Getting a mortgage in today’s world seems a lot simpler than it did 5-10 years ago. Home buyers just give their basic information to a lender online and within a matter of minutes they’re given a variety of home loan options. But is it really that easy? And if so, does easy always equal savings or even make sense, for your clients? Probably not.
Buying a home doesn’t have to be complicated but it should entail more than just a click of a button. We’re talking about major finances here—so let's not have your clients make a major mistake before they even move in.
Comparing loans is one of the smartest things home buyers can do. Your client may be a first-time home buyer trying to figure out various down payment options, a veteran, want to live in a rural area, or just looking to purchase in a traditionally expensive area of the U.S. (hello, California!) What this comes down to is there are no two home buyers alike. And you can help increase your clients' chances of getting the best loan terms for their situation so they can buy a house more affordably.
Everything moves at a fast pace now days. But faster isn’t always better. Give your buyers some time to look at loan comparisons side-by-side. To compare accurately they need to look at:
Interest rates: The cost they’ll pay each year to borrow the money on a home loan. In this case, the lower the interest rate percentage, the more they’ll save over the life of the loan (which is a good thing, of course). Many homeowners choose to “lock” their interest rates 60-90 days before closing on their home loan to avoid potentially rising rates.
Mortgage points: Mortgage points are also referred to as discount points. It is a charge that may incur based on the interest rate choose and/or the terms of the loan, credit score, etc. One discount point is 1% of the total home loan amount. For example, on a $300,000 mortgage, 1 point would cost your client $3,000 directly out of their pocket on closing day. Keep in mind, this money is in addition to the down payment and adds to the total closing costs.
It’s also important to note that paying 1 discount point does not equate to a 1% lower interest rate. The charge for discount points may differ between loan programs and lenders. Your home buyer can pay mortgage points and not get any reduction on their interest rate so they really need to pay attention to the fine details to understand why a rate may have discounts points and other rates may not. Send our points calculator to your home buyers and let them see if paying mortgage points makes sense for them.
Down payment: This is the cash home buyers are putting up front on the final price of the home before the mortgage starts. Putting 20% down will help avoid paying mortgage insurance in most cases, but it doesn’t mean home buyers need to put all their cash in hand toward the down payment. Anywhere from 3-10% down could be the best bet. Have your clients talk to a Home Loan Specialist to see what works best for their situation.
Closing costs: When buying a house, closing costs are part of the contract (as you know). The average home buyer pays about 2-5% of the loan amount in closing fees. So, what’s included in closing costs? Usually there's a variety of fees such as: application fee, attorney’s fees, administrative or processing fees, insurance fees, property taxes, and expenses from the title company.
Origination fees: Origination fees are charges that borrowers will pay for a lender to originate the loan. They are not upfront fees – they’re paid on closing day. One lender may quote a lower interest rate to frame the loan to be more appealing, however, that lender may also be charging higher origination fees to compensate for the lower rate. When advising your clients to compare quotes from different lenders, the best thing for them to do is to look at Section A of the Loan Estimate to really understand what each lender is charging.
Customer satisfaction and referrals: Customer service is key when getting a home loan. It’s a scary thought to leave the biggest purchase that your clients may ever make in the hands of someone who may not know what they’re doing. It’s always good to check out testimonials on Google or a social media channel about a lenders capabilities and timeliness of closing.
Long-term goals: Communication is important not only during the mortgage process but also after closing on a home loan. Make sure the lender your clients choose, checks in after they've closed to ensure that the mortgage is still working for them to help build wealth and make progress toward their long-term goals.
Helping our clients understand the importance of comparing mortgage quotes is one of many ways to set yourself apart as a real estate agent. Choosing to partner with Churchill Mortgage shows clients you’re someone they can trust and grow with, because that’s what we stand for.
Connect with us for more information on how we can help elevate both your business and each client’s experience!
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