Rethink Everything About Educating Borrowers on their Loan Options

Mortgage industry experts provide insights and content to educate borrowers on their loan options.

Mortgage Content That Works: Simplify > Educate > Converse > Convert
Mike Faraci, CEO & Founder, Red Button Media

Advice for Loan Officers to Offer Fair and Honest Loan Product Recommendations
Brian Vieaux, President and COO, FinLocker

How Changing the Credit Conversation will Lead to Stronger Relationships
Sue Buswell, Credit and Score Consultant #sueknowsthescore

20% Down is so 20th Century
Jeremy Potter, President, titleLOOK

Revolutionizing Mortgage Advice: Digital Co-Pilots for Loan Officers
Jeffrey Walker, CEO and Co-Founder, CredEvolv

Explain to First-time Homebuyers the Benefits of Paying Mortgage Insurance to Buy Sooner
Brian Vieaux, President and COO, FinLocker

Down Payment Assistance: Knowledge Is Power
Rob Chrane, CEO & Founder, Down Payment Resource

Unlocking New Possibilities: Reverse Mortgage New Construction Purchase
Heather Kyle, Loan Officer, Guild Mortgage

View all previous articles

Advice for Loan Officers to Offer Fair and Honest Loan Product Recommendations

Brian Vieaux, President & COO of FinLocker

Consumers at all stages of the homebuying and homeownership process have a baseline expectation of their loan officer to be an expert in structuring a loan by coordinating the information they provide and matching that to an appropriate loan product. However, the responsibility doesn’t end with merely presenting a loan solution; it extends to providing comprehensive education and offering transparent guidance to empower borrowers to make informed decisions.

A lot of loan officers, though, aren’t taking the time to truly educate borrowers about all their options. What I see happen too often is that loan officers present what they perceive as the best option for a consumer’s situation—and that’s the only option they present.

I recommend, especially in light of some of the news that’s hit the industry of late, that loan officers take the time to understand each borrower’s specific financial scenario and structure multiple product options tailored to each borrower’s unique circumstances. For instance, comparing a 30-year fixed-rate loan versus a 15-year fixed-rate loan and showing the consumer not just the difference in the monthly payment but also how the term difference accelerates their amortization of that particular loan. Similarly, comparing a fixed rate loan with an adjustable rate mortgage based on a conversation with the consumer who only plans to live in the home for three or no more than five years. By presenting a comprehensive view of both traditional and non-QM loan products, loan officers can empower their borrowers to make informed decisions.

The importance of education is not just financial readiness but also taking the time to provide each consumer with a specific personal financial scenario involving homeownership and presenting different loan product options that meet their financial circumstances. A good example of how to represent those options is using a tool like the Total Cost Analysis that Mortgage Coach creates for its loan officers. This tool makes it easy to tell the story of one loan program versus another, so it’s easier for the consumer to make an educated decision.

Ultimately, the role of a loan officer extends beyond facilitating a transaction; it encompasses guiding borrowers through one of life’s most significant financial decisions. By embracing a commitment to fairness, transparency, and education, loan officers can fulfill their duty to homebuyers and homeowners. Through collaborative exploration of loan options and transparent communication, loan officers can cultivate trust and foster informed decision-making among borrowers, laying the foundation for long-term financial stability and successful homeownership.

Mortgage Content That Works: Simplify > Educate > Converse > Convert

Mike Faraci, CEO & Founder, Red Button Media

Creating compelling educational content in the mortgage industry requires finesse, especially when tackling complex topics for an audience unfamiliar with the intricacies of mortgage financing. If you’re seeking to educate and attract future clients, here are some ways to do that effectively, through your content.

1. Understanding Your Audience’s Mental State

• Recognize the mental space of your audience. Many individuals encountering your content may lack a foundational understanding of mortgages due to gaps in financial education.
  Understand that viewers consuming content on social media platforms often operate in a state of reduced mental capacity, seeking entertainment or distraction from daily routines.
  Tailor your content to simplify complex mortgage concepts, resonating with viewers who may not be operating at maximum mental capacity while scrolling through their feeds.

