Michaela Phillips - What Lenders Wish Agents Knew

[00:00:01] Welcome to Highest and Best, a podcast for women in real estate, where we explore the freedoms and complexities of this high-intensity career. From candid conversations with top agents to inspiring interviews with coaches, researchers, athletes, and female executives, we share valuable tools to help you stay calm, confident, and continue to show up as your highest and best self. Thanks so much for listening.

[00:00:27] Welcome to Highest and Best Season 2. I am your host as always, Sarah Hubbard. I am an agent in Boulder, Colorado with Volta & Co. And I am so excited for our guests today for a lot of reasons, one of which is that the feds had yet another meeting today, the number we all hang on as realtors. We're going to talk about lending today and my guest is Michelle Phillips. She is the senior loan officer with Arbor Financial Group, also one of my absolute favorite go-to lenders.

[00:00:56] She is a senior loan officer in Boulder, Colorado. And so I am so excited to have you on the podcast today, Michelle. Thanks for doing this. Michelle Phillips. You're welcome. Thank you, Sarah. And you're always so sweet with the things that you say about me. So I really appreciate all of your support and you're obviously very great to work with. Michelle Phillips. Oh, thank you. I want to hear about your background, but I will give you more kudos as I'm sure I will be doing quite a bit in the next 45 minutes. But as I always tell my clients,

[00:01:24] there's some touch points across the home purchase process that I feel like are absolutely essential to everything going smoothly. And the phrase that I use with people all the time is, okay, if you have worked with, say, a big box bank in the past, or you've got a connection to a lender via your parents, right? Which I hear all the time. My dad's got a guy. My mom's got a guy. That's all well and good.

[00:01:48] But the phrase that I use is, do you have someone that you love and trust that will pick up your phone on a Saturday night at 9pm? Because that's what this job entails is, yes, when all goes smoothly, could anyone from any bank do it? Potentially. But when creativity is needed, when timelines change, when maybe your finances are just a little bit out of the box, right? That creativity and that personal connection makes all the difference in the world.

[00:02:17] And what I know when I connect people to you is not only are they going to understand that, but that they are going to go into the transaction with their eyes wide open because you're going to talk them through what's important and what they need to know about their own finances. And that gives me peace of mind as a realtor that my clients know what this lending process is, and they know what you're telling them, and they know what they're signing. And for me, that really, that gives me peace of mind.

[00:02:45] So thank you for being one of those people that I know is going to handle my clients with care. Thank you. And I do. That's important to me. But I'll tell you a little bit about my background first. How did you get into this? Have you been doing this your whole career? Yes. So I actually have a degree in psychology, and I'm from Florida. I moved to Colorado to Boulder in 93. I was just coming for the summer, and then I was going to go back to Florida and work on my master's. I was going to go get an MBA.

[00:03:13] And I fell in love with Boulder, as so many of us do. Ended up staying, but I couldn't get a job anywhere. The job market was really tight. I applied at Amoco. I applied at a shoe store. It was really tight. So I actually ended up being a receptionist at a real estate office in Boulder. They're no longer around, but that's how I got into the business because I met realtors, and I met a loan officer who was just getting started way back in the day in 93.

[00:03:40] So I've been doing this, what, 31 years now because I officially started in lending in 94. But lenders would go to a realtor's office and literally put in flyers in their boxes about rates and stuff because we didn't have the internet. We had cell phones, but that was very close to the beginning of cell phones. Maybe pagers is what we had.

[00:04:00] So anyway, I met a lender and I started working for him as a processor, but I had so many connections that I'd made at the real estate office that I was able to just segue into originating loans. And so that's how I got started. And officially 94 was when I started originating my first loans. It was very different then. Literally, we had fax machines, loan applications.

[00:04:28] You literally had to have signatures. There wasn't e-signing or anything like that. Loan disclosures. A loan disclosure package was maybe six pages. And now as a realtor, if you've been to closings, sometimes those stacks are really thick. It's very different. We didn't have the compliance that we have now. But I fell in love with the business for two reasons. I loved the personal aspect of it, connecting with people.

[00:04:56] But I also love the minutiae of it as far as looking at people's bank statements, figuring out their income, making sure there weren't any holes in what I was presenting to an underwriter so we could get things done quickly. So it just met both sets of my personality. And I just never looked back. Learned from a processing standpoint originally.

[00:05:19] So I was doing the processing, collecting the information from the borrowers, verifying their income, submitting it to underwriting, getting approvals. And then after doing that for about six months, I was ready to get out there and start originating. And the company I worked for at the time, the owner was just a lovely man. And he pushed me to do it. I was terrified.

[00:05:41] I went from making a salary of $18,000 a year as a loan officer to being 100% commission. And I was terrified. And I have in the last 31 years, I've been 100% commission my whole career. So that's how I got started. I was also very nervous that I would wake up in the morning and be a slacker. I'd watch TV. I'd watch TV. I would call my mom.

[00:06:10] I would do anything but work because I didn't have, I didn't have, you know how when you have a W-2 position or you're salaried or you're hourly, you've got a set of tasks. Sure. And I was afraid that I was really nervous that I would burn out and not be, just not apply myself and keep it going. But it didn't work that way. I was able to stay focused and just never looked back. Because you love it.

[00:06:37] I think if you don't have that why, that purpose, that's where you hop around job to job or you don't show up to work with kind of your full self. And that's why I think we see so much turnover with some of the younger generations because they're not quite finding that why. And you got really lucky and found something that felt really purposeful to you 30 years ago, which is unbelievable. Unbelievable.

[00:07:01] Let's back up for one minute because I think I want to get your perspective on just the lending world overall. Because I think this is something that a lot of people don't totally understand. And that I get a lot of questions as a realtor about, which is when should I shop alone? What's the difference between U.S. Bank and Arbor Financial Group? What's the difference between a national lender and a local one?

