The real estate market was booming. Then, the coronavirus hit, lowering interest rates. Interest rates bounced around wildly, and the market came to an abrupt halt. Homes are still selling, albeit at a much slower pace, as millions of people file for unemployment due to stay-at-home orders and social distancing measures.
Many potential buyers have put their plans to buy a new home on hold because there’s too much uncertainty in the market. Potential buyers have also dipped into savings, eliminating some or all of their down payment for a home.
A high level of forbearance, hitting 7% overall and nearly 10% for FHA and VA borrowers, puts the real estate market in a state of volatility. Lenders are increasingly tightening their qualifications for borrowers in an effort to limit risk. Chase announced that they’re raising minimum down payments from 3.5% to 20% and will require credit scores of 700 or higher for borrowers. FHA loans have been temporarily suspended by some lenders.
Interest rates may be lower, but the qualifications will put many potential homebuyers out of the market.
What’s the Next Step for Borrowers?
Borrowers will enter a phase of uncertainty as the coronavirus pandemic continues to impact the economy. The next step for borrowers will be tricky:
- Borrowers that meet new credit score and down payment criteria can proceed with buying a home.
- Borrowers that do not meet these criteria will need to improve their credit scores or save more for a down payment.
Because of these developments, mortgage lenders will need to approach the market differently going forward.
How Lenders Should Approach the Market
Borrowers are watching the market anxiously and with a lot of confusion as to how the pandemic will impact their chances of borrowing for a home. Your job as a lender is to put borrowers’ minds at ease.
You can help alleviate the anxiety and confusion by:
- Being transparent with interest rates
- Outlining changes to credit and down payment requirements
- Creating helpful resources that can help borrowers work towards meeting new requirements
Mortgage lenders need to create content and resources that educate potential buyers on how to move forward with their home-buying goals. Webinars, workshops, and other mediums can be used to educate borrowers on how to:
- Build their credit scores to meet new score requirements.
- Save more money for a down payment.
Borrowers will need guidance, and it’s up to lenders to provide it to potential buyers.
How the CardTapp App Can Help
CardTapp is here to help by providing lenders with a quick and easy way to educate app users on new lending information, resources, and requirements. You can:
- Add buttons that link to resources, videos, or webinar registrations on your app.
- Add resources for items not published online.
When monitoring your app’s activity, identify users that browse resources and reach out to them over the phone or on video. Human interaction can help answer many of the questions the person may have and provides the one-on-one assistance many borrowers want from lenders.
Looking at the Market Ahead
The world’s economies and markets may be turned upside-down right now, but the impact from the pandemic won’t last forever. Buyers will adjust to new requirements, and lenders will have a steady flow of borrowers in the future.
Taking the time to educate borrowers now will pay off in the long-term. Educated borrowers are stronger borrowers, so lenders may even alleviate some future risks by helping potential borrowers navigate the new requirements.
You can take advantage of the current climate to make sure your app is intuitive and provides:
- Peace of mind
- Valuable Resources
Focus on Relationships
But you don’t want to rely only on these resources to educate potential borrowers. Make sure to add a personal touch. Building strong relationships with borrowers today, will create relationships that last well beyond the coronavirus pandemic. Request a CardTapp demo to find new, exciting ways to deliver resources digitally while still focusing on meaningful interaction with customers.