Demystifying Mortgage and Financial Terms

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Mortgage Marketing Mistakes to Avoid

Scott Schang, CEO of FindMyWayHome.com

“Ok, Mr & Mrs Client, I’ve reviewed your DTI and LTV, and I’ve factored in all of the LLPA’s. I’m going to shoot you out an LE, and we can review the terms, including the APR and TIP when it’s convenient.”

One of the biggest mortgage marketing mistakes I see new, or inexperienced loan officers make is to pepper to the consumer with acronyms and inside baseball terms.

I’m not saying that you shouldn’t educate consumers on mortgage terms, but ask yourself, will the consumer see this term or acronym on any of their documentation? The answer to this question is almost always no.

The biggest offenders of “mortgage speak” are the terms DTI and LTV. If you’re going to create content, or have a conversation with your prospect about their debt to income ratio, explain to them what a debt to income ratio is, how it’s calculated, and why it’s an important part of the loan qualifying process.

There is no room for the term DTI in this conversation. DTI is insider baseball. It’s office speak.

Loan to value is an important part of the conversation whether you are doing a purchase or a refinance. Explain the importance of the appraised value as a percentage of the purchase price or loan amount, how it’s determined, and why it’s important.

There is no room for the term LTV in this conversation. LTV is insider baseball. It’s office speak.

Same goes for LLPA, APR and TIP. Loan level price adjustments should rarely enter the conversation with a client. You can explain how their loan to value and credit score can impact their interest rate, but there is no need tell them what the underwriter calls it.

When reviewing what a Loan Estimate is, you can cover the annual percentage rate and total interest percentage features of the loan and how they can be used to compare loan programs between different lenders.

There are exceptions. If you’re creating written content, I absolutely recommend that you write out the term, then put the acronym in parentheses. Debt to income ratio (DTI), Loan to value (LTV). This is good SEO, and it’s also informative for online consumers.

I always communicate my marketing message with consumers the same way I would explain what I do to my mother, or grandmother. Never assume that your client knows what you’re talking about.

Explain the process in very simple terms. Qualifying for a mortgage is an intense, emotional experience for most consumers. Don’t make it more difficult by making them feel stupid for not knowing your secret, insider speak.

Cracking the Code: Decoding Mortgage Acronyms for First-Time Home Buyers

Jeffrey Walker, CEO and Co-Founder of CredEvolv

Entering the world of homeownership should be a thrilling adventure. Amid the excitement, you might encounter a language that sounds like alphabet soup – mortgage acronyms. To help you unravel these mysteries, I’ve assembled a few of the most common terms for first-time home buyers along with some common misconceptions.

FTHB (First-Time Home Buyer): Being an FTHB means you’re taking your first steps into the world of real estate ownership, but it may also enable you to qualify for special programs. FTHB’s are not just young adults – anyone buying a home for the first time (or those having no ownership interest in a residential property during the three-year period preceding the date of the purchase) qualifies.

FHA (Federal Housing Administration): FHA loans are backed by the full faith and credit of the US government and come with lower down payment requirements and friendlier credit terms. FHA loans aren’t only for low-income individuals – they are a great option for anyone, especially those looking for a smooth path into homeownership.

PMI (Private Mortgage Insurance): PMI might sound like a mysterious fee, but it’s there to help you buy a home with a down-payment as low as 3% (or less in some cases). If your down payment is below 20%, PMI is your lender’s safety net. PMI doesn’t protect you – it protects the lender, and it applies to both FHA and conventional loans.

APR (Annual Percentage Rate): APR might seem like just another number, but it’s crucial for helping borrowers shop for the best loan terms and is a more accurate reflection of what you actually pay on borrowed funds. APR isn’t just mortgage interest; it’s a reflection of the interest rate PLUS any points, mortgage broker fees and other charges that you pay to get a loan – a true apples-to-apples comparison across multiple lenders.

Navigating the mortgage landscape doesn’t have to feel like deciphering a secret code. By understanding these common acronyms, you’re equipping yourself with the tools to make informed decisions.

Demystifying Credit and Scoring  Acronyms and Abbreviations

Sue Buswell, Credit and Score Consultant #sueknowsthescore

Our empowerment of future home buyers needs to include a guide or dictionary to help them understand the terms and acronyms used throughout the home purchase process.

