Let’s be honest—it’s a tough market for originators, especially with interest rates at their highest level in decades. But if you’re passionate about serving your customers—especially first-time homebuyers—now is not the time to throw in the towel.

Yes, rates are higher and home inventories are tight in many markets. But many people still yearn to own their own home, and even with higher rates, buying is still cheaper than renting in many markets.

All you need to increase homebuyer opportunities is the right plan and the right resources. Here are three of the best strategies you can start using today.

First, You Must Put Buyers First

Until spring of 2022, rates have been so low for so long that it can be difficult to get out of the refi mindset. Of course, there are still reasons why some homeowners need to refinance, and there is still life in home equity lending, too. In fact, many correspondent lenders have moved away from straight refis to cash-out refis and HELOCs to help borrowers who want to pay off bills or renovate their homes.

But these products don’t offer nearly the same returns as purchase loans, which is why you’re always better off prioritizing homebuyers over refi opportunities.

For one, buying a home is inherently a more emotional experience, so the lender that helps someone into a home creates a strong bond that often results in a client for life. Secondly, helping a buyer overcome the odds and get into a home equates to repeat business and referrals for you—not just from your client, but from real estate agents and your other business partners, too.

Focus on Millennials and Minorities

Another factor to consider is the demographics of today’s homebuyers. By sheer numbers, Millennials now comprise the largest group of American adults, and most of them are in their 30s—prime home buying age.

A larger proportion of Millennials are also people of color. In fact, the Latino homeownership rate increased from 47.5% to 48.4 percent between 2019 and 2021, according to the National Association of Hispanic Real Estate Professionals (NAHREP).

If you want to attract more homebuyers, start focusing your marketing efforts on Millennials and particularly Black and Hispanic borrowers, many of whom have been historically shut out of homeownership. And if you’re serious about helping underserved borrowers, there are resources available to help them finally achieve their dream.

Why down payment assistance is Indispensable

No doubt, today’s homebuyers are struggling against challenging odds. If you hope to help as many of them as you can, you should be providing them with information on down payment assistance programs and down payment assistance grants, generally referred to as DPA.

By far the biggest obstacle to young people looking to buy their first home is coming up with enough money for a down payment. And it’s particularly hard for minority borrowers, whose families typically lack the same level of household wealth as white borrowers.

Fortunately, there are many homebuyer assistance programs available to first-time borrowers. That includes CBC Mortgage Agency’s down payment assistance program Chenoa Fund, which provides down payment assistance to qualified, creditworthy borrowers. Over the years, this program has helped thousands of borrowers unlock the doors to homeownership and start building financial wealth through home equity. At CBC Mortgage Agency we believe everyone should have access to affordable housing. If you’d like to learn more about how we can help your clients overcome their homeownership hurdles—even in a tough market—let us know. Just reach out to us 866-563-3507 or drop us a note to info@chenoafund.org.

CBC Mortgage Agency – NMLS 1186381

For licensing information, go to www.nmlsconsumeraccess.org.

Illinois Residential Mortgage License #MB.6761292. Illinois Department of Financial and Professional Regulation, Division of Banking, 100 West Randolph, 9th Floor, Chicago, IL 60601 – 1-888-473-4858. Georgia Residential Mortgage Licensee, License # 1186381

Did you know that June is National Homeownership Month? This is a great time to celebrate and recognize being a homeowner or striving to achieve homeownership. Choosing to become a homeowner is an impactful decision that is very rewarding, but following through may take a lot of blood, sweat, and tears. In this article we will discuss what National Homeownership means along with a brief history of what makes this month special to so many people.

How Did National Homeownership Month Start?

Ok, so you’re probably wondering how National Homeownership Month started. Back in 1995, it started out as National Homeownership Week, a strategy from President Clinton’s administration to increase homeownership across the nation, which efforts improved awareness and support of homeownership. This led to the year 2002, in which President George W. Bush expanded the observance to the entire month of June.

Recently an article from U.S. Department of Housing and Urban Development quoted past President Donald J. Trump on National Homeownership Month: “For generations, homeownership has sustained and empowered Americans. Recently, we have been reminded that our homes are central to our health, our independence, and the well-being of our families. In response to the coronavirus outbreak, millions of Americans have transformed their homes into safe havens, virtual workplaces, classrooms, and, most importantly, places to nurture hopes and dreams for the future. During National Homeownership Month, we acknowledge the many benefits of secure and affordable homeownership.” 

