Buying a home is a complicated process for everyone involved, including the real estate agents and brokers who already know what to expect. From the perspective of the homebuyer, especially those making their first forays into homeownership, it can be a whirlwind of confusion and frustration. Compound that with the negative economic impacts from COVID-19, and you’ve added uncertainty to the equation.
It’s safe to assume most folks perusing the market understand the risk or are financially stable enough to be making such a significant purchase at this time. But it doesn’t hurt to reiterate the importance of finding the right home, with the right loan, from the right lender, for a given budget.
As an agent, don’t neglect the financing part of the home-buying process. Here are some things to consider on your next deal, which may lead to a speedier and smoother closing:
Know the price range
Getting pre-qualified for a mortgage will help someone understand the ceiling on their price range. However, that can be misleading, potentially getting an individual in over their head. It is equally important to understand whether the monthly payment on a new home is not only feasible for your buyer, but comfortable. Consider presenting the following questions: Is it more or less than your current housing payment? Can you make the new payment without impacting your lifestyle and budget? Assuming a household’s income is never a guarantee, is there a safety blanket to maintain payments for a period of time? Talk through these questions, so a buyer can truly wrap their heads around the magnitude of their purchase.
Keep credits in check
It seems like this goes without saying, but low interest rates can be enticing for other large purchases that need financing. Make sure buyers know to avoid opening any new credit lines, increasing the balances on credit cards or other loans, or drawing from savings accounts that will be utilized for down payments and closing costs. This could lead to a delay in closing, or worse, cause a buyer to no longer qualify for a loan.
Explain the low rate environment
Speaking of interest rates, be prepared to explain why rates are low, and why they won’t stay low. It’s not uncommon for a prospective buyer to not be interest-rate savvy, only understanding that: low rates = a good time to buy. For those that can secure funding at this time, that assumption may be true. But if the economy worsens, returns on savings could be diminished, credit card limits could be shrunk, and the market as a whole may take more time to recover. These aren’t make-or-break points for every prospective buyer, but always things to consider.
Explore affordable housing programs
The previous point may encourage some homebuyers, but know that programs are available to ease financial burdens for those who could use it. There are a slew of Affordable Housing Programs available that can be used to buy a new home or refinance existing mortgages. They are designed for people with low-to-moderate incomes, based on a percentage of the average income in their community.
Nonprofits, local housing authorities, and even financial institutions, including FirstBank, offer competitive terms for borrowers earning low-to-moderate incomes. Outside of FirstBank’s own program, it partners with a handful of organizations that provide down payment assistance. The bank set up a $1 million fund with Trellis, an Arizona Housing Services organization, to offer down payment assistance to qualified homebuyers to afford a new home. In Colorado, FirstBank has established an exclusive program with Impact Development Fund, helping qualified low-to-moderate income borrowers by providing up to 20 percent of the purchase price or $30,000 (whichever is less) in down payment assistance.
Additional affordable housing programs, from low-interest loans to grants, are out there and ready to be taken advantage of. Know what products are available in your market, because their requirements may fit more buyers than usual in this recent downturn.
Remember communication is key
Encourage buyers to have thorough conversations with their lenders about what documentation will be needed throughout the mortgage process. It’s always best to be prepared early on, which can help them get organized. Talk about interest rates, homeowners association (HOA) payments, tax and insurance payments, and how they affect their price range.
Go above and beyond
Even with relaxed guidelines, social distancing is just about the only certainty for the immediate future. This means would-be homebuyers are leaning more on technology, opposed to the tried and true showing. Instead of just being the broker between buyers and sellers, this is an opportunity to be the eyes, ears, and brains of the operation. Acquaint yourselves with various neighborhoods and types of properties. Utilize the tools available to buyers, like watching Realtor.com alerts and market-specific resources, to stay on top of homes as they are listed.
Be a trusted resource on a variety of things, most notably the home’s resale value, neighborhood, if the size matches the buyer’s needs, and all-around expertise from experience. Talking someone into the right home, or out of the wrong home, is a great way to market yourself as a trusted agent and potentially secure future business.
FirstBank. Member FDIC. Equal Housing Lender. NMLS ID # 458768.
FirstBank, one of the nation’s largest privately held banks with a focus on “banking for good,” maintains over $20 billion in assets and operates more than 115 branch locations across Colorado, Arizona and California. FirstBank offers a variety of checking accounts, savings accounts, home equity loans, mortgages, and a full range of commercial banking services, including financing, treasury management and deposit accounts.