Mortgage lending has a language of its own, as does the Credit and Scoring world.

To help you all help your buyers, I am sharing common acronyms and abbreviations found on a credit report. To assist I referred to TransUnion’s how to read a credit report guide which is 14 pages long, and I’ve included a link for you.

FCRA, CFPB, FTC, CRA, FICO – The rules, enforcers and providers

The Fair Credit Reporting Act is the rule that Lenders and Creditors must follow as it relates to the release, retention and use of consumer credit history.

The Federal Trade Commission and the Consumer Finance Protection Bureau can issue warnings, fines and provide enforcement of these rules.

Credit Reporting Agencies may refer to the 3 National Credit Reporting Agencies, or the reseller of their services within the Mortgage industry.

Fair Isaac Corporation is the company that created the first scoring models used in Mortgage Lending adopted in 1995.

ECOA, DLA, MOP, REV, INS, KOB – Standard credit report identifiers of ownership, creditor type and payment history

The Equal Credit Opportunity Act of 1974 makes is illegal for lenders to discriminate based on race, color, religion, national origin, sex, marital status, age, the receipt of public assistance. This is enforced by the CFPB.

On the credit report the ECOA is often a 1 or 2 alphabetical assignment to identify ownership of the tradeline. B for borrower, BC for joint borrower and co-borrower.

Date of last activity is the month/year your creditor is reporting the last activity took place on the account. That could be a charge, payment, or balance update.

Manner of payment is a numerical assignment of the consumers payment status. If they are on time, it is a 1, meaning paid within 30 days. A 2 signifies payment over 30 days late but less than 59, a 3 is at least 60 days late, but not quite 90 days late. 8 is a repossession, 9 a charge off, and there is a UR or 0 for unrated.

Revolving identifies accounts such as Home Equity Lines of Credit or HELOC, credit cards and other debts that are set for a minimum payment vs a set payment and term. Often seen on the credit report under the MOP section, R-01, 02, 03 depending on delinquency or on time payment.

Installment loans are auto, home loans, personal loans and other closed end loans that have a set monthly payment and number of months to pay the debt in full. I-01, I-02, etc. under MOP.

Kind of Business is the classification in alphabetical code to identify the creditor type. AU for auto, BB for bank, FA finance company. There is a key on most reports to help you identify creditor type.

SSN, OFAC, SDN – Identifiers and optional watchlist checks

Social Security Number for the consumer will often have portions of the number redacted for security

Office of Foreign Asset Control and Specially Designated Nationals are checks required for potential money launderers or drug traffickers. While not always on a credit report, the CRA’s make these options available to lenders.

There are more….many, many more but I’ll leave it you to download and save the TU guide. You can find it here HowToReadCreditReport.pdf (transunion.com), or reach out to me anytime for decoding assistance on LinkedIn at #sueknowsthescore.

The ABCs and VOA, E and I’s of Mortgagese

Brian Vieaux, President & Chief Operating Officer, FinLocker

For many first-time homebuyers, navigating the mortgage process can feel like entering a different world where the inhabitants speak a foreign language, especially when acronyms like VOE, VOI, and VOA are casually thrown around, and a pre-approval can be obtained with a push of a button. As industry insiders, it’s our responsibility to bridge the gap between complex jargon and the average homebuyer’s understanding. After all, clarity is key when embarking on the journey to homeownership.

As part of FinLocker’s financial education social media strategy, we ran a year-long series of #TerminologyTuesday post to demystify the frequently used jargon and acronyms. I recommend that you use my content and that provided by the other FinTalk contributors this month to create your own social media posts:

Why Pre-Qualify or Pre-Approval Matters

Whether you’re eyeing a conventional loan backed by a Government-Sponsored Enterprise (GSE), an FHA loan (insured by the Federal Housing Administration), VA loan (back by the Veterans Affairs), or USDA loan (backed by the United States Department of Agriculture), taking the initial step of meeting with a loan officer, who has an MLO license (Mortgage Loan Originator) is crucial. But should you aim for pre-qualification or pre-approval? Let’s break it down.

Pre-Qualification: A Glimpse into Your Affordability

Getting pre-qualified involves sharing some basic financial details with your mortgage lender. This process helps estimate the ballpark figure of how much house you can comfortably afford. Think of it as a sneak peek into your future homeownership potential. Armed with this estimate, you can establish a realistic budget to begin your home search.