[00:07:24] So I know that's a very big and complex question, but if we zoom out for just a minute, how would you describe to someone what the whole landscape of lending looks like and what those big categories are? Things are constantly changing.

[00:07:40] And one of the avenues that's become more and more prevalent in today's lending market is lenders working in a broker type situation versus working at a bank, like a U.S. bank or credit union, or working at like a retail operation where you're still not. And I've done that most of my life.

[00:08:09] I changed to the broker, came back to the broker model a year ago. And I'll get to the reason for that. But so you've got three different kind of big pictures. You've got banks where banks, you know, typically they don't have alternative. If you get a loan with U.S. Bank as your lender and that's who you're with, there's not a lot of options. Retail operations, which would be like a guaranteed rate. I worked there for a while.

[00:08:38] They're lenders, but they have different options of where you can send loans and put them in different envelopes, whether it be someone who has not good credit. So they're going into what's called a subprime loan or somebody getting an FHA loan or a VA loan. And then you have brokers, which is becoming more and more popular because our market is so competitive. What a broker is, it pretty much cuts out the middleman.

[00:09:06] When I was at a retail situation, like a guaranteed rate, my company, it was Synergy One Lending. I had a manager who was my sales manager. I had in-house underwriters who sounds great and it is a great thing. They would literally worked for Synergy One Lending and they approved the loan in-house. So there's a little bit more control there. We had a marketing manager.

[00:09:28] We had all these different layers, but what that does is it takes away from the interest rates because you're paying. It takes away from my income because it makes, in my opinion, makes interest rates a little bit less competitive because there's so much fluff. There's so much middleman. And after being in the industry for 30 years, I don't need that. I don't need an office manager. I don't need a sales manager.

[00:09:57] So the broker aspect is great because you are essentially self-employed like you are as a realtor. You get to control your expenses, office, marketing, et cetera. But you deal directly with the lenders. And so you can offer better interest rates because there's less fluff in the middle, if that makes sense.

[00:10:17] And I got to the point because our industry was becoming so competitive because rates had gone up that I was losing referrals from my referral partners because there was other people able to beat my interest rate. And when it comes down to it, in most cases, the interest rate is what is the most attractive feature to a borrower. Now, there's different aspects as far as personality, things like that. But it really boils down to the interest rate.

[00:10:44] So that's the three, that's how I would explain the three divisions. The broker avenue that I'm in now isn't for everyone because you don't have the leadership necessarily. Same with being a realtor. There's some platforms that provide a lot. And if you're by yourself as your own broker, you're not getting anything. So with the experience that I had, that broker avenue was the better option for me. But yeah, those are the three major things.

[00:11:11] With a bank, you pretty much have an employee that's a W-2 employee. They get fed a lot of referrals from a bank, typically. People who just walk in the door, bank there. And there's pros and cons to that as far as things. And then the retail operation, I think we're going to continue to see that shrink. Because people are going to be like, I either want to be at a bank or credit union, or I'd rather be out on the broker avenue and have a little bit more control. Yeah. And that explains, I think, more.

[00:11:40] I think a lot of the clients that have come to me and they wonder why the rate is different at different places. I know. I think they think when there is a rate drops or there's a Fed meeting and there's an interest rate that's advertised here or there, that it's the same rate that everyone's operating under. And maybe it's just a different process or different rules and regulations. But the rates are different. And they're not always close. There's some pretty substantial differences, oftentimes, between not only those three options,

[00:12:09] but even within those buckets as well. Yes. And I think a big part of it is how you, how within those buckets, how the lead generation comes in. So if you're at a bank and you're just dealing with people that bank there and they're walking in, they automatically have that trust with you. Then it's not as necessarily, it's not necessarily as competitive of a situation.

[00:12:36] Whereas if you're online and you're, and you're getting leads from different avenues on the internet, that situation can become a lot more competitive because it's, you're not, you don't have as much control of where the lead generation comes from. That being said, we're talking about rates and how important it is. There is a part of it that then comes into the relationship because, and I'm very, I try to be,

[00:13:06] and this is something we can talk about, but transparency is key in our industry in order to be successful in my opinion. And so there still is a lot of relationship drive to choosing a different, choosing a lender. But yes, you see a variety of different interest rates out there. And sometimes I see them and I'm just like, that is crazy that they're actually getting clients because those rates are so high.

[00:13:30] It's just, it has a lot to do with the lead that, that, that is associated, whether there's a lot of people who in this generation are very internet-based and they have a lot more, they, they utilize the internet a lot differently than say someone else that's walking in and personally doing their banking at U.S. Bank, like handing over a deposit and actually physically putting it in the bank. So I think that comes to play too. It's really interesting.

[00:14:00] My parents are in their early eighties. When I purchased my first house, I'm also from the Midwest. So, you know, that generation, my dad's been at the same bank for 60 years. He's got his person. It felt really important to him that I was going through a lender he knew. And that was a really long time ago. And I now know so much more about the industry, but at that time, and I think this is what happens so often with people is it's just one less thing to have on their plate.

[00:14:27] If they, if someone in the family says they need to work with so-and-so, they just go with it. They probably don't understand how different those rates could be if they put a little bit of extra time and effort into potentially having conversations with a couple of other options. I do think I always really love working with local lenders. I think there's a lot of flexibility there. And folks who know the market here in Boulder, they know me, they'll pick up my call.

[00:14:57] They'll pick up the call from my clients if there's a last minute kind of freak out. And I think there's a lot of those different elements that people don't really understand when they're picking a lender. And so I try to give folks a good broad view of what's available, but not push them toward anything, of course, give them some folks that I like and trust. But if so often they've already got someone that they like and maybe a national bank, and that's just the way that it works. I want to, before we move on, just to hit on one other thing, which was,

[00:15:24] I think in the past couple of years, there's obviously this massive growing community of folks who are self-employed, who are 1099 contractors, entrepreneurs. We are seeing folks who have been maybe out of work for a year or are in kind of these nuanced professional positions and who may still be operating under the understanding that you need two years of W-2s to get approved for a loan.

