Moshe Wilshinsky – Mortgages

Don’t Rely on Miracles With Your Mortgage

Pesach is a time of freedom and identity. First you must know yourself; and then there is the question of how other people perceive you. This might well be the subject for a whole other article, but right now I would like to discuss how a mortgage banker perceives you.

So who “knows you best”? Leaving aside your parents and your spouse, close friend etc., the answer might well be long-time service professionals, your lawyer or your accountant. For some people, this applies to their banker as well.

What most people fail to recognize, though, is that even if they are lucky enough to have a banker who knows them, it does not necessarily mean that the bank does. When applying for a mortgage, this difference becomes very acute. While their banker, based on a relationship spanning many years, does know them and can give certain services or make certain accommodations because of it, unfortunately the mortgage regulations in Israel over the latter part of this decade do mitigate the effect that the relationship can have on the decision process of those in the bank with the authority to approve a mortgage.

How income and assets are documented, age and citizenship, are all factors dictated by different regulations that can significantly affect or even prevent bank approval of one’s mortgage. Even though a person’s retail or business banker wants to give them a mortgage, they cannot because they do not have the authority, while those in the bank who do have the authority will not exercise it unless the applicants meet regulatory guidelines.

With the proper expertise in the regulatory issues and experience in multiple approaches to how to document or address regulatory requirements, with time these issues can be overcome. However, while the retail or business banker may have the desire to help, they do not have the expertise and experience. Far too often the person in the bank who has the expertise and the authority does not have the relationship with the customer, is overwhelmed with a hundred other files, and, as the responsible party for the discussion to grant the loan, simply does not want to stick his neck out. It is, after all, very rare for the denial of a mortgage application to ever come back to haunt them, whereas approving one certainly can. This can either be because of potential default, or  more likely, a Bank of Israel audit of the file.

I have said many times in previous articles that the process of getting a mortgage is not something that should be started after the apartment is found or the contract signed. Ideally, the process should commence much earlier, because mortgage approval is a tool that should be used in the hunt for an ideal home. Making the assumption that your bank “has your back”, and starting the mortgage process with not enough time to qualify and fund a mortgage from a new lender, may leave the borrower facing a potential default or in need of a miracle.

Like many things in life (e.g. cleaning for Pesach), the earlier you can start the mortgage process the better. Having an approval before signing your purchase contract will make the transaction go smoother and help eliminate one task from the list of things you need to get done in the course of purchasing a property. The benefit of working with a qualified mortgage broker (i.e. expertise and experience) is that while your bank will be given a chance, you are not dependent on it, and you will not need a miracle if your bank’s mortgage department does not find the details of your mortgage application redeeming.

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