As published in Scotsman Guide's Residential Edition, February 2009.
While interest rates are generally lower than they have been in recent years, many elements of the market lag because of depressed property values and tougher lending standards. Although many people hope to enter loans insured by the Federal Housing Administration (FHA), those who hold stated-income or no-documentation mortgages still can’t provide the level of paperwork and income proof to enter a better loan. Because of these challenges, many mortgage brokers will want to focus their efforts on the purchase market.
When working in the purchase market, brokers can find opportunity by understanding their borrowers, building referral relationships and becoming FHA experts.
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Know your borrowers
While some people spend a year or longer looking for the right house, they don’t spend nearly as much time thinking about their finances or about how their impending purchase will affect their cash flow or investment goals. Mortgage brokers can help these clients better understand the terms of their impending loan and how it can affect their financial situation. Brokers also can refer clients to a financial counselor who can help them plan a budget and discuss their larger financial picture.
Brokers also may want to discuss:
The possible effects of improving clients’ credit scores;
The possible consequences of missing out on low interest rates; and
How much house clients can afford based on their income level.
Ultimately, listen to clients’ concerns and remind them that you’ll be ready to help them when they decide to act.
Although a number of borrowers will attempt to find and finance a home on their own, others will seek sound advice from a finance professional they already know and trust. Because of this, client referrals are invaluable.
Real estate agents likely are the most-important people with whom to build referral relationships. These relationships work best when they are mutually beneficial, allowing all parties to save time and make money.
The best real estate agents to build partnerships with are full-time career agents. Be careful not to spend too much time building a relationship with agents who don’t give the real estate industry the same amount of effort that you do. These part-time agents can end up wasting your time, rather than helping you close deals.
In establishing your referral relationships, spend time discussing how you and your new partners can help each other. Demonstrate your lending expertise by providing information that makes their jobs easier. Clearly demonstrate that you can save agents’ time by prequalifying clients before they begin to shop for houses. If you can, prove your points with case studies and personal anecdotes.
This year, brokers who are approved to work with FHA programs likely will find themselves closing more loans than those who are not. And don’t just learn about FHA -- become an expert and educate your clients and referral partners. This can help establish you as their go-to broker and keep your pipeline full.
Also remember that the current federal, first-time-homebuyer tax credit can be used in conjunction with these government-backed loans. For most buyers, that tax credit will be $7,500. The exception is for homes that cost less than $75,000. In these cases, the credit will be equal to 10 percent of the home’s purchase price.
An FHA borrower who is also claiming the tax credit can experience incredible benefits. For example, a 3.5-percent downpayment on a $400,000 home is equal to $14,000. Borrowers in that situation, however, could get more than half of that money back on their next tax return.
Dave Muti is a senior mortgage planner with Millenium Home Mortgage LLC in New Jersey and the author of Mortgages: What You Need to Know. He is a sought-after speaker, trainer and motivator for the mortgage industry.
Many professionals use his book to help educate their clients. You can learn more about Muti’s methods, including how to win new clients through his referral-marketing-drip system, by visiting www.pocketguidepress.com and www.dripmarketingcampaign.com. Contact Muti at email@example.com.