Also, it’s a time to celebrate the benefits that homeownership brings to families, neighborhoods, and communities across America. National Homeownership Month is a spotlight on supporting the American Dream of owning a home, and a time to recognize the organizations that help individuals and families to achieve their homeownership goals. It reflects and commemorates the U.S. Department of Housing and Urban Development and Federal Housing Administration to the realtors, financial and housing counselors, and assistance programs that all play a part in helping first-time homebuyers make their dream come true. 

National Homeownership Month Is For Everyone

National Homeownership Month is also a great month to set a goal toward homeownership. Did you know that about 85% of non-homebuyers aspire to own a home? So, if you don’t own a home, it’s a great opportunity to prepare and set yourself up for the responsibilities and challenges along the way. This way when you’re ready to buy a house it will actually become a home instead of a financial burden. 

In conclusion, National Homeownership Month is a time that everyone can enjoy and celebrate. It’s an opportunity to achieve memories that last a lifetime and wealth that can reflect generations. So, let’s all take the month of June to celebrate homeownership whether you’re a current homeowner or on the path to homeownership. 

Visit our website and learn more about how Chenoa Fund, powered by CBC Mortgage Agency, can provide down payment assistance to access the right home mortgage. See how you can celebrate homeownership every day and make your dream a reality with lenders and real estate agents that are Chenoa Fund compliant. 

CBC Mortgage Agency – NMLS 1186381

For licensing information, go to www.nmlsconsumeraccess.org.

Illinois Residential Mortgage License #MB.6761292. Illinois Department of Financial and Professional Regulation, Division of Banking, 100 West Randolph, 9th Floor, Chicago, IL 60601 – 1-888-473-4858

COVID-19 has turned the US housing market into a seller’s market, and as a result many buyers find competition when putting offers on available homes. Often this results in bidding wars, where two (or more) buyers compete for a home by incrementally increasing their bid for the purchase price.

Naturally, the buyer willing to offer the most money often ends up winning out a bidding war. However, buyers do have options to help them win a bidding war even if they aren’t offering the most cash. If you ever find yourself bidding for the home of your dreams but are concerned that you won’t be able to commit enough money to win the bid, consider these four tips to help make your offer stand out from the crowd. 

A Quick Warning

Bidding wars, sometimes, are very fast and furious, leading buyers to bid more money than perhaps they actually want to pay for a home. If you find yourself in a bidding war, make sure that you have a clear idea of the highest price you’d be willing to pay and can afford to pay. It does no good to win a bidding war if the purchase price you become committed to is outside your budget or well above market value.

1 — Provide a Pre-approval

A mortgage pre-approval is an offer from a lender to lend you a certain amount of money—it’s as close as you can get to guaranteeing a mortgage without having a purchase contract in place. Providing your pre-approval letter to a seller shows that you are a serious buyer who can get mortgage financing; the lender has little reason to fear that you’ll sign a contract and then be unable to follow through, which would waste a lot of their time. Pre-approval letters mean reliability in the eyes of many sellers.

2 — Consider Dropping Contingencies

A contingency is a legal condition that allows a buyer back out of a purchase contract with little to no consequences. Dropping contingencies can make it difficult for you to back out of purchasing a home without penalties, but it makes the selling process easier and more certain for the seller; again, this means reliability to a lot of sellers, and some sellers will accept a lower, but more reliable, home offer. However, before dropping a contingency, make sure that you’re able to handle the risk involved—for example, if you drop the appraisal contingency and the appraisal comes back lower than the purchase price, you’ll probably need to make up in cash the difference between the appraised value and the purchase price.

3 — Meet the Seller’s Needs

Selling a home isn’t easy, and often sellers find themselves needing something to make their move more convenient. For example, some sellers might want to stay in the home long enough for their kids to finish the school year before moving, even if the closing date comes before then. Other sellers might want to get out of the house now, and won’t be interested if you can’t commit to a quick closing date. Whatever the case, take the time to talk with the sellers and learn what their needs are—if you’re flexible enough to help them out in an individualized way, they’ll often seriously consider your deal before others.

Another source to help you learn your seller’s need—whether your able to speak to the seller or not—is the listing agent.