Pre-Approval: A Stronger Financial Endorsement

On the other hand, pre-approval dives deeper into your financial profile. Lenders scrutinize your credit score and review your finances, like bank statements, pay stubs, and tax returns. This thorough examination gives you a more concrete understanding of your purchasing power. A pre-approval is like a golden ticket in the real estate world, as it adds significant credibility to your offer and demonstrates to real estate agents and home sellers that your finances have been vetted.

Demystifying the Acronyms: VOE, VOI, and VOA

Once you’ve chosen your path – pre-qualification or pre-approval – and found your dream home, it’s time to tackle the VOE, VOI, and VOA steps in your mortgage application. Let’s unveil their meanings:

Verification of Assets (VOA): Lenders want to determine that you have enough money to cover your down payment, closing costs and have enough money left over to make your first few mortgage payments so they will review your financial assets, such as your checking, savings, investment and retirement accounts with recent bank statements.

Verification of Employment (VOE): Lenders want to be certain that your income source is stable and reliable so they will contact your employer (or HR department) to confirm your position and length of employment with the company.

Verification of Income (VOI): Lenders assess your financial stability by reviewing your most recent two pay stubs from each employer, two years’ worth of tax returns, and other relevant documents.

Being able to explain the mortgage process in simple, relatable language is what separates originators who position themselves as trusted advisors from those who only view borrowers as a single transaction. After all, in the complex world of mortgages, clarity and guidance can make all the difference in providing first-time homebuyers with a smooth and successful homebuying journey.

Catch-22 of the Mortgage Process: What are we really talking about?

Jeremy Potter, Strategist and Advisor

I remember the first time I heard it. TRID. The new(est) rule from the CFPB on how the HUD-1 closing disclosure will change. TRID redefined the presentation of the fees and costs of the mortgage. TRID would come to define the next few years of the industry and, in the process, the way millions of first-time homebuyers review their home loan documents. It was also the first time I ever saw an acronym of acronyms. That’s right, peak regulatory compliance if you ask me. Nevertheless, TRID stands for TILA-RESPA Integrated Disclosure. TILA stands for Truth In Lending Act and RESPA means Real Estate Settlement Procedures Act. TRID is then the acronym for two other laws that had also been shortened. An acronym of acronyms is perhaps a sign that we did not go far enough in simplifying these regulations.

The good news for our clients – consumers – is that they do not need to know what TRID means. They experience it but do not have to know the acronyms. Part of the job of being in this industry is translating our complicated jargon into the plain language our customers understand. Further, an informed, confident consumer who fully understands the product and terms is a more resilient homeowner.

As the market has tightened, our industry scrambled to define or redefine what it meant to be a loan officer or branch manager in a competitive market. The expectation that an expert will advise consumers through a complicated and time-sensitive process is nothing new. The real question is – will the next generation of homebuyers look to the experts to explain the complexities of mortgage jargon OR will they rely on technology to show them the definition of the mortgage process?

Certainly there have never been more tools – Google, Wikipedia, Chat GPT – instantly available to consumers to explain things like APR, LTV, DTI and amortization. Simply providing a definition is only so helpful. The key is to customize and personalize the information. Consumers want to know – what does it mean for me? History says experts, trusted experts, are difficult to displace. Where our industry can continue to carve out implicit value that can never be displaced is the ability to customize and personalize the process for our customers.

Cash is king

For instance, LTV might be important for a product & pricing grid but it is the amount of the earnest money deposit (EMD) and the size of the down payment that will determine the consumer’s monthly payment. Monthly payment is the #1 thing all consumers care about and no disclosure or industry term can displace that fact. I would argue it’s much more critical for our teams and tools to be framing up the implications of cash versus home equity when discussing LTV. The definition of LTV is rendered almost irrelevant to the consumer when the full context is presented.

Timing is everything

The right information presented to the right person at the right time is powerful. Too often our industry uses urgency as a crutch. It’s easier to point to urgency & deadlines in the real estate contract or rate lock to avoid having to explain key pieces of the transactions. “We just have to” as an answer to anything the consumer asks is pretty underwhelming. One way to know where critical aspects of the process exist is to look at consumer-submitted questions. When I was at Rocket Mortgage, the rate lock was one of those critical moments. The acronym APR might not seem critical for consumers but framing up the cost of their money (interest rate%) over time (amortization) must be well understood to select the right options and know what one can expect.