[00:15:51] So let's talk about just this new workforce world and how someone in that might navigate the loan process. Are they looking for a specific type of lender? How do those folks get approved and can they? It's really been exciting, believe it or not, in the last, I would say 12 months because of some changes, some program changes we've seen in the lending world.

[00:16:19] Basically, if you've been in the real estate for a while, you've heard stories. If you haven't, in 08, we had a major, major meltdown, the big recession. And there were a lot of, a lot of people blamed it on the mortgage or on the lending environment that we had at that point. And the biggest part of that was as I aged into this industry, I was shocked to see some of the programs that were in place in 08. There was a no doc loan.

[00:16:48] You didn't have to have income. You didn't have to have assets. The interest rate was all based on how much of a down payment you had. And literally, you put it alone. There were stated income loans where if you came in, Sarah, and said, okay, I'm applying for a loan and I pulled your credit and I saw that the mortgage that you wanted, I would back it out and say, your income needs to be, this is what we're going to state your income to be. And so that became more and more popular.

[00:17:18] There were loans for investment. Investment, people, investors, buying properties, putting zero down, doing stated income loans. So it was the Wild West. And the compliance that I talked about earlier wasn't there. There's documents now that borrowers have to sign. And this has been in place ever since that meltdown. Actually, they had to sign them during the meltdown or prior to the meltdown, but we didn't have to use them.

[00:17:43] Documents where we would be able to pull your tax transcripts and match those to what you gave us. So long story short, what happened was when this market crash happened and lenders got blamed, banks got blamed. It was not a lot of blame was put on the consumer because the foreclosure rates were so high. People were walking away from mortgages because they got in over their heads or they thought that the properties were going to rent for more than they did.

[00:18:08] Long story short, we saw a really crazy pullback after that where it became very, you had to have A plus credit, W-2 income, consistency, 20% down. And so it was like that for quite a while. And now we're starting to see, it's not as crazy as it was prior to 08, but we are starting to see some options coming for the self-employed, coming back for the self-employed borrower. Sure.

[00:18:35] One thing that's really popular and it's, believe it or not, I've done a couple of these loans in the last couple of months and I really like them. They're called non-QM. So they're not considered a qualified mortgage, but basically where we look at bank statement loans, where we will take a borrower's 12 months bank statement deposits and be able to average those deposits to come up with an income. When you're self-employed, you write everything off or you want to in all of your expenses,

[00:19:05] because that's, that those are costs that you use to gain this income. So you want to be able to show that and to have a lower tax, taxable, taxable annual tax or whatever. Long story short. So what they do is they take these 12 months bank statements. They allow you to take an average of deposits and then we can use that as your monthly income. Wow. These are becoming more and more popular.

[00:19:29] It's actually, as time goes on, as that market gets flooded with investors that are interested in getting those borrowers, it's becoming more and more competitive. The rates aren't that much higher than the actual rates. You can put a little bit less down. You don't have to have 20% down anymore. You could do 15% down or 10% down. So those programs are starting to come back. And it's been pretty exciting because when you look at, when you think of it that way and you think of it as if you're self-employed and your bank statements and your deposits,

[00:19:59] yes, some months the deposits aren't there, but other months you've got some nice deposits. So that's the transition we're seeing. There's still some conservativeness behind those programs. They require, depending on what industry you are in, they will require a certain debt percentage. So if you're a manufacturer and you're building equipment and things like that, they may only

[00:20:23] allow us to use 40% of those deposits versus if you're an esthetician and you have no employees and you don't have a lot of overhead, they may allow us to use 80%. So there's still some checks and balances there, but those kinds of programs are coming back and it's opening up the doors for a lot of people who didn't know they had these options. And I think it's so necessary after COVID, so many companies closing their brick and

[00:20:52] mortar offices, moving all their employees to contracts so they don't have to pay the overhead of benefits, et cetera. It, I think, opens up a lot of potential for folks to hopefully be first-time homeowners with that. And so I am thrilled that all of those options are around. I hear a lot from people, oh, I'm self-employed or I just went contract a year ago. I'm never going to get a loan. And what I tell people all the time is don't ever question whether you can get a loan. Go get pre-approval.

[00:21:21] And that's what I want to talk about next. Go talk to somebody because pretty darn quickly, you can hear if you can or you cannot. And you can get some pretty good numbers that aren't locked in, but some pretty good numbers around what you can be eligible for. So I tell people that all the time. It's, gosh, take 48 hours, get some docs together and just get the answer. Don't sit around assuming you can't. So let's talk about the pre-approval process for a second because the number one misconception

[00:21:49] I think is that people think pre-approval for a loan is this massive lift of documents and it's going to take forever and there's no reason for them to do it unless they're totally ready to buy a house. As a realtor, I would prefer to not work with anyone that isn't pre-approved because I like to know that we are looking at the right price point of house. The only way to get to that right price point is to really look at what those monthly payments

[00:22:15] are going to be and know that my clients feel comfortable with that monthly payment. And it also, yes, the process itself over the course of contract to closing does require quite a bit of documentation and information coming your way, but the pre-approval is fast and easy. So talk me through what you're doing in that stage, whether it's doing some financial analysis, a little bit of financial coaching sometimes, which is what I love about you, and then approving

[00:22:44] potentially them to get the loan. So what happens in that very first step? There's a couple of things. One thing that's important for realtor relationships is every lender is different as far as their pre-approval process. And so I think that's what I, when I talk to realtors, it's important that you have a concept and understanding of how the lender you're referring your clients to works that process because you don't want it to be just too easy breezy.

