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   ARTICLE   |   From Scotsman Guide Residential Edition   |   October 2008

Build Business by Helping Clients Creatively

Two products can help brokers survive the downturn and help their clients take control of their finances

As many mortgage brokers know, helping clients find the best solution for financing takes creativity, especially in the current market. By educating your clients about their options, you can build confidence with them.

With the reduced availability of and tightened underwriting guidelines for many loan types, creative financing takes on a new meaning. Brokers are finding that their clients may not qualify for loans they previously would have. You can help these clients by exploring alternative programs for financing.

Doing so, you can help clients control their investments. This is where true professionals with sound judgment can support their clients in their decisionmaking.

There are two products in particular that can help homebuyers, depending on their situation: interest-only mortgages and reverse mortgages.

Interest-only mortgages

These loans, although certainly abused in recent years, still can be beneficial for some homebuyers. With them, homebuyers will have low payments and will be able to apply principal for recasting payments at any time to reduce the debt. In addition, the mortgage interest is tax-deductible.

Be sure to keep in mind, though, that you only should suggest interest-only mortgages to clients who can also afford conventional financing with a 20-percent downpayment. Interest-only loans are risky and inappropriate for buyers who have little or no cash assets.

Also, whenever possible, give clients a variety of loan-program options with explanations of each to match them with the best solution for their needs. Be clear in your explanations; it should be no surprise consumers don’t understand industry jargon, such as recasting or jumbo. True professionals place themselves in their borrowers' shoes and exercise this philosophy to generate plausible alternatives.

Once the numbers are crunched and underwriting gives a loan commitment, continue to educate your customers on the product so they understand that the loan is interest-only for a term, not for the life of the loan.

Reverse mortgages

This growing product can be beneficial for many of your homeowner clients who are 62 or older. Get educated on reverse mortgages so you understand the benefits they can have for this segment. As a reverse-mortgage specialist, you can give these clients perhaps the most versatile and creative financing option available to them.

The U.S. Department of Housing and Urban Development requires reverse-mortgage counseling to ensure that borrowers understand the costs and are not using money for high-risk investments. Further, the Federal Housing Administration-insured Home Equity Conversion Mortgage program requires that a portion of the equity remain in property.

The key benefits include: All interest is deferred and is a tax write-off. There is no income requirement. There is no medical requirement. Credit scores are not important either, but credit must be pulled to verify that the property does not have any liens. Finally, there are no out-of-pocket closing costs.

The worst thing about reverse mortgages perhaps is their name and the lack of public awareness.

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Despite the tighter underwriting standards and fewer loans available, mortgage brokers who understand their clients’ needs will survive the industry downturn while also helping clients purchase a home.


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