Here’s a news flash – Most Americans want to buy a home. Here is another flash – many don’t understand the mortgage process. Realtor Alert! You can, and probably should, help educate your clients to avoid misconceptions. It’s good for your business.
You would be amazed by how many recent surveys have confirmed that while people know that home ownership is important, they are unsure about navigating the mortgage process. For this article, I’m picking what I think are three important issues that discourage people from buying. Realtors looking to build their own business may want to consider helping these current and potential clients understand their options.
1.) Super Credit
Good credit is always a plus, but a few blemishes here and there are not necessarily fatal to your client’s home ownership dreams.
Most of us would love to go to a lender with a 740 + credit score. In reality, you can still get a loan with a score of 720 or even the upper 600s. Those with a credit score around 640 may still qualify, but they will pay higher rates.
Given the importance of the credit score, Realtors should counsel clients about doing things that might harm their score. This is probably not the time to buy that brand new truck or cancel that credit card.
2.) Huge Down Payment
You would be surprised how many people think that you have to put at least 20% down to get a mortgage. While it is always good for borrowers to have some “skin in the game,” there are loan programs to fit many needs.
For example, the FHA, Federal Housing Authority, has a 3.5% down loan program. The Veterans Affairs loan program can go up to 100% financing. Movement Mortgage has a very good list on their website explaining these and other programs. When you get to their site, click on “Purchase” on the top bar.
3.) Too Much Paperwork
OK, so this one is pretty much true. Even so, there are ways that a good Realtor can help a client through what is important and what is bureaucratic paperwork. While we would never say any documentation is unimportant, here are some things that deserve your client’s attention.
* Loan Application – As the say goes, “garbage in, garbage out.” Work with your client and the loan officer to be certain that all the information here is correct and truthful. An inaccurate account balance can really mess up the works.
* Good Faith Estimate (GFE) – This is an early opportunity for your client to see the whole loan process. Review the fees, rates, and conditions to be certain that your client is heading down the right road.
* Lock-in Agreement and Approval Letter – The mortgage process is all about the paper, tons of paper. Keeping your client focused on long-term issues, like the interest rate and loan conditions, is critical. Be sure that you and your client have reviewed both the initial lock-in agreement and the final approval letter. Understanding future responsibilities should make the client more comfortable moving forward.
These are all big topics, so come back soon. I’m planning to expand on each subject in future articles.