2. Avoid Math Overload

• Steer clear of intricate mathematical explanations involving percentages and dollar amounts, which can overwhelm and deter viewers.
  Instead of diving into DTI ratios and specific financial thresholds, convey eligibility criteria in relatable terms, focusing on spending habits rather than numerical specifics.
  Frame qualification requirements in straightforward language, ensuring viewers grasp the essentials without the need for extensive mathematical comprehension.

Example – The best way I’ve ever heard DTI explained: “Spend less than $43 of every $100 pre-tax dollars on housing and debt payments and you’ll qualify!”

3. Focus on the Client Experience

• Shift the focus from technical program details to the experiential benefits for clients, illustrating how specific programs can alleviate common housing-related challenges.
• Frame your content to center around the viewer’s journey and aspirations, portraying them as the protagonist navigating the path to homeownership.
• While your content lays the groundwork, save in-depth discussions for one-on-one conversations, where you can address specific questions and concerns.

4. Dispel Mortgage Misconceptions

• Combat prevalent misconceptions surrounding mortgage insurance and down payment requirements by providing accurate information and clarifications.
• Showcase the advantages of utilizing mortgage insurance as a tool to expedite the homebuying process and build long-term equity.
• Offer tangible examples and scenarios to illustrate the financial implications of different homebuying strategies, empowering viewers to make informed decisions.

5. Educating on Mortgage Processes

• Break down intricate mortgage processes, such as pre-qualification versus pre-approval, into digestible explanations accessible to viewers with varying levels of expertise.
• Focus on imparting essential knowledge that equips viewers with the confidence to engage with mortgage professionals and navigate the homebuying process effectively.
• Educate viewers on critical aspects of mortgage shopping, such as obtaining multiple quotes and negotiating terms, to empower them to make informed financial decisions.

Effective mortgage content creation hinges on the ability to simplify complex concepts, engage viewers effectively, and provide valuable insights tailored to their needs.

By adopting a client-centric approach and leveraging the power of video content, mortgage professionals can establish trust, build credibility, and ultimately foster meaningful connections that turn into leads, loans, and referrals.

How Changing the Credit Conversation will Lead to Stronger Relationships

Sue Buswell, Credit and Score Consultant #sueknowsthescore

As loan officers, you are tasked with answering all of the questions buyers and homeowners have about their transaction.
• Interest Rate Queries? Absolutely! With the necessary information, we can furnish accurate rate quotes.
• Choosing the Right Loan? Once we gather a comprehensive financial picture, we can guide buyers to the appropriate loan options.
• Loan Term Decisions? By understanding their long-term housing goals, we can advise on the optimal loan duration.

Credit Score and Credit Report Insights? Discussing the current, mid, and qualifying scores is common, yet the nextgen loan officer looks to transcend these basics. Your role involves not only sharing credit score data but empowering your clients to enhance their credit.

When consulting on loan options, the borrower’s credit score is pivotal—it influences the interest rate, loan type, down payment requirements, and PMI, among other factors.

Rather than merely asking clients if they know their credit score, engage them more constructively. Inquire about their use of credit monitoring services. Regardless of their response, probe further by asking what aspects of their credit they wish to improve, then outline actionable steps to assist them.

Even borrowers with a decent credit score, such as 700, can potentially elevate it to 720 or higher with straightforward adjustments and within a few weeks.

Utilize industry resources like CreditXpert to discuss potential improvements in credit scores with your clients. Their research indicates that over 70% of borrowers could enhance their scores, but many are never presented with this opportunity by their lenders.

For consumers who require additional guidance to become mortgage-ready, leverage tools like CredEvolv, which connects non-profit credit counselors with you and your clients.

These questions not only provide alternatives to the standard “Do you know your score?” but also aim to initiate a dialogue, build rapport, and shift away from merely transactional interactions.

Educating your clients about the importance of improving their credit score—a key element they can control in the loan process—sets both parties up for ongoing success.

How Changing the Credit Conversation will Lead to Stronger Relationships

Jeremy Potter, President, titleLOOK

The average mortgage rate sheet is confusing. The pricing adjustments to the base price for different products, different FICO buckets, geographies, and, in some cases, even channel (retail, wholesale, online, etc.) are not meant for anyone other than a licensed mortgage loan officer (MLO) to understand. Hidden in the daily rate sheet, however, are often critical decisions that could change the return on investment (ROI) for the home buyer.

