Refinancing a mortgage loan gives homeowners an opportunity to save money, often with very little effort. It is a clear win-win for both the client and the broker.
So why don’t more people do it?
While prospective clients should be knocking down your door for better terms, there is still one major obstacle that even the best mortgage loan advertising can’t fix: bad credit.
Refinancing with Bad Credit
A lot has changed since 2008. Banks have become more careful about who they loan to and how much they are willing to lend. Unless your clients have substantial equity (and sometimes even despite that), their credit scores will heavily affect their refinance rates.
A mortgage broker who is well-versed in credit repair now has a definite competitive advantage over less-educated counterparts.
Low Credit Scores Mean High Interest Rates
When refinancing, your clients’ ability to qualify for a new loan, as well as the terms of that loan, are completely dependent on your their financial standing.
Consider these statistics:
The average credit score in America is 695
The average minimum credit score requirement for mortgage loan approval is 660
That’s good, right? Not really. Although the minimum requirement is below the average, it won’t get your clients a good rate.
A credit score of 760 will get your client the best rate available but a credit score of 660 could mean a difference of more than a percentage point (and tens of thousands of dollars over the life of the loan).
While it is entirely possible for borrowers to refinance their homes with bad credit, many simply won’t qualify, and those who do, won’t get a low enough rate to make it worth their while.
Mortgage Loan Advertising Won’t Help You Close More Loans
Stricter credit requirements have not only led to more mortgage loan rejections, but also to fewer applicants—particularly those with bad credit.
In fact, recent studies show that lower-credit applicants account for only 33% of all mortgage loan applications, down from 62% a decade earlier.
When it comes to real estate, consumer confidence is low, and many homeowners are too afraid to re-commit. Those with poor credit know they are already fighting an uphill battle and are abandoning the pursuit of refinancing their mortgage altogether.
While this trend makes sense, it also means a smaller pool of potential clients for you, no matter how much money you spend on mortgage loan advertisements.
You shouldn’t abandon mortgage website marketing altogether, but you will close more loans by helping clients improve their credit scores than you will by advertising lower rates.
Give Yourself a Competitive Advantage by Helping Your Clients Improve Their Credit
Under federal law, it is illegal to charge for credit repair services while targeting mortgage loan applicants. This prevents brokers from promising a payoff they cannot guarantee. Fortunately, it is not only possible to offer free credit repair services for your clients, but increases your income at the same time.
Consider the potential for new business
In December 2010, as the damage caused by the real-estate crisis was beginning to heal, it was estimated that 20 percent of American households with fixed-rate mortgages could and should have refinanced—but didn’t.
Imagine helping 20% more homeowners refinance, having 20% more loans closed, and 20% more income for you.
Learn the basics of credit repair for free
There are many reasons for mortgage brokers to get credit repair training, and helping your clients qualify for lower rates is just one of them.
Fortunately, learning the basics of credit repair does not have to be expensive or time-consuming. In fact, it is possible to get free credit repair training online before you decide if it’s even the right choice for your business.
You cannot charge for your credit repair services, but you will increase your income when you improve clients’ scores and close more loans.
Improve your mortgage website marketing
When it comes to reaching a new audience, you don’t just need a wider net; you need a smarter one. Let potential borrowers know that you can help them improve their credit score at no additional cost, which will help them qualify for the loan they need, at the lowest interest rate possible.
When you become known for repeatedly getting your clients the lowest rate when refinancing, you not only close more loans, you get more referrals.
There are many ways to find new clients but when it comes to mortgage loan refinancing, it doesn’t matter how many prospects you have if they don’t qualify or don’t see the benefit. Don’t wait for the right clients to come to you, give yourself a competitive advantage by helping your clients improve their credit scores and start closing more loans!
For more info on how your business can benefit from offering credit repair services to your clients, check out How Credit Repair Can Help You Close More Mortgage Loans.