[00:23:14] And then there's a surprise. Yeah. We've all seen that. The letter comes across a little too fast. Exactly. Exactly. And I've been there. I've been there. I've been doing this a long time. I'm not, I'm pretty, I'm not real. I'm not real hardcore when it comes to clients, but there's also some checks and balances as a lender before you get that letter out there that you want to make sure you do because as crazy as it may sound, borrows don't always know what their income is and they can

[00:23:42] be W2'd and have a salary and they still don't know. And so it's, you get this information, but it's always a good thing to, to be able to back it up a little. And it also depends on the client that you're working with. But as far as the pre-approval goes, I would, when I start that process, because let's face it as a lender, and this is something I learned early on, I'm asking the most intimate questions to people. People aren't used to talking. The first thing I say, okay, what's your income? How's your credit? How much money do you spend the bank?

[00:24:11] Yeah. Yeah. So it's a very, very intimate conversation. And that's how I started with borrowers is listen, I will be as transparent with you as you want me to be. Because as a realtor, you see this, every client's different. Some clients have, let's face it, some trust issues. They have a lot of questions and that's their right. So when I start the process, the biggest thing that I talk to clients about is their comfort level.

[00:24:36] Because when we start talking about these payments, the biggest, if you qualify for a mortgage, the most important thing is, yeah, you qualify, but how comfortable are you with that payment? So it's pretty much the things you would think about the conversation is income, down payment, credit. I don't necessarily pull credit immediately because I find that in this, after 30 years

[00:25:02] of doing this credit, and there's a lot of conceptions that people have about credit because you see the commercials, how important your credit score is, things like that. People are very cautious about having people pull their credit. And so you have to respect that and explain it to people. But the pre-approval process is basically a conversation, starts with a conversation about income. The type of income is W-2, is it self-employed? If it's self-employed, that leads to a bigger discussion.

[00:25:31] How long you've been in your line of work, what your history is. If you've only been working a year and then prior to that, you were a stay-at-home mom for three years, how is that going to affect things? Income, credit, down payment, and then we look at debt ratios and payments. And that's where the comfort level comes in. It can become very clear how far I need to take the conversation pretty quickly, depending on the borrower.

[00:25:57] The other thing that it's important to back up that I've learned, I'd say the hard way, but there's so much writing on this pre-approval letter sometimes that you do want to take it seriously. Like these letters are easy to send out, but I like to have them provide a pay stub or W-2. I want that supporting documentation. Have I submitted it to underwriting and have a stamped approval? No, I haven't done that yet. It depends on the market though, and that's another conversation.

[00:26:27] But so yeah, so basically I have the conversation with borrowers. I don't always pull credit until they're ready to physically submit an offer. But I would say 50% of the time I do, just based on what they tell me their credit is. The pre-approval letter typically says that we've verified your income assets and your credit. So those are the things that we need to make sure we do for our own liability and for the offer.

[00:26:55] And then you also see, and you probably experienced this, whoever the listing agent is on the other side, some listing agents I never hear from at all throughout the whole process. Other listing agents, if I haven't already called them to introduce myself and say, hey, I just pre-approved Tom and Judy Smith. I'm sending over a letter. What are your questions? If I haven't already called them, they're calling me for that information. So the best way to represent the borrower making an offer is to get as much information as you can from them.

[00:27:25] No, you're not submitting it to the underwriter at this point, but you're using your expertise to analyze their information and present it to the listing agent on the other end. Like I said, I've learned the hard way and I have, I've been doing this a long time and I'm still not perfect. Getting a pay stub, being able to really, because like I said, borrowers, they don't realize that the last couple of months you've taken time out off without pay. And when I get your pay stub, you said your full time, which is 40 hours.

[00:27:54] You only worked 20 hours the last two or three months. That could be problematic. So doing that due diligence is really important too. So that's what goes into it. A big part of the pre-approval process for me though, like I said, is talking with the borrowers. I typically, after we get off the phone, spend another 45 minutes to an hour running different scenarios for them so they can see the numbers, see the proposed payments, and again, getting back into their comfort level.

[00:28:23] Because that's a big part of it. It's the biggest part of this first phase for me as well. I think for realtors as well. And I love nothing more than when I introduce my clients to a great broker or a great lender and they come back to me and they say, hey, we thought we were ready because we'd been pre-approved two years ago for this. We now know we're not quite ready and we want to wait until we feel comfortable. And I love that because that call for me, it's peace of mind for both parties.

[00:28:51] It's peace of mind that I know that they've seen a monthly payment range and that we are looking at homes in the right range. And I always have a conversation around, okay, what's a comfortable number and what is the biggest stretch? More than likely for my clients, at least what they're pre-approved for is way beyond even that. So we're really zeroing in on where we want to look and what we want to look for. And oftentimes when they look at what's for sale in that price point, it isn't time for them. They want to wait. And that's great. I love that.

[00:29:20] And it's also peace of mind for them because as you said, it shows me they're serious about buying. If they go through the process of meeting with someone like you, getting some introductory kind of documentation, you can tell pretty early on if they're serious or they're not serious. And it gets the wheels in motion. And for me, what I always say too is the last moment that you want to be handling all of this and having your very first conversation about what's possible is when you're under contract so much. Yes.

[00:29:48] And I always try to tell people, hey, this is a very fast track timeline regardless when we go under contract. Let's have this already done. So I have the peace of mind that we're looking at the right house. You have the peace of mind. You can afford it. We're being respectful of the other party because we're going in with good intentions. And then take this off your plate because if we're trying to turn around an offer and all these other elements in a really quick time period, this is not something you should be worried about.

[00:30:17] And then as you said, that call to the broker or the lender for me is essential because I can tell within a few minutes if they even know who the client is that I'm talking about, if they pick up my call. It's definitely like a reading people moment, but I can tell when I'm getting the wool pulled over my eyes. I can tell when they don't actually know anything about this person. So it makes all the difference in the world to have folks like you call and really speak confidently about a potential buyer.