The three biggest factors that influence mortgage value are
1). Whether the home is the primary residence
2). Credit score and
3). Down payment or Loan-To-Value (LTV).

Assuming most of the mortgage customers right now are buying a home and the vast majority of those are buying the home they intend to live in full-time. This means primary residence is almost always assumed to be true. Most of the advice about mortgage rates already assumes this fact.

This leaves credit score and LTV as major considerations in the price of your mortgage.

Here’s where the mortgage process starts to get complicated for many people. Credit score is not that easy to come by. The best way to know your credit score is to get it on your own (i.e. freecreditreport.com), subscribe to a service that provides it, or reach out to a mortgage professional who can check your credit as part of a Pre-Qualification. One of the benefits of FinLocker is providing a range that helps know where you will likely end up in the credit score aspect of pricing. The downside is that while that tells you the mortgage eligibility it does not provide that price. As a result, the true monthly payment remains unknown in the early stages of a mortgage application because daily price depends on final data.

This means there are two key aspects about mortgage product and pricing within your control. One, continue to improve credit score during the home buying process by paying down debt and making payments on time. Two, how much cash you will set aside to pay as the down payment.

Mortgage pricing varies widely between 3% and 20% down. Let’s assume 3% down is available to most first-time home buyers with credit above 620. To be sure, you will need to meet with an MLO to verify a specific set of income measurements to be sure you qualify.

If you can put 3% down, do it.

Most advice (at least historically) has been put as much down as possible. There are two reasons why:

1. 20% down “avoids” paying private mortgage insurance (PMI) that is an additional monthly payment added to your mortgage payment for anyone putting less than 20% down

2. Incentivized pricing, i.e. a lower rate, is available the more you put down between 3% and 20%.

Lenders want the cash to create a risk buffer so that the home can fluctuate in value through normal market cycles without risking the amount you owe. Ultimately, though, the cash is worth more in your pocket than locked in your new home as equity.

In today’s market, I would put as little down as possible and keep as much cash liquid as possible when buying your first home. Cash will allow you to manage unexpected home costs or life events. Cash will allow you to invest elsewhere for diversified returns. Cash on hand will still allow you a rate-and-term refinance should rates drop.

There is one exception. If you are lucky enough to have parents giving you the 20% to put down. Then it is wise to lock that money in as home equity and take the lower rate.

Otherwise, it makes sense to ask your MLO how to calculate how much more savings you’ll have in the first 3, 5, 7 and 10 years by utilizing a lower down payment with PMI. When it comes time to apply for your first mortgage, consider thinking about the future as the next couple years, not 30 years.

Revolutionizing Mortgage Advice: Digital Co-Pilots for Loan Officers

Jeffrey Walker, CEO and Co-Founder, CredEvolv

Mortgage loan officers aren’t perfect. Although they play a critical gatekeeper role in the financial education of consumers, it’s virtually impossible to expect that 80,000 loan officers can effectively guide first-time homebuyers, veterans, borrowers looking to take equity out of their home or those seeking to improve cash flow 100% of the time. I’ve learned over nearly a three-decade career leading mortgage sales organizations that certain myths have a way of impacting how the loan officer (aided by the media) conveys product value to consumers. For example:

• FHA is the best choice for first-time homebuyers because they alone offer low down payments and low FICO gating scores
• Consumers must have to have a 20% down payment to get a mortgage
• Down payment assistance is only for low-income borrowers
• Credit-challenged borrowers should take a mortgage product with the lowest credit score requirement

These are just a few examples of ways a loan officer can unwittingly fall into the trap of recommending a sub-optimal solution for their consumer. And let’s be frank, there is a perception among some that loan officers care more about the commission than they do about setting the consumer up for lifelong success. So, while loan officers are not perfect, there are market-ready solutions that can help them be the best consumer advocates possible. When it comes to educating consumers about their options, it’s time for a better model. One that leverages the experience and knowledge of the loan officer but is not wholly dependent upon them.

