8 Loan Program Tips Every Real Estate Agent Should Know

As a real estate agent, you’re often the first person someone searching for a home interacts with. They look to you for guidance on market trends, ask you about average home prices, and count on your negotiating expertise.

The many ways you bring value to your clients set you apart from other real estate agents in a competitive industry. Another way you can level up the experience your clients get when working with you is by partnering with an expert lending team.

When you can give your clients fundamental financing advice as a trusted advisor who’s already familiar with their personal financial situation and goals, you become their home buying hero. Nothing replaces the financing expertise of their loan officer, but these tips can help you steer them in the right direction or help them avoid delays pursuing an option that won’t work for them.

Check out these eight financing tips that every agent should know.

Simple Income Verification for Self-Employed Borrowers

Common types of income considered self-employment are sole proprietorships, LLCs, partnerships, freelance and seasonal work, 1099 or contracted employees, and gig work.

If your self-employed client has been in the same line of work for at least five years, they can typically qualify using just their most recently filed tax return. The income from that return is used to establish how much they can qualify to borrow.

Adding In Commission Income

If your client is in a field with commission income, there’s some good news for them, too. They can use reliable commission as part of their income on their loan application.

They can use the 24-month average of their commissions as added income, as long as they’ve been in that line of work for at least two years.

Utilize Adjustable-Rate Mortgages to Take Advantage of Lower Rates

Adjustable-rate mortgages (ARMs) serve a valuable purpose in the lineup of mortgage options, especially in an environment where rates are rising.

If your client is likely to relocate or move to another home during the initial, fixed-rate period of the ARM, it’s a great opportunity for them to take advantage of a lower interest rate with low risk.

The average length of time American homeowners lived in their home in 2021 was six years and three months. To break that down into a real-life scenario, if your client finances your home with a 10/1 ARM, they would have more than three and a half years beyond that average to sell, refinance, or even take advantage of more favorable market conditions.

Don’t Forget about Veterans Affairs (VA) Loans

Veterans Affairs (VA) loans come with low rates, don’t require mortgage insurance, have their own proprietary appraisal process, and can have up to a 90% LTV ratio on cash-out refinances.

Veterans, active-duty service members, current or former National Guard or Reserve members, discharged members of the National Guard, and surviving spouses are all eligible to take advantage of VA financing.

Investment Properties vs. Second Homes

It’s important for your clients to choose their loan program wisely because there are times when a property can fall into more than one category. Take investment property qualifications versus second homes, for example.

Investment properties are categorized by being rented out year-round and require a down payment of at least 20%. Second homes, on the other hand, must be occupied by the owner partially throughout the year and require just 10% down.

Understanding those nuances and presenting the right financing options for your client could make the difference between closing the deal and not.

Parents Helping Their College Students Buy a Home

Rather than pay for their child’s rent, some parents opt to help their college student purchase a home and start building equity early.

College students can purchase a home as their primary residence, with their parents on the loan application as a co-borrower, even if it’s just the student living in the home. This makes the parent a non-occupant co-applicant, and it’s an option with many loan programs.

Options for Adult Children to Finance a Home for Their Parents

Just as parents can help their college-aged children, adult children can help their parents finance their primary residence, if needed.

If their parents can’t afford a mortgage on their own and the adult child or children can establish that they can afford to cover the mortgage along with their own debt obligations, there are loan programs that support these scenarios.

Getting A Mortgage After Bankruptcy

It is possible for your clients to get approved for a mortgage even after filing for bankruptcy. Waiting periods will vary based on the type of bankruptcy they filed (chapter 7 vs. 13) and the loan program they’re financing with.

The best ways for them to get back on track and qualify for a mortgage is to follow credit repair tips, including following a budget, paying bills on time, and saving for a down payment.

It’s always good to have a foundation on financing advice you can offer to your clients, but there’s no replacement for a strong partnership with an expert lending team.

Get connected with an FHM Loan Officer today! They will be your home financing guru, keeping you up-to-date on market changes and helping with creative financing solutions to meet every one of your clients’ needs.