Have you ever had a deal fall apart because of financing? Have you ever had a buyer upset with you because they struggled to secure their home loan?
Many agents aren’t quite sure how to avoid home loan issues like these. After all, the financing is between the buyer and the lender, so what can you do?
There are actually a few ways you can help your homebuyer clients secure the right home loan for them. Taking these extra steps can simplify your transactions for smooth closings. Just as importantly, helping your buyers secure the right home loan leaves you with well-satisfied clients who are more likely to refer you to their friends and come back to you in the future.
Here are three ways you can help your homebuyer clients secure the right home loan and close the deal.
1. Share the Good News About Homebuyer Assistance Programs
In a survey conducted by the National Association of REALTORS, 45% of consumers report believing that they need a down payment of 16% or more to buy a home. In reality, conventional loans can come with down payments as low as 3%, and some government-backed loan programs over 0% down options. Reach out to every renter in your market to make sure they understand that low-downpayment programs are available for well-qualified buyers.
You can also promote the FHA home loan program, which offers down payments as low as 3.5% and has more flexible credit score requirements. There are renters in your market right now who mistakenly believe their credit score would disqualify them from homeownership. By explaining this path to homeownership, you could help more people in your community get on the property ladder.
There are also federal homebuying assistance programs available, as well as state and local options for buyers to explore.
2. Be Ready to Teach Mortgage Finance 101
Many homebuyers are completely overwhelmed by the whole concept of mortgage financing. Being able to explain the basics will help your buyers feel more comfortable thinking about home loans. This can make them more likely to apply for offer-ready pre-approval, getting them one step closer to buying.
You don’t need to go into detail, but you should be able to explain the following in simple terms:
Five Main Types of Home Loans
Make sure your buyers understand which of the five main home loan types may apply to them:
- Conventional loan. The most common home loan type. Suits a wide range of buyers.
- FHA loan. Ideal for buyers who may struggle to qualify for a conventional loan.
- VA loan. Reserved for military service members, veterans, and their spouses. Offers a 0% down payment option to well-qualified buyers.
- USDA loan. Specifically designed to boost interest in communities with lower population density. The property must be located in an eligible rural area. Other property restrictions and income restrictions apply. Offers a 0% down payment option to well-qualified buyers.
- Jumbo loan. Reserved for loans that exceed the maximum loan limit set by the Federal Housing Finance Agency.
How Interest Rates Work
Help your buyers understand how interest rates affect their mortgage payments. Explain that higher rates mean higher mortgage payments.
Make sure to offer some historical context for today’s rates. With media headlines sensationalizing the interest rate hikes over the last few years, your buyers might not know that today’s rates are below the historical average. This information can make your buyers feel more confident in their decisions to buy now.
You should also be able to explain the difference between fixed-rate mortgages and adjustable-rate mortgages (ARMs). Simply share that interest rates on fixed-rate mortgages are locked in while interest rates on ARMs fluctuate with market changes. You may also want to mention that mortgages can be refinanced. So if market conditions (or your client’s situations) change in the future, your clients may be able to refinance for more favorable terms.
And finally, you can let your buyers know that there are options for getting a lower interest rate, including:
- Buying mortgage points,
- Improving their credit scores,
- Opting for a shorter-term loan, and
- Choosing an ARM over a fixed-rate mortgage.
Why Pre-Approval Matters
Have you ever shown homes to a buyer only to learn that the buyer couldn’t qualify for a home loan at all? If so, you might already insist on pre-approval for your buyers before starting the home search. But it’s important that the buyer understand why they need to be pre-approved.
First, explain that the pre-approval can inform their budget. Knowing upfront how much they can qualify to borrow can save them from wasting time looking in the wrong price range.
Secondly, buyers need to know that pre-approval can strengthen their offer to buy a home. Pre-approval offers some assurance to the seller that the buyer is likely to qualify for the financing needed to close the deal. This makes sellers more comfortable accepting the offer and placing the home under contract.
3. Build Relationships with Lenders
Maintaining strong relationships with local lenders allows you to help your homebuyers secure the right home loan quickly and easily.
Simply advising your client to go search for a lender is risky. Your buyer might not actually follow through with that advice. Or, if they do, they might not come back to you when they’re ready to start their search. It’s better to have reliable, knowledgeable lenders at your disposal to answer your buyers’ questions quickly and keep you in the loop. This can speed up the approval process, helping you close deals promptly and seamlessly.
Furthermore, professional home lenders stay up-to-date on the ever-evolving home loan options. While you can explain the main home loan types, lenders have the details on loan limits, income limits, and other qualification criteria your buyers need to know. Local lenders are also experts on regional homebuyer assistance programs. Your lender might have the keys your buyers need to make homeownership accessible.
How Keller Home Loans Can Help
Keller Home Loans is dedicated to serving homebuyers and the real estate professionals who represent them.
With the new My Agent Station platform, you get full-service home loan support conveniently online. You’ll know exactly where each of your buyers stand in the process of securing their home loans. And you’ll avoid being blindsided by issues with your buyers’ financing.
Keller Home Loans can help you streamline financing for your buyers so you can serve more people, close more deals, and build your referral business.