We’re honored to have Brentt Taylor from MortgageLoan.com share with us his knowledge and insights. – The KCM Crew
In order to remain competitive in today’s market, real estate professionals must be armed with up-to-date and relevant information. A strong knowledge of the mortgage market can make or break a deal. As a real estate professional, you can’t give prospective buyers any “outs” when trying to make
Interest rates are low; however, lenders are not making it easy for borrowers to access money. Since many prospective home buyers require financing, real estate professionals must have an in-depth knowledge of the types of mortgages available, as well as the fees associated with closing.
Is the buyer qualified for a mortgage?
This question seems obvious, but many real estate professionals fail to do their due diligence and end up running clients all over town, only to discover that their prospective buyers are unable to qualify for any kind of mortgage. These scenarios create an extensive waste of time for all parties — prospective buyers, sellers, and real estate professionals.
Have the prospective buyer fill out a pre-qualification form and have a mortgage professional run the information through his or her system to catch any red flags before the real estate professional takes a client to look at homes. Pre-qualification also lets the client and real estate professional know the exact amount approved for the borrower; therefore, the real estate professional is able to show property that is in the approved range. In other words, prospective buyers need not be shown $350,000 homes when they have been approved for $150,000.
Understanding the mortgage and buyer fit
It is important for real estate professionals to have their clients understand the mortgage practices of different types of lenders, specifically, commercial banks and savings associations.
Commercial banks make both VA and FHA loans as well as conventional mortgage loans. Savings associations make VA and FHA loans too; however, they prefer to make conventional loans. Federal Housing Administration (FHA) loans are insured by the government in order to decrease lender risk and entice lenders to write a mortgage. Department of Veteran’s Affairs (VA) loans are backed by the government specifically to give incentive for lenders to give mortgages to veterans, their spouses, and active military personnel.
Real estate professionals need to ask their prospective buyers specific questions in order to obtain the correct mortgage fit. For example, a real estate professional who is showing houses to veterans and their spouses must be aware that the VA loan is a bit more liberal as far as criterion are concerned. Perhaps someone who is unable to obtain a conventional mortgage would qualify for a VA backed mortgage.
Conventional vs. non-conventional loans
Conventional mortgages may or may not be insured by the government through either Fannie Mae or Freddie Mac. Even if they are not backed by the government (conforming loans), these types of mortgages carry lower interest rates because they are underwritten following the same strict rules as if they are insured by Fannie Mae or Freddie Mac.
Non-conforming (also known as sub-prime) loans carry a higher interest rate and are underwritten in a casual manner. These mortgages are designed for those with poor or no credit; however, real estate professionals need to be up to date on these loans for that client with poor credit who really wants to buy that house.
Using points as an incentive:
Real estate professionals and many buyers know that lenders charge points. A borrower is able to lower his or her interest rate by paying a certain amount up front on a mortgage. Each point is equal to 1% of the amount being borrowed, and each point paid takes a quarter of a percent off the interest rate.
In order to sweeten the deal for a buyer, a real estate professional can offer to pay for the points on a mortgage by lowering the price of the original sale in order to cover the difference.
It is important for any real estate professional to keep himself up to date on the rapidly-changing housing market. They should be able to put buyers into their dream homes without leaving any money on the table.