Positioning the Right Lending Solution for your Customers

May 25, 2017

Do most of your clients call asking for a quote on current thirty year fixed conventional rates? Or maybe from time to time someone is interested in a shorter fifteen year term, or perhaps an FHA loan? Many consumers aren’t aware of the wide variety of home loan options available on the marketplace. They often simply don’t realize that there might be a better fit for their scenario.

Set yourself apart from your competition by asking questions of your customers to help discover which loan product would best help them achieve their goals. Some helpful pieces of information include:

  • How long do you plan to own this property?
  • Would you prefer to save on up front out of pocket expenses?
  • Is your priority to minimize the amount you’ll pay in interest over the life of the loan?
  • Could you afford a higher monthly payment, or is it more important to keep monthly expenses down?
  • Have you considered buying a new home?
  • Do you plan on doing work to the home you are buying (or refinancing)?

As you start to learn more about the specifics of the scenario it may become clear that one mortgage product or another could open up opportunities for these home buyers or homeowners.

For example, buyers making an offer on a home that they plan to renovate or update may not be aware that with a renovation loan they can finance the cost of the work done to the home as well as the purchase price. Some homeowners plan on financing these improvements with a credit card or equity line – and may be thrilled to learn they could use the low rate funds from their first mortgage as an alternative.

Other benefits of renovation loans that are often unknown to consumers are:

  • There are several different program options to choose from such as those for small, low-cost repairs, larger renovations that include structural work, and even special products that allow for luxury improvements like a pool or tennis court.
  • Some programs allow for the cost of alternate housing during the renovation to be financed. This is often a very attractive alternative to paying two mortgages or rent and a mortgage for some period of time, living in a construction zone, or moving in with the in-laws!
  • The value of the home after it is renovated can be taken into consideration for loan to value calculations.

Another mortgage product many consumers are not familiar with is the One Time Close Construction Loan. This can be an excellent option for buyers considering building a new home. A traditional construction loan has two closings, one before the start of construction to finance the purchase of the lot (if needed) and the building phase, and a second when the home is complete to arrange the permanent financing.

With the one time close program there is just one closing, prior to breaking ground, that takes care of the lot financing and construction costs all in one low rate first mortgage. Here are a few scenarios where this is particularly useful:

  • Rising rate environment.
    One big advantage of the One Time Close program is that the final rate is locked in before construction begins. With a traditional construction loan there is a temporary rate during the building phase, and the home buyers may have to watch nervously as rates climb during those months before they can lock in the rate for their permanent financing as the home nears completion.
  • Buyers looking to keep costs down.
    There are a lot of savings built into the One Time Close loan. Having only one appraisal, one closing, one set of documents reduces many of the duplicate charges seen when two closings are required.
  • When qualification may be an issue.
    Another benefit is that once the single closing is complete the buyers can rest easy that the financing is all taken care of. When another closing takes place after construction, the borrowers must re-qualify at that point. A drop in credit scores or some other problem could create a major headache right before it’s time to move into the new home.

By asking questions and thinking outside the most common mortgage options you may find financing solutions that create exciting opportunities for your clients.

Have questions about renovations loans, one time close construction loans, or any of our other programs? Visit afrwholesale.com or contact us anytime.

Photography by [By Ruslan Grumble] © shutterstock.com

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