Here are three examples of how digitally delivered customized consumer education is serving as a loan officer co-pilot to the benefit of consumers:

1. Monster Lead Group, a data-driven direct mail mortgage marketer, observed database behaviors that could only be attributed, statistically, to consumers not being exposed to all their options. This led them to build two educational products, one consumer facing and one for loan officers, to bridge the information gap. Consumers interact with their data and options, allowing them to take agency over these options by pre-populating multiple benefit scenarios they can adjust for different outcomes. By delivering the same outputs to the Loan Officer (and unprecedented consumer insights), Monster empowers the consumer, provides transparency and engenders trust between the consumer and Loan Officer.

2. FinLocker works along-side loan officers to leverage consumer-permissioned data and proprietary analytics to deliver personalized financial journeys (homebuyer education, credit education, post-purchase education, etc.). This holistic approach enables consumers to achieve and sustain homeownership while allowing loan officers to serve more consumers efficiently and at scale.

3. CredEvolv helps loan officers keep credit and debt-challenged consumers in their pipeline by offering an AI and machine learning-based ‘not yet’ instead of a ‘no.’ Their customized digital blueprint helps consumers realize that success is possible and that they are not alone, and they take the heavy lift of credit education off of the loan officer without asking the loan officer to give up control of the relationship.

Bottom line – even the most experienced loan officers can serve more consumers, build deeper empathy, and generate better consumer outcomes if they are open to partnering with innovative education experts.

Explain to First-time Homebuyers the Benefits of Paying Mortgage Insurance to Buy Sooner

Brian Vieaux, President and COO, FinLocker

Here is a blog and social media posts to share with your consumers that explains the advantage of buying now with a lower down payment and paying mortgage insurance, and the difference between PMI and MIP. You can also create videos for each advantage and another video that explains the differences.

Title Options:

Mortgage Insurance: Your Key to Homeownership Sooner

Mortgage Insurance Explained for (Your State) Homebuyers

For many first-time homebuyers, the idea of paying Mortgage Insurance (MI) can seem like an extra financial burden. However, rather than viewing MI as a deterrent, first-time buyers should consider the advantages of purchasing now with a low down payment and paying MI, rather than waiting to save for a 20% down payment.

For those not familiar with the term, Mortgage Insurance is a monthly fee that protects the lender if you default on your mortgage. It is typically required when a homebuyer puts down less than 20% of the home’s purchase price as a down payment. Conventional “conforming” loans and FHA loans differ on mortgage insurance requirements.

Differences Between Mortgage Insurance on Conventional and FHA Loans

Conventional Loans: With a conventional loan, Private Mortgage Insurance (PMI) is typically required when the down payment is less than 20%. PMI is calculated based on the home price, loan amount, down payment, and your credit score. It’s common for homebuyers to put 3.5% to 5% down on a conventional loan. While the amount you pay for PMI can vary, Freddie Mac, one of the government-sponsored entities (GSEs) that backs conventional conforming loans, says you can expect to pay approximately between $30 and $70 per month for every $100,000 borrowed.

Once the loan-to-value ratio reaches 80%, borrowers can request to cancel PMI. Borrowers don’t have to make additional payments to reach the 80% equity. An increase in the home’s value, either through renovation or home prices, can also contribute to the value. Lenders cancel PMI automatically once 22% equity is reached.

FHA Loans: FHA loans require both an upfront mortgage insurance premium (MIP) of 1.75% of the original loan amount and an annual MIP of 0.85%, which is recalculated every year. The annual fee is divided into 12 payments and added to the monthly mortgage payments.

If the down payment is less than 10%, the MIP annual fee remains for the life of the loan. If your down payment is 10% or higher, the annual MIP requirement ends after 11 years. Once at least 80% equity is reached, you will need to refinance to a conventional mortgage to remove the MIP.

While mortgage insurance is an added monthly cost, it can be well worth the investment to stop renting and start building equity as a homeowner sooner. With home prices expected to continue rising, it often makes more financial sense for first-time buyers to purchase now with PMI rather than waiting a few more years to save 20% down.

Here’s why you shouldn’t let mortgage insurance deter you from becoming a homeowner.

