The American Dream of owning a home is never more alive and exciting than for the first-time homebuyer. And, like any “first” in our lives, that first home is often the most memorable home we’ll ever own. It brings back memories of when we were first starting out … back at a time when life seemed simpler, exciting and filled with optimism.
Oh, how things have changed! Many today are struggling to make the payment on that bigger house they moved up to and now cannot afford. Some find themselves wishing for those “good old days” of the lower home payments on that first house. More than one person has thought, “If I had only held on to that first house, I would nearly have it paid off by now … I wouldn’t be feeling so stressed out!”
The role of the mortgage lender is critical in making the American dream of homeownership a reality, especially for the first-time homebuyer. But many mortgage lenders have forgotten (or never learned how) to embrace the first-time homebuyer.
Here are Five Ps that will help you to transition your business to successfully work with first-time homebuyers:
Get yourself in position to work with first-time homebuyers. For many lenders today, the bulk of their business has been refinance activity. They have never developed the necessary business relationships to come in contact with first-time homebuyers. Here are some ideas to help you:
a) Realtors: Excuse the obvious, but for many the “obvious” is easier said than done. This is especially true of lenders who only have experience with refinance transactions. I cannot tell you the number of lenders who have contacted our consulting firm asking us to teach them how to successfully work with Realtors. We have been able to help many of them make the transition, but again, most of them underestimated how much time and effort is required to successfully make the transition. Keep in mind, there have been a number of lenders who have been working with Realtors successfully for years and have well-established relationships that are not easily unseated. But it can be done if you employ the right strategy.
b) Builders: Just like Realtors, working with builders that build homes targeted for the first-time homebuyers seems to be an obvious strategy. However, it is substantially different than making a loan to a consumer who already owns a home. And to complicate matters even more, many well-established builders own their own mortgage company. They do their best to capture as many of their own sales as possible. While on the surface, this would seem like “game over” for any outsider trying to get their foot in the door, it can be done. Again, our consulting firm has successfully been able to help originators transition their businesses to be successful in getting business referrals from builders. Keep in mind; the number one mission for builders is to get their homes sold. In the end, whoever is most successful in accomplishing this objective wins.
c) Referrals: Believe it or not, your existing database is a potential source for first-time homebuyer referrals. The key to this strategy is to have well-planned marketing campaigns to your past customers. It doesn’t necessarily matter how long it has been since you last contacted them. Of course you will be more successful if you have continued to stay in touch with your previous customers. Don’t fret … consulting firms can help you get a plan in place. Just make sure anyone advising you has a proven track record. An unemployed mortgage person turned “consultant” (at least until they can find their next job) may be “affordable,” but not necessarily have the experience necessary for your situation.
d) Internet: As many have come to know, more and more consumers are researching loan programs on the Internet. Therefore, the Internet is an excellent source of first-time homebuyer leads. Consider this, first-time homebuyers are typically younger, and therefore, already very comfortable and proficient at using the Internet to do their research. In fact, more and more studies reveal that an increasing number of consumers are going to the Internet to research loan programs before contacting a mortgage professional. If you are considering buying Internet leads, keep in mind that the key to successfully working with Internet leads is speed! The advantage goes to the first loan originator to speak to a consumer after they have hit the “Enter” key on their keyboard. We have clients who have wisely moved their entire office to be on a fast Internet service so that when the consumer hits the “Enter” key, they received the lead a few seconds faster than the competition. Again, he who talks to the consumer first has an overwhelming advantage over the second, third or fourth originator that calls the consumer.
Another important issue you should consider is whether or not you are better “positioned” to help first-time homebuyers as a mortgage broker, as a net branch of a larger entity or as a mortgage banker. It is getting increasingly more difficult to survive as a mortgage broker. The advantages brokers once enjoyed are diminishing. Many brokers have made the decision to convert and become a mortgage banker. This strategy allows them to continue to remain autonomous, which gives them the best advantage of all to best serve first-time homebuyers.