“Always call the listing agent in advance of writing an offer. See what terms the seller is looking for in regards to possession, title company, etc. You might not get a chance to negotiate, so going in strong will really improve your chances.” —Doxie Jelks, GRI of Keller Williams

4 — Add a Personal Touch

Many sellers make deep emotional connections with the home they live in and hope that the home will be treated as kindly as they treated it, and loved as well as they loved it. It’s possible to win over a seller’s heart by penning a genuine personal letter that expresses who you are and your excitement about the home. Don’t be afraid to add some personal details about your life and family or ideas that you have for different rooms in the home. If you’re struggling with medical issues or other expenses that make it difficult to offer a higher purchase price, consider including those in your letter, and the seller might be sympathetic to your situation.

Unfortunately, it’s impossible to be absolutely certain how anything will go in a bidding war, as it’s up to the sellers who they will sell their home to and at what price. But the more tools you have at your disposal, and the more you do to make your offer stand out, the better chance you have of winning a bidding war without having to offer more than you can afford.

Recently, U.S. Mortgage Insurers (USMI) published a report revealing that, on average, it takes borrowers 21 years to save up for a 20% down payment. This number falls to 7 years for a 5% down payment, which is still a long period of renting and saving. In either case, waiting this long deprives borrowers of a significant amount of wealth accumulation from equity.

Opportunity Costs: Losing Equity

Let’s put this into perspective using USMI’s numbers (a national median income of $63,179 annually) and assume yearly home value appreciation of 5%. If a borrower saves for 7 years, a home worth $274,600 today (the national median average) would be worth about $386,389. A borrower saving 21 years for the same home would find a new home price of $728,595. The following chart illustrates the price difference for both scenarios and the difference in down payment costs.

$274,600.00

Home Value:

$274,600.00

Value +7 Years:

$386,389.78

Value +21 Years:

$728,595.55

Difference:

$111,789.78

Difference:

$453,995.55

Original DP (5%):

$13,730.00

Original DP (20%):

$54,920.00

DP +7 Years (5%)

$19,319.49

DP +21 Years (20%)

$145,719.11

Difference:

$5,589.49

Difference:

$90,799.11

Waiting only 7 years for a 5% down payment has the lowest opportunity cost of these two scenarios, but that opportunity cost is still very stiff: $111,789.78 difference in home value lost, and a down payment over $5,000 more expensive. It’s clear that waiting costs borrowers a lot of money, even when the down payment is smaller.

Opportunity Costs: Worse for Minorities

These numbers aren’t good, and they are much worse for borrowers in demographics that statistically struggle with the down payment barrier. For example, if the above averages were broken down nationally by race, white Americans average about 20 years to save up for a 20% down payment, putting them about on par with the national average. Hispanic Americans average about 26 years, raising the above projections and wealth loss by a decent amount. Black Americans, on the other hand, average a whopping 42 years (Private Mortgage Insurance, 6). Black Americans are also much less likely than white Americans to have family that can assist with the down payment, making it more likely that their only option is to save up. Taking twice as long to save up for a down payment, and with home values increasing yearly, black Americans lose over twice the equity wealth that white Americans do when waiting to buy a home and saving for a down payment, whether it’s a 20% down payment or a 5% down payment.

Opportunity Costs: Time

These numbers show a great deal of wealth lost when borrowers have to save for years for a down payment, but they don’t reflect the time lost as well. Waiting 21 years for a 20% down payment (or 42 years, as is the average for black Americans) sees enough time pass to have a child grow up and move out. Waiting 7 years for a 5% down payment (14 years for black Americans) sees enough time pass that a family’s babies turn into adolescents, all without the benefits of living in a home their family owns.

Opportunity Costs: Rent Versus Mortgage Payment

More immediately, borrowers miss out on a lot of wealth just from the difference between rent payments and mortgage payments. The average US rent payment is $1,343 and raises about 5% a year. Using USMI’s numbers, and assuming a fixed interest rate of 3.25% (just a little higher than the national average of 3.15%), an average mortgage payment would be $1,195—about $150 cheaper every month. This doesn’t take into account insurance, HOA fees, and other costs that come with homeownership, but fixed-rate mortgage payments don’t increase every year, while rent payments do.

