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Knowledge is king: Embracing first-time homebuyers with education

Cary Reines
Apr 28, 2010

As April 1 nears and buyers race to beat the deadline for the first-time homebuyer tax credit, lenders and Realtors have taken out the racing flags to carry them in. Real estate industry statistics suggest that approximately 1.8 million people are expected to receive the federal first-time homebuyer tax credit. They also indicate that the rebate has currently spurred approximately 350,000 home sales. With literally millions of potential first-time homebuyers who qualify for the tax credit, mortgage professionals continue to work hard to sell. But what is the best way to “embrace” this group, and with what? The answer is education. Hold education seminars for first-time homebuyers As mortgage professionals, it’s our responsibility to get information to the right people. If possible, hold education seminars in your local communities for potential first-time homebuyers. This provides an excellent forum to educate this group on the benefits of owning a home, the purchasing process, how much they can afford and so on. For a Peachtree City, Ga. branch of Embrace Home Loans, a national lender based in Newport, R.I., seminars have been key to originating leads for years—even before the federal tax credit. According to branch manager Joy Millard, the branch made a strategic decision to target first-time homebuyers many years before the tax credit. In doing so, they built relationships with downpayment assistance programs like the Georgia Department of Community Affairs that enabled them to cultivate a pool of first-time homebuyers to target. But where they generated these leads was through seminars held by the downpayment associations throughout Atlanta. Members of the branch would join the seminars, and afterwards, make themselves available to answer any questions and to pre-qualify potential buyers on the spot. “We would often leave with 30 or 40 leads after each seminar,” said Millard. But this was before the current economy and the tax credit offer. Now, the branch is also answering questions about how to qualify for the tax credit and what the guidelines are. According to Millard, this is just one more incentive they can discuss at these seminars. Educate yourself and know your target market In any selling situation, it’s imperative to identify and know your target market. And right now, who better to target than recent college graduates with secure jobs? With more than 30,000 students, North Carolina’s largest university, North Carolina State University, is located in the heart of Raleigh, N.C. Raleigh also has an unemployment rate much lower than the national average with businesses in multiple industries such as photonics, biotechnology, IT and communications, and computer and video gaming, all looking for talent. This combination makes for a lot of potentially great lending opportunities for mortgage professionals. According to Jan Sylvester, branch manager for Embrace Home Loans’ Raleigh, N.C. branch, now more than any other time, they receive numerous direct calls from recent graduates looking for advice on purchasing their first home. Many of these individuals are unsure of the process and simply need guidance. “We make certain we’re available to advise this group,” said Sylvester. “This group is new and inexperienced in buying a home; therefore, it’s expected they’ll have lots of questions and we want to be there to answer them.” Sylvester continued, “What’s different about now is that there’s a lot more of them to advise. We’ve experienced a new wave of potential buyers calling, so we’re not as active in directly marketing.” But it’s more than just knowing your target market. It’s also critical to know what other offers are being available in addition to the tax credit. For instance, the Georgia Homebuyer Tax Credit offers up to $1,800 in tax credits to Georgia homebuyers via a credit on their state income tax. This is in addition to the $8,000. “It’s critical that lenders and other mortgage professionals are aware of all opportunities available to homebuyers in their area,” said Millard. “By combining the Georgia and the federal tax credits, this can be a very powerful incentive for potential homebuyers.” Educate your sales force Let’s face it. Lenders aren’t the only ones selling; it’s in large part the Realtors. So do them a favor and keep them current on tax credit updates and other news that could help them encourage potential first-time homebuyers to purchase. Today, we’re in an economic state where now really is the time to buy. Not only has the tax credit provided an incentive, but also interest rates are at an all-time low and home values have plummeted, making this a prime time to own a home. Yes, it’s been rumored that the federal tax credit will be extended again, and some industry experts even believe the tax credit will be available for a very long time until the economy fully recovers. Even if that’s the case, the combination of the tax credit, historically low interest rates and low home values will probably not be available for a very long time, and mortgage professionals need to make certain that potential homebuyers realize this. Let this group know and understand to ensure they’re comfortable with the idea of owning a home. Build relationships with realtors in your community and send emails, newsletters and alerts when news breaks. It’s critical to give this group the tools necessary to sell and to sell well. Lessons learned … or is it too late? To truly engage potential first-time homebuyers, education is key. For this group, owning a home might be a complete mystery from the lending process all the way down to how much they can actually afford. This can often be a confusing and cumbersome process that would justify being a permanent resident of an apartment complex. But there are benefits, and these need to be made clear. Additionally, education is critical for mortgage professionals, too. Knowing your target market and their hesitancies of buying a home are important. And obviously knowing everything about the federal tax credit is essential as well as knowing other opportunities available. But according to Millard, it may be too late for some lenders and mortgage professionals to jump on the first-time homebuyer wagon. “We’ve been targeting this market segment for many years,” said Millard. “When others in the industry were turning their noses up at the idea of lending to first-time homebuyers because it wasn’t as profitable, we were. We supported and built relationships with down payment assistance programs because we saw a need to reach first-time homebuyers. Now, everyone wants to because there is a profit. Unfortunately, we’re hearing from different assistance programs that many mortgage professionals missed the boat by not participating earlier.” But there will always be a demand from first-time homebuyers. And even after April 1, interest rates and home values are likely to still be low for some time; therefore, it would be wise for mortgage professionals to begin building relationships in their local communities now, even after the tax credit is no longer offered, and keep themselves aware of other opportunities available to this market. Cary Reines is executive vice president of Embrace Home Loans, a direct lender for Fannie Mae and Freddie Mac, approved by the Federal Housing Administration (FHA) and the U.S. Department of Veterans Affairs (VA), and an issuer for Ginnie Mae.  
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