If your in sales, chances are you have heard about ABC. Also known as “Always be closing.’ For mortgage brokers this phrase has probably been drilled into your head at some point in your career or another. One of the many challenges mortgage brokers face is turning prospects into clients. The goal of this article is to help you do just that. We will discuss some of the hurtles mortgage brokers face in trying to prequalify prospective homebuyers and some of the steps you can take to turn prospective home buyers into actual preq buyers.
Turning a prospective client into an actual prequalified buyer is no easy task. Getting qualified for a mortgage can not only be frustrating for prospective buyers, home sellers and real estate agents but also for mortgage brokers. The two most common barriers to entry for consumers looking to obtain mortgages are undoubtedly credit scores and debt to income ratios. Over the years mortgage brokers have gotten creative on ways to improve a prospective home buyers credit score with things like unsecured debt analyzers. Technology now allows mortgage brokers to run a credit score analysis that will show buyers which unsecured debts to pay down, by how much and how big of an improvement it will have on the buyers credit score. Once the prospect has paid down the right debts by the right amounts, the broker can then run what’s called a rapid rescore which will update the buyers credit score to the reflect the hopefully higher score.
The next hurdle is the potential clients debt to income ratio. This ratio is simply the amount of monthly debt the prospect has compared to how much monthly income they have. Most lenders require prospective home buyers to have at a minimum a debt to income ratio of 43% or less to prequalify. While technology can help a buyer know which debts to pay down, it hasn’t reached the point of giving you the money to actually pay them down. Wouldn’t that be nice? But a seasoned mortgage broker can help buyers lower the debt to income ratios without costing the prospective buyer any money.
One way mortgage brokers can do this is by looking at the buyers recurring debt and determining which debts can be refinanced. Let’s imagine a client with an auto loan with a monthly payment of $800. The mortgage broker can look at the remaining balance on the auto loan and see if the client has any equity. If the prospect has equity in the car, they could simply refinance the remaining balance over a longer period of time which reduces the amount of monthly debt thereby decreasing the debt to income ratio. Another tip is reducing monthly debt like homeowners insurance.
While there are many ways to reduce the monthly cost of homeowners insurance, none are more powerful than shopping the buyers homeowners insurance. Mortgage brokers would be wise to add this tool to their belt. The first thing I tell mortgage brokers to do is to partner with an independent insurance agent and to recommend a policy review for every prospective client.
By partnering with an independent insurance agent, the mortgage broker can almost be guaranteed that the buyers debt to income ratio will fall. This is done by having the homeowners insurance agent prepare several home owners insurance quotes which will allow the buyer to compare homeowners quotes based on homeowners insurance premiums and home insurance rates. The homeowners insurance policy review can also be a life saver for the prospective client. Many times the homeowner will not have the coverage they need or in some cases the coverage they think they had. Simply shopping your clients homeowners insurance can drastically improve a clients chances at getting qualified. It is not uncommon to see clients save hundreds of dollars each month simply by doing this.
Partnering with an independent insurance agent can also lower other monthly debts like car insurance. Chances are your prospective client owns an auto or two along with the current house they own. Most insurance companies will offer discounts to their insureds by bundling their homeowners insurance with their auto insurance. Many times the policy review will uncover that not only has the buyer been overpaying for home insurance but they have also been overpaying for car insurance. We recently had a client who had been paying over a $1,000 a month for home and auto insurance. A simply policy review led to the client switching both their homeowners insurance and car insurance saving the client over $500 a month. This one tool could help decrease your prospective buyers debt to income ratio by as much as 10% or more depending on the amount of their monthly income.
If your a mortgage broker and you haven’t partnered with an independent insurance agent today, don’t waste another second. Go online today and do a google search for an independent insurance agent. Take a look at their websites and then pick a few to call. Find out if they are licensed in your state. Offer to partner exclusively with the agent. Partnering exclusively with the agent also means they will send you referrals. It’s a win win for the insurance agent and you.
Your friend and neighbor,