Unless all your clients are cash buyers, mortgages are an integral part of any real estate agent’s business. Knowing some basics about mortgages will make you a better adviser to your clients and a more effective businessperson. Although it is by no means necessary to become a mortgage expert, the following three mortgage insights will increase your value as a real estate professional.
1. Condos have special underwriting requirements.
If you’re working on a condo deal, it is in your and your client’s best interest to work closely with the mortgage loan officer to make sure the property meets the lender’s underwriting criteria. This is typically done through a condo questionnaire the lender will provide you.
Among other things, they will be looking out for things such as pending litigation against the condo association, the percentage of units that are owner-occupied and whether any part of the building is used for commercial activity. Many condo transactions are either seriously delayed or completely derailed by last-minute surprises that should have been discovered early in the process.
2. The minimum down payment is not 20 percent.
The 20 percent down is the amount necessary for a buyer to avoid paying private mortgage insurance (referred to as PMI) on the loan, but most loan programs require as little as 5 percent down. For first-time homebuyers, recent conventional (nongovernment) loan programs introduced to the market allow buyers to get a loan with only 3 percent down. If you work primarily with first-time homebuyers, you should also be aware of down payment assistance programs offered by local governments and municipalities.
3. Shopping around for a mortgage will not hurt your credit score.
Shopping around for a mortgage with multiple lenders is highly recommended, and even though credit inquiries do impact your credit score, there is an exception when it comes to credit inquiries from mortgage lenders. All such inquiries made in the 30-day period prior to scoring your credit are usually ignored. Furthermore, inquiries outside of that 30-day period that fall within a typical shopping period are counted as only one inquiry.
There is a lot more to know when it comes to mortgages, but these three tips will help you look like an expert in the eyes of your clients.
Valentin Saportas is co-founder and CEO of MortgageHippo, a mortgage technology company that partners with financial institutions to provide better online experiences to borrowers. You can follow him on Twitter @vsaportas.