Home Borrower Opinion: Are lenders dropping the ball on homeowner assistance?

Opinion: Are lenders dropping the ball on homeowner assistance?


Buying a home is stressful in any market. Now, with inventory levels at historic lows and median home prices at historic lows, the buying climate has become a Thunderdome. Nearly one in four recent home buyers have scheduled additional therapy sessions to deal with stress, according to a recent Realtor.com survey. Homebuyers are also looking for information about another possible source of help: homebuyer assistance programs.

From Multiple Listing Services (MLS) to consumer-facing giants like Zillow, real estate agent.com and red finthe real estate industry is raising awareness of homebuyer assistance programs through agent training and self-service tools that help consumers find the programs they qualify for.

If real estate professionals are perfectly positioned to introduce the concept of home ownership assistance, real estate financing is not their thing. So they’ve taken what I like to call the “ask your doctor” approach, where they advise buyers to ask their “doctors” (i.e. their lenders) if the buying a house suits them. With hundreds of thousands of people using online homebuyer assistance tools every day, it’s time for lenders to get up to speed on these programs to help customers determine if homebuyer assistance is buying a house suits them.

Is it still possible today to win offers with help with the purchase of a house?

An unfortunate, though common, misconception among lenders is that buying a home with homebuyer assistance is not feasible in today’s competitive market. In fact, over half a million people have bought homes with the help of these programs in the past year.

Additionally, there is an abundance of homebuyer assistance programs to meet borrower demand. As of the first quarter of 2022, there were 2,238 active homebuyer assistance programs nationwide — a figure that includes down payment and closing cost programs, mortgage credit certificates and affordable first mortgages — with at least one program available in each of the 3,143 US counties and 10 or more programs available in over 2,000 US counties.

There is consumer demand for home buying assistance. There are programs to support the application. And, most importantly, borrower financing with home purchase assistance is good for business.

The Business Case for Offering Home Buying Assistance

An analysis of loans refused by Down payment resource found that almost a third of all denials could have been converted into closed loans if home purchase assistance had been used. By simply putting homebuyer assistance on the table, lenders could potentially close over 30% of units. And even better, this low hanging fruit can be reaped by capturing leads that lenders have already had a hard time getting through the door.

In addition to providing a significant income opportunity, home buying assistance also connects lenders with real estate professionals. This signals a huge opportunity for lenders in a buying market where relationships with real estate professionals, especially buyer’s agents, are king.

One of the most common questions asked by real estate professionals is: “Can you tell me which lenders offer home purchase assistance programs?”

Inventory constraints and rising prices are making it harder than ever for buying agents to help homehoppers move into the homes they love. As a result, agents are eager to connect with lenders who not only offer home buying assistance, but who they can count on to explain these programs and facilitate a smooth financing experience.

In today’s market, every lender needs a superpower, and it’s in demand. Additionally, financing with homeownership assistance is a relatively uncontested market space, as many loan originators are inhibited by their fear of the unknown.

In addition to being the right thing to do, helping borrowers become homeowners through homebuyer assistance puts lenders at the heart of a transformative financial step that creates loyal customers for life.

To understand why borrowers who qualify for home purchase assistance can be so grateful to a lender who offers a winning financing game plan, consider their circumstances. After recovering from the economic setbacks of the Great Recession, a large cohort of millennial homebuyers are entering the market with solid incomes and demonstrated ability to pay – only to have their dreams dashed. As housing prices rise in communities of color, many are trying to get their foot in the door before they get paid.

First-time and traditionally underserved homebuyers are in dire straits right now, not because they are missing out on some abstract American dream of homeownership, but because they are losing their best opportunity. sustainably increase their wealth.

Home ownership is the primary vehicle for creating wealth in the United States, where the average homeowner has a net worth 40 times that of the average renter. Today, many homebuyers watch in anguish as a narrow window of opportunity for financial security closes just beyond their reach, perhaps forever.

What to do

As housing finance professionals, we have a significant impact on the ability of cash-strapped borrowers to access home ownership, and we must strive to be informed of the affordability programs available to borrowers in our markets. . While homebuyer assistance programs are not a panacea for affordability issues facing consumers, they are an important tool for giving qualified borrowers a boost in homes.

When homebuyers lose a handful of deals to cash offers, it’s easy for them to get discouraged. It is essential that lenders encourage them to persevere, because house prices and rents will only continue to rise.

In ultra-competitive markets, winning deals for borrowers who don’t have cash reserves on hand to cover valuation spreads can require difficult conversations where expectations about neighborhood and timing of purchase must be reset. When mortgage professionals have these discussions, it is important that borrowers understand the cost of waiting. Appreciation will likely exceed borrowers’ ability to save, and interest rates and inventory issues are highly unlikely to improve in coming years.

Instead of spending years saving to increase available cash, lenders should help homebuyers finance with a down payment assistance program, of which there are thousands. It’s a common misconception that homebuyer assistance programs only cater to low-income borrowers, new homeowners, and properties with a limited sale price. In truth, there are a plethora of programs designed for people of color, veterans, community heroes such as firefighters and nurses, and more.

Borrowers who need home buying assistance are no longer a niche market segment. With home prices skyrocketing at an unprecedented rate, borrowers who would benefit from homeownership assistance now represent a large market segment on their own. Especially as refi volume evaporates and purchase volume declines, it is crucial that lenders offer relevant lending programs in order to capture every fundable loan.

Rob Chrane, Founder and CEO, Down Payment Resource.

This column does not necessarily reflect the opinion of the editorial staff of HousingWire and its owners.

To contact the author of this story:
Rob Chrane at [email protected]

To contact the editor responsible for this story:
Sarah Wheeler at [email protected]