A deal killer brokers can overlook

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Too many mortgage brokers are missing the biggest deal killer out there, says one Vancouver broker, and it can be easily avoided with one simple conversation.

“It is definitely something we as brokers need to do, to tell the clients that they are harming themselves by making big-ticket purchases right when their mortgage loan is being approved,” Mark Fidgett, a broker with Verico NotaPennyDownMortgages, tells MortgageBrokerNews.ca. “It is ironic that the best thing that could happen to a client is to be rejected for such a car loan, because then it wouldn’t adversely affect their credit ratio.”

Fidgett has seen deals fall through in the past because a client will get approved for a mortgage loan, but then go out and apply for a car loan or lease and fundamentally change their credit ratio before the deal is consummated, leaving the client in the position of suddenly becoming unqualified when the lender does a new credit bureau check.

“Credit advice is something that brokers need to learn more themselves,” he says. “A lot of brokers do it right, but a lot of them don’t; agents new to the channel need to know there is more to it than just learning how to write a deal, but how to make the deal work.”

Spurring Fidgett’s cautionary YouTube video “Credit No No” was a specific deal that almost fell through because of that earlier scenario.

“We had it happen; a family was approved, the non-refundable downpayment was made, the bank gives their initial commitment – and then they go out and get a car loan. Suddenly they find they don’t qualify,” he says. “I asked if they had a family member willing to take over the car loan, and fortunately they did to get back to the right ratio.”

Fidgett adds that if the family had the right information to begin with, the entire situation could have been avoided.

“The client needs to understand that the lender is telling them ‘we are giving you this commitment, so long as everything stays the same,’” says Fidgett. “Clients need to clearly understand that lenders will want to run a fresh credit bureau check after 30 days. Equifax doesn’t give clients a ton of information, so it is up to us as brokers to educate them on credit ratios.”

  • Omer Quenneville on 2013-04-26 10:02:48 AM

    I have personally seen this happen many times over. I go over in detail with my clients now about what not to do after they have been approved and I leave them a list.

    I can't believe deals die because of this. What are we doing if we are not having this conversation with our clients.

  • John Dearin on 2013-04-26 11:00:28 AM

    I missed something in this article? We tell all our clients the hazard of putting any credit in their name including increasing credit card debt while waiting a mortgage. It is as critical a piece of information as anything else in the process. Brokers are missing this?

  • Kevin Anderson on 2013-04-29 7:30:18 AM

    I wish my broker had this conversation with me.

  • Omer Quenneville on 2013-04-29 10:14:41 AM

    Can I ask what happened Kevin? And the end result?

  • Kevin Anderson on 2013-04-29 10:36:19 AM

    Bought a pre-build. Received the approval, 6 months later our vehicle breaks down and needed to be replaced. Purchased a new vehicle. Come walk through time, bank pulls a new credit bureau and broker phones us and explains that ratios are no longer within CMHC's guidelines. We had to find a co-signor or put 20% down or risk losing our deposit. Luckily my wife's father was able to co-sign. Broker said it was a condition printed in the forms we signed, but neither my wife nor I were specifically made aware of this fact.

  • Anthony on 2013-04-29 12:33:31 PM

    you gotta guide your client right through process until the keys are in their hands...and even doing so, at times they still goofball the deal with a new car lease just before closing...oi vei...

  • @MortgageMark on 2013-04-29 2:24:15 PM

    Received several emails asking what video Don was referring to... http://youtu.be/oU3cPtH2DPQ

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