How Mortgage Lenders Can Secure First-Time Homebuyers Through Special Financing Programs

How Lenders Can Replace Lost Refinancing Volume with Special Financing Programs

Rising mortgage rates typically have two impacts on the real estate industry: less customers seeking mortgages, and less homeowners rushing to refinance their homes. What’s a mortgage lender to do to make up for this lost loan volume? To start, you can re-target your strategy to focus on a niche market: first-time homebuyers and special financing programs.

This means FHA, USDA, VA mortgages and CRA regulations. Although higher mortgage rates may scare off some customers from engaging in the mortgage market, there’s still a large pool of new homebuyers eager to get their hands on a loan.

Why Special Financing Programs Can Fuel Your New Business Efforts

In instances of rising mortgage rates (typically during times of economic growth), there’s opportunities to capture new customers. The refinancing market may be slow today, but there are always new homebuyers looking to enter the market.

To ease the first-time homebuyer’s fear, mortgage lenders should offer prospective homebuyers tools to help them understand the true cost of a specific property. For example, RatePlug, a platform that generates new opportunities for lenders by integrating the total cost of the property with MLS listings, offers an affordability calculator to usher buyers through the decision-making process. RatePlug provides agents with a dashboard that displays properties pre-qualified for VA financing in addition to USDA, CRA, and in select markets, FHA.

From there, you can be begin discussing special financing mortgages to see if they qualify for loans with low down payment requirements. These are particularly popular for first-time homebuyers.

As explained by Brad Springer, CEO of RatePlug, informing homebuyers off all their options is key to differentiating yourself with first-time homebuyers.

When using a service like RatePlug, lenders can display their mortgage payment and branding information within the property listings their agents are sending to home buyers. These services can also be used to leverage affordability and VA, USDA and FHA Loan eligibility. Because RatePlug’s technology is fully integrated within the MLS, it has the ability to pre-qualify all properties available within the market.

Even with that technology by your side, it’s still important to understand the intricacies of special financing programs and options:

  • USDA Loans: Have low down payment and even lower credit/income requirements. For USDA home eligibility, a variety of requirements must be met, depending on the region the loan is applied in.
  • VA Loans: VA loans are handled directly through the U.S. Department of Veterans Affairs for U.S. veterans, and have low requirements for down payments –  0 percent in some cases. VA Loans do not require private mortgage insurance and are easier to obtain.
  • FHA Loans: Federal Housing Administration (FHA) loans are specifically designed for first-time home buyers who might otherwise qualify for a typical bank loan. FHA requires a minimum down payment of 3.5 to 10 percent of a home’s purchase price.
  • Community Reinvestment Act: This is not a loan, but instead a body of rules that encourage banks to to make loans to low- and moderate-income borrowers under current programs, such as FHA and VA loans.

While the refinancing market may be sluggish for the immediate future, as mortgage rates are projected to continue to rise, the availability of special financing programs offer opportunities to secure new customers and differentiate yourself as a lender.

Having the right resources and tools at your disposal for potential homebuyers can be the first step in increasing your mortgage leads with first-time homebuyers. It also increases your chances that when the refinancing market is ripe again, those customers will come back to you to serve their mortgage needs.