You generate a real estate lead, who is looking to buy a house, but their budget is very low. Do you move on to the next lead or find a way to work with their budget? We believe in working with every lead because everyone deserves to live the dream of owning a home. So forget your commission and focus on the person on the phone who wants to get out of the rental market and become a homeowner. Help educate them on loan options and affordable housing options like those listed below.
You call a lead only to learn they want to buy a home for $90K when the median value in your area is $150K. Instead of giving up on this lead, share some of the mortgage options below or direct them to a lender/counselor specializing in low income home buying programs. The individual requirements vary with each program and, in some cases, borrowers must participate in educational courses.
HomeReady® mortgage loans are conventional loans from Fannie Mae. They can be used by first-time or repeat buyers, are free from representations and warranties, are quick to obtain, and the buyer only has to come up with a 3% down payment. Borrowers can even accept a gift, grant or loan from friends or family to cover the 3% down payment or the amount of the closing costs.
HomeReady® borrowers can also use income from others in the household to obtain approval. In other words, if they have a renter, that income can help them get approved for the loan.
Consider sharing this income eligibility tool to see if your lead qualifies.
Home Possible® & Home Possible Advantage® Loans
Freddie Mac offers Home Possible® mortgages with as little as a 3% down payment. Borrower sweat equity can have bearing on the down payment and closing costs, resulting in further savings. Borrowers can potentially get a lower than average fixed-rate mortgage which provides affordable, stable monthly payments. This loan will save borrowers thousands by not requiring them to pay for an upfront mortgage insurance fee. The monthly PMI fee may be lower than other mortgage options too.
A co-borrower, who is not going to occupy the house, is an option with this loan. Using a co-borrower can improve the chances of qualifying for the loan and possibly a higher mortgage amount.
I recommend sharing the Freddie Mac Home Possible Income & Property Eligibility tool with your leads to help them determine if they meet income requirements for the loan program.
Good Neighbor Next Door
Created to benefit nurses, first responders, teachers, EMT's, fire fighters, and law enforcement officers, the Good Neighbor Next Door program offers HUD foreclosures at a 50% discount, if borrowers meet eligibility requirements. In addition, a mere $100 down payment is necessary with a FHA mortgage. These HUD homes are typically in areas being revitalized. Buyers must live in the home for at least 36 months.
Manufactured and mobile homes are some of the most affordable home options available today. Many can be financed with a standard mortgage, if they're on approved foundations and taxed as real estate. It's important to point out to your clients that some mobile homes will not qualify and, instead, will have to be purchased with personal loans because they are not considered real estate.
Mortgage Credit Certificate (MCC)
Under the MCC program, if a first-time home buyer meets the income-eligibility requirements, they will get a tax credit equal to a portion of their mortgage interest. This tax credit, issued by certain state or local governments, can be claimed by the taxpayer during the given tax year. This credit will then be added to the borrower's qualifying income, per the lender, allowing them to qualify for a higher mortgage amount than they normally would be able to qualify for.
Down Payment Assistance
Down payment assistance programs vary by state but are created to make a difference for potential home buyers who can't afford to save for a down payment and closing costs. This program can provide funds, from non-profits, employers, cities, etc., to help bridge the gap between what the borrower qualifies for and what a home is selling for. This money is a loan and will eventually have to be paid back by the homeowner so the non-profit, who provided the funds, gets paid off and can recycle the money back into the program. The FHA, on the other hand, provides grants for down payments which do not have to be paid back (ex. Step Up Program, MyHome Assistance Program, and Next Home). Whether the money is being loaned or granted to the future homeowner, it's designed to get people into homes they otherwise could not afford.
Habitat for Humanity
One misconception about Habitat for Humanity is that the home buyer is getting the house for free. In reality, those potential home buyers who cannot save enough for a down payment can participate in the program and get a mortgage through Habitat. These homes are more affordable due to volunteers who build the homes and through donated building materials. For those who are accepted into the program, they get an interest-free mortgage and don't have to pay a down payment or closing costs. The homeowner is required to pay the mortgage back over a 15 year period, in most cases, and those payments help to keep the program running.
When working with low-budget real estate prospects who want to purchase a home, it's important to provide financing options vs. disregarding them as potential clients. Share information on funding programs designed for those with low budgets, and/or set them up with a professional who can provide in-depth information on these programs. If they have bad credit, help them by providing steps to improve their FICO score. By helping one person, you may create a domino effect which helps many other accomplish their dream of owning a home. So get out there and change some lives by sharing this information with your leads.
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