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Determining The Right Loan For You or Your Buyer

The author Truman Capote was once asked if there were days he only wrote one word.  He responded, yes, but they were the right words.  As Realtors, it is in the best interest of both you and the client that they select the “right” loan product. 

You do real estate for a living, while most homebuyers only look for financing a few times ever. You have a wonderful opportunity to help guide them in ways that work today and will continue to serve the client’s financial well being for decades, a great way to drive those referrals. 

Don’t Chase Rainbows

Consider your client’s situation.  Look at their age, income, liabilities, and prospects.  This will help guide you in recommending loan products for which they will actually qualify.  Selling the client on the benefits of a low down payment loan when their credit score won’t allow it serves no one. 

To do this you may have to ask some probing, and often personal, questions. Be sure the client understands what you are doing.  Don’t come across as a nosy Realtor who wants to know everyone’s business. 

Best Prices vs. Your Price

Everyone wants the best price, but in lending, that is often relative.  The buyer with a modest credit score won’t get the same interest or point treatment as the buyer with a great score.  Discuss the factors that influence prices with your buyer.  Here are some suggestions to get you started. 

  • Credit score
  • Down payment size
  • Intent to occupy rather than rent
  • Length of loan

Match Loan Type with Client Needs

Just because the client’s parents had a 30-year fixed mortgage doesn’t mean that is their best option.  Realtors spend more time with homebuyers than almost any other real estate professional.  Use that time to discuss the various loan options.  Again, here are some ideas. 

  • ARM – Is the client a risk taker who would be comfortable with interest rate adjustments?  If so, an adjustable rate mortgage might be just the thing.
  • Less Than 30-Years – Clients who can handle a higher payment will save a lot of money over time with a 15- or 20-year mortgage. 
  • Bi-Weekly – For the right client, a loan paid every two weeks is perfect.  They save lots in interest by making additional payments each year with very nominal impact on the family budget. 

Balance Rates and Fees

This is a great opportunity to show your knowledge.  We know that lenders will trade long-term interest rates for a short-term fee.  Help your client make a good choice on this.  If they can afford some upfront cash and plan to stay in the house a long time, suggest that they buy down the rate.  

Ain’t Over Till It’s Over

As they shop for a loan, borrowers need to know that until they “lock” in their loan, all the cost items are subject to change.  Be sure that your clients know this as it might keep them from waiting too long and ruin their purchase opportunity and your commission. 

A top Realtor doesn’t just find the right house; he or she finds the best package of house and financing.