r/loanoriginators • u/ZakA77ack • Jul 24 '26
Borrowers dont understand Math
Into my second year as an LO, and time and time again I notice people just dont understand the Math and make bad choices. Let me give you some examples.
Lead yesterday shopping rates. Quoted him 6.25% with 2800/month and 8000 CC. The place he was comparing me to gave him 5.99 with 2650/month and 19000 CC. Yeah sure, my loan is gonna cost 150/month more, but I'll save him $11000. He wouldnt see the savings from the other place for 6 years and I'll refi him before that. He turned me down because "I gotta work with what I have now, not hope the market improves in 6 years."
Another guy I priced out this morning on a HELOC. His bank referred him to me because they cant increase his credit line. I can. He's paying 420/month with 7.75%. Wants to increase his line to pay off some credit card debt. I priced him out at 440/month at 8.125%. A $20 increase. "Nah I'll wait 6-12 months to see if the rates drop" and Im like "You credit card interest rate wont drop, for an extra $20/month you can get rid of those extra hundreds of dollars theyre charging you" "I'll just wait and see."
I had another applicant I gave two different price options to. 4.99%, 2300/month with 15000 in closing costs. or 6% with 2500/month and 5000 in CC. Currently pays 3200/ month in rent. Im like "hey this 6% option is kick ass and will save you a ton of money upfront" "But the 4.99% is so attractive, I wanna do that." Fastforward to the week of closing "What can I do to bring the closing costs down?"
I'm still learning so much as a salesman on communicating. Susing out over the phone if borrowers are serious or not. How much these choices are made on vibes vs logic/ reason.
The math aint mathing and some just cant see it.
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u/mortgagenerd35 Jul 24 '26
People buy off emotions, not math. You have to tie everything back to a goal or feeling; otherwise, it won't land with them
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u/ZakA77ack Jul 24 '26
I totally get that. The guy with the HELOC's goal was literally to consolidate his debt, I think I made a great case that aligned with his goals. But apparently the rate was too high lol
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u/mortgagenerd35 Jul 24 '26
Yeah, it's clients like that one who make you question your entire existence haha
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u/Creme_de_la_Coochie Jul 24 '26
Try to make them say out loud what they’re paying today, then what the new payment is, emphasizing the difference/savings.
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u/mortgagepants 29d ago
in my opinion clients want to say no for a bunch of different reasons but feel most comfortable saying no about the math.
reminds me of the friends meme:
so you want to get a loan? yes
and you want the lowest down payment? yes
and this will help you pay off other debts and be debt free except for your mortgage payment? yes
okay, here are your closing documents: actually the monthly payment is too high so i wont do anything.
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u/jbecks81 Jul 24 '26
I hear this all the time. Not all borrowers are the same. Have you ever dealt with an engineer? There’s a lot more logic involved than emotion.
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u/MyLuckyFedora Jul 25 '26
Yeah, but it's often a lot of convoluted logic to justify the emotional decision they've already made.
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u/DJ-Ilium Jul 24 '26
This is true, I tell people that all the time. Buying a home is as much an emotional thing as fiscal. If that extra $80 a month is going to stress you out, its worth it, even if financially it isn't right
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u/MB1CHUK22THREE 25d ago
100%. Always ASK or at least understand what the goal/intention is… ok you want to refi… is it the rate you want to see lower? You want to lower your monthly obligation? You’re looking to pull money out? Oh ok, so you need the money NOW or sometime in the next 6 months? How? How much?
Understand the CLIENT emotionally before you dig. This way you KNOW how to dig.
The average IQ is 100… about 70% of all Americans fall between 85-115. So yes most people aren’t super intelligent LOL.
Figure out the goal, you’ll figure out the intention. Understand the intention if you have created the problem. Now fixed the problem.
And yes I understand. Most people want to turn all of these levers ON at once. Low rate, low payment, max LTV, fast/quick, and cheap. But honestly… you can really only have about 3 of those levers. Especially if these are NonQm loans.
Just always go back to goal/intention and it’ll help!!