[00:30:47] It really strengthens an offer, I think. Yeah. And I will say too, most of the experiences, the pre-approval experiences that I have, the borrower is enlightened. Yes. It provides so much. It's like financial advising. Yeah. It provides so much clarity and a level of comfort. Yeah. And so that's a good feeling because that's what you want. The buyer's regret and things like that. It happens because it's a big decision.

[00:31:14] But just being able to create that relationship, let them feel like, hey, I'm here for you. Any question you want to ask me, you can ask me. Any numbers you want to see, this is what I do. It is what I do. And so that's a big part of it. Clean into this opportunity to understand your finances, clean them up, feel really confident about making this big step. I totally agree. I think it's a really wonderful call to make at the beginning of the process. It just keeps the process positive. Yeah.

[00:31:42] Positive and transparent and honest. This is another big one I get all the time, which is when should someone lock in a rate? So should a buyer be talking to Michelle, Joe, and Bob, and she likes all three and is getting numbers and has done pre-approvals with all of them. But when should said buyer lock it in and make it official with one of you? At what part of the process?

[00:32:11] Two answers to that question. First of all, I will tell you that if a buyer should not be having three different lenders pull their credit. Yes. And I, let's face it, this is the world we live in. I know clients are typically shopping, but I say to them, hey, only one of us needs to pull your credit. If one of us pulls your credit, find out what your scores are and you can just reiterate that to the, whatever the lender is you're talking to, to get a rate. Great tip. Great. Yeah. Yeah.

[00:32:37] And the crazy thing is credit reports like are $99. I was going to say, I feel like I have access to my credit report, like through my financial platforms at all times. Yes. And you do. And what I tell people is that credit score you're getting is based on a different formula than what the mortgage credit score looks like. And I know we're getting off topic, but yeah, no, that's important. Yeah. Mortgage credit reports are based on mortgage criteria.

[00:33:06] And I don't know all the ins and outs because that's like a super techie thing, but I have to warn people just because you're, what is it? Free credit report. Right. Says your score is 800. Doesn't mean, no, it doesn't, it most likely isn't going to be 620 when I pull it. If your score is that high, it's going to be a high score, but it may not be 800. It may be 790 or 780. Because it's guessing. It doesn't have all the information. Exactly. Our criteria is a robot, not a human. Yeah.

[00:33:33] It's little, it's a little bit different than your discover card and your Amex card, what they tell you. But I will say, so crazy thing is credit reports. And then I'll answer your question a little bit more. Since I started in the business, they used to be like $3 per bureau. So if you have three credit bureaus, they were $9. Literally they're $99. What that means is when I check your credit, guess who's paying that credit report? Me. Very seldom, very seldom. Do I take a credit card from a borrower to get their, to pull their credit?

[00:34:02] It's just too early in the process that I'm asking for credit cards. So that's not how I do it. But I'm already invested when I pull that credit report, right? So what do I tell clients? Back to your original question. I personally would love it if a borrower would do all of their due diligence and decide who they're going to work with prior to going under contract. Especially if I've been taking the time and Sarah's calling me on Saturday morning and I'm getting this letter to her really quickly.

[00:34:31] And then I'm, and then I'm calling the other agent and I'm doing all this due diligence. I would prefer it if they could make that decision in advance. Very often as our industry works, that doesn't happen. Usually borrowers. And I think that this is usually a borrower will make a decision as to who a lender is going to, they're going to work with. If they're like a known shopper, they will usually do it the day after they go under contract. If they've talked to two or three different lenders, that's when they usually do it.

[00:35:00] Now, I prefer if they make their decision as soon as possible, as their realtor probably does too. You like to know who you're lending for. Oh, for sure. Yeah. That would give me a lot of anxiety if we're doing all of that for the first time a week after. Oh yeah. And it's just a, you have your same, you have your same experiences dealing with John Consumer and what you prefer too. You'd rather know right away if they're going to work with you versus spinning your wheels and things like that. It's par for the course.

[00:35:30] You as a lender, as a local lender that's been in this market for a long time, I have very strong personal relationships with realtors that almost, that dictates my, it dictates how I do business, how I do business and how I respond to referrals because that's almost the bigger part of my job is that relationship and taking care of them and their peace of mind. So that comes into play.

[00:35:55] But yeah, most people, preferably you should choose a lender if not prior to going under contract, then immediately after contract. One thing that I do see that happens a lot is a borrower will get a pre-approval letter from like a big bank. And it's so easy to have that access. It's a weekend and the realtor says, we can just use that pre-approval letter for now. And then once they're under contract, they really start shopping, maybe talking to more local lenders, et cetera.

[00:36:21] Because let's face it in certain markets, a listing agent, they feel more comfortable knowing a local lender as well. Now they can't dictate who you use, but it plays a part in it as far as just that comfort level. So yeah, again, yes, I have definitely seen that. And I know that an offer is stronger when it is the lender that person's going to move forward with. And when I pick up the phone to them, I know that's going to be the person that if there

[00:36:48] are any issues, I can call as well from a listing side. Because I do think a lender I've never heard of, ice cream lending versus one I know really well, I'm going to counsel my clients based on what I know about which is a stronger offer. And so yes, in a dream scenario, all of that is locked in. And the differences in those rates, as we talked about before, are going to be apparent prior to.

[00:37:15] Nothing's going to change in that 24-hour window around if you have a better rate than a bank. Those differences are going to stay generally different. It doesn't mean on that one day, all of a sudden, US bank is going to have a much better rate than you. The question is always, what's the right time to lock it in based on, am I getting the lowest one? And I think you'd have a pretty good sense at that point where they stack up if you're talking to multiple lenders.

