Have you ever baked a cake? Since I’ve been spending more time in my spaceship lately, I’m dabbling in the Earthling tradition of food preparation, starting with dessert first! One of my gravity-based mentors told me that chances are, unless you have elder family member’s recipe tattooed on your brain, you need to look at and follow a recipe. Anyone who has ever baked knows this is critical because too much or too little of any single ingredient can turn a two-layer birthday cake into a hollowed out cake bowl full of mush!
The steps you follow in a recipe are very similar to the mortgage process. As a credit union mortgage lender, you recognize the steps that need to be taken to get a loan from application to closing and beyond through the life of the loan. But do your members know this or understand what the various steps are or why they are needed? Probably not.
As I’ve said before, we need to be conscious of the fact that WE know mortgages; we deal with them each and every day. Our members don’t. In fact, if you think about it, a member probably only enters the mortgage loan process a few times in their life. Because of this, education provided by their trusted credit union is of the utmost importance if you want to deliver the service they deserve with this major financial decision. That said, let’s look at the steps taken to “bake” a mortgage.
First, you need to stress the importance of your members getting pre-approved for a mortgage loan. I talked in-depth about this in my previous blog post, so I encourage you to check it out if you haven’t already.
Once the member is pre-approved, they can start the home shopping process. While this is typically considered the fun part of the home ownership endeavor, help them make sure they’re going about the process in the most effective and efficient manner. It’s a lot like prepping the kitchen and making sure you have all the necessary ingredients before starting to bake. Stress the importance of having a real estate professional working with your member on their behalf, watching out for their best interests (kind of like a sous chef).
The real estate professional will help them with everything from finding potential homes in their price range to determining the must haves versus the nice to haves, and negotiating an offer to purchase. That’s when the credit union enters the kitchen and starts pre-heating the oven. The credit union is the chef in the process.
Once the offer is accepted by the seller, the chef receives the recipe and starts pulling together the ingredients to a most fabulous credit union mortgage! While the exact recipe may vary from CU to CU, especially considering recent business process changes put in place during the COVID-19 pandemic, the steps to the recipe generally include:
- Ordering an Appraisal: Explain to the member that this is needed to assess if the home is fairly priced per comparable properties in the neighborhood. Let them know they’ll receive a copy of this report.
- Preliminary Title Report Ordered: This helps the chef make sure there aren’t any encumbrances or liens on the property that could ruin the cake.
- Loan Goes to Underwriting: Let your member know what happens in underwriting—the application is evaluated and supporting documents are requested and attained. Stress to the member that to help ensure the cake is properly baked, they need to provide requested ingredients (i.e., documents) to the underwriter as soon as they can upon request.
- Initial Approval: Once the underwriter finishes their part of the recipe, the member’s loan is initially approved; however, make sure the member understands that there may be conditions attached to the approval requiring additional documentation, for example.
- Closing Disclosure Sent: If you mention CD to your member, they’ll most likely think you’re talking about your favorite band. Explain what the Closing Disclosure includes, noting that it represents good-faith estimates until the final closing papers are drawn up. Also let them know that the CD must be received at least three days prior to the closing.
- Closing is Set: Once the cake is baked, it’s time for the member to receive it! To do so, let them know they’ll have a lot of papers to sign and that the closing agent will explain each one. While you’re not required to attend the closing, it can be a nice “credit union” touch to consider doing so.
- Loan is Funded: In simple terms, the chef is paid for the cake as is everyone who helped during the process, including real estate agents and the seller.
- Servicing Begins: This is a critical part of the process to explain to members—who services their mortgage loan and what exactly that entails. Make sure the member knows who will be servicing their loan to avoid any possible confusion.
- Celebration: Your member gets to celebrate their successful home purchase—possibly by baking a cake in their new kitchen.
While this seems like an overly simple way to break down the mortgage process for your members, remember that they are sure to have questions along the way. Communicate with them regularly so that they are in the know and can ask questions as they come up. Consider using automated loan status updates, a tool many myCUmortgage partners are taking advantage of. Whenever milestones such as the ones listed above are met, the member and their real estate professional receive updates via email. It’s a pretty cool and easy-to-use tool that really fulfills the credit union way of doing business.
But probably the biggest helping hand you can lend to your members is making sure they don’t ruin the cake by opening the oven too soon or not providing needed ingredients. We’ll look at some things you can do to keep your members from jeopardizing their pre-approvals in my next post.
For the time being, enjoy the positive spin on letting your members eat cake!