The MBA forecasts the purchase market to pick up 12-20% in 2010, while refinancing could fall as much as 40% if rates start to rise. Is your credit union ready for the change?
An active first time home buyer program is a great way to ensure a healthy purchase mortgage volume throughout the year. And, recent efforts aimed at bringing FTHB into the market along with record low interest rates have attracted more interest than ever. A three-pronged approach to first-time homebuyers—combining education, service, and value—can be the key to establishing mortgage-based relationships.
1. Lead with education. The Internet is the first place home buyers go for market research. However, the wealth of information available on the Internet can be daunting. Credit unions should actively promote websites, resources, and tools that are produced by reliable sources and provide cleanly presented, digestible information. Credit unions can help by compiling “Reliable Resource” suggestions for distribution to prospective home buyers, as well as robust calculators.
2. Invest time in the borrower. The proliferation of new (and riskier) mortgage products over the past few years could confuse even seasoned buyers. As first-time homebuyers increase their knowledge of the home-buying process and the real estate market, they can also benefit from clear explanations and side-by-side comparisons of the different mortgage products. Significant time should be spent educating borrowers on the inherent benefits and risks of each mortgage type, the range of possible future payment changes, and financial impact of those changes on the borrower’s financial health.
3. Provide visible cost savings. Tangible value—real money—can create a strong incentive for first-timers. Many credit unions have formed partnerships with CUSOS that pair agents who have agreed to a reduced commission with new home buyers. Some partnerships offer rebates at the time of purchase; others will waive certain fees or pass along savings for future home good purchases. Credit unions are also offering interest-free advances on the First Time Home Buyers $8,000 tax credit to be used for down-payments.
First-time homebuyers are a valuable, yet vulnerable group of home purchasers: they tend to be younger, they earn less money, and a growing number are single. They understand the benefits of ownership, but their limited knowledge of the real estate process can create anxiety and slow the decision-making process. This anxiety is understandable—after all, buying a home is often the first big decision made using borrowed money. But a little help delivered the credit union way can enhance their knowledge, boost their confidence, and seal the deal.