4 Advantages of Buying Now With a Lower Down Payment

The sooner you purchase a home and start building equity, the sooner you can start realizing the financial benefits of homeownership. These include locking in your monthly housing payments, tax benefits, and taking advantage of potential home price appreciation.

1. Immediate Entry into the Housing Market: Let’s say you want to buy a $400,000 home and have $20,000 saved for a 5% down payment. With MI, you could buy that home today rather than waiting another 2-3 years or more to save a full 20% down payment. Home prices could continue rising during that time, potentially making homeownership even more unattainable.
2. Building Equity Over Time: While a larger down payment can reduce monthly payments and eliminate the need for PMI, it also means waiting longer to build equity in the home. Equity is the difference between the market value of your home and the amount you owe on your mortgage. With a lower down payment, purchasing now allows buyers to start building equity immediately as they pay down the mortgage balance over time.
3. Flexibility with Savings: Saving for a 20% down payment can tie up a significant amount of money, potentially delaying other financial goals such as saving for emergencies, retirement, or other investments. Opting for a lower down payment and paying PMI allows buyers to maintain more flexibility with their savings, allocating funds to various financial priorities.
4. Potential Tax Benefits: Depending on individual circumstances and state tax laws, mortgage interest and PMI payments may be tax-deductible, providing some financial relief for homeowners.

While mortgage insurance is an added monthly cost, it can be well worth the investment to stop renting and start building equity as a homeowner sooner. With home prices expected to continue rising, it often makes more financial sense for first-time buyers to purchase now with PMI rather than waiting a few more years to save 20% down.

 Social Media Posts

Take the leap into homeownership with confidence! Mortgage Insurance (MI) may seem like an extra expense, but it could be the key to entering the housing market sooner and reaping the benefits of own your home. Read our blog to learn more.

Waiting to save a 20% down payment? Think again! Mortgage Insurance (MI) offers flexibility and financial advantages that could outweigh the costs. Find out why you shouldn’t let MI deter you from becoming a homeowner in our latest blog post.

Did you know that Mortgage Insurance (MI) could be your ticket to seizing homeownership opportunities now and building equity faster? Learn how in our blog.

Don’t let Mortgage Insurance (MI) hold you back from homeownership! With MI, you can unlock the door to your dream home sooner rather than later. Explore the benefits of purchasing now with a lower down payment in our blog.

Hashtags for your social media posts:

#homeownershipjourney #homeownershipgoals #homebuying #homebuyingtips #homebuying101 #homebuyertips

#mortgageinsurance #mortgageinsurancefacts #mortgageinsuranceexplained #firsttimehomebuyertips

#equitybuilding #equitybuildingtips

Down Payment Assistance: Knowledge Is Power

Rob Chrane, CEO & Founder of Down Payment Resource

The path to homeownership is filled with excitement, anticipation and a fair share of complexity, especially for first-time buyers. As industry experts, it’s important that we equip homebuyers at every stage with the knowledge necessary to secure a financial foundation that will support wealth building and long-term stability.

Due to the growing awareness and accessibility of homebuyer assistance programs in recent years, loan officers should be prepared to discuss the more than 2,300 programs available to help buyers with down payment, closing costs, prepaids and more.

Down payment assistance (DPA) programs can be a valuable resource for both first-time and repeat buyers, helping to make homeownership more accessible and sustainable. For example, DPA can help lower LTV, which can open the door to better and more affordable first mortgage scenarios, including conventional (rather than FHA) financing, reduced mortgage insurance costs and better interest rates.

As home prices continue to rise, exploring down payment program options can help bridge the affordability gap and provide a much-needed boost for prospective homebuyers.

Here are a few things every homebuyer should know when it comes to navigating the process of securing DPA:

• Homebuyer assistance programs come in various forms, such as loans, matched savings, tax credits and more. DPA is the largest category of programs—74% to be exact—and comes in two primary forms: non-repayable grants and second mortgage loans with varying payback or loan forgiveness provisions.
• Programs vary widely in terms of eligibility criteria, funding availability, and the amount of assistance offered, but it’s important to note these programs are not just for low-income or first-time buyers. Over 40% of all homebuyer assistance programs do not have a first-time homebuyer requirement, and many programs have income limits at 140% of Area Median Income (AMI) or higher.
• These programs are for owner-occupant buyers only, and both the homebuyer and the property must be eligible.
• There are often additional benefits, or even entirely separate programs, for educators, protectors, health care workers, veterans and individuals with disabilities.
• Many DPAs can be combined or “layered” with other programs, offering additional financial support for buyers.
• Most program providers require applicants to complete homebuyer education courses, especially first-time buyers. These courses can be done in-person or virtually and provide valuable information about the homebuying process, financial management, and homeownership responsibilities.

