Residential Magazine

Downpayment Assistance Can Aid Everyday Borrowers

Teachers, firefighters, police officers and more can benefit from these programs

By Laura Brandao

The impact of the COVID-19 pandemic has been far-reaching, and when it comes to real estate, first-time homebuyers have been among the hardest hit. The mortgage industry saw an extreme seller’s market in 2021. Desperate to get their hands on the limited inventory available, seasoned buyers with money in the bank competed in a virtual feeding frenzy for homes within seconds of them coming on the market, often presenting cash offers well above asking price.

As mortgage rates dropped to historic lows, refinancing also was a hot product that accounted for a large share of business for many lenders. All of this amounted to having the needs of the “everyday borrower” almost entirely overlooked.
Now, of course, the market is starting to settle. Mortgage rates are inching up and more homes are expected to hit the market. It’s starting to return to a purchase-oriented market. This means that those everyday borrowers are back and they’re ready to claim their piece of the real estate pie. Smart mortgage originators are quickly realizing that it’s time to revisit the options that are available to better accommodate this homebuying audience.

Emerging need

Who is this audience exactly and what do they need? There are many first-time homebuyers and young families out there who are preapproved and can make regular mortgage payments but don’t have the ability to afford a hefty downpayment.
There’s even more to this story, because many of the borrowers who are now ready to buy have taken on a new role since the pandemic began. Some of those who need a little extra help with their downpayment are the country’s most important first responders: educators, military personnel, civil servants, doctors and nurses who have been working feverishly through the pandemic. These borrowers are ready to buy and they need options, so it’s up to mortgage professionals to help them. But how?

To make the right recommendations to borrowers, you should have a deeper conversation about their lives, their families and their overall financial needs.

The good news is that there’s no need to reinvent the wheel. Of course, every lender needs to stay on top of the latest and greatest programs that are available to meet the changing needs of the buyer. But when the market shifts, especially one that has been so volatile, it’s all about reeducation — that is, taking a look at existing loan programs that might offer new opportunities for the current homebuyer profile.
For instance, standard Federal Housing Administration 203(b) loan programs can be paired with U.S. Department of Housing and Urban Development downpayment-assistance grant programs to help the people who are helping the nation’s communities. Some lenders already pair these programs together. Downpayment-assistance programs can offer forgivable grants, but many also offer additional perks.

Due diligence

Downpayment-assistance programs could be a perfect fit for buyers in the new and ever-changing market landscape — but as with any loan program, new or old, finding the right fit is the key. For mortgage originators, this has to start with three critical steps: research, education and communication.
Shop the market. Do your research. Not all loan programs are created equal, even if they do have the same name. Some have a one-step underwriting process while others require more steps, which may be a deterrent. Some require a second loan on the property while others allow for a fully refundable grant of the downpayment-assistance funds. Do your due diligence and find the programs that are a better fit for your clients’ needs.
Education is key. Consider today’s audience. Looking at an existing program through a new lens can uncover unique ways to connect with and support the ever-changing profile of today’s homebuyer. Pairing a 203(b) program with a downpayment-assistance program could be a perfect match for borrowers who are current, retired, volunteer, nonpaid or plan to become first responders, educators, or medical or military personnel, as well as civil servants in a federal, state or local municipality, along with eligible properties located in an underserved census tract.
Communication is vital, especially during the pre-interview. Getting to know your buyer is the first and most important step in the process. To make the right recommendations to borrowers, you should have a deeper conversation about their lives, their families and their overall financial needs. Make it a best practice to look beyond the loan and help a borrower to the best of your ability. Consider what else they’re paying for. Do they have daycare costs? A kid in college? Financial goals for the future?
Go beyond the basic mortgage application to gain a better understanding of what loan is truly right for them. And make sure to avoid jargon and industry speak. Acronyms can be confusing to the borrower, so make sure to break it down.
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The bottom line is, just as housing prices change based on current conditions, loan offerings must adapt to the evolving needs of the borrower. As purchase loans start to reemerge, it’s time for mortgage originators to take a second look at some “oldies but goodies.” They can then differentiate their business and reengage Realtors and borrowers alike. ●


  • Laura Brandao

    Laura Brandao is chief growth officer and a partner at mortgage lender EPM, where she oversees operations and business development. She also serves as the CEO of Lighthouse Lending Capital, a new division of EPM that specializes in unique loan programs and private lending. She serves with several organizations dedicated to lifting others, including as chair of the visionary program for the National Association of Minority Mortgage Bankers of America (NAMMBA) and on the Mortgage Bankers Association of New Jersey’s women's committee.

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