Programs That Could Help Your Real Estate Clients Afford Their Homes

  • Explore federal loan options like FHA, VA, and USDA to expand affordability.
  • Consider down payment and closing cost assistance grants and employer-assisted programs to lower upfront costs.
  • Recommend low- or zero-down-payment loans for first-time buyers and those with lower budgets.
  • Partner with a reputable mortgage loan officer who can provide a wide range of home lending products to meet the unique needs of each of your clients.

A crucial part of being a real estate agent is understanding the various home financing products and specialty programs available to help guide your clients.

Real estate agents have the opportunity to enhance their clients' homebuying success by understanding the various home financing products and programs, as well as by partnering with a reputable mortgage loan officer. Knowing what's available, from federal and zero-down loans to down payment and closing cost assistance grants, may help you put more buyers in a position to close on their homes.

Federal Home Financing Programs

The federal government offers several programs designed to make homeownership more accessible. These programs may mean smaller down payments and lower barriers to entry for first-time homebuyers and clients working with smaller or tighter budgets.

  • FHA loans: The Federal Housing Administration (FHA) offers these loans, which are tailored for buyers with lower credit scores and minimal savings. They require a down payment of as little as 3.5% and are available for one-to-four-unit properties.[1]
  • VA loans: Available to eligible veterans, active-duty service members, and certain members of the National Guard and Reserves, Department of Veterans Affairs (VA) loans offer options with little to no down payment required (other than the VA funding fee) and competitive interest rates with no private mortgage insurance required.[2]
  • USDA loans: U.S. Department of Agriculture (USDA) loans are aimed at rural and suburban homebuyers with moderate incomes. They provide 100% financing, eliminating the need for a down payment. They also offer reduced mortgage insurance costs.[3] USDA loans do require an upfront guarantee fee (that eligible clients may be able to roll into the mortgage to avoid paying the amount out-of-pocket), along with an annual (monthly) guarantee fee, which is similar to mortgage insurance.
  • HomeReady loans: Fannie Mae offers these loans for lower-income homebuyers. They allow down payments as low as 3% and have flexible credit requirements. They also permit the use of gifts and grants for down payments and closing costs.[4]

Down Payment Assistance and Grant Programs

Down payments and closing costs often pose significant barriers to homeownership. Buyers who qualify for a mortgage payment based on their income and debt ratios may struggle due to a lack of savings or other funds to put down or cover closing costs (which can range from 3%-6% of the home loan amount) on the home they want. Fortunately, some programs may be able to support buyers in this situation.

  • State and local programs: Many states offer assistance programs for homebuyers. These programs can include grants for full or partial down payments, along with other types of loans for the down payment only.
  • Bank programs: Lenders often have their own programs to help buyers move to a new home. These can include grants, down payment assistance loans, credit-building options, and other opportunities.
  • Lender grants: Some lenders provide their own grants, not related to state or local grant programs.
  • Community initiatives: Some communities offer incentives for buyers to move to the area. These can include down payment assistance, grants, and other support, especially for buyers looking to purchase a new-build home.

Depending on the program, buyers may be able to couple a grant or other down payment assistance option with their loan to purchase a home at a better interest rate, with more credit and income flexibility and little to no down payment. Working with your buyers and their MLO may help them save significant time, money, and stress as they move toward homeownership.

It's also important to note that some employers may offer grants or low-interest loan options to their employees or provide relocation packages. In most cases, these can be used along with other grants or loans, including state, local, or lender-based opportunities.

The Importance of Partnering With a Mortgage Loan Originator

In a competitive real estate market where affordability challenges are at the top of buyers' minds, real estate agents need to offer more than just property listings and neighborhood information. They also need to help clients navigate the financial aspects of homeownership. 

That's where a strong partnership with a reputable MLO comes in. A trusted, knowledgeable originator can play a significant role in the homebuying process. These financing professionals offer expertise that complements your real estate agent services to create a comprehensive and exceptional experience for your buyer. 

