Consumer lending is a “black box” to novices, a process they don’t necessarily understand and aren’t equipped to navigate with assurance. Finding ways to empower borrowers and give them confidence in the process is an essential step in turning prospects into clients. Here are seven ways you can build confidence, and trust, in the minds of every potential borrower who walks through your door.
1. Explain How Consumer Lending Works
The first thing you can do is the simple and obvious one: You’re the expert, so give them the benefit of your expertise. Unless your borrowers are already knowledgeable or make it clear they “don’t want to know,” you should provide a nutshell overview of the loan process. It should include a quick primer on credit scores, debt ratios and all the other factors that go into constructing a loan.
This is a more important piece of the puzzle than you may realize, but it’s a crucial trust builder. Borrowers who feel comfortable with you and feel that you aren’t just trying to bury them in bafflegab will be more inclined to trust you. They’ll feel empowered by your expertise, and willing to let you use it on their behalf. Take this seriously: If you see they’re not following your explanations, back up and try again. Eventually, you’ll learn exactly which words and phrases get the best results. Once you do, keep using them.
2. School Them About Less-Obvious Costs
A lot of prospective borrowers will walk in the door thinking that choosing a mortgage comes down to finding the lowest rate. That’s important, to be sure, but it’s not the whole picture. As their collaborator in the lending process, you can empower their decision-making by educating them about the other costs and fees that factor into the mortgage.
It’s not going to matter so very much with people looking to buy a “forever home” and stay in it for decades, but differences in closing costs can be a real factor for those who might be selling and moving on in a few years. A loan with a slightly higher rate but fewer costs might make better sense, especially now while rates are astonishingly low.
3. Tell Them What They Don’t Want to Hear
Borrowers who have been preparing for homeownership by poring over glossy magazines or bingeing on HGTV may have some unrealistic expectations about what they “need” in a house. The path of least resistance is to say, “Well, we’ll see what we can do…,” but it’s better to be proactive and help them set realistic expectations.
You’re the professional, and it won’t take you long to estimate how large a loan your borrowers might reasonably command, and how that relates to the local market. Managing those expectations, right up front, may feel high-risk but it marks you as a trustworthy source of accurate information. It also sets the stage for you to offer your assistance in helping improve their credit-worthiness, so they can perhaps manage a better loan.
4. Never Stop Cultivating Your Networks
One of the biggest super-powers a potential borrower can have is a well-connected lender, broker, or real estate agent. The more lenders, brokers, and realtors you have good relationships with, the more effective you’ll be at playing matchmaker on your clients’ behalf. That’s especially true if you consciously target networking within different market segments: It allows you to find a good match for almost any borrower who walks through the door.
Depending on your temperament, you might think of this personal interaction as the best or the worst part of your job. Either way, it’s important. Keep cultivating the best people you can find, even if the payoff in referrals back to your office takes time to build. In the interim, you’re placing your borrowers in good hands and that in turn reflects well on you.
5. Move Quickly
Rates are astonishingly low at the moment — they have in fact hit record lows recently — which means a lot of people who might otherwise have been priced out of the market can think seriously about buying. Unfortunately, that uptick in demand has coincided with tight inventory in many markets, and when supply and demand go in opposite directions it’s not good for your borrowers.
The faster you can position your borrowers for an advantageous mortgage, the sooner they can start making offers. In a tight market, a few days can be the difference between getting a home or not getting one.
6. Help Them Come Up With a Bigger Down Payment
All things being equal, a borrower with a bigger down payment can usually qualify for a better mortgage and consider a wider range of potential homes. Relatively few buyers can afford to put down a full 20 percent — in 2019 the median down payment was 12 percent, and just 6 percent for first-time buyers — but any increase in the down payment is a clear win, if your borrower can manage it.
Whenever it’s appropriate, provide your borrowers with a checklist of potential ways to increase their down payment. If there’s a likelihood they can manage an increase in their down payment through one or another avenue, illustrate for them what difference it could potentially make to their mortgage’s terms.
7. Show Them How to Improve Their Credit Score
Helping your buyers boost their credit score is probably the single biggest thing you can do to empower them in their quest for home ownership. Most consumers leave credit-score points on the table, simply by not knowing how to optimize their existing financial activity for maximum effectiveness.
The most effective way to do that is through ScoreMaster, which in the company’s testing resulted in an average 61-point improvement in the user’s credit score. Most mortgages are approved at a score of 720, so even before you sit down with a new prospect you can have illustrations prepared to show the difference in mortgages available at 720 points vs 780 points. Your prospect’s initial score may be higher or lower, but the effect should be very similar.
Making ScoreMaster Part of Your Business
To maximize ScoreMaster’s effectiveness, introduce it at your very first meeting with a new borrower. Position it as a tangible benefit of doing business with your brokerage, a power tool you can place at their disposal to save them money and/or get them a better home and mortgage. Best of all it involves you as a collaborator in upgrading their finances, which builds the relationship and puts you in a position of trust.
Contact ScoreMaster today for a demonstration, and learn how we can help turbocharge your business in this highly competitive time.
*Legal Disclaimer – ScoreMaster is a patent-pending educational feature simulating credit utilization’s effect on credit scores via payments or spending. Your results may vary and are not guaranteed.