Cost is a new four letter word

On the one hand, the best process would be proactive explanation of key terms as the customer moves through the process. As we look ahead to further cost cutting measures and an even tighter market, this is the perfect time (speaking of timing!) to ask whether you have the most proactive process for delivering the right information at the right time for the most number of clients. And where flexibility is needed to achieve personalization, do our systems allow our team members that ability?
On the other hand, the cost to the consumer is also part of an overall theme for the next several years. We know lenders do not want to increase any production costs. The regulators will be scrutinizing the cost to the consumer. This has occurred to some degree in the appraisal space and appears to be headed for the title space. As we approach explaining loan terms and costs to consumers, the new first-time homebuyer of 2024 (and beyond) wants to go way behind APR, interest rate, and PMI. In other words, they expect to go beyond the acronyms. We have to be ready if we’re to survive.

(Dis)Trust the Process

The last thing about consumer understanding that is critical for our future is “the process.” Despite (or perhaps because of) a global pandemic and relatively volatile interest rate environment over the last few years, the process has not changed all that much. Consumers on the other hand have only increased their expectations. As one Gen Z customer put it to me, “I don’t understand why this is so hard, it’s just math.” Put another way, if you have my data and you know what today’s pricing is, what is so hard about running some rules against the data? To the new homebuyers of the future, machines solve complicated math problems all the time – why is mortgage approval any different? This is a much more abstract threat than approaching tweaks to how we educate consumers about our process or our terms but that does not mean it’s not a real threat.

As you look ahead to the 4th Quarter and to 2024, consider how spending real time customizing and personalizing the terms and process points will dramatically change the experience for our clients. There are some key terms, to be sure. There will be questions about certain acronyms. But answering the question you know – as the expert – that is really being asked is where the true magic can happen. If you want to go even further, aligning technology and process to proactively avoid confusion with key moments, meetings and explanations using the client’s real data in each communication is what success looks like now.

The Power of Your Mortgage Knowledge: Bridging the Gap for Homebuyers

Mike Faraci, CEO & Founder, Red Button Media

As a mortgage professional you possess a wealth of knowledge about the intricate workings of the mortgage industry, a realm often unfamiliar to those outside it. Yet, what may seem like familiar concepts and terms to you, holds the key to making homebuying accessible and comprehensible for your future clients.

Translation: Stop taking your foundational knowledge for granted and start sharing it!

Here’s three huge reasons why you should do exactly that:

1. Empowering Informed Decisions
Homebuyers rely on your knowledge to make crucial decisions. By teaching them common terms like “down payment,” “debt to income ratio,” and “closing costs,” you empower them to make informed choices. An educated homebuyer is a confident one.

2. Reducing Confusion
The mortgage process can be daunting and filled with complex jargon. When you simplify these terms, you help your clients feel less confused and more at ease during the home-buying process. Less confusion will result in a smoother transaction for all involved.

3. Building Trust
Trust is the foundation of any successful partnership. By sharing your expertise in understandable language, you build trust with your clients. They’ll appreciate your efforts to demystify the process and rely on your guidance with confidence.

Here are some of the most important terms and concepts that homebuyers don’t typically understand right away, along with talking points and simplistic ways to explain them to anyone.

(If you need some content ideas, each of these would make a great piece to post.)

Down Payment: Most people know what this is, but they do NOT know how much is required. Countless surveys and polls show that roughly 50% of the country still thinks it takes 20% down to buy a home! Spread the word about your favorite low-down payment options.

Debt to Income Ratio: People hate math, so don’t do any. “You can spend up to $43 of every $100 pre-tax dollars you make on your housing payment and credit debts,” is the best way I’ve heard to explain a 43% maximum DTI ratio.

Closing Costs: Make sure your clients understand that these are additional fees, and explain what’s included. Many first-time homebuyers are under the impression that down payment is the only out-of-pocket expense. Also let them know it’s possible for sellers to give credits towards closing costs.

Credit Score: Simplify the notion of a credit score as a report card for past financial responsibility. Explain how a higher score can lead to better mortgage terms, and how “perfect” or “amazing” credit is not required to qualify for a mortgage.

Equity: Illustrate equity as the portion of the home the buyer owns outright. Emphasize how it doesn’t only grow when home values rise, but also with every mortgage payment they make.

