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   ARTICLE   |   From Scotsman Guide Residential Edition   |   September 2009

How to Build Financial Literacy

The onus is on brokers to educate borrowers before, during and after the transaction

The topic of financial literacy may sound dry and academic. But with a push for mortgage transactions to be more transparent, it's imperative.

Financial literacy is an individual's commitment to be informed about, aware of and responsible for the possible risks of a transaction. It's a commitment to own the costs of the risk as much as the proceeds. It isn't simply the transfer of knowledge via disclosures. Instead, it comes from an individual's ability to make informed financial decisions.

Especially in today's environment, mortgage brokers can embrace the market's changes and cultivate strong relationships by helping improve their clients' financial literacy. Here's how and when.

Before the transaction

Use this time to build relationships with borrowers while preparing them to qualify for the best products and loan terms. You can increase clients' financial literacy by:

  • Examining credit scores: Mortgage brokers can review clients' credit reports, identify weak spots and recommend solutions. This process also can help borrowers understand the importance of paying down debt loads.
  • Setting expectations for the type of loan clients can get: Explain the requirements to qualify for specific loan terms and how long clients should expect it to take before they're qualified. If your clients' credit scores already look good, instruct them on maintaining favorable scores. Schedule regular checkup meetings.
  • Advising clients to study the FICO Web site (fico.com): View the site and its affiliated consumer site (myfico.com) with clients at your office to demystify the score and boost borrowers' confidence. Books about enhancing and maximizing credit scores also can help empower and encourage clients along the way.
  • Refer clients to nonprofit homeownership-counseling services: Counseling agencies nationwide can provide valuable information on homeownership, including how to select and purchase a property; what to expect during the transaction; and how to budget and save to make homeownership affordable. Many are approved by the U.S. Department of Housing and Urban Development (HUD) and provide counseling at little to no cost to homebuyers. A directory of HUD-approved agencies is available at sctsm.in/HUDagencies.

During the transaction

As your clients prepare to house-hunt in earnest, get them preapproved. If your clients have been in a credit-rebuilding program, notify them as soon as they have reached the threshold for loan qualification, and begin the preapproval process.

Use the house-hunting, offer-submission and transaction time periods to
review important information you first shared with your clients during the pre-transaction phase. Continually reinforce the positive outcome -- the right home purchased with the right mortgage, made possible because they have taken the time to become financially literate.

Keep demystifying terminology and methodology. Explain the steps of preapproval and final approval, describing the lender's decisionmaking process in consumer-friendly language.

After the transaction

Your clients' need for financial literacy doesn't end with the transaction. Your role as their mortgage adviser and advocate shouldn't stop there, either.

Ongoing marketing to clients should highlight information and topics that were important before and during the transaction. A simple e-mail that says hello and links to a worthwhile news story often is appreciated. More-elaborate e-newsletters can do a better job of capturing attention and conveying professionalism. But don't delay post-transaction contact programs for want of a snazzier marketing piece.

Books also make great gifts and learning tools. Sending your clients a best-seller about financial literacy and wealth-building can help keep them focused on those topics and on the great service you provide.

•  •  •

Financially literate clients are informed and optimistic. They are also happier homeowners who appreciate your services and are quick to refer friends and family to you. Ultimately, they're proof that brokers have done their job well.


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