[00:37:42] And very often, sometimes a borrower will come back to a lender or a bank and say, hey, gave me this rate. Can you match it? Yeah. And you may see that happening. Because it is so competitive, I personally put out the lowest rate that I can. So I don't have a lot of flexibility. I have flexibility to do things for free, but nobody wants to do that. Sometimes it can become a game too, because a certain lender or bank or whatever doesn't feel like they're being shopped.

[00:38:09] So they put one thing out there and then all of a sudden they're being shopped. And oh, I can lower that rate. Yes. That's a game that we play. But to answer your question too, about when is locking in essential? It's funny because a lot of consumers that purchase properties, they don't even realize that they have a choice to lock in versus not locking in once they're under contract. And that goes with the education that they are given by the lender that they're working with.

[00:38:37] I have, there's always, you can always get a sense, not that I'm an economist. I wish I would have learned more of that in college instead of psychology, but psychology comes into play in this industry. If you're a dedicated person in the lending business, there's usually a climate that we're in as far as mortgage interest rates and a direction you can get a feel for where they're

[00:39:02] heading, whether you're coming up towards a Fed meeting or, or let's say some big news is coming out. Unemployment rates are coming out. It comes out the first Friday of every month, educating a consumer and letting them know, Hey, this is what drives our market. The consumer price index, the jobs report, the Fed meeting. And so when you educate borrowers, then they feel like they have a little bit more control of whether to put, when to push that trigger as far as locking in a rate.

[00:39:31] I will often get clients. What I usually tell a client is I really need you to lock in about 10 days prior to closing because there's disclosures that we're required to send out and we don't want anything to slow up the closing process. But I have clients often that I will email rates daily and we will keep an eye on them. And rates not only change in the morning, we get new rates, but during the day they can change. If the Fed met today, they lowered it by a quarter. But if all of a sudden the stock market goes up 500 points, how is that affecting rates?

[00:40:00] So rates, rates move just like the stock market does. So often I will have clients where we're looking at rates every day. I usually tell a client, you don't need to lock in prior to 30 days because there's so much time there unless we're in a climate where, Hey, rates are going up. And so it's just, you have to gauge the client, the climate. You have to gauge your client. Like a conversation I say is, do you like to gamble? Would you rather be locked in?

[00:40:27] Did I say most people would rather be locked in wishing they weren't locked in versus locked in wishing they were wait, not locked in. Let me say this again. Most people, it's better to be locked in wishing you weren't locked in than not locked in wishing you were. Yes. So when you're under contract and you have a timeline, you are gambling every day that you don't lock in. Yeah. But it's part of that. Do all that due diligence.

[00:40:52] As you're starting your process, get through the pre-approval with whoever you think is the best fit for you at that point. And you'll get a sense of the difference in rates generally, those big buckets. Lock in, pick your lender, the one you want to move forward with. Mint. Yes. Yes. When you're under contract and then lock the rate in with that lender based on the counsel that they are giving you and your comfort level around market volatility in those 30

[00:41:22] or 60 days. Exactly. Amazing. Okay. Love it. I know that you are working with realtors on a daily basis. Obviously, you're face-to-face with borrowers as well. But since this podcast is for realtors, I wanted to give you a chance to help us be better as well. And so I want to ask you how we can be better working with lenders, how we can be more on the top of our game. What questions should we be asking you?

[00:41:48] If there are three things you could tell realtors about how to be really great partners for lenders like yourself, what would you say? I think understanding and like we're talking about, understanding the process as far as just exactly what we're talking about. What is the conversation? Kind of like I mentioned to you, what is the conversation that you're having when you talk to my borrower up front? What information are you getting? How is the process going to move along?

[00:42:17] What is the locking situation? The relationship between the realtor and the lender becomes so important during the process. And I know I'm not being specific to these three questions, but what can I expect from you as the lender? And what can you expect from me as the realtor as far as communication? Another thing is listening to the lender. Listening when I say, let's communicate in advance about some of these deadlines that you're

[00:42:47] putting out there. I have realtors that I've worked with, funny realtors. Oh, I love them. Who will call me in advance of writing an offer and saying, can we go over these dates? And you tell me if they work. That's key because it sets the expectation of what you can expect and what I can expect. Now there are situations where I will get a contract and it was so competitive that we waived the loan approval deadline. We didn't bother telling you that, Michelle. Because it's so competitive. That's fine. The realtor obviously has confidence. They have to know you.

[00:43:16] I was going to say, oh my God, my mouth just dropped when you said that. But of course, they know that. Okay. Got it. Realtors don't go doing that. If you don't have a Michelle, you really have to learn though. It's that. I think that's the probably the biggest thing to the realtors can work better with lenders is that relationship. Use your lender as a resource and as a tool to get your clients what they want. When it's been a competitive market, I've had conversations with realtors about deadlines

[00:43:45] that I feel comfortable you can waive. It's amazing to me when you don't have that conversation. If you have a borrower who's putting a lot of money down on a purchase, if it's over a million dollar purchase, typically the lender is always going to require an appraisal. If the purchase price, if it's not, it's a different conversation, but you can get what's called an appraisal waiver if it's less than a million. But if you're putting a lot down, if your borrower's putting a lot down, how important is that appraisal deadline?

[00:44:15] How much stronger can it make the contract if you waive that appraisal deadline? Having that knowledge, having the borrower be part of that conversation, you can be strategic. That's the best case scenario for the borrower to get the property that they want. Because when a borrower is putting a lot of money down, we're still going to need an appraisal, but they're putting so much money down that if it comes in lower, it's not going to really matter to the loan and getting a loan approval. So that's where you educate your borrower.

[00:44:44] Are you comfortable waiving this? Sometimes it's so competitive as anything you can do to make it stronger. So I think that would probably be the best thing that a realtor can do is really develop that relationship with the lender. Yeah. I see it as such a team effort. I think from that very first call to my client's lender to get to know them, talk about, hey, what are you hearing from them? Here's what I'm hearing from them.