Here are just a few benefits of partnering with an experienced MLO.

Expert Financial Guidance

An MLO will assess your client's financial situation carefully to recommend all the suitable loan products that may work for them. Matching buyers with financing that meets their needs and addresses their goals is a significant part of what MLOs do. Because MLOs are licensed professionals with a deep understanding of lending products, underwriting guidelines, and borrower qualifications, they are often well equipped to guide clients through financial questions and concerns related to homebuying.

They evaluate each client's unique financial profile, including income, debt, credit score, and long-term goals, to recommend realistic and attainable mortgage solutions. While real estate agents help clients find the right home, the MLO may help them afford it for the long haul. This personalized guidance may help protect buyers from financial overextension and position them for long-term success, which is crucial to homebuying readiness.

A More Streamlined Process

Strong collaboration between agents and MLOs facilitates smoother transactions, reducing delays and enhancing client satisfaction. Since real estate transactions involve many moving parts, delays or denials in financing can cause a deal to collapse. 

An established working relationship with an MLO creates an efficient workflow for timelines, expectations, and next steps. Whether addressing documentation issues or communicating loan status updates, an MLO may help your buyers close with fewer surprises.

Access to Programs and Assistance Opportunities

MLOs often know the latest assistance programs and can help clients navigate eligibility requirements and application processes. They stay current on the latest financing options, including niche programs, grants, and local or employer-sponsored assistance. You and your buyers may not know about some of these programs, but working with the right originator can change that.

This access may make a crucial difference in affordability, especially for first-time buyers or clients in high-cost markets or with lower incomes. When agents collaborate with knowledgeable MLOs, they offer creative solutions to buyers who might otherwise think they're priced out of the market.

Prequalify and Preapprove Your Buyer

You don't want a buyer falling in love with a house they can't ultimately afford. The first step in the process is often prequalifying your client to get an initial understanding of your buyers' purchasing power, enabling more targeted home searches. A prequalification can also help establish a buyer's budget and give important information about homebuying readiness. 

A prequalification may use the client-provided information on stated income, employment, and assets, with a soft credit pull to obtain an initial view of the credit history. While a prequalification provides an initial view into what your borrower may qualify for, it is typically not used when making an offer on a home, as much of the stated information for the client has not yet been validated.  

The next important step in the home buying process is to get a mortgage preapproval for your client. The MLO can help guide the buyer through this process, which requires the borrower to provide proof of important qualifying factors, such as income, employment, and assets. This may include uploading documents like W-2s and bank statements. A preapproval also requires a hard credit check, which may incur a fee.

An Underwriter will then review all this information, and if approved, will issue a preapproval letter. The preapproval letter will indicate the maximum loan amount that the borrower may qualify for and is typically required by sellers and their agents when your client is ready to make an offer.  

A preapproval can help strengthen your buyer's offer, especially in a competitive market where the house they want may have multiple offers.  

Agents and MLOs can form a tight-knit team dedicated to helping clients achieve their dreams of homeownership as easily and realistically as possible. Some homebuying scenarios are more complicated than others, but the right people can make a difference when it comes to available options.

Final Thoughts on Affordability Programs

Real estate agents who understand home financing options are usually better prepared to serve their clients' best interests. Informed agents can guide those clients toward achievable homeownership by familiarizing themselves with federal programs, down payment assistance, low- or zero-down payment loans, and employer-assisted housing opportunities.  

Cultivating strong partnerships with MLOs may help your clients receive tailored financial solutions, streamline the buying process, and enhance their overall satisfaction. Together, agents and MLOs may empower clients to overcome financial barriers and achieve their dream of owning a home.

Ready to do more for your clients and your real estate business? Contact PNC Bank today and let us help with your real estate banking and client mortgage needs. Our comprehensive solutions mean multiple options in one convenient location so you can make the most of your relationship with us.