Level the Field: Down Payment Assistance

At CBC Mortgage Agency, we are grateful for the efforts of groups like USMI that provide products and services that help borrowers buy a home with smaller down payments. The smaller the down payment, the sooner the borrower can buy the home and experience wealth accumulation. We also cheer that borrowers can get conventional loans with 3% down payments or FHA loans with 3.5% down payments, further lowering the down payment barrier. However, even with lower down payment options available, the down payment barrier is still very real, and still prevents many borrowers, particularly low-income borrowers, from buying a home and accumulating wealth. The next step needed to level the playing field and empower as many creditworthy borrowers as possible is down payment assistance.

Down payment assistance allows borrowers to purchase a home for $0 down, and sometimes even helps with closing costs. The difference in wealth accumulation is staggering for borrowers who can buy a home now. All the numbers presented above—the tens and hundreds of thousands of dollars lost as borrowers waited to save for a down payment—becomes future wealth when borrowers can buy now.

Actual Results: Chenoa Fund’s Success

Tens of thousands of borrowers have used Chenoa Fund to purchase a home, many of which were first-time homebuyers and/or minorities, and their stories are a testament to the importance of down payment assistance. For example, borrowers that received Chenoa Fund’s assistance in 2016 have since averaged over $59,000 in wealth accumulation! From 2016 to 2019, all borrowers included, Chenoa Fund borrowers have averaged over $24,000 in wealth accumulation. This difference is life changing.

Chenoa Fund isn’t the only down payment product on the market, and wise borrowers will shop around to find the down payment assistance that fits their unique situation best. This is a good thing—more competition means more innovation to provide a better product to borrowers, and prevents the harm or stagnation that comes with monopolies. More access to down payment assistance, specifically assistance that targets creditworthy borrowers, can only help improve American homeownership across the board, and help low- to moderate-income borrowers break the down payment barrier and see real wealth accumulation now.

Borrowers with good credit need down payment assistance (DPA). Unfortunately, DPA is often marketed only towards buyers with poor credit, which creates an unfortunate have/have-not scenario: houses get purchased by borrowers with poor credit or borrowers with good credit and large savings, but not by borrowers with good credit and low savings, even if these borrowers can afford a monthly mortgage payment. This situation unnecessarily locks borrowers out of the housing market for years while home prices increase.

This situation is also exacerbated by the facts that borrowers with good credit are often advised to save up for a down payment and other options might not be mentioned. These borrowers are sometimes never aware that they could buy a home now with some assistance, and that buying a home now may achieve more in the long run.

That said, why is down payment assistance the better option for borrowers with good credit?

Data collected by Home at Last shows that DPA helps all borrowers accumulate wealth faster by buying now, with down payment assistance, than saving now and buying later. How? Home prices, on average, go up (Home At Last shows overall increase from 2000 to 2017). Sometimes there’s a downturn in the market, even a big one, but homebuyers will likely see price appreciation if they stay in their home for 3–8 years. This means wealth accumulation for borrowers who use DPA and buy now. This also means a higher down payment down the road and very little wealth accumulation for borrowers who rent and save now. This disparity is even greater for borrowers with good credit, who can often get better rates even on mortgages with down payment assistance. This reasoning is supported by Home At Last’s projected numbers that, in a three-year period, a borrower who buys a $300,000 home using DPA will accumulate about $60,000 in wealth more than a renter who spends that period saving for a down payment. Those are significant numbers, particularly for low- to moderate-income borrowers.

Home at Last’s data is substantiated by CBC Mortgage Agency’s own numbers (CBCMA is the company that provides Chenoa Fund, a DPA program), as reported in the National Mortgage Professional Magazine. From 2016 to 2020, 96% of borrowers who used Chenoa Fund had an average home value increase of $27,000. Especially considering how new loans from 2019 and 2020 bring the average down, that’s a really good number. Most of those borrowers are low- to moderate-income, and many with credit scores as low as 620. It is awesome that these borrowers are able to break out of the renting cycle and see real wealth increase. Just as good, some of those borrowers have great credit scores and are realizing the same benefits. Clearly, down payment assistance should be offered to any borrower who needs it and can afford a monthly mortgage payment.

Home and Last’s data and CBCMA’s data fuel compelling arguments that buying now with DPA is the best option for borrowers who can afford a monthly mortgage payment. And, with over 50% of renters seeing the down payment as the primary obstacle to homeownership (Urban Institute), the need for DPA couldn’t be more relevant. The best thing to do now is to bring DPA to more borrowers with good credit scores.

Next week’s article will discuss more reasons why borrowers with good credit need down payment assistance.