January 23, 2024
Needham, MA--When the real estate market struggles as it is currently, some have to occasionally resistthe temptation to shoehorn an eager borrower into a loan for a home they cannot afford simply to get their business.
Ethical lending calls for a different approach, focusing on the long-term financial health of the client. Thus, cultivating borrowers for your lending institution becomes a long game that provides a pathway for success for the borrower and hopefully leads to a client relationship that includes a multitude of financial products over the years.
To create a relationship with a borrower that goes beyond the acquisition of a single mortgage requires a broader mindset within the lending institution about the role of the loan officer.
Let’s look at what that mindset may include.
There are a lot of financial considerations when taking out a mortgage of which most first-time homebuyers are not aware. While the loan officer is looking for data to assess, it’s helpful if the borrower understands how the various pieces that determine their eligibility can be adjusted to make their purchase a reality, such as reducing debt or increasing income.
Many of the elements, when properly addressed, can improve the borrower’s outlook before they even begin to look for a home. In today’s market, loan officers have a terrific opportunity to help the borrower position themselves for success since most borrowers meet with the loan officer before shopping for a home to find out exactly what they can afford given their financial picture.
Looking at all of the factors ahead of time can inform them what to look for – or avoid – when buying a home, such as:
- Purchasing a home in a lower price range to lower the downpayment needed
- Investing in a larger downpayment to reduce the interest rate
- Eliminating the mortgage insurance requirement or reducing the number of years the borrower must retain a mortgage insurance policy through a larger downpayment
- Buying outside of an HOA to eliminates fees
- Avoiding a purchase in a designated flood plain to eliminate flood insurance expense
Educating your client about each of these mortgage expenses can help them make more intelligent decisions about where and what they purchase and how they can ensure they acquire a mortgage they can actually afford over the long haul.
One of the biggest challenges a borrower faces is their debt-to-income ratio, and a loan officer who is consultative with the borrower can help the borrower think through how to reduce their debt, consolidate their debt under a lower interest rate, or increase their income or by taking on additional work, such as a part time or freelance job.
It’s not just about the house
Ultimately, the goal is having the borrower in a position to be able to comfortably afford their mortgage and still be able to manage their student loans, car payments, unexpected expenses, childcare and a plethora of other financial demands that must be met.
The best service you can provide your customer is to ensure they are rooted in the reality of today armed with the necessary information to navigate their debt effectively.
Loan officers who are genuinely concerned for the financial health of their clients will be rewarded with loyalty through the years, as their clients graduate from borrowers to investors.
At Kriss Law/Atlantic Closing & Escrow, we have a full range of experienced legal professionals who are here to partner with you as you shepherd your customers through the rigors of the mortgage process. Contact us to learn more about our services and expertise.