Qualify vs Afford: Many buyers think they can afford whatever mortgage amount they qualify for. We know that’s not true. Educate homebuyers about qualification being calculated using gross income and credit debts only. Empower them to put together their own budget to determine how much they can really afford.

Educating prospective homebuyers is not just about simplifying language; it’s about fostering trust, confidence, and successful partnerships. By sharing your knowledge and helping clients understand essential terms and concepts, you’ll guide them towards homeownership with clarity and confidence.

Make the journey to homeownership an empowering one and you’ll end up with a pile of positive reviews, referrals, and repeat business.

Help Homebuyers Navigate a Real Estate Purchase with Education

Paul Gigliotti, COO & Executive Board Member of Axis Lending Academy

Education is the root of understanding, empowerment, and growth beyond measure. When you are educated in a subject, it allows you to understand it from all angles. When you understand a subject from all angles, even at a high level, you become more aware and appreciative. When you have this level of empowerment and knowledge as a consumer about a product or service you are using, and you become more aware of how this product or service was manufactured, you then have lifted the value, the process becomes transparent, and therefore you enter the situation with an entirely new dynamic of confidence. As consumers, when we purchase a good or service that has as much significant impact personally, socially, and economically as buying a home, being educated in the good/product or service will ensure you comprehend the process and support you as a consumer in obtaining the desired “price” and level of service. This is key for such a large investment as a home for two reasons. 1- Part of the journey is being educated in the financial benefits of homeownership to maintain assurance in your financial solidarity and security for future generations in your family. 2- Knowledge continues to be power. Understanding homeownership long-term will lead to additional growth, strengthening your financial future.

Educating your customers will ensure a relationship between you and the rest of the professionals involved in the loan life cycle journey based on trust and transparency. This type of relationship will have only one outcome—benefit and growth. Not only will the customer be more likely to return to you for future purchases, but they will remember the support, guidance, and knowledge you provided them, ensuring they will refer others to you. You see, as humans, we remember what is taught to us; we remember being educated far more than we remember being told what to do. As the saying goes—give a person a fish, and they will eat for a day; teach a person to fish, and they will eat for life.

There are a lot of tools in our industry that support educating the consumer. I recommend taking those tools and creating a loan life cycle document branded to you, highlighting major milestones based on your specific process within your mortgage lending organization. Then, on the back, include the below jargon/acronyms. This will again support and craft a valued relationship based on education, empowerment, and trust.

I reflected on my own personal journey during my first home buying experience and remembered the terminology that confused me to come up with this list.

Real Estate Buyer Agent: The buyer agent represents the buyer and can assist with several aspects of the home buying process, such as finding a home, scheduling viewings, submitting offers, setting up home inspections, etc.

Real Estate Seller Agent: The seller agent handles many tasks involved with selling a home, including analyzing the market to determine the time to sell, giving you advice for maximizing your property’s value, and procuring the most advantageous offer.

Mortgage Lender Pre-Approval: A pre-approval is a much more detailed process and is considered to be much stronger. This process includes reviewing all income and asset documentation, such as pay stubs, tax returns and bank statements, to ensure you have the ability to receive underwriting approval.

Mortgage Lender Pre-Qualification:  A pre-qualification is a loan application based on what the buyer/borrower told the Mortgage Lender. This is typically a faster and less detailed processing than a pre-approval.

Close of Escrow Period: Close of escrow is part of closing on a house when both parties complete their half of the agreement. It’s important to note that close of escrow may or may not happen on the actual closing date. For instance, you could exchange all necessary documents/materials ahead of time before the title exchange.

Contingency period: The contingency period is the length of time a buyer or seller has to complete or remove a contingency in a real estate contract. Without the right contingency, a buyer can’t back out of the contract without potentially losing their earnest money deposit.

Home Appraisal: An appraisal is an unbiased professional opinion of a home’s value and is required whenever a mortgage is involved in buying, refinance or selling a property. The home Appraisal value is the value the mortgage lending company uses to assess the value of the collateral regardless of the purchase price.

APR: The Annual Percentage Rate (APR) is the cost you pay each year to borrower money, including fees, expressed as a percentage. The APR is a broader measure of the cost to you of borrowing money since it reflects not only the interest rate but also the fees you have to pay to get the loan.

