The housing crash of a decade ago taught everyone a series of painful lessons. To ensure the market could withstand future economic downturns, protective measures were put into place.
One of the most notable changes requires loan officers, mortgage brokers and lenders to document a borrower’s income, to make sure the client can indeed afford the loan. You could say that out of the recession was born a better, more dependable process, but it created general misinformation that homeownership is more difficult to achieve. For originators, it’s time to look at things from the buyer’s perspective.
Too many potential first-time homebuyers would rather pay someone else’s mortgage (rent) rather than take the steps to start paying their own. The homebuyer is not being educated on how or where to look for an expert loan officer. In a world where consumers have control over just about everything they do, there is a lack of information on where to go and what to do when buying a home.
Flawed process
Think about all the options facing homebuyers. They can generally start in one of three places: an online search, a real estate website or a referral. Chances are, with an online search, they’re stumbling across paid lead-generation companies who will take them through a series of application questions. Little does the buyer know that on the other side of that search are lenders, originators and real estate agents paying for that data.
There’s a fundamental lack of transparency here because the buyer is trusting a lead-generation company to deliver a housing expert. Do these lead-generation companies vet who buys the leads? Maybe or maybe not. And although consumers often safeguard their identity and security online, they quickly offer up all of their personal information to a complete stranger when looking for a home.
Today’s homebuyers are looking for expertise and definitely want choices. The process, however, is flawed because the buyers aren’t clients at this point — they’re leads. Each time someone shops online and comes across a landing page for a mortgage quote, that person just became a lead. When someone looks at properties online and asks to speak to an agent, that person just became a lead.
Once the buyer hits the enter key on their keyboard, their information goes viral and gets disseminated and sold throughout the industry. That home shopper has no idea who is buying their data nor do they know how the data will be used.
This is a problem because most buyers don’t have a clue where to start. They don’t understand the process. They don’t know what to do other than cross their fingers and Google, hoping they land on a site with some integrity rather than an uncaring, lead-generating mill.
Inform and educate
How do buyers become educated on where to start the homeownership process? The typical first move is going to a search engine and typing in key phrases such as “the first step to homebuying,” “the first step to homeownership” or “the homebuying process.”
The problem here is the promotional content that a generic search attracts. Too often that ends up being a bank or a mortgage company with an agenda to get the buyer to choose their loan officer.
Put yourself back in the shoes of the buyer: Do you believe the thought of sitting down with an independent originator even crossed their minds? Are they aware this person can walk them through the process and has no agenda? Clients need to be made aware of how a great originator can fit in the homebuying journey. From your first contact with a client, you need to explain this to them.
“ Every borrower needs a great mortgage originator to tell their story to the underwriter. ”
Make it simple
The first place to start is to have a conversation with your buyer about their goals, their reasons for buying and where they’re at in the decisionmaking process, as well as about the process itself. Most homebuyers think the first step is to shop for a home, but this puts them at a disadvantage.
A great loan originator makes it simple for the borrower. These are the three primary things your buyers need to know: How much money do I have to put down? How much can I afford to pay monthly? What price range of homes does this lead me to?
The client also needs to know what type of documentation will be needed. Put it in one simple list. This includes a record of assets and expenses such as their tax returns, W-2s, pay stubs and bank statements. Include all pages, front side and back side.
As an originator, explain how you will need to closely audit every page of every document they send. Let them know it’s your job to catch any line items such as expenses and cash deposits, then explain to the buyer how you’ll prepare the file for approval by obtaining letters of explanation. There is always a human story to be told. Buyers also should be informed that they need a home-insurance quote. They might need referrals if they don’t know where to start.
Have your buyers take this list seriously. Let them know this list can make or break their entire homebuying process. Every borrower needs a great mortgage originator to tell their story to the underwriter. The narrative can show the underwriter why the buyer is qualified. This is no small order.
Worth the hassle
Assuming everything is in order, let your buyers know you’ll run their credit and qualify them based on the documents they sent. If you see any issues with income or credit, give them advice on how to improve their situation. And if everything looks good, let them know they’ll receive a letter stating that they’re preapproved.
Your buyers need a real estate agent to help them achieve their next step. Referrals between originators and real estate agents can be a two-way street. Find someone for your borrower who is a skilled negotiator and that agent will likely refer you clients in the future. The agent can put them in touch with skilled contractors and home inspectors.
If they’re not aware, let them know that the buyer’s agent works directly for them for free. The seller of the home pays the commissions of both their agent and the buyer’s agent. Your buyers want an agent who understands them, knows what’s most important to them and will fight for them — even after they get their house keys.
A preapproval letter from a lender offers a distinct advantage. Buyers who are able to submit an offer, along with an official letter showing they’ve been approved for a loan, allows sellers to feel much more confident that the deal will close on a date they can rely on. If your buyers are questioning whether the hassle of the preapproval process was worth it, let them know this is what could make the difference in them getting into their dream home versus getting passed over for a higher offer from a nonapproved bidder.
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Homeownership is the safest path to wealth and everyone needs a home. Today’s well-informed buyers should understand they need “money in their pockets” before buying, as well as the importance of a letter of approval. And as important as moving into a dream home is, so is securing a top-notch loan officer and real estate agent.
