June is National Homeownership Month, a time to celebrate the benefits that homeownership brings to families, neighborhoods, and communities across America. It’s also an opportune time for you to educate prospective borrowers and first-time homebuyers on the value of homeownership. We’re discussing topics like the housing market, the benefits of homeownership, the challenges first-time homebuyers face, and how different mortgage structures can help your borrowers.

First-time homebuyers should know these do’s and don’ts of the mortgage process.

According to a USMI study in 2021, homebuyers are facing substantial challenges that are out of their control, like a lack of affordable housing, housing insecurity, and low supply. But, as mortgage professionals, what we can control is helping borrowers understand down payment requirements and the overall homebuying and mortgage process. It can be stressful and time-consuming for all parties involved, but laying out these top strategies will better prepare your borrowers for the homebuying process. That’s why we’re here to help. When talking to your borrowers, don’t forget to relay the following tips:

Savings and Credit

1. Borrowers should check their credit by requesting a free credit report, and improve their score if necessary. Understanding debt and how it impacts their credit score can help them better understand how to manage their finances to streamline the lending process.
2. Inform them to use direct deposit to put part of their paycheck into savings instead of transferring money into other accounts after the fact. Moving money around once you’ve begun the lending process interferes with the timeline that you set in place.
3. Have them look at their income and bills to see if more money is coming in than going out. If that is the case, then they are making headway on effectively saving for a home.

Mortgage Application Process

4. They should line up documents to prove their earnings, savings, and debt obligations. This organization allows the borrower to have their documents handy, streamlining the process and possibly getting the borrower into a house sooner.
5. Encourage them talk to a mortgage pro to review loan options and types of MI available. This could also mean sharing the ways that MI can get them into a home faster, provide more flexibility with savings, and reduce the amount needed for a down payment (as little as 3%!).
6. Instruct them to calculate their down payment using an online tool so they have an idea of how much they can put down. Understanding this piece will help them to better budget, understand how much house they can afford, and break down what is required to calculate the down payment number.

Unexpected Costs

7. They will want to hire a real estate agent to help them with the homebuying process – the agent will look out for the borrowers’ best interest. They understand the market and the needs of both you, the lender, and potential FTHBs.
8. Include a home inspection in the real estate contract to catch major issues. Doing this up front helps them prepare for any obstacles that they may face with a new or even older house – preventative measures are key.
9. Determine final costs like movers, loan closing fees, tax, and insurance. Informing borrowers of these estimated costs while they’re planning and budgeting will give them a more realistic snapshot of the total costs they can expect.

A first-time homebuyer may not know the nuances of the mortgage lending process, but with these helpful strategies in place, their homebuying journey could be made that much easier. Getting organized, putting together a list of to-dos, and understanding the market will give your potential FTHB prospects the advantage they will need to stay competitive in today’s market.

Want more resources to distribute? We’ve got our FTHB Kit launching right around the corner, so you can expect to have more great pieces of information coming your way soon. Plus, we’ll provide helpful, interactive documents that your borrowers can use like an in-house mortgage payment affordability calculator, budget checklist, downloadable infographic detailing the benefits of MI, and much more!

Sources: NerdWallet, Bankate, and myFICO

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