Mortgage note Rate: The Mortgage note Rate is the percentage you pay for the use of funds, often expressed as a yearly percentage, as mentioned on the promissory note or document.

Mortgage Term: The Mortgage term is the term of your mortgage or how long you have to repay the loan. The typical mortgage terms are 15, 20 or 30 years.

CTC: Clear to Close (CTC) means you have met the requirements and conditions to close on your mortgage.

DTI: Debit to Income (DTI) ratio is all your monthly debit payments divided by your gross monthly income.

LTV: Loan to Value (LTV) ratio is a lending risk assessment ratio that financial institutions and other lenders examine before approving a mortgage.

Seller Credit: A seller credit is money that the seller gives the buyer at closing as an incentive to purchase a property.

In our current paradigm, when providing detailed information, a simple, quick, easy-to-read guide is crucial. As professionals in the housing industry, we have the great ability, some might say duty, to offer all the required tools and resources to financial wealth. And the current access (Axis) point to the American dream of homeownership for all.

How a Bunch of Letters Impact Your Ability to Qualify for a Home Loan

Dustin Owen, Founder & Host of The Loan Officer Podcast

DTI, LTV, AUS are not the elements from your 10th Chemistry quiz that you got wrong. Nope. Not at all. They stand for Debt To Income ratio, Loan to Value and Automated Underwriting System. When your mortgage lender explains PAIL to you, know that they are not talking to you about your Barney lunchbox that you just had to have when you went off to Kindergarten. To them PAIL stands for your Property, Assets, Income and Liabilities. The quicker you can wrap your head around this industry jargon, the more comfortable you will become with the approval process of financing your home purchase. Let me explain.

DTI is a mathematical equation used to see if you can afford the mortgage payment. The lender divides your monthly debt by your gross (that’s the big number on your paycheck; not what gets direct deposited) monthly income. And, you most likely have two DTI’s. One is a front-end ratio and the other is a back-end ratio. The front is just your total housing payment divided by monthly income and the back is housing payment plus things like auto loans, student loans, child support, credit card payments etc. divided by monthly income. If your front ratio is too high (i.e. over 40-45%) then you won’t qualify. If your back-end is too high (i.e. 45-55%) you will not qualify. This is regardless of your credit score or how much money you put down.

LTV is your loan to value. All loans have a maximum LTV. It is basically your loan amount divided by your sales price (or appraised value; whichever is LESS). In general terms, the lower your LTV the better your chances are of qualifying. Some loans (i.e. home loans for investment properties) have a max LTV of 80%. Other loans (i.e. FHA loans) will finance up to a 96.5% LTV and for a VA loan, because the downpayment requirement is generally 0%, the LTV is 100%.

AUS is simply a computer software lenders use to efficiently underwrite and qualify home loan applicants. You see, there are the rules as written by the various government entities (i.e. Fannie Mae, HUD, Dept of Veteran Affairs etc.) and then there is AUS. The “rules” or guides may say “X” but AUS can override said rules and these overrides are for the benefit of the borrower. This means more homebuyers get to hear “yes”. One thing to understand about AUS is that it is only as good as the data which was input prior to it being run. AUS approvals still need to go to a mortgage underwriter (human) to verify the data used for the AUS approval is accurate.

And then there is that Barney lunch box…er…I mean P.A.I.L. If you want to understand what a mortgage underwriter is looking for when reviewing your loan application just know they are reviewing your PAIL. They need information about the property. Why type of home? What is its appraised value? How will you be using the home? (To live in? To rent?) Etc. They need to know about your assets. It is not just about how much money you have but where is that money being held and how long has it been in your account? Do you have access to the money? Is any part of it a loan? Etc. The underwriter wants to know about your income. Are you paid hourly or are you on a salary? Do you own your own company and if so for how long? How long have you been with your employer? Etc. Then they need to know about your liabilities. Liabilities is who do you owe money to and how much are you obligated to pay each month. It is also what is your history with credit? (Think credit score) Do you have any bad debts? (i.e. Collections, Tax liens etc.)

As G.I. Joe taught me, knowing is half the battle. Now you know. You are half-way there. Your final step is to find a proven mortgage professional to walk you through the rest of this process. Don’t go at this process alone. Take it from a home loan expert.