[00:45:12] Are we on the same page about what this price is and where they're comfortable? I always walk through the contact with my clients well before we're under contract because I need the peace of mind that they have read that very boring 28-page document and have a good sense of what the major categories are, especially as it relates to the things we might move to be competitive. I need them to know when I say, let's waive appraisal. Let's move our loan contingency.

[00:45:39] And you're using that verbiage as well that we're not just speaking over them or they're just saying yes and signing. I need them to know that. I need to know that they understand what that means. And I love it when I know that there's a lender that's also going to be explaining that to them. And so I know that they feel incredibly informed on, let's be honest, some really complicated documentation. I do not claim to understand the mortgage world.

[00:46:05] That is why I love having lenders like you who I know are going to speak to my clients in a way that fills them in as much as they need to know as well and doesn't just have them signing documents they don't understand. And I need them to understand the real estate world as well. And they're both incredibly complex industries. So buyers are taking on a lot at the beginning of this process and they're learning a lot. It is certainly drinking out of a fire hose. And I think having folks who really walk them through that is essential because otherwise

[00:46:30] you really are just signing, you're signing your life away a little bit. And what I tell my clients, our job as a realtor, as a lender is to protect your earnest money. Yes. That's a big part of what I do in my job that I have to make sure I'm not doing anything that's going to put that earnest money at risk. Communicating with the realtor if we do have a deadline issue, staying on top of that.

[00:46:55] Another thing you asked or another, this is a funny one, but it's very true way that realtors and lenders can work better together is I always, I don't think, or just realtors should not be quoting interest rates. And as you guys get inundated with interest rates, because that's one way lenders can communicate with you and show you how great we are and how lower rates are and et cetera.

[00:47:20] And it's real easy to see that text and say, oh yeah, this is the rate. I always tell my clients, especially when I first started doing this, don't quote interest rates because every situation is different. And every borrower has is different as far as credit score, things like that. When you ask, I have people ask me, what's the rate today? It's such a layered conversation that you have people. So that's another thing just that lenders and realtors can work together.

[00:47:48] Now it's okay to call me and say, hey, Michelle, I'm working with these clients. I already know they're going to put 20% down. I'm totally, I've had realtors. I think Sarah, you and I've had this conversation. I'm really encouraging them to give you a buzz, but can you give me an idea of a range based on X, Y, and Z? And I'm always going to say, okay, best on X, okay, based on X, Y, and Z, you can use this number, but you want to be careful. And so that's part of letting the realtor do their job, letting the lender do their job. Yeah.

[00:48:16] And as we said, the information I'm getting from the buyer when really pressed by you may be very different. Their understanding of their income may feel confident when I'm talking to them. And then it's a very different ballgame when you're talking to them. So it really is such a powerful team effort. I think between the two of us and those two parties, I think we get to the heart of the real story. I want to ask you, because if you can't laugh at our jobs, then what can you do?

[00:48:41] What are some of the craziest things you've seen in your career over 30 years? Are they night before closing crises? Are there, I just love our title folks always have hilarious stories of things that happen in closings, but any crazy experiences you've had in 30 years that stand out? Oh my goodness. Yes. Always, you know, the story about don't go buy a new car before you, before you, oh gosh,

[00:49:08] I had one recently where the borrowers were purchasing a property and they actually had a long contract, which you don't see that often, like maybe a 45 day close or whatever. And they let me know about a couple of days beforehand that they were going to Japan for 10 days and they would be back the day before closing and they wouldn't have any communication.

[00:49:36] They wouldn't have, be able to have any communication unless they found an internet cafe they could go to. And so it's just, I sometimes am just shocked. Oh yeah, I actually, it's funny. I've been doing this forever, but these are recent ones. I had a client who actually did right before Thanksgiving, all of a sudden it was new construction. We were closing December 1st, which was a Monday after the holiday, which was end of the month, Monday before the Monday after the holiday. It was crazy. Title companies are closed on Friday.

[00:50:05] And he calls me on like Tuesday and says, can we move up the closing? And I said, sure, we can try. There's a lot of stuff that goes on in the back as realtors know, as far as these, the closing disclosure needs to be signed three days in advance. Sure, I can try to do that. So I'm jumping through all these hoops to figure it out. And I'm like, why, why do we need to do that? And he said, I know you told me not to change jobs and I have a job letter. He told me he had a job offer. And I said, listen, that's fine, but do not give your resignation.

[00:50:33] Until after you close, because we always as lenders, not me personally, but in the team will do a verification of employment within 10 days of closing. You never know when that's going to happen. He goes on to say, I've given some of the people in my management know that I'm going to be leaving. And I just was, how am I going to get through this? Because every employer is different. We qualified him on commission and a base salary. We needed that commission. If you change jobs and you still have a base salary,

[00:51:02] we can't use that commission most likely because you're in a position. So things like that, when you think that should be lending or consumer 101, still happens. No matter how much you tell people, no matter how much you tell people. Don't make any sudden movements between contract and closing. Yeah. Yeah. It's just crazy. You have to have a level. And it's interesting. People get into this industry, the mortgage industry. It's not an easy one. It's not an easy, it's not an easy job.

[00:51:29] There's so many different facets that we have to be aware of. And luckily in those situations, it all worked out. But that's why it's important to work with people who know what they're doing and can manage and can be reached on the weekends when all of a sudden, oh my God, he just bought a new car, what do I do? Can use their resources to figure that out. But yeah, there are crazy things that happen. Yeah. The flexibility, I think, I was just having this conversation around home insurance the other day,

[00:51:58] because that is another area where I want my clients to not just pick a number, but have a person that they can call and talk to who will explain their policies to them. And again, you hope you never make that call. But if you do, you want someone in the other line who's going to say, I got you. And that's not always the case in lending. It's surely not always the case in home insurance. It's not always the case with realtors. You really want people that are going to take you seriously and be responsive.

