When working with buyers, it’s vital that you are educated on all aspects of the lending process AND that you are passing that knowledge on to your clients.
This is something that will not only improve the chances of your offer getting accepted and save you the time and hassle of writing multiple offers, but is a key differentiator between a real estate agent and an EXTRAORDINARY REAL ESTATE ADVISOR.
Here are 4 conversations that every extraordinary real estate advisor should be having with their clients about lending:
1. DOWN PAYMENT CONVERSATION
- Think they want to put 20% down since operating out of preconceived notions
- Need to educate on the amount of money down that buyers have expectations around relative to appraisal gap
- Pivot to instead think about how using the cash
2. NEXT STEPS CONVERSATION
- Connect/Introduce to Lender with contact info and a bit about their situation – Never say “gave them your name”
- Set the expectation that the lender will call them
- Provide insights into what the lender will talk to them about – Cover rates, down payment, etc.
3. APPRAISAL GAP CONVERSATION
- Best if the agent has already introduced them to the concept
- If putting the minimum down, don’t have flexibility and appraisal must be extra cash.
- If not putting the minimum down, then can structure it and adjust based on the appraisal to have same payment and terms. *Given the jumbo loan example.
4. MORTGAGE INSURANCE CONVERSATION
- Critical to own responsibility to gather the information to have conversations around lending – need to be able to open up the conversation to potentially get qualified with 5% down and mortgage insurance – talk through best case and worst case scenario to write the most aggressive offer
- $1 mil buyer instead of 20% down to not have mortgage insurance – be able to do $100,000 down and then $100,000 for appraisal gap – Difference in payment to not put 20% is an emotional decision since they believe they need to not have mortgage insurance
- They have expectations on how expensive mortgage insurance will be and using online tools to look into it.
- FHA mortgage insurance is more expensive but it is still not a ton a month.
- Give them encouragement too since no one wants to pay things that they don’t have to pay but it is a tool to get you into the house.
- It is possible based on the home appreciation to get out of the mortgage insurance within even 6 month
YOUR ACTION ITEMS
- Identify one expectation or one education topic about lending that you need to get better at
- Set the expectation with your buyer about the importance of having a great lender – This is an expectation to establish not a decision for the buyer to make.
- Have to be pre-underwritten, appraisal gap, mortgage company funding their own money
- Your capacity to deepen your knowledge and ability to set expectations is crucial for your career.
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