Homebuyers often have three common questions about home down payments. Of course, with the growing number of mortgage options and the ever-changing rules associated with them, it can be hard for real estate agents to have all the answers to every question.
However, it is possible to prepare yourself and understand how to answer the most common down payment questions from homebuyers.
1. Do I have to put 20 percent down?
These days, while some lenders and loans still require 20 percent down, it’s possible for many homebuyers to qualify for loans with smaller down payments.
Some loans, like the Veterans Affairs (VA) loan, don’t require down payments at all.
You don’t need to memorize the specifics of each loan’s down payment requirements, but you should be able to provide clients with an overview of their options.
If they’re interested in learning more about the down payment specifics of the various loan options, recommend that they discuss this with a mortgage professional.
2. How much should I put down?
Once homebuyers realize they don’t have to put 20 percent down on a property purchase, it’s common for them to ask their buyer agents how much they should put down.
Although down payments of at least 20 percent will reduce interest and allow buyers to avoid paying private mortgage insurance (PMI), many prospective homebuyers simply can’t afford to make large down payments.
When they can’t, you can reassure them that there are other options available. Helping them understand what those options are and helping them formulate the questions they can ask their lender is a great way to build a good agent-client relationship.
3. Are down payments tax deductible?
Owning a home does come with several tax benefits, and most homebuyers know there are tax deductions associated with purchasing a home. However, not many homebuyers know what these deductions are. As a result, you should expect to be asked whether or not down payments are one of these deductions.
Unfortunately for the vast majority of your clients, the answer will be no. While this answer is sure to disappoint clients hoping to save on taxes, it’s almost never a deal-breaker. Besides, if you’re knowledgeable on the closing costs and recurring fees that are tax deductible, you can always cover these items after delivering the bad news to soften the blow.
Handling the questions you can’t answer
Eventually, no matter how much you know about the lending process, one of your buyers will have a question you can’t answer.
As long as you handle the situation well, it’s really a non-issue. After all, you’re not a lender; you’re a real estate agent.
As a real estate agent, you’re expected to guide clients through the process of buying and selling property. You’ll need some knowledge concerning loan options to meet these expectations, but very few clients expect you to be an expert on mortgages.
When you’re asked a question you can’t answer, guiding the client to someone who can is often the best course of action, which is why finding a reliable mortgage expert to work with is so important.
Pat Hiban is the author of NYT best selling book “6 steps to 7 figures – A Real Estate Professional’s Guide to Building Wealth and Creating Your Destiny”, the founder of online real estate sales training site Rebus University and the host of Pat Hiban Interviews Real Estate Rockstars an Agent to Agent Real Estate Radio Podcast with Hiban Digital in Baltimore, Maryland. Follow him on Instagram or Twitter.