Education is the root of understanding, empowerment, and growth beyond measure. When you are educated in a subject, it allows you to understand it from all angles. When you understand a subject from all angles, even at a high level, you become more aware and appreciative. When you have this level of empowerment and knowledge as a consumer about a product or service you are using, and you become more aware of how this product or service was manufactured, you then have lifted the value, the process becomes transparent, and therefore you enter the situation with an entirely new dynamic of confidence. As consumers, when we purchase a good or service that has as much significant impact personally, socially, and economically as buying a home, being educated in the good/product or service will ensure you comprehend the process and support you as a consumer in obtaining the desired “price” and level of service. This is key for such a large investment as a home for two reasons. 1- Part of the journey is being educated in the financial benefits of homeownership to maintain assurance in your financial solidarity and security for future generations in your family. 2- Knowledge continues to be power. Understanding homeownership long-term will lead to additional growth, strengthening your financial future.
Educating your customers will ensure a relationship between you and the rest of the professionals involved in the loan life cycle journey based on trust and transparency. This type of relationship will have only one outcome—benefit and growth. Not only will the customer be more likely to return to you for future purchases, but they will remember the support, guidance, and knowledge you provided them, ensuring they will refer others to you. You see, as humans, we remember what is taught to us; we remember being educated far more than we remember being told what to do. As the saying goes—give a person a fish, and they will eat for a day; teach a person to fish, and they will eat for life.
There are a lot of tools in our industry that support educating the consumer. I recommend taking those tools and creating a loan life cycle document branded to you, highlighting major milestones based on your specific process within your mortgage lending organization. Then, on the back, include the below jargon/acronyms. This will again support and craft a valued relationship based on education, empowerment, and trust.
I reflected on my own personal journey during my first home buying experience and remembered the terminology that confused me to come up with this list.
Real Estate Buyer Agent: The buyer agent represents the buyer and can assist with several aspects of the home buying process, such as finding a home, scheduling viewings, submitting offers, setting up home inspections, etc.
Real Estate Seller Agent: The seller agent handles many tasks involved with selling a home, including analyzing the market to determine the time to sell, giving you advice for maximizing your property’s value, and procuring the most advantageous offer.
Mortgage Lender Pre-Approval: A pre-approval is a much more detailed process and is considered to be much stronger. This process includes reviewing all income and asset documentation, such as pay stubs, tax returns and bank statements, to ensure you have the ability to receive underwriting approval.
Mortgage Lender Pre-Qualification: A pre-qualification is a loan application based on what the buyer/borrower told the Mortgage Lender. This is typically a faster and less detailed processing than a pre-approval.
Close of Escrow Period: Close of escrow is part of closing on a house when both parties complete their half of the agreement. It’s important to note that close of escrow may or may not happen on the actual closing date. For instance, you could exchange all necessary documents/materials ahead of time before the title exchange.
Contingency period: The contingency period is the length of time a buyer or seller has to complete or remove a contingency in a real estate contract. Without the right contingency, a buyer can’t back out of the contract without potentially losing their earnest money deposit.
Home Appraisal: An appraisal is an unbiased professional opinion of a home’s value and is required whenever a mortgage is involved in buying, refinance or selling a property. The home Appraisal value is the value the mortgage lending company uses to assess the value of the collateral regardless of the purchase price.
APR: The Annual Percentage Rate (APR) is the cost you pay each year to borrower money, including fees, expressed as a percentage. The APR is a broader measure of the cost to you of borrowing money since it reflects not only the interest rate but also the fees you have to pay to get the loan.
Mortgage note Rate: The Mortgage note Rate is the percentage you pay for the use of funds, often expressed as a yearly percentage, as mentioned on the promissory note or document.
Mortgage Term: The Mortgage term is the term of your mortgage or how long you have to repay the loan. The typical mortgage terms are 15, 20 or 30 years.
CTC: Clear to Close (CTC) means you have met the requirements and conditions to close on your mortgage.
DTI: Debit to Income (DTI) ratio is all your monthly debit payments divided by your gross monthly income.
LTV: Loan to Value (LTV) ratio is a lending risk assessment ratio that financial institutions and other lenders examine before approving a mortgage.
Seller Credit: A seller credit is money that the seller gives the buyer at closing as an incentive to purchase a property.
In our current paradigm, when providing detailed information, a simple, quick, easy-to-read guide is crucial. As professionals in the housing industry, we have the great ability, some might say duty, to offer all the required tools and resources to financial wealth. And the current access (Axis) point to the American dream of homeownership for all.
