Preparing Home Buyers in a Seller's Market
Few people think about starting their home search by contacting a lender. They prefer to start with the fun stuff like perusing Zillow and picturing the furniture they’ll buy for their new living room. In many cases, homebuyers rely solely on their real estate agent’s recommendation to determine where to get a home loan.
For financial institutions, promoting the bank as the first stop in the home buying search can ensure your customers look to you for their mortgage instead of relying on their realtor. A home buyer is more likely to close on the house they want if they contact a lender prior to beginning their search. Mortgage programs may experience increased success by helping customers understand this point through education and marketing.
Below are some helpful tips from BBOK’s Mortgage Program Director Wendy Wayman-Weir to share with your customers to help them have a leg up when beginning their home search:
Timing is crucial
Starting the mortgage process 12 months in advance of purchasing a home may seem too early for most customers. However, if customers have a credit issue, it could take months to fix. Or perhaps they find they need additional funds for down payment and closing costs, the extra time allows for that. It also provides the homebuyer time to understand the loan process and what kind of documentation will be needed to obtain a pre-approval letter.
Promoting the lender role in the home purchase process
Purchasing a home in a seller’s market is tough. Time is not on the buyer’s side and it has become imperative for potential homebuyers to be financially prepared before looking for homes to ensure they can competitively bid on their dream home once they find it.
More and more buyers are finding themselves in bidding wars for the home they want. If the buyer is eligible and to allow him/her the flexibility to change the offer, issuing a pre-approval letter for a higher amount than the borrower is planning on buying may be helpful. This gives the buyer better leverage and the option to go up on their offer without having to come back to the bank in the middle of a bidding war.
Pre-approval letters empower buyers
From the seller’s perspective, a pre-approval letter from a reputable local lender often can make the difference between accepting and rejecting an offer.
For the buyer, the steps involved in pre-approval can help a buyer to better understand the amount of mortgage they can afford and the various payment amounts—both upfront and on an ongoing monthly basis.
When your bank offers the pre-approval letter, it is helpful to communicate with the buyer that:
- The pre-approval is only good for a limited time. They should understand the expiration date and the process for getting re-approved.
- It is encouraged to keep finances as static as possible as they move closer to a home purchase. Changing jobs, opening accounts, moving money could all have a negative impact on the bank’s ability to complete the mortgage.
- The buyer should be actively gathering documentation to complete the mortgage application while searching for the home instead of waiting until after a home is found. This ensures the buyer can move the loan process along and ultimately get to the closing table quickly.
Encourage your customers to work with a full-time agent
Make sure to have a list of real estate agents who work well with your bank’s mortgage lenders available for your customers in case they haven’t already chosen one. Having an agent who is available and responsive can be the difference maker when the seller is negotiating with several different buyers.
To learn more about the competitively priced mortgage products and benefits of BBOK’s Mortgage program, contact Wendy at 316.681.9216.