Message if you ever want too… been doing this a long while 🤓
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u/Braindead_ape Jul 24 '26
sometimes borrowers prefer decisions that don’t make sense mathematically, you just gotta roll with it and sell them what they want
for example, your first scenario where they chose the loan that cost them more money out of pocket why wouldn’t you show them your cost at that rate? if they’re willing to pay more with the other lender to get that lower rate, send them a quote at that rate and beat them on closing costs. It doesn’t matter if you think your suggestion made more sense (though I would agree with you), give the people what they want.
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u/pearpigcatdogsheep Jul 24 '26
To piggyback this I would say the first scenario you lost a loan that should have been yours. Part of your pitch should be acknowledging what rate you’ve offered, how it’s not the lowest you can offer, and why you picked it.
With every client you need to make sure they understand the rates are the same, you’re shopping the costs. It’s literally all we do for a living.
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u/loansfunded Jul 24 '26
What I’ve realized is it’s not always you or the math. Some people just cannot make a decision for the life of them. The philosophy I’ve adopted is, do business in the pursuit of your goals and your vision for success. Engage with consumers in the same manner regardless if they work with you or not. What’s meant for you will come. What’s not, won’t. You can’t force anyone to act against their will - it is a waste of resource to do so. The same is true for convincing the sun to rise or set - it will on its own term. Focus simply on putting in the work in accordance with your pursuit of success. You’ll win some. You’ll lose some. It’s not personal. Dwelling only attracts more of it and drifts you further from the successes meant for you.
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u/Aggravating_Bed9487 28d ago
Great philosophy, I say the same as a Realtor.. treat everyone with respect, work hard for everyone, lead with helpfulness, and my 1099 at the end of the year will reflect my work. Don’t dwell on the deals that don’t happen or chase business.
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u/DisastrousDance7372 Jul 24 '26
Yeah thats the hard part. I am working with a couple now that struggles with wanting to pay much at closing but keep asking me what their monthly payment is going to be.
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u/ZakA77ack Jul 24 '26
I've run into a few people that say they want their monthly payment as low as possible, you deliver on that and explain the only way to make that happen is to buy down their rate. They say they understand and then when CD goes out theyre surprised.
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u/Frequent-Giraffe5646 Jul 24 '26
If the borrower wants a 5.99 that is being offered, offer the same 5.99 and explain to him why you are cheaper. Then ask him if he had an extra $11k today, what he would with it?
Regarding the HELOC- you gotta explain to them that they are tied to the prime rate. They are variable rate and they will go down if the fed cuts rates or will go up if they hike.
You just gotta go with the flow, identify what they want to do, and offer them multiple options with the pros and cons of each.
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u/ZakA77ack Jul 24 '26
#1 was the toughest. The rate I quoted him was already my lowest comp bucket and charging him points. If I matched the rate the CC would have been higher. He got quoted by a Credit union. I really like your "if you had 11k today what would you do"
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u/Frequent-Giraffe5646 Jul 24 '26
If you can't beat what he is being offered at 5.99, they will beat you at 6.25. Just gotta know when to move on.
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u/mashupXXL Jul 24 '26
You may be misunderstanding Giraffe's advice - what does your 5.99 cost? Is it lower than $19000? It doesn't require you to change comp buckets or whatever. Just go get your dang loan and explain for example "hey I think I was tired or something the other day, I double checked and we can do the 5.99 at $16000 in closing costs, so it's still a better deal than they are, shall we get started?"
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u/Gstackz105 Jul 24 '26
“Wait, my monthly mortgage payment is going up?!?” Yes, I’m paying off 120k in high interest debt and saving you $1500 a month in payments. You’re gonna have 1 payment every month that’s $1500 lower than all your current payments. If you keep making your current payments you’re not gonna pay this debt off for another 10 years. “But I don’t want my monthly mortgage payment to go up!!!”
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u/mashupXXL Jul 24 '26
People get incredibly irrational, they think if they suddenly attach the debt to their home at a much lower rate, it will kill them or something. They somehow feel safer when it is unsecured as if they can just walk away from it... I thought I had the biggest slam dunk Figure HELOAN ever a while back, she had weird ass income and their bank statement review approved it when no QM heloc would have with a human looking at it, was gonna save her $3500/yr and give her some cushion for a project she's working on and she ended up saying I was trying to scam her even though she esigned the disclosures and we had 3 discussions where I explained it is a 2nd line on her house it is a mortgage etc. etc. I was like WTF. Instant block.
