having significant credit issues and inconsistent income. They believed that owning their home would guarantee easy approval. To manage this, I first acknowledged their concerns and explained the lender's perspective, focusing on how credit history, income stability, and debt-to-income ratio are key factors in the approval process.
I then reframed the conversation by outlining realistic options, such as smaller loan amounts or improving their credit over time to increase their chances of approval. I also discussed alternative lenders who specialize in bad-credit situations. By setting clear expectations and providing actionable steps, I helped the client understand the process and avoid disappointment while still offering them solutions to move forward.