For Loan Officers, Authenticity Is Everything On Social Media

Douglas Wilber, CEO Denim Social

Let’s cut to the chase. Loan officers, this one’s for you.

Using social media to build your thought leadership as a mortgage loan officer is important, but you have to speak plainly and clearly to your followers. Those that don’t prioritize authenticity will miss out on the opportunities that social media can offer.

Your social media self should just be an extension of your in-person self. Think about what your customers want to hear. What are they interested in, what do they need to know?

Social media is a game of attention spans. Don’t let your voice get lost in the mix. Use your authentic voice to build real trust and create stronger relationships, so that you become the source of truth for all things mortgage.

For loan officers to successfully connect with their customers on social media, authenticity is essential.

Customers support businesses that resonate on social media, and authenticity is key to strengthening that loan officer-customer relationship. Leading with a personalized approach on social media is the only way to make it happen.

Sounds easy, right? Loan officers, stick to the basics and start with these approaches:

Rely on user-generated content.
User generated content is 12x more trusted than product descriptions, and brands see a 25% increase in conversion with organic images versus overly-curated ones. Don’t rely on others’ content – create your own posts.

Incorporate video content into your mix.
With younger generations spending up to 4 hours per day on social networks, video is only going to grow in popularity. Grab your phone and have a conversation.

Keep audience experience top of mind.
Customers are loyal to businesses that they like and that they feel are authentic and care about them. Put yourself in their shoes, listen to what they’re saying, and use social media to meet them where they are.

Always offer value with content.
Why should they care? Post with purpose. Everything you say on social media should have the “what’s in it for me?” factor.

Social media is not going away – but the good news is that it presents countless opportunities for LOs to connect. In today’s digitally connected world, it’s an essential channel for communication and growth potential. There’s no need to make it more complicated than it needs to be. You’re just continuing the same conversations you have every day, online.

Above all, speak to your followers the same way you’d speak to them in person. The ability to show up and resonate with audiences on social media will be a winning strategy every time.

Luckily, Denim Social has a guidebook that’s specifically designed for loan officers looking to strengthen customer relationships on social media. Download Helping Mortgage Loan Officers Achieve Success with Social Media Marketing here.

Home Buying 101

Dan Smokoska, Founder, Loangendary Marketing

Let’s say you and I were talking about a recent ad campaign that I just launched for a mortgage company. Throughout the conversation, I’m telling you about the “click-through rate,” the “ROAS,” and why I opted for a paid ads strategy instead of an organic strategy.

Would this be your reaction: 😐

You bet it would be!

Now, let’s switch from marketing to mortgages.

Jargon. It makes your homebuyers’ eyes glaze over (even more so for first-time homebuyers).

So, how do we clear the haze? By injecting some simplicity and clarity into how we communicate to our borrowers.

Here are three ideas to try:

1- “Watch Your Language” (social media campaign):
How about a midweek “Terminology Tuesday” or “Words Wednesday” where you break down those head-scratching mortgage terms. Lights, camera, clarity! Dedicate a day to streamlining a term that usually stumps.

2- “The Book Of Mortgage Jargon” (ultimate guide):
Craft a fun, witty guide that pokes fun at complex mortgage vocabulary. It’s the Rosetta Stone for home buying – with a pinch of humor and a ton of utility. Share it as the initial icebreaker, the perfect primer for anyone starting their home-buying adventure.

3- “Your Journey To Homeowner” (streamlined email series):
In bite-sized, easily digestible chunks, deliver a series of emails simplifying the home-buying journey. Think of this as your borrower’s weekly (or bi-weekly) espresso shot of mortgage knowledge. It’s not just about simplifying terms, but showing your commitment to creating an incredible experience for them.

Remember, in an industry muddled with terms, be the guide that offers clarity. Think less Encyclopedia Britannica, more Home Buying 101. Now, let’s elevate their experience from confusing to confident!

The ABC’s of DPAs

Rob Chrane, CEO & Founder, Down Payment Resource

I think we can all agree the housing industry loves an acronym, but since down payment assistance (DPA) is our business, I’ll stick to what we do best. And, I’ll make sure to throw in some helpful acronyms and terms along the way.

Of the over 2,300 homebuyer assistance programs available in the U.S., 75% offer some form of down payment or closing cost assistance.

