Show Me the Money Today’s tight U.S. credit market is making it difficult for many potential buyers to purchase Florida properties. Here’s how you can help.
“It’s been a roller coaster for myself and my customer base,” says Maggie DeGennaro, sales
associate with Keller Williams Advantage Realty in the Orlando suburb of Oviedo. “My customers have had trouble getting loans because banks are asking for high credit scores and big down payments.”
Fortunately, there are steps Florida real estate professionals can take to help buyers get the financing necessary to complete the transaction. Here are five suggestions: 1. Prequalify buyers as soon as possible.
“Before you even think about showing houses, you need to sit down with the buyer and discuss the financial side,” says Beth Butler, chief operating officer of Esslinger Wooten Maxwell in Coral Gables. “If there are financial issues, you may not be able to help them.”
Ritch Workman, co-owner of Workman Mortgage in Melbourne and president of the Florida Association of Mortgage Brokers, agrees with Butler. “More than ever, it’s important to get a full preapproval prior to showing homes,” he says. “It’s hard to get someone’s hopes up for a new home only to find that they don’t qualify for the mortgage.”
Workman suggests asking a potential buyer some basic questions: Do you have money for a down payment? How is your credit rating? Are you a first-time buyer or a veteran who might be eligible for a VA loan?
“You don’t have to go into the details right away, but the answers to these questions will help you determine if this person is likely to qualify for a mortgage,” Workman says. “Then, you can call a mortgage broker, relay the information and discuss the possible options.” 2. Cultivate relationships with mortgage lenders in your local market.
As a real estate professional, you should cultivate ties with one or more local mortgage experts who can advise your customers on credit-related issues.
“I would recommend that you have a personal relationship with [at least] one mortgage banker, building a level of mutual trust,” says Workman. “But you should never discourage a client from shopping around and comparing different offerings. That helps educate a borrower about the market and may help them avoid paying too much for a mortgage.” 3. Consider FHA or VA guaranteed loans.
For buyers with credit issues—or small bank accounts—an FHA or VA guaranteed mortgage may provide a financial solution. While 20 percent down payments are typical on conventional mortgages, FHA and VA loans may require only 3 to 5 percent down for qualified buyers.
In addition, prequalifying for an FHA or VA loan might allow the buyer to use some of those down-payment funds to pay current debts and improve the all-important credit score (see “Credit Where Credit” is Due on p. 34) If the buyer may qualify for these programs, set up a meeting with a mortgage specialist and discuss the situation. 4. Explore alternative sources of credit.
A seller may be willing to offer a first or second mortgage to complete the sale—even if the buyer has less than perfect credit. A first-time buyer may be eligible for special assistance, such as a lower down payment or mortgage rate. A growing number of Florida employers offer housing assistance programs for relocating employees.
Edward Zoller, a sales associate with Villa Realty Group Inc. in Cape Coral, says it’s important to look at all the options available to a buyer, such as a business line of credit or available equity in other properties. “I recently helped a client who was able to pay cash for a Florida home by using his farm in the Midwest as security for a loan,” he says. 5. Help the buyer improve a poor credit rating.
In the past year, DeGennaro has helped several renters boost their credit ratings to enable them to buy a home in the future. “I encourage them to prepare a financial plan that will focus on the ultimate goal of ownership,” she says.
Workman points out that it takes time to raise a low credit score—from 90 days to six months, even for a buyer who can pay off all current debts. “Look at a consumer you’re helping along the path to credit recovery as a future closing,” he says. “It’s like a CD in the bank that eventually will pay you back with interest.”
Reflecting on the tight credit situation, Sue Paskert, a sales associate with Courter Realty Inc. in Tampa, has perhaps the best advice. “Hang in there with your buyers. Be patient, look at the options and keeping working with the lender until you have a solution.” Richard Westlund is a Miami-based freelance writer.