Everyone in the real estate and mortgage industries spends a great deal of time and energy on getting new business. Then they focus almost solely on the transaction. Originators and their business partners typically spend very little time building relationships and fulfilling what clients truly crave: clarity, confidence and education about the twists and turns ahead, both during and after the mortgage transaction.
Mortgage borrowers frequently feel confused, stupid or even fearful. They want help but oftentimes don’t know how to verbalize it. What they are truly thinking is, “Help me, please.” Mortgage originators must become better at understanding the borrower’s needs and feelings, then develop a way to put them at ease by making them comfortable and confident while building a long-term relationship.
Prospective U.S. homebuyers are in a much weaker financial situation than many people realize. Millennials, for instance, are less well-off than previous generations due to lower earnings, fewer assets and less wealth, according to the Federal Reserve. This makes life’s milestones such as buying a home harder to achieve.
People are generally living longer, making less and spending more, while many haven’t saved anything for the future. Most, if not all, of their net worth is tied to their home.
The modern-day loan originator is now most relevant and valuable to their clients as a financial adviser, mentor and advocate. A mortgage originator could well be the only person a client has spoken to about their personal financial decisions.
Many originators are solely focused on educating their clients on transactional items such as the costs of a mortgage, the documents needed in the process, what the underwriters will request from them and what happens if the home appraisal comes in below expectations. The real question is, what are originators teaching their clients beyond that? Many haven’t given this a thought or even understand what it entails.
Long-term thinking
Mortgage originators must offer more advice at the beginning of the loan process and be less focused on the transaction if growth is their goal. Originators need to think long term and not just about the present. If not, all future business will be eaten up by the big boys with the big bucks and pricey ad campaigns.
It’s a sad but true story. So, what can loan originators do for their clients to give themselves a fighting chance? They must act more like mortgage advisers and financial advocates for clients. What should this look like? Originators should be providing the advice that can help their clients on the journey to homeownership, educating them on the transaction and motivating them to get to the closing table.
Imagine meeting a couple who are considering a mortgage. They tried to purchase a home last year and have saved $10,000. When they applied at their local bank, they discovered that they needed $20,000 and could only afford a house valued at $125,000 or less. Since they don’t have the $20,000, they are considering spending the $10,000 on a trip to Hawaii.
Playing the role of adviser, the mortgage originator can educate these potential borrowers about other options. It’s clear that this couple had gone to a local bank that only offered conventional loans, and therefore were told that a 10% downpayment and closing costs would add up to about $20,000.
Maybe if they knew that a Federal Housing Administration (FHA) or U.S. Department of Agriculture (USDA) loan could get them into their dream home for less than $10,000, they wouldn’t consider spending their hard-earned money on a vacation. Instead, they could be using this nest egg to build their financial future.
The modern-day loan originator is now most relevant and valuable to their clients as a financial adviser, mentor and advocate.
Connections and experience
Offer your expertise and contacts to your clients, who almost always are less experienced and less connected. Be a resource to your clients and connect them to trusted professionals who also can save them pain and money.
Clients will need a good insurance agent who explains options to them and also discusses the other safeguards their family needs. Recommend an attorney that you trust. Only one-third of the U.S. adult population has a will, which means the other two-thirds do not. Don’t let your clients be part of the latter group.
Introduce them to a financial adviser who will help to protect their financial future and assist in making smart, big-money decisions. New homebuyers need to be connected to trusted real estate agents. Too many new buyers don’t know that they should have an agent working on their behalf and that they don’t pay them directly out of their wallet.
Save your clients time and help them avoid costly errors. During refinance booms, always think about what your clients are doing with the savings. Are they investing the extra money? Are they applying it to the mortgage or other debt? Educate them on ways to benefit long term. Offer the advice and connections that can help make a difference in their life.
Show them ways to save more in taxes. For example, any household with more than $109,000 in taxable income cannot write off mortgage insurance. Educating clients on this fact and following up with loan options that don’t require mortgage insurance can be a huge benefit.
Many homebuyers want to automatically put 20% down. Show them other options with lower downpayments and no mortgage insurance. They could keep a bit more in their pockets upfront. It’s the loan originator’s job to make them aware of options they didn’t know existed. By giving them choices, clients can feel empowered to make their own smart decisions.
Unbiased advice
Give unbiased advice by leaving emotions and financial reward out of the equation. Giving buyers more than one option is simply good business. Too often, borrowers are only shown a single option. Everyone in the industry, especially mortgage brokers, needs to be sure they are giving their clients more than one choice.
Even if the only options they have are an FHA or USDA loan, show them options for how they can set up their loan or how they can pay down their balance more quickly. Sit down and explain it to them. Put the client at ease. Make them feel confident that they are working with the right person and are making the best possible decision for themselves, their family and their future.
This will make them feel in control and empowered by seeing the things they don’t yet understand. It also will reduce or eliminate the number of clients who shop loan originators. The clients that only see one option are the ones who won’t be sure they are making the right choice. They will wind up working with the originator who makes them feel the most assured.
Lastly, don’t only show them an option that pays you more. Set financial gain in the back seat for a minute. Don’t assume that a client really wants to put 20% down because they told you. Make it a habit to show people options. Treat people the way you would want to be treated and help them become more financially grounded.
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If you give your clients information like this, you will never be driven out of the loan origination business. Borrowers will refer their family and friends to you. The professionals you refer clients to will in turn refer their clients to you. You will become the adviser they’ve never had, and they will rely on your experience and knowledge throughout the years. ●