The increasing popularity of DPA programs is a testament to their effectiveness in addressing the financial barriers to homeownership. Understanding these programs can be a game-changer for homebuyers, and knowledge is indeed power when it comes to leveraging these opportunities.

Unlocking New Possibilities: Reverse Mortgage New Construction Purchase

Heather Kyle, Mortgage Loan Officer, Guild Mortgage

As loan officers, we’re always on the lookout for innovative solutions that not only benefit our clients but also help us grow our business. Enter the Reverse Mortgage New Construction Purchase program—a powerful tool that opens exciting opportunities for both loan officers and homebuyers. Let’s dive into the details and explore how this program can transform the game.

What Is It?

In a nutshell, the Reverse Mortgage New Construction Purchase program allows older buyers to finance their new dream homes without the burden of traditional mortgage payments. Here’s how it works:

1. All-Cash Buyers: Imagine clients who’ve diligently saved up their hard-earned cash. They’re ready to settle into their forever homes, and they want to do it without the hassle of monthly mortgage installments. Reverse mortgages make this possible.
2. Design Center Upgrades: Who doesn’t love a swanky kitchen or a luxurious bathroom? With this program, buyers can finance 30% to 50% of their design center upgrades using the reverse mortgage. Granite countertops, custom cabinets, or that spa-like shower—they’re all within reach.
3. Lock It In: The down payment percentage gets locked in at application. No surprises, no last-minute changes. Stability is key.
4. Credit Line Growth: Here’s the secret sauce: the reverse mortgage line of credit grows over time. It’s like having a financial safety net that keeps expanding. And it’s insured by the FHA.

Why Should Loan Officers Care?

1. Expanding Your Client Base

Reverse mortgages for new construction attract a unique clientele—those all-cash buyers who want to live mortgage-free. By offering this program, you tap into a market segment that traditional mortgages often miss. Think of it as widening your net to catch those elusive fish.

2. Building Trust and Expertise

When you guide clients through the intricacies of reverse mortgages, you become their trusted advisor. You’re not just selling a loan; you’re providing a solution tailored to their needs. This expertise builds long-lasting relationships and referrals.

3. Differentiating Yourself

In a competitive landscape, standing out matters. Reverse mortgages set you apart. Imagine a conversation with a potential client:

“Yes, we can certainly explore traditional financing options, but have you considered a reverse mortgage for your new construction? Let me walk you through the benefits.”

Boom! You’ve just elevated your game.

4. Strengthening Builder Relationships

Builders love a loan officer who brings value to the table. By promoting the Reverse Mortgage New Construction Purchase program, you’re not only helping buyers but also supporting builders. They’ll appreciate your commitment to making their projects more accessible.

Benefits for Buyers and Builders

For Buyers:

• Age in Place: Reverse mortgages allow clients to settle into their forever homes and age gracefully. No need to downsize or compromise.
• Financial Flexibility: Keeping liquid assets means less strain on retirement funds. It’s like having a financial safety cushion.
• Upgrade Confidence: Buyers can personalize their new homes without draining their savings. That dream kitchen? It’s on the menu.

For Builders:

• Streamlined Transactions: No interest rate gymnastics. Builders can focus on what they do best—building homes. Skip the rate buydown drama. Simple and sweet!
• Enhanced Purchasing Power: Reverse mortgages boost buyers’ purchasing capacity. More buyers mean more sales.
• Design Center Boost: Builders can offer design center upgrades without buyers breaking the bank. Happy homeowners, happy builders.

The Reverse Mortgage New Construction Purchase program isn’t just about loans; it’s about possibilities. As loan officers, we have the power to transform lives and create win-win scenarios. So, let’s unlock those doors, one mortgage at a time.