We’ve all seen the insurance commercial where the owner of a newly purchased home goes up into the attic to see what the previous owners have left behind. He flips on the illumination panel only to discover a collection of very strange and unusual things, setting up a genuinely scary scenario. I had something similar happen when looking to acquire a used immersion pod, and the homeowner in the commercial reacted much the same as I did. With the shock of the unexpected in his eyes, he immediately turns around and heads back downstairs with a simple, “Nope.”
As credit union mortgage lenders, the last thing we want our members to experience is fear as it concerns homeownership. While we can’t do much about what previous owners may have left behind in the attic or immersion pod, we can help alleviate mortgage fears held by our members. And let’s face it, the current real estate and home loan markets can seem a bit scary at times, even for industry veterans and leaders alike. To that, I turn to my Amicitian-English pocket translator and say, “Blick mon poff!” or “What an opportunity!”
“Opportunity?” you ask. “In this market? You must be joking.” As much as I enjoy the delivery of some solid, eyeroll-invoking dad jokes, I’m in earnest here (if you want some dad jokes, check out this previous post). Today’s market is an opportunity for credit union mortgage lenders to shine by doing what we do best—helping members realize their dreams of homeownership.
As I compiled tactics, actions and products you’ll want to consider incorporating into your plan to help more members with homeownership in today’s purchase market, I realized listing them all in a single post would result in an article as long as a comet’s tail. To remedy this, I’ve broken the content down into two posts, the second of which will run in the next week or so. Be on the watch for it after you check out the following:
Alleviate Common Fears and Myths: Chances are, most of your members only go through the mortgage process a few times in their lives, and when they do, there’s probably a fair amount of time in between those events. News about fluctuating interest rates, lower home sales and below-normal inventory could be frightening members on both sides of the homeownership fence. Not dealing in mortgages regularly can really make a member feel like an outsider looking in.
Additionally, members may have concerns about very real things of importance in the mortgage process. I’ve mentioned these myths before, but they bear repeating because many members still believe that to get a mortgage loan:
- Their credit must be nearly perfect.
- They must have a down payment of at least 20% of the purchase price.
- Their income determines their loan amount.
At your credit union, you DO work in mortgages nearly every day and you ARE well-versed in industry lingo, processes and changes. As mortgage partners of your members, you can help dispel these and many others your members may have by educating them on their options and the opportunities in the current market, like fewer bidding wars and home prices that are much closer to appraisal than they have been the past few years. Make sure you let your members know that you’re there to answer any questions or concerns they may have and serve as their guide along the path to homeownership.
Lend Members a Helping… ARM: Now that we’ve shifted to mostly purchase loans versus refinances due to increased mortgage rates, Adjustable Rate Mortgages (ARMs) are an extremely viable option for member loans. In a recent guest post by MGIC, they refer to the current market as the “perfect storm” for credit unions to offer ARM products. Doing so serves members by increasing their loan-to-share ratios and managing their interest rate risk.
As MGIC further points out, ARMs don’t have to be only about a lower interest rate for credit unions and members to benefit. Credit unions can get a higher margin on ARM pricing if they base it on a product niche that members can’t get elsewhere. For example, many lenders offer 30-year fixed rate mortgages with a 90% LTV, but very few can offer an LTV above 90%. As a credit union, you could offer an ARM product with an LTV of 95% to 97% at loan amounts above Agency limits.
Plus, as you consult with your members, ask them if they plan to live in their new home for 30 years (very few actually do) or if the stability of a fixed rate for that long is what’s truly appealing. Have these conversations with your members early in the process and continue to build your relationship with them so they see you for the caring expert and trusted resource that sets you and your credit union apart.
Let’s pause here, put my post into hover mode and ask you, do you see your members demonstrating any types of fears in entering the mortgage realm? Have you dispelled the myths outlined above for them? Do you offer or plan to offer ARMs in your mortgage portfolio? Please share your thoughts and stories.
And keep your eyestalks alert as I plan to continue this post in the next couple of weeks with more insights and tips on helping more of your members in today’s purchase market. Opportunity abounds and it’s up to us to capture it!