These programs are available through state and local Housing Finance Agencies (HFAs), city and county governments, employers, non-profits, land trusts and more. As a matter of fact, our latest Homeownership Program Index (HPI) revealed that 45 additional agencies stepped up to administer homebuyer assistance programs in Q2 2023 — a 3.9% increase over the previous quarter. Over 1,300 agencies now provide assistance to aspiring homeowners across the country.

DPAs most often come in the form of silent second mortgages or non-repayable grants and offer several thousand to tens of thousands of dollars to eligible homebuyers. In addition to helping with the down payment, program providers often allow the funds to be used for closing costs, prepaid expenses, rehab or repairs (which can be particularly important to enhance a property or accommodate livability standards for disabled homebuyers), and even loan principal reductions. In response to market challenges, we’ve also seen a recent increase in the number of programs that allow funds to be used for temporary or permanent interest rate buydowns.

A common misconception about DPA is the idea that these programs are only for first-time homebuyers (FTHBs) when in fact 39.7% of homebuyer assistance programs in the U.S. have no FTHB requirement. Beyond that, most programs adhere to the Department of Housing and Urban Development’s (HUD’s) definition, which states you’re a FTHB if you haven’t owned a home in the last three years. And, many programs will waive their FTHB requirement for veterans, or if a homebuyer is purchasing in a targeted revitalization area.

As for additional criteria, the homebuyer must meet 1st mortgage requirements. If the DPA has income limits, they will be market adjusted, often based on calculations for the Area Median Income (AMI), and may range from 80% up to 140% AMI or higher. Since the property must qualify as well, purchase price limits may be applicable and are usually in line with HUD’s loan limits in each market, offering assistance at or beyond median home price values.

Ultimately, DPAs are available in every market across the country, and help homebuyers increase their purchase power by reducing the down payment burden. If you’re interested in finding out what’s available in your area, check out our free eligibility search tool to see what’s out there for you or your clients.

The Role of GSEs in Homebuying

Brian Vieaux, President & COO, FinLocker

Government-Sponsored Enterprises (GSEs) are not just another set of acronyms in the world of home buying; these entities are fundamental to the stability of the housing market and play a significant role in making homeownership a reality for millions of Americans. Understanding their roles and missions can empower you as a homebuyer, enabling you to make more informed decisions and secure the home of your dreams with confidence.

What are GSEs?
GSEs, short for Government-Sponsored Enterprises, are quasi-governmental organizations established with a specific mission: to enhance the flow of credit within the U.S. economy. While they do not directly lend money to the public, their impact on the housing market is substantial. GSEs achieve their mission by guaranteeing third-party loans and purchasing loans in the secondary market, ultimately ensuring that mortgage lenders and financial institutions have the necessary funds to support homebuyers.

Let’s delve deeper into the three major GSEs regulated by the Federal Housing Finance Agency (FHFA):

Freddie Mac (Federal Home Loan Mortgage Corp.) was created in 1970 to promote affordable homeownership among the middle and working classes by expanding the secondary market for mortgages in the U.S. Today, it continues to fulfill this vital role by purchasing mortgages from lenders, which it pools and sells as mortgage-backed securities (MBS) to private investors on the open market. This secondary mortgage market provides lenders with liquidity to continue lending to prospective homebuyers for new home purchases.

Fannie Mae (Federal National Mortgage Association) was introduced in 1938 to improve the flow of credit in the housing market while reducing the cost of that credit. Like Freddie Mac, Fannie Mae purchases mortgages from lenders, allowing these lenders to free up capital and extend credit to more borrowers.

FHLBs, known as the Federal Home Loan Banks system, is a unique entity owned by over 8,000 community financial institutions nationwide. The FHLB system, established in 1932, plays a crucial role in providing stability to the housing finance market. FHLBs lend to the financial institutions, which, in turn, helps ensure that credit remains readily available for a diverse range of homebuyers, particularly in local communities, through smaller, community-based lenders.

Why should homebuyers care?
Understanding the roles and functions of GSEs is important for homebuyers. These organizations indirectly impact your ability to secure a mortgage with favorable terms. When GSEs purchase loans from lenders, it encourages lenders to offer competitive interest rates and flexible mortgage terms to borrowers like you.

Additionally, GSEs promote stability in the housing market, making homeownership more sustainable. They help prevent market volatility, ensuring that you can confidently invest in a home, knowing that a stable housing finance system backs your investment.