For my last several posts, we’ve looked at that curious group you call millennials and how you and your credit union can help them become home owners. We’ve discussed how to assist them once they make the decision to buy, help define what a mortgage is and gave tips on selecting a lender.
Once they’ve had the chance to digest all of this, it’s go time for your millennial members to start the home purchase process. But, before you release these mortgage-hungry members into the wild real estate market, you need to get them started with their application and provide some final pieces of knowledge on things they’re certain to ask you about. One of the first things I learned on your planet was how much you value human-to-human relationships, and this is an area where credit unions excel.
The first step is the application. To help get them started, you need to set the stage and prep them for show time. Inform them that as part of the application process, their credit report will be run. This report considers their credit card balances, bill payment history and number of credit accounts to generate an overall credit score. Be sure they know how this score impacts your credit union’s decision to lend to them and at what interest rate.
Provide them with an easy-to-follow list of information and documents needed for their application. Some examples include:
- Employment history for the past 2 years
- Residential history for the past 2 years
- Outstanding balance of any current debt (such as student loans or car loans)
- Social Security number
- Pay stubs from the past 30 days
- W-2s for the last 2 years
- Bank statements for all financial accounts
Once the application is complete, engage in steady communications with them, during which time they’re certain to hear a lot of terms or lingo new to them. As a new resident of your planet, I understand this challenge. Always keep in mind that although you and your credit union deal in this business day-in and day-out, this process is probably completely new to them and one that they only experience a handful of times during their lives.
Below I’ve listed several of the terms millennials will hear during their home buying journey. You can be their mortgage dictionary and help them get a leg up by reviewing this terminology. You can start with the roles within your credit union’s mortgage operations.
Loan Officer: Hey, this is probably you! Often called LO for short, let them know that this is the person who guides them through the process from start to finish by giving an overview of what needs to be done, providing a timetable and reviewing all costs associated with their mortgage.
Loan Processor: This person is responsible for collecting all necessary documentation and verification to get applications ready for approval.
Mortgage Underwriter: This is the decision maker on the loan. They review all information and ultimately make the call to approve or deny your millennial member’s application.
Closer: When a loan has gone through all other steps in the process, the closer verifies that all documents are signed and nothing has changed since the time your member applied for the loan.
Next, give your members insight on the actions being taken during the loan approval, including Processing, Closing and Servicing.
Processing: This is when the credit union verifies that all information provided is accurate, including information related to the house being purchased. Processing also includes the following three elements:
- Appraisal: This is what determines the official value of the house. An appraiser uses their industry knowledge and expertise to determine the home’s market value and judge whether this is in line with the asking price. This appraisal value impacts how much your credit union will ultimately loan the member.
- Title Search: This is when a third party performs research into the history of the house. This includes uncovering all previous transactions on the property, any unpaid property taxes or other claims that may be outstanding against the property.
- Underwriting: This is where the underwriter makes the decision to approve or deny the application. The underwriter double-checks all aspects of the application to assess the potential risk of lending to the member. This could include re-pulling credit scores, confirming income, verifying the appraisal, etc.
Closing: This is when the new purchase is made official and the property title passes from the seller to your millennial buyer. This involves signing multiple closing documents. Prior to the actual closing, I encourage you to walk through these documents with your member in advance.
Servicing: The servicing of the mortgage is the process by which loan payments are collected, an escrow account is managed, and taxes and property insurance are paid. Explain to your millennial that even though their loan was granted by their credit union, they may not be the same institution collecting the payments and providing them with statements.
Though specific payment terms may vary by credit union, property taxes and mortgage insurance charges are typically paid to the insurance companies and taxing authorities in 1 or 2 lump sums per year. If an escrow account is established, make sure the millennial realizes that they contribute a portion of each monthly payment to this. When these payments are due, the mortgage servicer is responsible for paying them on time with the funds they’ve already set aside in their escrow account.
In the end, remember to emphasize that you, your credit union and the millennial member are a team. It is your goal to help them through the process and make it as easy as possible for them. This may not seem like rocket science to you or me, but these millennials are new cadets in the vast space of the mortgage industry. Help make sure their journey is phenomenal!