Brokers have the tools to combat affordability challenges, says executive
The financial landscape has changed for people looking to become first-time homebuyers, and most of the changes have made things far more challenging.
Many of these potential buyers moved into a rental property, hoping to save up enough money for a down payment and for closing costs on a new home. However, soaring rent costs have made it difficult for those potential buyers to save money.
In addition to high rental costs, many renters may also be facing student loan debt that was previously in forbearance. This has added a large monthly payment to an already tightened budget.
Even though many of these renters may be earning enough money to qualify for a mortgage, these additional expenses have discouraged them from reaching out to a broker. One mortgage executive believes brokers will play a critical role in keeping these potential homeowners from giving up on their dream.
Miki Adams (pictured top), president of CBC Mortgage Agency, said first-time buyers are facing different challenges than in the past.
“First-time homebuyers today are facing a very different landscape than previous generations,” Adams told Mortgage Professional America. “Many are contending with student loan debt, higher rental costs and limited savings while earning solid incomes. But what's often missing isn't financial responsibility, but access to resources and guidance. Without generational wealth or family support, the upfront costs of homeownership can feel overwhelming.”
Brokers as trusted advisors
Because many of these potential buyers don’t have that support, Adams believes it becomes more critical for a mortgage broker to provide that support and become an advisor in the process.
“Mortgage brokers play a critical role in that they can really become the borrower's trusted advisor,” Adams said. “They are helping buyers to understand realistic pathways to ownership, helping them to navigate assistance options and helping them to feel confident about making a long-term decision, such as buying a home.”
One major advantage brokers have when working with first-time buyers is greater access to loan products and lenders. Whether it is with large independent mortgage banks or smaller non-QM lenders, brokers have more freedom to shop customers around to make sure they get a loan type and terms that set them up for success.
In addition, Adams noted that brokers are also more in tune with local down payment assistance providers, which can help first-time buyers overcome one of the biggest hurdles to homeownership.
“One of the benefits for mortgage brokers is they have access to a diverse set of loan products and assistance programs,” she said. “That's just absolutely essential in today's market. Affordability challenges aren't uniform, and borrowers don't fit neatly into one profile. Having access to and understanding different tools, like down payment assistance programs and other low-down-payment programs, allows brokers to responsibly bridge the gap between income and savings.”
Sustainable affordability
As she advises lenders and brokers, one of the main focuses for Adams is to make sure the emphasis is on long-term affordability. It’s not enough to just get someone into a home. The plan is for them to be able to stay there as long as they want.
“When a broker can pair a down payment assistance program for a borrower with sound underwriting and education, and programs that don't increase risk for borrowers, they're really helping to ensure that borrowers are prepared and positioned for long-term success in owning their home,” Adams said. “I’m a very big believer in education. And helping borrowers understand the different programs that are available to them, walking them through how they work, is critical.”
Part of that long-term success is a broker building a relationship with their customer. This not only allows them to take an advisory role in their first home loan, but also in future mortgage transactions.
“That's really what I've seen in my experience,” she said. “Mortgage brokers can become a long-term advisor for the borrower. I think advisor is the keyword.”
Being an advisor allows the broker to help the homeowner build long-term financial stability. This allows for that mortgage to bring sustainable affordability. Adams thinks the current focus on ensuring that stability is a change for the better in the industry.
“I think in the past, there have been moments in history where we've been more short-sighted when it comes to long-term sustainability,” she said. “Hopefully, we've learned those lessons, and we'll be able to create something better for new homeowners in the future.”
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This article is part of our Monthly Spotlight series, which in January focuses on Affordability. Full coverage can be found here.
