Many agree that the mortgage process can be overwhelming for anyone. Sure, we can make the process of filling out a mortgage application easier for borrowers with the convenience of online, over the phone or in person. But are we capturing all of the information we need to make a decision? Are we providing a good experience for the borrower or complicating it by not asking the right questions?
Interest rates were incredibly low over the last couple of years, along with the inventory of homes for sale. This resulted in bidding wars and a rise in home prices. While it’s true that we have seen an uptick in the interest rates coming out of the COVID-19 pandemic, buyers are still continuing to purchase homes.
So, what can we do to set our borrowers up for home loan success in this market?
Set buyers up for success before they shop by offering a pre-approval. We’ve all heard this phrase before, but what about a pre-approval underwrite? Working with a partner who offers a full underwrite before they shop, is like giving them purchasing power times a thousand. If you recognize there could be hurdles because your borrower has variable income, the application is for a government backed loan or to simply have a second set of eyes take a look at an out of the box scenario, a pre-approval underwrite is a fantastic way to set your borrower up for success in this competitive home buying market.
How much is your borrower comfortable paying each month?
"What would you be comfortable with for a monthly payment?” What a powerful question, because it allows you to back into the loan amount by considering first, what your borrower wants to pay monthly versus how much you can get them pre-approved for. Perhaps they are currently paying rent of $800 monthly but feel they could increase to $1,100 a month for a housing payment. Personal circumstances should be the primary driver for financial choices.
How much of down payment do they have?
Lastly, but very important, how much of a down payment does your borrower have to bring to the closing table? This answer will aide you in determining the loan type that best suits their situation. Even no money down or low money down programs like FHA, VA, USDA and some conventional programs have closing costs. Funds available for the purchase loan will be a key driver in determining what loan type best fits them.
About the Author:
Kristina Dewitt has over 20 years of experience in the financial industry, including leading mortgage teams and in the mortgage lending industry. Kristina truly embodies being in the business of serving people. More important to me, she says, are the relationships built over the years.