Deal notes, are you using them to your advantage?
Create a smooth application process with great deal notes.
How much time do you spend writing your deal notes? From a lender’s perspective, applications with good deal notes stand out. Supplying accurate and reliable information helps underwriters make decisions more quickly. From your client’s perspective, they’ll appreciate you for speeding up a sometimes stressful process.
Getting to the deal note
If you asked an underwriter for their wish list, it would probably include the following:
- A complete application with all relevant documents and information attached
- A thorough vetting of your client’s situation with a BDM prior to application
- A deal that meets the lender’s minimum requirements
- A great deal note that explains the client’s situation
All four of these points make it easier for the underwriter to evaluate the deal, but it’s the deal note that can help you, as a broker, stand out.
What information should a deal note include?
A great deal note provides a summary of the issues on the client file and fills in the gaps to tell the client’s story as it relates to credit circumstances or ‘between the lines’ details. Your underwriter isn’t looking for a recap, they’re looking to understand why there is an issue.
Example of a good deal note:
I have obtained consent from the customer to pull a credit bureau on [day/month/year] at 3 p.m.
[The client] is coming up for renewal on his/her private mortgages and would like to refinance to get a better rate.
Back in 2019, [the client] got hurt and missed some work. This put [the client] behind and eventually was sent to collections on the [credit card] and other debts. [The client] went to a mortgage broker in [name of city] that did a 1st and 2nd to pay off his/her mortgage and pay out the debts. [The client] knew that [credit card] was paid from proceeds and the other trades owed were also paid out. [The client] is working with a lawyer to get proof the collections were paid.
Now that there is a lot of equity in the home, [the client] would like to try to get ahead. Good secure job and only a car loan for debt.
This is a good deal note because it provides all the relevant information that affects this client’s credit that the underwriter might question when the application is received:
- They’ve dated when the bureau was pulled.
- They explain why the client wants to refinance, which was to get a better rate and get out of the private mortgages.
- They explain why the client has collections, which in this case was an injury that caused him/her to miss work and affected income.
- They explain why the lawyer was involved, justifying why a trade is listed on the bureau that has already been paid. Now the underwriter can move ahead.
- They verify secure employment.
- They list the client’s debt (a car loan) which affects debt servicing ratios.
- They strengthen the deal by noting that there is equity in the home.
Example of a bad deal note:
Did you think the empty box above was an oversight? It’s a common scenario for underwriters; they get the deal package with no deal notes. This makes it harder to assess a client’s situation and more than likely, the underwriter will have to call the broker with additional questions. This back and forth takes time, which holds up the application, making you and your client wait.
Other topics for a deal note
Depending on your client’s circumstances, you might include other relevant facts, such as:
- Is it a new purchase, refinance, or second home?
- Is it an investment property or owner-occupied?
- Does the client have non-traditional sources of income, and how does it relate to stable employment?
- Is there a bankruptcy or consumer proposal in the past and if so, why?
- How did you calculate the client’s income? Did you use a 2-year average using business income? Or a most recent paystub?
- Are you looking at a specific rate, deal, or program that this lender offers? Is there a specific date required for closing or COF date?
Basically, if it affects your client’s situation (good or bad), mention it.
Deal notes are especially important to alternative lenders
In alternative lending, every deal is unique, and they are rarely straightforward because alternative lenders specialize in helping people with more complex employment and histories. An alternative lender will still require your clients to meet mortgage qualification criteria, but they’ll accept higher debt servicing ratios and work with non-traditional sources of income. Your deal notes are critical in connecting the dots.
Robust deal notes help you as well
First, client satisfaction is key in your industry. When you provide underwriters with essential credit details and explanations about the client’s situation, the entire process moves along faster. This is especially important if the client needs to get financing in place quickly.
Second, good deal notes help you keep track of client details as you juggle multiple clients with applications in various stages across multiple lenders. Making robust deal notes helps you stay on top of information and manage the process seamlessly.
Give your deal notes a boost
It’s time to kick things up a notch. If you know one of your underwriting partners has preferences about deal notes, take the time to submit your notes that way. It will go a long way to building a good relationship and establishing trust.
If you have questions about how deal notes can help secure your client an alternative mortgage, contact us to talk to one of our underwriters.