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RISE ABOVE THE MORTGAGE CHALLENGE
Tips and advice for helping buyers reach the closing table
Today’s mortgage environment is unlike any we’ve seen before. Having weathered the worst financial crisis since the Great Depression, lenders and mortgage insurers have understandably rewritten the rules of what it takes for consumers to acquire a mortgage.
In fact, when REBAC surveyed members last spring, ABR®s said that difficulties obtaining financing was the top issue preventing buyers from completing a purchase. People associated with the lending industry agree that the lending process has never been more complex and that the rules are changing much more rapidly than before.
Since the crisis began, there have been extensive modifications to existing mortgage programs, plus the creation of several new ones, prompting enormous challenges for lenders to train staff and keep them up-to-date on revisions. With the rules constantly changing, it’s no wonder that it takes longer to process mortgage applications.
While the current environment is admittedly challenging, it’s still quite possible for qualified buyers to secure attractive financing. Granted, it takes more work than before. But buyer’s representatives can provide a valuable service to their clients, and themselves, if they learn how to navigate the current lending environment and share their knowledge with their buyers.
What steps can you take? Read on for expert advice from several ABR®s and mortgage lenders.
1. CLEAR UP MISCONCEPTIONS
One of the biggest mistakes consumers now make is sitting on the sidelines and waiting to buy a home because they are under the impression that it’s impossible to get a mortgage, or that the minimum down payment is 20 percent. But FHA loans, with just 3.5 percent down, now dominate the market. Even in today’s tougher lending environment, FHA remains flexible and buyer-friendly.
Another common misconception concerns the home buyer tax credit. “There was a massive race to get under contract before the home buyer tax credit expired,” observes Katy Kitchin, Retail Sales Supervisor with Edina Realty Mortgage in Lakeville, Minnesota. “But what buyers don’t realize is that today’s rates are much better than last spring. It may help to explain that even if they missed out on the tax credit, today’s lower rates provide lower monthly payments and reduced interest expense over the life of the loan.” Depending on the amount borrowed and terms of the loan, these savings could easily exceed the former tax credit.
2. QUALIFY YOUR BUYERS
Don’t waste time showing homes to consumers who can’t buy them. As John Anderson, ABR®, CRB, CRS, GRI of Twin Oaks Realty in Crystal, Minnesota, points out, “Nothing is more frustrating than spending time with a buyer who doesn’t qualify, or spending time trying to hold a deal together. Both scenarios can be avoided by taking a few key steps up front.”
Anderson admits that even the best transactions are going to take more time and work now than before. But in a market where there are fewer transactions, it’s far preferable to concentrate on buyers who will be able to close.
How? Before you begin showing properties to a buyer, set up a time to discuss the current mortgage situation. Ask questions about their financial picture, including how much money they can apply to a down payment and their credit history. Find out if they might qualify for any special loan programs offered at the federal or local level. Educate them on current mortgage options and the steps needed, starting now, to get their financing lined up.
This initial conversation may reveal warning signs. Even if it doesn’t, it’s a good idea to suggest that buyers consult with a qualified mortgage specialist and secure a preapproval. “Good agents don’t work with buyers unless they take care of this first,” says Kris Drake, Branch Sales Manager for Plaza Mortgage Services in Leawood, Kansas.
Even though buyer’s reps are at greater risk of wasting their time with unqualified buyers, Drake has actually observed more reluctance among agents to insist on preapprovals. “Buyer’s reps don’t want to appear overbearing or turn away hard-to-find buyers,” says Drake. “When the market was more active, they seemed tougher on this point.” From a lender’s perspective, however, it’s much more important to weed out unqualified buyers up front, simply because it can prevent so many problems down the road.
John Jeffries, a Home Mortgage Consultant with Plaza Mortgage Services in Kansas City, Missouri, agrees. “Encourage buyers to fill out an application right away,” says Jeffries. “It’s the best way to look beyond their credit score and see if any other hurdles exist.”
And what if a buyer doesn’t qualify now? You—or your lender—can offer or recommend credit counseling services instead, so these buyers understand how to get back on track. In this way, you are still providing a valuable service to them.
“Never turn a buyer away completely,” says Anderson. “You’re going to feel a lot better about helping them work on their credit if you haven’t already amassed a lot of time and frustration heading down a dead-end path. And when they are ready to buy, it’s very likely they’ll come back to you.”
Continue reading this article in the Today's Buyers Rep Newsletter.
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Thursday, November 4, 2010
RISE ABOVE THE MORTGAGE CHALLENGE
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Great information. Qualifying all buyers is key! Otherwise you might just be wasting your time.
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