Any mortgage originator can offer traditional loan programs. Offering nontraditional lending can open doors for a mortgage originator to reach a whole new world of niche borrowers, however.
These programs can include construction, jumbo and hard money loans. They also could include nonqualified and reverse mortgages, Section 184 Indian Home Loan Guarantee financing and other specialty loan programs.
Working these loan programs will make you the go-to loan originator for many buyers. That could include an individual looking to purchase a million-dollar property with 10 percent down, a property investor who needs the services of a fix-and-flip lender or buyer, or the owner of small storefront looking to buy a mixed-use property in a downtown area.
The lending market is becoming tighter and tighter, with the refinance market predicted to drop 27 percent in 2018, according to the Mortgage Bankers Association. That means purchase business will become the dominate program for most companies. Mortgage originators who can step outside of their comfort zones can capitalize on niche programs.
The vast majority of alternative-lending programs are untapped by most lenders and loan officers because there has been an abundance of traditional borrowers. As the number of traditional borrowers shrinks, mortgage originators will need to explore other avenues to keep their pipelines filled. Be the first outside of the gate to specialize in one or two of these niche programs.
See if your company has the ability to lend direct to foreign nationals, for example, or is able to broker these loans out. Then, let real estate agents in your area know that you can help their nonresident buyers. You also can market your services online by blogging about the program or creating a video explaining the benefits of the foreign-national program and uploading it to YouTube.
Another niche area to tackle is the U.S. Department of Housing and Urban Development’s Section 184 Indian Home Loan Guarantee Program. This is a home-loan product specifically designed for American Indian and Alaska Native families as well as Alaska villages.
A program that can yield two loans with one buyer is a construction loan. Help a buyer with the construction loan to build an owner-occupied property. Four to six months later, once the property is completed and the local building department has issued the certificate of occupancy, you can have the permanent loan already processed and ready to close in order to pay off the construction loan.
Imagine having six to eight construction loans in process within a six-month period and then have those same buyers doing another loan with you for the permanent financing. That’s to 12 to 16 additional loans every year.
When it comes to rates on jumbo-loan programs, nondepositary direct mortgage bankers cannot compete with depositary banks. If you are in a market that supports loan sizes over $424,100 — the loan amount that typically qualifies as a jumbo loan — you may need to rethink the company you are working for if your rates are not competitive enough to gain market share in the jumbo space.
The bigger banks have staked out the market for those higher-end buyers where most mortgage bankers and originators cannot compete. If you decide to make a switch to a different company where your business can grow with the jumbo market, make it on your terms.
The mortgage industry goes through its highs and lows in terms of interest rates, programs, loan limits, underwriting guidelines and technology. Make sure it benefits your business if you make a move to take advantage of jumbo and traditional loans.
Another niche program, one that hopefully will be around long after we retire from the mortgage industry, is the reverse mortgage loan. Most of us are hoping to retire after 62, but life expectancy was 78.7 years in 2011, according to the Huffington Post. There will be a market of homeowners looking to tap into their home’s equity to be able to manage the daily cost of living on a fixed income after retirement.
Expect the mortgage industry to go through ups and downs. Prime programs, such as conventional loans or Federal Housing Administration or Veteran Affairs mortgages, will always attract a crowd. Alternative loans will always be a secondary focus for most mortgage originators. Break out of your comfort zone and add just one alternative-lending program for now. That will give you time to understand, market and process that particular loan to ensure you grasp the program.
Alternative-lending programs can be very profitable for an originator who promotes them in their local area to real estate agents and buyers. That originator could become the only professional to turn to for that lending option.
The first step is to pick a niche you will enjoy working with, and see if your company has the ability to close that loan. If so, learn the product’s guide-lines. Then promote your services to local real estate agents who have buyers that will fit into your alternative-lending niche.
Continue promoting your knowledge about the program by writing for blogs, uploading videos and reaching out to the community through social media. When a borrower searches online for a loan program, your name should be the first one to show.
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There is a big world out there known as alternative lending. Taking a risk by jumping into that arena can lead to big rewards, but you have to be willing to step outside the box of traditional loan programs.