Preventing Fallout: 5 Questions Every Agent Should Ask (Part II)

This series was inspired in part by a friend who is a very successful Realtor. He maintains that 90% of the fallout today is caused by bad lenders. With so many new folks in the business, there are plenty of incompetent and unscrupulous people. Some are your client’s friends, some family members. Most are inexperienced. Protect yourself.

Part I was devoted to down payment. Here is the 2nd key question every agent should ask.

Question #2: Can you document your income?

A lot of buyers won’t know what you mean. That’s okay; just get them talking. You want to determine the quantity and the quality of their income and job history. Lenders want to see a reliable steady income stream. They will often average income over two years because they are as concerned about the quality of your client’s income as they are about quantity.

A couple of tenured teachers making $100k year together have good quantity and good quality. But a recently self-employed person with an aggressive accountant may have neither. From their answer, you still won’t know how much debt they have or their debt ratios, but you may be able to figure out quickly whether they are a full doc or a stated income borrower.

Stated Income, No Ratio, and No Doc loan—liar loans as they’re often called—are where many of the industry’s problems took root. In an effort to correct that, most lenders have now abandoned 100% stated income loans, especially for W-2 employees. As a result, loans that were readily available 90 days ago no longer exist. It happened quickly.

Even at something less than 100% LTV, stated income loans now require higher credit scores and more seasoned reserves than just a few months ago. If the buyer answers no to Question #1 and they also need one of these liar loans, shove those car keys back into your pocket and call your lender.

In Part III, we’ll review Fico scores and what you need to ask in order to feel confident in your buyers ability to qualify.