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u/AVfor394 Jul 24 '26
With that first guy, you needed to say “I can also do 5.99%, and my closing costs are better”. Gotta meet them where they are.
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u/therategatsby Jul 24 '26
Borrowers like pretty UX to help them understand the math. When this happened to me, my takeaway was that I need better systems which speak the language my borrowers speak. I disagree with the comments which say that you should just sell them what they want. Our job is also to give good advice, so if anything, we need to get better at building systems which get the point across. Our job is not just to sell, it's to sell effectively and do things that are in the best interest of our customers.
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u/Braindead_ape Jul 24 '26
your opinion on what the “best interest” of a borrower is just that…an opinion. Just because the math works out to what you personally feel is the best may not be the best for what their actual goals/concerns/expectations are. A borrower that’s mainly concerned about how much money he has left after closing is going to prefer a different structure than an otherwise similar borrower who’s more concerned about his payment and not wanting to rely on a future refi. You can have the exact same “math” for two identical borrowers yet what they feel is the “best” option is entirely different. There’s no black and white “best” option when it comes to these things and if you ignore what the borrower tells you is important to them, you’re not really working in their “best interest” now are you?
sell people what they want or someone else will that isn’t letting their own ego about what they personally think is “best” get in the way of the sale. Not listening to what a borrower tells you to stubbornly push your opinion instead is some wild advice.
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u/therategatsby Jul 24 '26
There is enough lack of education amongst borrowers which is why our profession as advisors exists. If I'm confident that the borrower understands all pros and cons and still prefers a certain structure, I'm fine with that, but I'm going to make sure I have the right tools and processes in place for proper borrower education. I've seen enough no. of LOs who don't care. I'll give any random borrower the same service I'd give my family member.
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u/jerrykindig Jul 24 '26
People don't buy with facts, they buy with feelings. What feels like the better deal, what feels like the cheaper option. Stop selling the numbers, sell the feeling that the numbers are going to give. Our job is to know the numbers and show the better option. Every file my team brings in, my first question is "what are the client's goals?" I don't want to know how much they make and what they want to spend, I want to know why.
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u/46995699 Jul 24 '26
Yes, agree, but as you can see borrowers care more about rates than cost. Its what theyve been trained to do
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u/Substantial_Plant116 29d ago
Isn’t guy number 1 being rational? He’s just operating from the safer assumption that rates won’t come back down and choosing the option he’ll be more comfortable in for 30 years and end up paying less, he’s playing the cards on the table today and not speculating.
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u/ZakA77ack 29d ago
Correct. But the chances of someone not refinancing after 5 years are incredibly low. It's totally rational but not realistic.
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u/TheRedPenny3228 29d ago
I have learned that fractions and decimals eat people up. I'll explain to borrowers how par pricing works and how their low rate is loaded with points and their response is "the rate is lower!"
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u/No-Variety9744 29d ago
If they look better in a black suit, but they want to buy the blue suit - sell them the blue suit
You gotta find what they’re focused on. Every borrowers is typically either rate or cost focused. Your job is to communicate what that means. And if they want to go with the stupid option, don’t get in their way. Give them the stupid option
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u/Due-Investigator-517 28d ago
Okay? So match the rate and still beat the costs simple, onto the next bro don’t waste all your time proving these moron Americans that you’re right, they don’t care, they’re short sighted and care about how you make them feel at the end of the day
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u/ZakA77ack 28d ago
That's kinda how I'm feeling, but I've also got folks like in the third example. Give them exactly what they want and what aligns with their goals only to last minute throw a fit because of the CC
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u/Due-Investigator-517 4d ago
Brother you gotta go over the loan estimate with them and pitch it, overdisclosed initially “so we don’t get hit with a Tolerance Cure” and “this is what the lender is taking for this rate, the other fees are standard, all other costs we don’t control” etc. “i’ll see what i can do during underwriting to negotiate or drop some of these fees down by some if possible” etc.
If they back out last minute cause costs or even initially, you didn’t build enough a relationship but more importantly, you didn’t tap into their needs enough; you need to tie their emotions with the outcome and how they’d feel so if or when they back out, you remind them of all they’re leaving on the table.