[00:52:27] And it's, yeah, if things hit the fan, man, I hope I'm calling you instead of someone who is one of 12 CC'd on an email from a big box bank. That's going to make all the difference in the world. Yeah. And it just boils down to relationships. I feel so blessed to have been in this business for the amount of time that I have and still be mentally okay. I'm just kidding. But I'm so grateful for the relationships that I have with my clients.

[00:52:56] I have clients that call me just to pick my brain. And that's refreshing. And then I also have realtors who refer me deals that are never going to go anywhere. But it's a relationship. So refer me a deal just so I can talk to the borrower and help them get some insight on the next steps for them or what they need to be doing. It's such a relationship-based business that we're in. You have to be able, though, and that's what I learned, like I said, when I changed companies.

[00:53:24] I can be the best at what I do, but if I can't put a great product out there, then I'm spinning my wheels. Yeah, absolutely. That's key as well. You just set me up for such a great transition to my last question, which I ask everybody on the podcast. And having known you now for a while, too, you are just steadfast in your kindness and optimism.

[00:53:49] And this job, as you said, your career is incredibly volatile and challenging. And, man, most of the people that you're working with, similar to real estate, are in really stressful times, making big decisions. There's vulnerability on the table. You are in an absolutely high-intensity job, but you manage to just stay so happy and positive and kind and helpful throughout all of that. And so I am wondering, what's your secret?

[00:54:18] What are the three big things, I ask everyone, that are helping you show up as your highest and best self to your work every day? That's evolved in my career. It definitely has. When I first started, the intensity was very – business was very demanding. And I, for a long time, didn't take good care of myself. And by me, it didn't take time in myself, in my relationships.

[00:54:48] I just worked. I worked 10-hour days. I don't have children, but I'm married for 26 years to my wonderful husband. And so the biggest thing now for me is taking care of myself and my relationship. Because that balance, having that balance has helped me be better at what I do. Coming in with that balance has been very helpful for me.

[00:55:16] So self-care is key because we get so caught up in the stresses that we have every day that it sometimes goes to the wayside. Yeah, the nervous system and the last-minute fire drill calls that are such a big part of our jobs. It'll take a toll. It'll take a toll. It'll take a toll. Another thing that has come up later in my career is working with people that I want to work with.

[00:55:39] As realtors get better at what they do and they get more seasoned, they start to attract a certain clientele that's more like them. So when I first started, realtors would have a kiosk at the mall. Oh my gosh. Yeah. And so anybody who walked by and who had a question was all of a sudden a client for them. So there was no sense of where their clients came from and things like that. But you needed the business.

[00:56:09] You wanted the business. You were hungry for the business. And so you worked with anybody that you could. Sometimes that costs a lot of stress down the road. And so for me, in my career, mutual respect is the biggest thing, whether that be with my referral partners or my clients. So working with people who have that is a key for me. That brings joy. Working with people who respect you. So that would be the second thing. And then the third thing is setting boundaries.

[00:56:38] Because people, sometimes you think, oh, you think that people are going to do what you let them do. And so if you set a boundary with someone as far as your availability. Now, of course, in our industry, things come up. And I know if my great referral partner is calling me on Tuesday at 830, they're calling me for a reason. They're not calling me because they met somebody at the mall kiosk today. So that's one thing.

[00:57:02] But setting boundaries really helps grow that respect with your clients and your referral partners and for yourself. And that's key because you have to be full in our industry. You can't be empty. That's exhausting. So setting boundaries is key, too. And being honest. I'm very transparent. I'm very honest. I tend to be more pessimistic than optimistic.

[00:57:29] Because I don't want Sarah, you to have any surprises at the closing table. So those are things that are key for me and happiness in my career and success in my career. Yeah. Oh, I love that so much. You have to be full in this job, not empty. Gosh, that is so true. And I think it really ties into one of the very first things you said at the beginning of our call, which is the work that we do asks a lot of vulnerability from people.

[00:57:56] We are asking intimate, sometimes scary, anxiety-driven questions about some things that may be very sensitive for them. And then we are standing alongside them through a process that might also feel self-conscious and scary and vulnerable. And I think when things go well, it feels great. When things go pear-shaped, it feels really stressful on us as professionals.

[00:58:22] And it always feels stressful in my heart, too, when those things go pear-shaped and we don't have any control over it. And so I think I couldn't agree more. The older I get and the more I'm in this work, the more I'm putting up boundaries for myself, knowing that's going to make me a better realtor. I couldn't agree with you more on that. Michelle, I just want to say thank you. I'm so grateful for your time.

[00:58:41] I think this is a topic that we as realtors talk about on a daily basis, but don't always get the opportunity to delve into in detail and at a high level like we did today. I'm so grateful for your partnership and such great care that you've taken of my clients over the past few years, but also just really grateful for your time. And before we jump off, how can folks who are listening find you, connect with you, chat with you? What are the best ways of getting in touch?

[00:59:10] You can definitely find me online for my contact information. My name's Michelle Phillips, Michael with an A, Phillips. Give me a buzz. Feel free to call me. It is the, what's the website? It's my name. Michelle. Oh, that's right. Michelle.com. Yep. Yeah. Michelleaphillips.com. Yep. And then that's my email too. Michelle at michellaphillips.com. Perfect. But yeah, I'm happy to chat. Yes. That's the best way to reach me. Amazing. Thank you so much. I really appreciate it. Thank you, Sarah. I appreciate you.

[00:59:39] Thanks so much for listening. And it's my goal to have this podcast be created for and by agents. So your input is absolutely encouraged. If you know another amazing agent, author, athlete, executive, or all around badass woman, you think I should interview, or you have a topic or discussion you'd love to see us cover, please email me at sarah.hubbard at compass.com.