If there was ever an area where the playing field has been leveled, it would have to be with loan products. In today’s generic world, the products offered to first-time homebuyers by one mortgage originator are about the same as another.
So, in a “vanilla world” how do you differentiate yourself? In a word, “marketing” … it comes down to how well you market your loan product versus the next guy. We have clients who we have helped create some amazingly successful marketing campaigns designed to get the attention of the first-time homebuyer. It can be as simple as giving your products unique names. Features and benefits of some programs are more beneficial to first-timers. Yes, having the right products is important, but how you market those products and your services can make all the difference in the world.
You may have heard that the definition of “luck” as “opportunity met with preparation!” Never is this truer than when the opportunity presents itself to work with first-time homebuyers. If you do not understand the unique needs of the first-time homebuyer, you can forget everything I have written to this point. I don’t care if you have positioned yourself extremely well with all the Realtors and builders in your area, and if you have the best priced products and marketing machine on the planet. If you do not know how to work with first-time homebuyers, you are DOA (dead on arrival)!
Here are a couple of things to keep in mind:
►Be prepared to explain your loan products in non-industry terms.
►Be prepared to invest the time to answer questions. Having a Frequently Asked Questions (FAQ) sheet can help save time, but there’s no substitute to spending the time talking with them and answering all their questions. See this as a marketing opportunity.
►There are more parties that need good communication as to the status of what is going on with the loan once it is in process. Those that have only had to communicate with borrowers in refinance transactions fail to realize how important it is to communicate with the Realtors (the buyers and sellers) and the seller if they are a builder.
It is in these simple basics that many fail, which can provide that is your open door.
If you have heard that “patience is a virtue” in life, well let me tell you that “patience is a necessity” when dealing with first-time homebuyers and their Realtors. They can sorely test your patience, but you must be patient and kind, or you will never make it when dealing with first-timers. That is not to say that you are not in control, but the one you first have to be in control of is your own emotions. It will only be a matter time before your patience will be severely tested. Realize that every opportunity to demonstrate patience is an equal opportunity to market your services. Stress levels are typically at their max with those buying a home for the first time. Your ability to manage circumstances will determine your level of success. I heard it explained this way: “Dealing with some first-time homebuyers is like managing a guillotine … it is essential that you keep your head when all those about you are losing theirs!”
Ah yes, another virtue … persistence … that dogged determination required in any endeavor worth pursuing. If you are going to successfully embrace a business model of working with first-time homebuyers, you have to keep in mind that if it was easy, everyone would be doing it. Persistence is an essential key to building a successful first-time homebuyers’ business model. The reason I recommend this model is that it will provide you with a steady stream of business, regardless of interest rates and market conditions. Beyond that, I can personally attest to the fact that few things in life are as rewarding as helping someone successfully buy their first home … and the more challenging the circumstances surrounding the loan transaction, the more rewarding it is!
I would recommend that you make this your professional objective/mission … to facilitate the American dream of homeownership by providing reasonable and affordable financing options for consumers so as to promote sensible long-term homeownership options. And keep in mind what I have been saying … more wealth will be created in the next five years in mortgage lending than all the wealth created in the previous 25 years in our industry. One of the best ways for this to happen is to successfully embrace the first-time homebuyer.
I hope you have enjoyed reading the articles written by my business partner, Andy Schell, over the past couple of months. I want to thank National Mortgage Professional Magazine for giving us the opportunity to write to you each month in this column … A View From the C-Suite.
David Lykken is president, mortgage strategies and managing partner with Mortgage Banking Solutions. David has more than 35 years of industry experience and has garnered a national reputation. David has become a frequent guest on FOX Business News with Neil Cavuto, Stuart Varney, Liz Claman and Dave Asman with additional guest appearances on the CBS Evening News, Bloomberg TV and radio. To listen to author David Lykken’s online radio show, log on to www.blogtalkradio.com and type in “Lykken on Lending” in the “Search” box on the right-hand side of the page.