This piece originally appeared in the June 2024 edition of MortgagePoint magazine, online now.
In today’s low-volume market cycle, mortgage originators can build business by focusing on purpose-built loan products designed to overcome the specific challenges homebuyers face in the current market.
In a landscape marked by limited turnkey housing inventory, significant affordability issues, and relentless competition from cash-rich investors, homebuyers need more than plain vanilla home loans.
The key is to tailor the financial solutions to meet the needs of various borrowers, including first-time home buyers, those who are looking to move up, and buyers willing to purchase fixer-uppers.
Positioning yourself to effectively help those borrowers navigate the complexities of the current market doesn’t just build your business, it turns you into a homebuyer’s hero.
Strategic Solutions for Today’s Homebuyers
New construction financing and meeting the demand for new homes: According to the National Association of Home Builders (NAHB), in March, 33% of all home sales were new construction financing. That is a significant increase from the 13% average between 2000-2019 in new construction. While virtually all national homebuilders have mortgage divisions, custom builders and small- to mid-size local builders can be an excellent source of purchase volume. Offering one-time close and specialty products that help move-up buyers time the sale of their existing home to the closing date for a new home helps originators to tap into this market segment.
Include manufactured home dealers in your marketing plan if you have financing for buyers who want to put a manufactured home on a lot they are buying or one they already own.
Competing against cash offers … enhancing buyer competitiveness: The prevalence of cash offers in today’s market cannot be overstated, with the National Association of Realtors (NAR) indicating that 28% of home purchases in April were all-cash transactions. This represents a competitive challenge for buyers relying on financing. MLOs can counteract this if they have loan programs providing a cash backup or a buy with cash and refinance later option for consumers. Closing date guarantees can also minimize contingencies, making purchase offers more competitive.
Bridge loans and facilitating the transition for move-up buyers: Bridge loans address a critical market need for homeowners looking to upgrade. By providing the liquidity needed to purchase a new home before selling the current one, these loans remove a significant barrier for move-up buyers in a fast-paced market.
Timing guarantees to ease transitions: Purchase guarantee programs add another layer of certainty for move-up buyers by guaranteeing that their home will sell within a specific time frame, and/or allowing them to stay in their existing home when new home construction delays happen.
Income producing options to make homeownership more affordable: As affordability challenges persist, innovative solutions, like Accessory Dwelling Unit (ADU) financing, become increasingly desirable. ADUs can expand a home’s livable space to accommodate multiple generations, or introduce potential rental income streams, making homeownership more achievable and sustainable for a broader audience.
Manufactured homes for affordability: Today’s manufactured homes are not your grandpa’s mobile home … they are factory assembled, energy-efficient, and come with features like porches and garages. Manufactured homes look just like stick-built homes, but carry a smaller price tag. With an estimated 4.3 million manufactured homes in the United States (according to MHInsider), having a product like Fannie Mae’s MHAdvantage presents an opportunity to address affordability.
In pursuit of fixer-uppers: Homes that linger on the market because they need updates to improve efficiency or aesthetic appeal are not likely to have multiple bidders. But, first-time homebuyers can be leery of taking on renovations, especially if they are tight on cash. MLOs who understand renovation home loans, and can convey the benefits, like doing the renovations before you move in or potentially deferring mortgage payments during the remodel period, can move customers from preapproval into homeownership.
The capacity to offer diverse loan products that address the specific challenges of today’s homebuyers is essential for mortgage loan originators looking to build their purchase volume. Those who find their current company’s product offerings lacking must seek partnerships that allow them to full0
The views and opinions expressed in this article are those of the author and do not necessarily reflect or represent the views, policy, or position of Planet Home Lending LLC.