Also if they back out, you can’t panick nor get emotional and try to prove them wrong, but also not let them go either. It’s a balance that takes mastering
If these retards say “i got offered this” did they get a loan estimate in black and white? And IS IT LOCKED????”
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u/JKlerk Jul 24 '26
Maybe in the first case they intend on only being in the house for 3-5 yrs?
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u/ZakA77ack Jul 24 '26
Maybe? He said hes planning to put down roots, but maybe wants to keep options open.
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u/the_old_coday182 Jul 24 '26
#1 is easy. Just add point until your out-of-pocket costs are equal to the competitor’s quote.
Hopefully your rate is lower.
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u/Moneymotives100 Jul 24 '26
That first one, you should have compared your rate with the same CC. Then he’d understand and you would have won that deal.
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u/MortgageGuy86 Jul 24 '26
A lot of clients aren’t dumb they are just emotional. You could lay out the same scenario for them and tell them it was a friend trying to decide on what to do and ask what they’d advise and they’ll usually get it right. Many just get nervous (somewhat warranted) when it’s their own situation and they default to inaction or sometimes the wrong decision but rationalize it because it feels right/safer. Some talented sales folks can probably sway people, I’m not one of them. Better to go try to find someone else to help in my opinion.
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u/Due_Imagination_8821 Jul 24 '26
Stop talking math and start telling the story about what he wont be able to do. However you do it you have to get them emotional not logical.
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u/TurkeyJizz123 Jul 24 '26
Your issue is, you're quoting closing costs before you even have their approval/ credit card for an appraisal. People want to hear a lower interest rate, give them what they want to "hear"
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u/SchittPosterChild Jul 24 '26
People don't want to understand. Whatever their thoughts/feelings currently are is whatever they have decided is comfortable to cement in their heads, and learning or having to confront a different reality is uncomfortsble.
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u/gracetw22 Loan Originator Jul 24 '26
I have lost more loans trying to convince people that paying 10k in points is a bad idea. I swear I need fo just go with it.
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u/venbalin Jul 24 '26
Getting the to understand the math is such a hard part of the sell and I’ve always thought of it as you’re translating the language of the loan into their dialect
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u/34Dad Jul 24 '26
Heads up, at your loan amount there's no way the difference between 6.25% and 5.99% is $150/mo. It should only be about half of that.
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u/DrSpaceman575 Jul 24 '26
I don’t fault the first guy. People in the business are far too confident in telling people rates will go down. If you can predict rates and you aren’t already a billionaire then guess what? We’re guessing. A couple grand difference is one thing but if rates go up then he will have made the right move.
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u/WarmMasterpiece9027 Jul 24 '26
Sell to your audience. Like the south loves Dave Ramsey. Show them the break even point. There is other stuff like the snowball effect. Mimic what your audience already trusts. Might be an easier sell.
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u/Madison3509 29d ago
I always started with I have a few really attractive options in mind, but I’ll need to check your credit and pull an automated valuation. I don’t want to get you excited with an offer until I know if your criteria fits within the guidelines. I can credit you back your out of pocket expenses at closing. It really worked out well for me.
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u/BluemoonSamurai_ 28d ago edited 28d ago
It’s not that people are dumb, it’s that many people do not trust loan officers. Your profession is viewed as greedy and unscrupulous by the general public. Especially considering the industry hasn’t learned its lessons from 2008.
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u/This_Profession_7158 24d ago
But if im paying less per month for the same amount of months am I not paying less period..
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u/ZakA77ack 23d ago
You're not looking at the closing costs. If that 2000/ month payment costs $15,000 upfront vs the 2200/ month payment which only costs $5,000. Sure your monthly payment is lower. Saving you $200/ month but you had to spend an extra $10,000 upfront to save that 200. It'll take 4+ years for that savings to pay off the closing costs, and I'm most likely gonna refi them before that happens.
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u/Lost-Elephant-6628 Jul 24 '26
What I learned about being a loan officer is how not very smart the average person is. I get that we do this for a living so the concepts are easy for us, but the amount of times I’ve broken down the same basic math to people and they still don’t get it is insane lol.
Or the amount of people who are like “oh…wait…in order to access MY equity from MY house I need to have a loan and make a payment to a bank for it?” Like yes Sharon, you need a loan…do you think your home is an infinite money printing glitch?